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☐ | Soliciting Material under §240. 14a-12 |
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Rules for the purpose of giving information with regard to Zai Lab Limited. The directors, having made all reasonable inquiries, confirm that to the best of their knowledge and belief the information contained in this document is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this document misleading.
NOTICE OF EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS |
Time and Date: | 8:00 a.m. (U.S. Eastern Time) on | |||||||
8:00 p.m. | ||||||||
Physical Location: | 4560 Jinke Road, Bldg. 1, Fourth Floor, Pudong, Shanghai, China 201210 | |||||||
Virtual Meeting Site: | www.virtualshareholdermeeting.com/ |
1.An ordinary resolution to re-elect Samantha (Ying) Du to serve as a director until the 2024 annual general meeting of shareholders and until her successor is duly elected and qualified, subject to her earlier resignation or removal; 2.An ordinary resolution to re-elect Kai-Xian Chen to serve as a director until the 2024 annual general meeting of shareholders and until his successor is duly elected and qualified, subject to his earlier resignation or removal; 3.An ordinary resolution to re-elect John D. Diekman to serve as a director until the 2024 annual general meeting of shareholders and until his successor is duly elected and qualified, subject to his earlier resignation or removal; 4.An ordinary resolution to re-elect Richard Gaynor to serve as a director until the 2024 annual general meeting of shareholders and until his successor is duly elected and qualified, subject to his earlier resignation or removal; 5.An ordinary resolution to re-elect Nisa Leung to serve as a director until the 2024 annual general meeting of shareholders and until her successor is duly elected and qualified, subject to her earlier resignation or removal; 6.An ordinary resolution to re-elect William Lis to serve as a director until the 2024 annual general meeting of shareholders and until his successor is duly elected and qualified, subject to his earlier resignation or removal; 7.An ordinary resolution to re-elect Scott Morrison to serve as a director until the 2024 annual general meeting of shareholders and until his successor is duly elected and qualified, subject to his earlier resignation or removal; 8.An ordinary resolution to re-elect Leon O. Moulder Jr. to serve as a director until the 2024 annual general meeting of shareholders and until his successor is duly elected and qualified, subject to his earlier resignation or removal; 9.An ordinary resolution to elect Michel Vounatsos to serve as a director until the 2024 annual general meeting of shareholders and until his successor is duly elected and qualified, subject to his earlier resignation or removal; 10.An ordinary resolution to re-elect Peter Wirth to serve as a director until the 2024 annual general meeting of shareholders and until his successor is duly elected and qualified, subject to his earlier resignation or removal; 11.An ordinary resolution to approve the appointment of KPMG LLP and KPMG as the Company’s independent registered public accounting firms and auditors to audit our consolidated financial statements to be filed with the U.S. Securities and Exchange Commission (“SEC”) and the Hong Kong Stock Exchange for the year ending December 31, 2023, respectively; 12.An ordinary resolution to authorize the Board of Directors to fix auditor compensation for 2023; 13.An ordinary resolution to approve, on an advisory basis, the compensation of our named executive officers, as disclosed in this Proxy Statement; 14.An ordinary resolution to approve a general mandate to the Board of Directors to allot and issue ordinary |
FROM: US$30,000.00 divided into 500,000,000 shares withand/or ADSs of up to 20% of the total number of issued ordinary shares of the Company as of the date of passing of such ordinary resolution up to the 2024 annual general meeting of shareholders;
TO: US$30,000.00 divided into 5,000,000,000Directors to allot and issue ordinary shares with a par valueand/or ADSs of US$0.000006 each (the “Share Subdivision”).
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The latest date and time for lodging a share transfer in order to be registered as a shareholder on the record date is 4:30 p.m. (Shanghai and Hong Kong Time) on April 20, 2023.
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PROPOSAL 13 | |||||||||||
PROPOSALS 14-15 | APPROVAL OF A GENERAL MANDATE TO THE BOARD OF DIRECTORS TO ALLOT AND ISSUE ORDINARY SHARES AND/ | ||||||||||
QUESTIONS AND ANSWERS ABOUT THE MEETING AND VOTING |
HoldersIf you are a holder of record of our American Depositary Share(s), or ADS(s), each representing one of our ordinary shares, as of 4:30 p.m. (U.S. Eastern Time) on February 18, 2022, who wishes to exercise your voting rights for the underlying ordinary shares, you must act through Citibank, N.A., the depositary of the ADSs (“Citibank”), to vote the ordinary shares represented by your ADSs. Citibank will distribute information to ADS holders as of 4:30 p.m. (U.S. Eastern Time) on February 18, 2022 describing how voting instructions may be delivered to Citibank by ADS holders.If you are a beneficial owner of ADSs registered as of 4:30 p.m. (U.S. Eastern Time) on February 18, 2022 in the name of a brokerage firm, bank, or other financial institution, you should have received information containing voting instructions from that organization rather than from Citibank. Simply follow the voting instructions to ensure that your vote is counted.By Order of the Board of Directors,Samantha (Ying) DuDirector, Chairwoman of the Board of Directors and Chief Executive OfficerFebruary 28, 2022
ZAI LAB LIMITED
PROXY STATEMENT FOR
EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS
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ZAI LAB LIMITED
4560 Jinke Road
Bldg. 1, Fourth Floor
Pudong, Shanghai, China 201210
PROXY STATEMENT
FOR AN EXTRAORDINARY GENERAL MEETING OF SHAREHOLDERS
IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR THE SHAREHOLDER MEETING TO BE HELD ON MARCH 28, 2022
This Proxy Statement is furnished in connection with the solicitation of proxies by the Board of Directors of Zai Lab Limited (the “Board”) for use at an Extraordinary General Meeting of Shareholders (the “EGM”), to be held at 8:00 a.m. (U.S. Eastern Time) on March 28, 2022 / 8:00 p.m. (Hong Kong Time) on March 28, 2022 at 4560 Jinke Road, Bldg. 1, Fourth Floor, Pudong, Shanghai, China 201210, and virtually at www.virtualshareholdermeeting.com/ZLAB2022SM for the purpose of considering and, if thought fit, passing the resolution specified in the Notice of EGM. This Proxy Statement is being mailed to shareholders on or about February 28, 2022.
Why am I receiving these materials?
You received these materials because our Board is soliciting your proxy to vote your shares at the EGM. As a shareholder of record as of 4:30 p.m. (Hong Kong Time) on February 18, 2022, you are invited to attend the EGM and are entitled to vote on the items of business described in this Proxy Statement. Holders of our ADS(s) will not be entitled to attend the EGM and cannot vote their ADSs directly. Holders of our ADSs as of the ADS record date may exercise the voting rights with respect to the underlying ordinary shares in accordance with the provisions of the deposit agreement among the Company, Citibank and the holders and beneficial owners of ADSs, or the deposit agreement.
What does it mean if I receive more than one set of printed proxy materials?
If you hold your shares in more than one account, you may receive a separate set of printed proxy materials, including a separate proxy card or voting instruction form, for each account. To ensure that all your shares are voted, pleases vote by Internet or by signing, dating, and returning a proxy card or voting instruction form for each account.
Why is the EGM a hybrid meeting?
Due to the ongoing public health impact of the COVID-19 pandemic and to support the health and well-being of our directors, employees, and shareholders, this year we will continue to rely on the latest technology to host a “hybrid” EGM. We believe that embracing the latest technology provides expanded access, improved communication and cost savings for our shareholders. Combined with allowing traditional in-person attendance, we believe this strikes the right balance between leveraging technology and maintaining the ability for our directors, employees, and shareholders to interact in person.
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How do I attend the EGM?
You may attend the EGM if you are shareholder of record of our ordinary shares physically at 4560 Jinke Road, Bldg. 1, Fourth Floor, Pudong, Shanghai, China 201210, or virtually by visiting our EGM website at www.virtualshareholdermeeting.com/ZLAB2022SM. To participate in the EGM virtually by visiting our EGM website, you will need the 16-digit control number included on your proxy card or on the instructions that accompanied your proxy materials. Shareholders are encouraged to log in to this website and pre-register for the EGM before the start time of the meeting. Online check-in will begin 15 minutes prior to the start of the meeting, and you should allow ample time for the online check-in procedures. If you choose to attend the EGM virtually, there will be technicians ready to assist you with any technical difficulties you may have accessing the virtual meeting website. If you encounter any difficulties accessing the virtual meeting website during the check-in or meeting time, please call the technical support number that will be posted on the EGM log-in page. Holders of ADSs will not be entitled to attend or vote at the EGM.
Who can vote at the EGM?
Only shareholders of record of our ordinary shares as of 4:30 p.m. (Hong Kong Time) on February 18, 2022 are entitled to vote at the EGM. As of 4:30 p.m. (Hong Kong Time) on February 18, 2022, we had outstanding 96,048,743 ordinary shares, all of which are entitled to vote with respect to all matters to be acted upon at the EGM. Of these shares, approximately 71,043,133 of the 96,408,743 outstanding ordinary shares were held in the name of Citibank, as depositary for the ADSs, each representing one ordinary share of our Company. Each shareholder of record is entitled to one vote for each ordinary share held by such shareholder. Holders of our ADS(s) cannot vote their ADSs directly. Instead, holders of our ADSs may exercise the voting rights with respect to the underlying ordinary shares in accordance with the provisions of the deposit agreement.
How do I submit questions at the EGM?
Shareholders who wish to raise questions at the EGM must submit their questions prior to the meeting. To submit questions in advance of the EGM, go to www.proxyvote.com before 8:00 a.m. (U.S. Eastern Time) / 8:00 p.m. (Hong Kong Time) on March 26, 2022 and enter the 16-digit control number included on your proxy card or on the instructions that accompanied your proxy materials.
What am I voting on?
You will be voting on an ordinary resolution to authorize and approve a share subdivision whereby, with effect from March 30, 2022 (the “Effective Date”), subject to and conditional upon the Listing Committee of The Stock Exchange of Hong Kong Limited (the “Hong Kong Stock Exchange”) granting the listing of, and permission to deal in, (i) the Subdivided Ordinary Shares (as defined below), (ii) any Subdivided Ordinary Shares which may be issued upon exercise of the outstanding share options granted by the Company or any Subdivided Ordinary Shares which may be issued upon vesting of the share awards under the equity incentive plan adopted by the shareholders of the Company on August 21, 2015 (as amended on February 3, 2016 and April 10, 2016) (the “2015 Equity Plan”) and under the equity incentive plan adopted by the shareholders of the Company on August 11, 2017 (the “2017 Equity Plan”), and (iii) any Subdivided Ordinary Shares which may be issued upon the exercise of share options or any Subdivided Ordinary Shares which may be issued upon vesting of the share awards to be granted from time to time under the 2015 Equity Plan and the 2017 Equity Plan, (a) each issued and unissued Ordinary Share with a par value of US$0.00006 each (the “Existing Ordinary Share(s)” or “Ordinary Share(s)”) in the capital of the Company will be subdivided into ten Ordinary Shares with a par value of US$0.000006 each (the “Subdivided Ordinary Shares”), and (b) the authorized share capital of the Company will be amended as follows:
FROM: US$30,000.00 divided into 500,000,000 shares with a par value of US$0.00006 each;
TO: US$30,000.00 divided into 5,000,000,000 shares with a par value of US$0.000006 each (the “Share Subdivision”).
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What if another matter is properly brought before the meeting?
Our Board knows of no other matters that will be presented for consideration at the EGM. If any other matters are properly brought before the meeting, it is the intention of the persons named in the accompanying proxy to vote on those matters in accordance with their best judgment.
How does the Board of Directors recommend that I vote?
Our Board unanimously recommends that you vote FOR the ordinary resolution to approve the Share Subdivision.
How do I vote?
Shareholders of Record
If you are a shareholder of record of our ordinary shares registered on our Hong Kong register or Cayman Islands register as of the record date, you may vote at the EGM, vote by proxy through the Internet, or vote by proxy using the proxy card. Whether or not you plan to attend the EGM, we urge you to vote by proxy to ensure your vote is counted. You may still attend the meeting and vote even if you have already voted by proxy.
To vote using a proxy card, simply complete, sign, and date the proxy card that may be delivered and return it promptly in the envelope provided. Proxy cards submitted by mail must be received no later than March 21, 2022, to be voted at the EGM.
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To vote while physically attending the EGM, attend the meeting by going to 4560 Jinke Road, Bldg. 1, Fourth Floor, Pudong, Shanghai, China 201210.
Beneficial Owners
If you are a beneficial owner of ordinary shares registered on the record date in the name of a brokerage firm, bank, or other financial institution, you should have received information containing voting instructions from that organization rather than from us. Simply follow the voting instructions to ensure that your vote is counted. To vote at the EGM, you must obtain a legal proxy or broker’s proxy card from your broker, bank, or other agent. Follow the instructions from your broker or bank included with these proxy materials or contact your broker or bank to request a proxy form.
Holders of Record of ADSs
Holders of record of our ADSs as of the ADS record date (4:30 p.m. (U.S. Eastern Time) on February 18, 2022)April 20, 2023) who wish to exercise their voting rights for the underlying ordinary shares must act through Citibank. The deposit agreement permits registered ADS holders of ADSs as of the ADS record date to instruct Citibank to exercise the voting rights for the ordinary shares represented by ADSs. Citibank has agreed that it will endeavor, insofar as practicable and permitted under applicable law and the provisions of the deposit agreement, to vote the securities (in person or by proxy) represented by the holder’s ADSs in accordance with such voting instructions as follows:
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•In the event of voting by poll, Citibank will vote (or cause its custodian to vote) the ordinary shares held on deposit in accordance with the voting instructions received from theADS holders of ADSs.
Instructions
June 12, 2023.
Kong.
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financial institutions with respect to our ADSs will be processed by Citibank in accordance with the provisions of the deposit agreement.
•You may submit another properly completed proxy card with a later date.
•You may grant a subsequent proxy through the Internet.
•You may send a timely written notice that you are revoking your proxy to Zai Lab Limited, 4560 Jinke Road, Bldg. 1,314 Main Street, Fourth Floor, Pudong, Shanghai, China 201210,Suite 100, Cambridge, MA 02142, Attention: Corporate Secretary.
•You may attend the EGMAnnual Meeting and vote electronically.electronically during the Annual Meeting. Simply attending the EGMAnnual Meeting will not, by itself, revoke your proxy.
If
Internet.
exercise discretion on whether to vote and, if so, how.
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issue who are present in person, virtually or by proxy and entitled to vote. As of 4:30 p.m. (Hong Kong Time) on February 18, 2022, there were 96,408,743 shares outstanding and entitled to vote. Thus, the holders of 9,640,875 shares must be present or represented by proxy at the EGM to have a quorum. Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank, or other nominee) or if you attendvote electronically or in person at the EGM.Annual Meeting. Abstentions and broker non-votes will be counted towardsfor the quorum requirement.purpose of determining the presence or absence of a quorum. If there is no quorum, the holders of a majority of the shares present at the meeting or represented by proxy may adjourn the meeting to another date.
the vote on these proposals.
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of on the Candidate as required by Rule 13.51(2) of the HK Listing Rules of the Hong Kong Stock Exchange.Rules. Any other shareholder proposal for the 2024 annual general meeting of shareholders in 2022 which is submitted outside the processes of Exchange Act Rule 14a-8 (including a director nomination)nomination under Rule 13.70 of the HK Listing Rules) shall be considered untimely unless received by the Company in writing no later than March 15, 2022.14, 2024. If the date of the annual general meeting is moved by more than 30 days from the date contemplated at the time of the previous year’s proxy statement, then notice must be received within a reasonable time before we begin to print and send proxy materials. If that happens, we will publicly announce the deadline for submitting a proposal in a press release or in a document filed with the SEC and announced in Hong Kong via the website of Hong Kong Exchange and Clearing Limited (www.hkexnews.hk). A copy of all notices of proposals by shareholders should be sent to Chief Legal Officer & Corporate Secretary, Zai Lab Limited, 4560 Jinke Road, Bldg. 1,314 Main Street, Fourth Floor, Pudong, Shanghai, China 201210.
Suite 100, Cambridge, MA 02142. Additionally, any shareholder that intends to solicit proxies in support of a director nominee other than our Board’s nominees must also comply with Rule 14a-19 under the Exchange Act.
All references to “Zai Lab,” the “Company,” “we,” “us” or “our” in this Proxy Statement mean Zai Lab Limited.
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MATTERS REQUIRING SHAREHOLDER ACTION |
DIRECTORS
Pursuant to the Company’s Fifth Amended and Restated Memorandum of Association (“Current Articles”), the authorized share capital of the Company is US$30,000.00 divided into 500,000,000 shares with a par value of US$0.00006 each.
Proposals
FROM: US$30,000.00 divided into 500,000,000 shares with a par value of US$0.00006 each;
TO: US$30,000.00 divided into 5,000,000,000 with a par value of US$0.000006 each (the “Share Subdivision”).
Conditions of the Share Subdivision
The Share Subdivision is conditional on:
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Effect of the Share Subdivision on Authorized Share Capital of the Company
Immediately following the effectiveness of the Share Subdivision, the authorized share capital of the Company will be US$30,000.00 divided into 5,000,000,000 Subdivided Ordinary Shares, of which 964,087,430 Subdivided
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Ordinary Shares will be in issue and fully paid or credited as fully paid, assuming that no further Ordinary Shares will be issued or repurchased after the date of this Proxy Statement and prior to the Share Subdivision becoming effective. Upon the Effective Date, the Subdivided Ordinary Shares shall rank pari passu in all respects with each otherAnnual Meeting in accordance with the Current ArticlesArticles. The Board of Directors recommends shareholder approval of the Companyre-election or election, as applicable, for each of these nominees. If elected at the Annual Meeting, each of these nominees would serve until the 2024 annual general meeting and shalluntil his or her successor has been duly elected and qualified or, if sooner, until the director’s death, resignation, or removal. For additional information on the Company’s corporate governance practices, including information on director elections and nominations, see Corporate Governance. For additional information on compensation for our non-employee directors, see Director Compensation. We will not enter into service contracts with our independent directors. For information on our employment agreement with our Chief Executive Officer, who also serves Chairperson of the Board of Directors, see CD&A - Employment Agreements.
Age | Director Since | Board Committees | Other Public Company Boards | ||||||||
58 | 2014 | Research and Development | None |
Effect of the Share Subdivision on ADS Ratio Change
Each American Depositary Share (“ADS”) of the Company currently represents the right to receive one fully paid Ordinary Share. In connection with the Share Subdivision, the Board resolved that, subject to and conditional upon the Share Subdivision becoming effective, the conversion ratio of ADSs to Ordinary Share(s) will change from one (1) ADS representing one (1) Existing Ordinary Share to a new ratio of one (1) ADS representing ten (10) Subdivided Ordinary Shares (the “ADS Ratio Change”). The ADS Ratio Change and the Share Subdivision, if approved, will take effect on the same date. No action is required by the Company’s ADS holders to effect the ADS Ratio Change (other than to vote to approve the Share Subdivision proposal at the EGM).
Because the ADS Ratio Change is proportionate to the Share Subdivision, no issuance, cancellation or exchange of ADSs will be necessary or carried out in connection with the ADS Ratio Change and Share Subdivision. In addition, because the Share Subdivision and ADS Ratio Change are exactly proportionate, the ADS Ratio Change, in and of itself, is neutral in its impact on the per-ADS trading price of our ADSs on the Nasdaq, as the percentage interest in our Company represented by each ADS will not be altered. The Share Subdivision and ADS Ratio Change will not result in the issuance of any ADSs or any change in the number of ADSs held by any ADS holder.
In addition, to facilitate the ADS Ratio Change, the books of the Depositary are expected to be closed for ADS issuances and ADS cancellations from March 23, 2022 (as of 4:30 p.m. Hong Kong Time for ADS issuance and 4:30 p.m. U.S. Eastern Time for ADS cancellations), or such later date as the Depositary may determine and announce, through and including March 31, 2022 (as of 4:30 p.m. Hong Kong Time for ADS issuance and 4:30 p.m. U.S. Eastern Time for ADS cancellations). This temporary closure will not affect an ADS holder’s ability to trade ADSs on the Nasdaq or otherwise transfer ADSs during that time. A separate announcement will be made by the Citibank confirming the ADS books closure period for ADS issuances and ADS cancellations.
Effect of the Share Subdivision on Board Lot Size
The Existing Ordinary Shares are currently traded on the Hong Kong Stock Exchange in a board lot size of 50 Existing Ordinary Shares each. The Board has resolved that, subject to and conditional upon the Share Subdivision becoming effective, the board lot size to be traded on the Hong Kong Stock Exchange will be changed from 50 Existing Ordinary Shares to 100 Subdivided Ordinary Shares (the “Change of Board Lot Size”). The Change of Board Lot Size will not affect any of the relative rights of the Shareholders. There will be a temporary counter open for trading in temporary board lot of 500 Subdivided Ordinary Shares (in the form of Existing Ordinary Share certificates) between 9 a.m. (Hong Kong Time) on Wednesday, March 30, 2022 and 4:10 p.m. (Hong Kong Time) on Tuesday, May 10, 2022.
The reason for the Change of Board Lot Size is to ensure the Company’s compliance with the board lot value being more than HK$2,000.00 as set out in the Guide on Trading Arrangements for Selected Types of Corporate Actions issued by the Hong Kong Stock Exchange on November 28, 2008 and updated on October 1, 2020. As of February 11, 2022, the market value per board lot of 50 Existing Ordinary Shares for trading on the Hong Kong Stock Exchange is approximately HK$20,620. Based on the closing price of HK$412.4 per Ordinary Share on the Hong Kong Stock Exchange as of February 11, 2022, the expected value per new board lot of 100 Subdivided Ordinary Shares would be approximately HK$4,124 immediately upon the Share Subdivision and the Change of
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Board Lot Size becoming effective. Therefore, the Board considers that a board lot value of HK$4,124 on the Hong Kong Stock Exchange would be commercially beneficial to the holders of our ordinary shares and potential investors as a whole. The Share Subdivision and the Change of Board Lot Size will not result in odd lots or fractional shares.
Effect of the Share Subdivision on the 2015 Equity Plan and the 2017 Equity Plan
As of February 11, 2022, the Company had an aggregate of 9,122,341 outstanding share options, restricted share units and other equity incentive awards (the “Awards”) granted under the 2015 Equity Plan and the 2017 Equity Plan to subscribe for an aggregate of up to 9,122,341 Ordinary Shares. The Board has resolved that, subject to and conditional upon the Share Subdivision becoming effective, proportional adjustments will be made to number of Ordinary Shares reserved for issuance under the Company’s 2015 Equity Plan and the 2017 Equity Plan, the exercise price of each Award, as applicable, and the number of Ordinary Shares underlying each outstanding Awards. The Company will inform each of the grantees of the Awards regarding the adjustments to be made pursuant to the respective terms and conditions of the 2015 Equity Plan and the 2017 Equity Plan in accordance with the terms and conditions, and its obligations under, the 2015 Equity Plan and the 2017 Equity Plan, as applicable.
Save as disclosed above, the Company has no other outstanding share options or convertible securities to subscribe for any Ordinary Share.
Reasons for the Proposed Share Subdivision and Change of Board Lot Size
The proposed Share Subdivision will increase the number of Ordinary Shares in issue and reduce the nominal value and trading price of each Ordinary Share. The Board believes that this will increase the trading liquidity of the Ordinary Share, lower the investment barrier, and will attract more investors to trade in the Ordinary Shares.
As mentioned above, the reason for the Change of Board Lot Size is to ensure the Company’s compliance with the board lot value being more than HK$2,000.00 as set out in the Guide on Trading Arrangements for Selected Types of Corporate Actions issued by the Hong Kong Stock Exchange on November 28, 2008 and updated on October 1, 2020. As of February 11, 2022, the market value per board lot of 50 Existing Ordinary Shares for trading on the Hong Kong Stock Exchange is approximately HK$20,620. Based on the closing price of HK$412.4 per Ordinary Share on the Hong Kong Stock Exchange as of February 11, 2022, the expected value per new board lot of 100 Subdivided Ordinary Shares would be approximately HK$4,124 immediately upon the Share Subdivision and the Change of Board Lot Size becoming effective. Therefore, the Board considers that a board lot value of HK$4,124 on the Hong Kong Stock Exchange would be commercially beneficial to the holders of our ordinary shares and potential investors as a whole. The Share Subdivision and the Change of Board Lot Size will not result in odd lots or fractional shares.
As of the date of this Proxy Statement, other than the Hong Kong Stock Exchange and the Nasdaq, there are no other stock exchanges on which any part of the equity or debt securities of the Company is listed or dealt in. As of the date of this Proxy Statement, the Company has no intention to carry out other corporate actions in the next 12 months which may have an effect of undermining or negating the intended purpose of the Share Subdivision and the Change of Board Lot Size, and the Company currently does not have any definitive plans to conduct any fundraising activities in the next 12 months. Nevertheless, the Board cannot rule out the possibility that the Company will conduct fundraising exercises when suitable opportunities arise in order to support future developmentChief Executive Officer, Dr. Du provides valuable knowledge of the Company and its subsidiaries.business.
Age | Director Since | Board Committees | Other Public Company Boards | ||||||||
80 | 2017 | Audit Compensation Nominating and Corporate Governance | None |
Age | Director Since | Board Committees | Other Public Company Boards | ||||||||
77 | 2018 | Research and Development | Innovent Biologics, Inc. (HKSE) InnoCare Pharma Limited (HKSE) Jiangsu Kanion Pharmaceutical Co., Ltd. (SSE) |
Age | Director Since | Board Committees | Other Public Company Boards | ||||||||
73 | 2021 | Research and Development, Chair | Infinity Pharmaceuticals, Inc. (NASDAQ) Alkermes plc (NASDAQ) |
Age | Director Since | Board Committees | Other Public Company Boards | ||||||||
52 | 2014 | None | CanSino Biologics Inc. (HKSE, SSE) Hong Kong Exchanges and Clearing Limited (HKSE) |
Age | Director Since | Board Committees | Other Public Company Boards | ||||||||
58 | 2018 | Commercial Nominating and Corporate Governance Research and Development | Jasper Therapeutics, Inc. (NASDAQ) |
Age | Director Since | Board Committees | Other Public Company Boards | ||||||||
65 | 2021 | Audit, Chair and Audit Committee Financial Expert | Corvus Pharmaceuticals, Inc. (NASDAQ) IDEAYA Biosciences Inc. (NASDAQ) Tarsus Pharmaceuticals, Inc. (NASDAQ) Vera Therapeutics, Inc. (NASDAQ) |
Age | Director Since | Board Committees | Other Public Company Boards | ||||||||
65 | 2020 | Nominating and Corporate Governance, Chair Commercial Compensation | Trevena, Inc. (NASDAQ) |
Age | Director Since | Board Committees | Other Public Company Boards | ||||||||
61 | 2023 | Commercial, Chair Research and Development | PerkinElmer, Inc. (NYSE) |
Age | Director Since | Board Committees | Other Public Company Boards | ||||||||
72 | 2017 | Compensation, Chair Audit | Syros Pharmaceuticals, Inc. (NASDAQ) |
Based onKPMG, a public interest entity auditor registered in accordance with the above,Accounting and Financial Reporting Council Ordinance in Hong Kong, as our independent registered public accounting firms and auditors for the fiscal year ending December 31, 2023. KPMG LLP has been the Company’s independent registered public accounting firm and auditor since 2022.
There are no preemptive rights with respect to the Ordinary Shares, and shareholders will not have any dissenters’ or appraisal rights in connection with adoption of the Share Subdivision proposal. The Ordinary
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Shares in issue and issuable upon the Effective Date of the Share Subdivision are identical to, and have identical powers, preferences and rights as, the currently outstanding Ordinary Shares. Adoption of the Share Subdivision proposal will not affect the rights of the holders of currently outstanding Ordinary Shares, except for rights incidental to increasing the number of Ordinary Shares outstanding. Appropriate adjustmentsshareholders. KPMG LLP will be made to all awards granted underresponsible for auditing our consolidated financial statements for the Company’s equity incentiveyear ending December 31, 2023 filed with the SEC and other employee incentive plansthe effectiveness of our internal control over financial reporting as well asof December 31, 2023 in accordance with the number of Ordinary Shares reserved for issuance thereunder.
Tax Effect of the One-to-ten Share Subdivision
Under existing United States federal income tax laws, the proposed one-to-ten Share Subdivision will not result in any gain or loss or realization of taxable income to owners of Ordinary Shares or ADSs. The cost basis for tax purposes of each Subdivided Ordinary ShareExchange Act, and KPMG will be equal to one-tenth of the cost basisresponsible for tax purposes of the corresponding Existing Ordinary Share. The holding period for each Subdivided Ordinary Share following the Share Subdivision will be deemed to be the same as the holding periodauditing our consolidated financial statements for the corresponding Existing Ordinary Share. The laws of jurisdictions other thanyear ending December 31, 2023 filed in the United States may impose income taxes onAnnual Report prepared in accordance with the receipt of additional Ordinary Shares pursuant to the Share Subdivision.
This summaryHK Listing Rules.
Expected Timetable(1)
The following timetable sets out the key days for the Share Subdivision and Change of Board Lot Size:
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The following timetable sets out the events following the approvalapproved at the EGMAnnual Meeting, the Board of Directors will reconsider its appointment of KPMG LLP and upon the fulfillment of the conditions for the Share Subdivision:
Note:
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Exchange of Share Certificates in Hong Kong
Holders of Ordinary Shares listed in Hong Kong may submit their Existing Ordinary Share certificates (colored blue) to the address and between the times set out below in exchange for Subdivided Ordinary Share certificates (colored green). The existing share certificates for the Ordinary Shares will only be valid for delivery, trading and settlement purposes for the period up to 4:10 p.m. (Hong Kong Time) on Tuesday, May 10, 2022 and thereafter will not be accepted for delivery, trading and settlement purposes. However, the Existing Ordinary Share certificates will continue to be good evidence of legal title and may be exchanged for share certificates for the Subdivided Ordinary Shares at any time.
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Note:
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Listing Application
An application will be made by the Company to the Listing Committee for the listing of, and the permission to deal in, (i) the Subdivided Ordinary Shares, (ii) any Subdivided Ordinary Shares which may be issued upon exercise of the outstanding share options granted by the Company or any Subdivided Ordinary Shares which may be issued upon vesting of the share awards under the 2015 Equity Plan and the 2017 Equity Plan, and (iii) any Subdivided Ordinary Shares which may be issued upon the exercise of share options or any Subdivided Ordinary Shares which may be issued upon vesting of the share awards to be granted from time to time under the 2015 Equity Plan and the 2017 Equity Plan. All necessary arrangements will be made for the Subdivided Ordinary Shares to be admitted into the Central Clearing and Settlement System (“CCASS”) established and operated by Hong Kong Securities Clearing Company Limited (“HKSCC”).
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Subject to the granting of listing of, and permission to deal in, the Subdivided Ordinary Shares on the Hong Kong Stock Exchange requirements and the Subdivided Ordinary SharesHK Listing Rules, KPMG LLP and KPMG will serve as the Company’s independent auditors until the next annual general meeting, unless removed or subsequently changed by shareholders at a general meeting.
do so.
This proposalProposal 11 requires the affirmativefavorable vote of a simple majority of the votes cast by the shareholders entitled to vote who are present in person, virtually, or by proxy at the EGM. AbstentionsAnnual Meeting. Broker non-votes and abstentions with respect to this proposal will not be treated as votes cast for this purpose and, therefore, will not affect the outcome of the vote. We expect that there will be no broker non-votes will have no effect on this vote.
proposal due to the discretionary authority granted to brokerage firms, banks, and other financial institutions.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS |
•each person, or group of affiliated persons, known by us to be the beneficial owner of more than 5% of any class of our voting securities;
•each of our named executive officers;
•each of our directors; and
•all of our executive officers and directors as a group.
Name of Beneficial Owner(1) | No. of Ordinary Shares | Percent(2) | ||||||
Directors and Named Executive Officers: | ||||||||
Samantha (Ying) Du(3) | 4,868,592 | 4.90 | % | |||||
Kai-Xian Chen | 31,016 | * | ||||||
John Diekman | 49,782 | * | ||||||
Richard Gaynor | 8,912 | * | ||||||
Nisa Leung | — | * | ||||||
William Lis | 28,764 | * | ||||||
Scott Morrison | 7,345 | * | ||||||
Leon O. Moulder, Jr. | 21,615 | * | ||||||
Peter Wirth | 350,615 | * | ||||||
Billy Cho(4) | 357,730 | * | ||||||
F. Ty Edmondson(5) | 16,449 | * | ||||||
Tao Fu(6) | 484,668 | * | ||||||
Harald Reinhart(7) | 98,771 | * | ||||||
Alan Bart Sandler(8) | 19,985 | * | ||||||
All Directors and Executive Officers as a Group | 6,266,744 | 6.26 | % | |||||
Beneficial Owners of 5% or More of our Ordinary Shares(13): | ||||||||
QM11 Limited(9) | 7,922,932 | 8.2 | % | |||||
Invesco Advisers(10) | 7,286,493 | 7.6 | % | |||||
Fidelity Management & Research Company LLC(11) | 7,047,351 | 7.3 | % | |||||
Baillie Gifford & Co.(12) | 5,658,901 | 5.9 | % |
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Name of Beneficial Owner (1) | No. of ADSs (2) | Percent (3) | |||||||||
Directors and Named Executive Officers: | |||||||||||
Samantha (Ying) Du (4) | 4,180,125 | 4.14 | % | ||||||||
Kai-Xian Chen | 28,372 | * | |||||||||
John Diekman | 48,782 | * | |||||||||
Richard Gaynor | 8,912 | * | |||||||||
Nisa Leung | — | * | |||||||||
William Lis | 23,330 | * | |||||||||
Scott Morrison | 7,345 | * | |||||||||
Leon O. Moulder, Jr. | 21,615 | * | |||||||||
Michel Vounatsos | — | * | |||||||||
Peter Wirth | 342,763 | * | |||||||||
Rafael Amado | — | * | |||||||||
Billy Cho (5) | 461,389 | * | |||||||||
Harald Reinhart (6) | 170,446 | * | |||||||||
Joshua Smiley | — | * | |||||||||
Alan Bart Sandler | 4,618 | * | |||||||||
All Directors and Executive Officers as a Group | 5,297,697 | 5.23% | |||||||||
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(1)The business address of all directors and officers is 314 Main Street, Fourth Floor, Suite 100, Cambridge, MA 02142. (2)One ADS of the Company represents ten ordinary shares. (3)Beneficial ownership representing less than 1% is denoted with an asterisk (*). (4)Includes 2,946,925 ADSs issuable upon exercise of vested options, options exercisable and RSUs eligible to vest within 60 days of April 17, 2023. Also includes 230,499 ADSs held by certain holders of ordinary shares, including the Company’s management and their affiliates, for which Dr. Du does not have any pecuniary interest but for which she may be deemed beneficial owner as these holders have granted Dr. Du the right to vote their shares. (5)Includes 407,642 ADSs issuable upon exercise of vested options, options exercisable and RSUs eligible to vest within 60 days of April 17, 2023. (6)Comprises 148,199 ADSs issuable upon exercise of vested options, options exercisable and RSUs eligible to vest within 60 days of April 17, 2023. (7)Based on information provided in a Schedule 13G/A filed by FMR LLC on February 9, 2023. Abigail P. Johnson is a Director, the Chairman and the Chief Executive Officer of FMR LLC. Members of the Johnson family, including Abigail P. Johnson, are the predominant owners, directly or through trusts, of Series B voting common shares of FMR LLC, representing 49% of the voting power of FMR LLC. The Johnson family group and all other Series B shareholders have entered into a shareholders’ voting agreement under which all Series B voting common shares will be voted in accordance with the majority vote of Series B voting common shares. Accordingly, through their ownership of voting common shares and the execution of the shareholders’ voting agreement, members of the Johnson family may be deemed, under the Investment Company Act of 1940, to form a controlling group with respect to FMR LLC. The address for FMR LLC is 245 Summer Street, Boston, Massachusetts 02110. (8)Based on information provided in a Schedule 13G/A filed by Invesco Ltd. on February 13, 2023. Invesco Ltd., in its capacity as a parent holding company to its investment advisers, may be deemed to beneficially own 8,231,036 ADSs which are held of record by clients of Invesco Ltd. The address for Invesco Ltd. is 1555 Peachtree Street NE, Suite 1800, Atlanta, GA 30309. (9)Based on information provided in a Schedule 13G/A filed by Qiming Corporate GP IV, Ltd. on February 14, 2023. Qiming Corporate GP IV, Ltd. is the general partner of Qiming Managing Directors Fund IV, L.P. and Qiming GP IV, L.P. Qiming Managing Directors Fund IV, L.P. holds approximately 3.06% of the equity interest of QM11 Limited. Qiming GP IV, L.P. is the general partner of Qiming Venture Partners IV, L.P., which holds approximately 96.94% of the equity interest of QM11 Limited. Qiming Managing Directors Fund IV, L.P. holds approximately 3.06% of the equity interest of QM11 Limited. Qiming GP IV, L.P. is the general partner of Qiming Venture Partners IV, L.P., which owns approximately 96.94% of the equity interest of QM11 Limited. Qiming Venture Partners IV, L.P. holds approximately 96.94% of the equity interest of QM11 Limited. The address for QM 11 Limited is Units 4205-06, 42nd Floor, Gloucester Tower, the Landmark, 15 Queen’s Road Central, Hong Kong. (10)The beneficial ownership percentages are calculated based upon an aggregate of 979,087,430 ordinary shares, equivalent to 97,908,743 ADSs, outstanding as of April 17, 2023. The beneficial ownership rules of the SEC differ from those of the Hong Kong Securities and Futures Ordinance (“SFO”) and the HK Listing Rules. As of April 17, 2023, the interests of our directors in our ordinary shares within the meaning of Part XV of the SFO were as follows: Dr. Du 54,257,490; Professor Chen 310,160; Dr. Diekman 487,820; Dr. Gaynor 89,120; Mr. Lis 233,300; Mr. Morrison 73,450; Mr. Moulder 216,150; Mr. Vounatsos 183,320; and Mr. Wirth 3,427,630. We note that we report ownership interest in accordance with Hong Kong requirements in ordinary shares and that one of our ADSs represent 10 ordinary shares. -25- Equity Compensation Plan Information The following table contains information about securities authorized for issuance under our equity compensation plans as of December 31, 2022.
(1)Equity compensation plans approved by security holders include the 2015 Plan, 2017 Plan, and 2022 Plan. (2)The weighted-average exercise price is calculated based solely on the exercise price of outstanding options and does not take into account outstanding restricted stock units, which have no exercise price. (3)Represents the number of shares reversed and available for future issuance under the 2022 Plan. (4)The Company does not have any equity compensation plans not approved by security holders. -26-
Composition of the Board of Directors The following table sets forth the name, age, and position of each of our directors as of April 1, 2023:
For additional biographical information for our directors, see Matters Requiring Shareholder Action – Proposals 1-10 – Election of Directors – Director Biographical Information. Election of Directors The Board of Directors currently consists of ten members. The Current Articles provide that unless otherwise determined by the Company in a general meeting, the number of directors shall be not less than one or more than ten. We are not subject to any contractual obligations regarding the election of our directors. Our Nominating and Corporate Governance Committee and Board of Directors may consider a broad range of factors relating to the qualifications and background of nominees, as further set forth below under “Director Nominations.” The laws of the Cayman Islands do not require an annual election of directors, and the Current Articles provide that each Director shall be elected annually for terms expiring at the next annual general meeting of the Company, at which he or she may be eligible for re-election or until the earlier of their resignation or removal. The Current Articles provide that (1) the shareholders requisitioning a general meeting of shareholders may put forward resolutions to appoint or remove directors (with or without cause), and (2) at that meeting so convened, the shareholders of the issued shares as of the applicable record date may by ordinary resolution approve the removal of directors. Shareholders holding in aggregate not less than one-tenth of the voting rights of issued shares and entitled to vote at general meetings to requisition an extraordinary general meeting of our shareholders in accordance with the Current Articles. Additionally, the Current Articles provide that any vacancy on the Board of Directors, including a vacancy resulting from an enlargement of the Board of Directors, may be filled by ordinary resolution or by vote of a simple majority of our directors then in office. Director Nominations The Board of Directors is responsible for nominating and recommending director candidates to the Company’s shareholders for election at the annual general meeting or for appointing directors to the Board to fill a vacancy or as an addition to the existing Board between annual general meetings. The Board of Directors has delegated to the Nominating and Corporate Governance Committee the responsibility to identify, evaluate, and recommend director -27- candidates to the Board of Directors for their consideration, as deemed appropriate. From time to time, the Nominating and Corporate Governance Committee utilizes third-party search firms to identify director candidates. The Board of Directors has adopted Corporate Governance Guidelines that include, among other things, the criteria that the Board of Directors may consider in evaluating the suitability of director candidates. The Board of Directors has delegated to the Nominating and Corporate Governance Committee the responsibility for reviewing, on an annual basis, the qualification criteria for the Board of Directors as a whole and its individual members and recommending any changes to the Board of Directors for approval. In identifying director candidates, the Board of Directors and the Nominating and Corporate Governance Committee may consider any factors that they deem appropriate in the context of the needs of the Board of Directors and the overall diversity and composition of the Board of Directors. Such factors may include, but are not limited to, the candidate’s qualifications, skills, expertise, experience, integrity, independence (including any actual or perceived conflicts of interest), and time availability in light of other commitments. Diversity may be considered across multiple dimensions, including diversity in experiences, perspective, and skills as well as diversity with respect to other background characteristics such as gender, age, culture, ethnicity, and nationality. Overall, the Board of Directors and Nominating and Corporate Governance Committee will be guided to select and recommend director candidates that they determine are best suited to meet the needs of the Board of Directors and further the interests of our shareholders through their established record of professional accomplishment, ability to contribute positively to the collaborative culture among board members, knowledge of our business, understanding of the competitive landscape, and professional and personal experiences and relevant expertise. Director Nominations by Shareholders Any shareholder wishing to recommend a director candidate for consideration by the Nominating and Corporate Governance Committee should provide the following information within the time frame set forth for shareholder proposals and in accordance with our Articles of Association to Zai Lab Limited, 314 Main Street, Fourth Floor, Suite 100, Cambridge, MA 02142, Attention: Chief Legal Officer & Corporate Secretary: (a) the name and address of record of the shareholder; (b) a representation that the shareholder is a record holder of our securities or, if the shareholder is not a record holder, evidence of ownership in accordance with Rule 14a-8(b)(2) of the Exchange Act; (c) the candidate’s name, age, business and residential address, educational background, current principal occupation or employment, and principal occupation or employment for the past five years; (d) a description of the qualifications and background of the candidate that addresses the criteria for board membership approved by the Board of Directors; (e) a description of all arrangements or understandings between the shareholder and the candidate; (f) the consent of the candidate (1) to be named in the proxy statement for our next general meeting and (2) to serve as a director, if elected at that meeting; and (g) and any other information regarding the candidate that is required to be included in a proxy statement filed pursuant to SEC rules and HK Listing Rules. The Nominating and Corporate Governance Committee may seek further information from or about the shareholder making the recommendation, the candidate, or any such other beneficial owner, including information about all business and other relationships between the candidate and the shareholder and between the candidate and any such other beneficial owner. Board Diversity In accordance with Nasdaq Rule 5606, the below chart provides information on each of our director’s voluntary, self-identified characteristics.
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Our Corporate Governance Practices We seek to implement and follow corporate governance practices in line with best practices in our industry. The Board of Directors has adopted Corporate Governance Guidelines, which are available on our website at https://ir.zailaboratory.com/corporate-governance/highlights. The Board of Directors periodically reviews and updates these Guidelines, as deemed appropriate, such as in consideration of evolving legal and regulatory requirements and corporate governance best practices. Our corporate governance practices include the following: •Each of our directors is independent, except for the Chairperson who also serves as our CEO; •Since July 2022, the Board of Directors has had a lead independent director to, among other things, lead meetings of the Board when the Chairperson is not present, serve as liaison between the Chairperson and independent directors, and preside over executive sessions of our independent directors; •Our directors are elected annually; •The Audit, Nominating and Corporate Governance, Compensation, and Commercial Committees are comprised solely of independent directors; •Each of the Board Committees operates pursuant to a written charter that has been approved by the Board of Directors and is available on our website; •Independent directors meet regularly without management; •The Company provides new directors with a director orientation program to help familiarize them with our business, policies, and procedures and makes available to directors continuing education programs; •The Board and Committees are provided access to senior management as well as independent advisors as necessary to perform their duties and, for Committees, in accordance with their respective charters; •The Board of Directors and Board Committees conduct an annual self-evaluation; and •The Board periodically reviews the Company’s succession planning. Independence of Directors The Board of Directors has determined that all members of the Board of Directors, except Samantha (Ying) Du, are independent, as determined in accordance with Nasdaq requirements and the HK Listing Rules. In making this independence determination, the Board of Directors considered the relationships that each such director has with us and all other facts and circumstances that the Board of Directors deemed relevant in determining their independence, including the beneficial ownership of our share capital by each director. In considering the independence of the directors listed above, the Board of Directors considered the association of our directors with the holders of more than 5% of our share capital. We expect that the composition and functioning of the Board of Directors and each of our committees will continue to comply with applicable SEC rules and regulations, HK Listing Rules, and Nasdaq and Hong Kong Stock Exchange requirements. There are no family relationships among any of our directors or executive officers or senior management. Board Meetings The Board of Directors held five meetings in 2022. The independent directors ordinarily hold executive sessions at regularly scheduled meetings of the Board of Directors. Each of our other directors then in office attended at least 75% of the aggregate of all meetings of the Board of Directors and all meetings of the committees of the Board of -29- Directors on which such director then served. Directors and director nominees are encouraged to attend the annual general meeting of shareholders, barring significant commitments or special circumstances. Seven of nine directors then in office attended the 2022 annual meeting. Committees of the Board The Board of Directors has five standing committees: the Audit Committee, the Compensation Committee, the Nominating and Corporate Governance Committee, the Research and Development Committee, and the Commercial Committee. The Company’s CEO and Chairperson participates as a member of the Research and Development Committee. Otherwise, all of the standing committees are comprised solely of independent directors. These committees perform important functions on behalf of the Board of Directors and meet regularly. All of our committees operate in accordance with written charters, which were approved by the Board of Directors and are available on our website at https://ir.zailaboratory.com/corporate-governance/highlights. The membership of each committee as of April 1, 2023, a brief description of their primary responsibilities, and the number of meetings held in 2022 are included below. Audit Committee Scott Morrison, John Diekman, and Peter Wirth currently serve on the Audit Committee, which is chaired by Scott Morrison. The Board of Directors has determined that each member of the Audit Committee is “independent” for Audit Committee purposes as that term is defined in SEC and Nasdaq rules and the HK Listing Rules. The Board of Directors has evaluated the background of Scott Morrison and, upon so doing, designated him as an “audit committee financial expert,” as defined in SEC rules. The Board of Directors has also determined that Mr. Morrison has the relevant accounting qualification as required under the HK Listing Rules. The Audit Committee’s responsibilities include: •Overseeing the integrity of our consolidated financial statements; •Overseeing our compliance with legal and regulatory requirements; •Overseeing the qualifications, independence, and performance of our independent auditor; •Overseeing the performance of the Company’s internal audit function, including reviewing the internal audit department’s responsibilities, budget, staffing, and any recommended changes in the planned scope of the internal audit with the independent auditor and management; •Deciding whether to appoint, retain, or terminate our independent auditors and approving all audit, permitted non-audit, tax, and other services, if any, and the fees for and terms of such services, to be provided by our independent auditor; •Reviewing and discussing with management and the independent auditor our annual and quarterly and interim financial statements and related disclosures as well as significant financial reporting judgments and critical accounting policies and practices used by us; •Overseeing our controls and procedures, including: (i) reviewing the adequacy of our internal control over financial reporting; (ii) establishing policies and procedures for the receipt and retention of financial and accounting-related complaints and concerns; (iii) establishing and implementing policies and procedures for the review and approval or disapproval of proposed related party transactions and reviewing all related party transactions for potential conflict of interest situations and approving all such transactions, if deemed appropriate; •Overseeing our enterprise risk management and related guidelines and policies; •Overseeing the integrity of our information technology systems, processes, and data and reviewing and discussing with management and the internal auditor the adequacy of security for our IT systems, processes, and data; -30- •Recommending, based upon the Audit Committee’s review and discussions with management and the independent auditor, whether our annual audited financial statements should be included in our Annual Report on Form 10-K filed with the SEC and our annual report and annual results announcement filed with the Hong Kong Stock Exchange; •Preparing the Audit Committee report and other disclosures required by SEC rules to be included in our annual proxy statement; and •Reviewing our earnings releases and unaudited financial statements to be included in our quarterly and interim filings with the SEC and Hong Kong Stock Exchange, as applicable. The Audit Committee held nine meetings in 2022. The Audit Committee’s written charter satisfies the applicable standards of the SEC and Nasdaq as well as the HK Listing Rules. Compensation Committee Peter Wirth, John Diekman, and Leon O. Moulder, Jr. currently serve on the Compensation Committee, which is chaired by Peter Wirth. The Board of Directors has determined that each member of the Compensation Committee is “independent” as that term is defined in the Nasdaq requirements and HK Listing Rules. The Compensation Committee’s responsibilities include: •Reviewing the corporate goals and objectives relevant to the compensation of our Chief Executive Officer, evaluating the performance of our Chief Executive Officer in light of such corporate goals and objectives and recommending to the Board of Directors for approval of our Chief Executive Officer’s compensation based on that evaluation; •Reviewing and approving the compensation of our other executive officers; •Approving our long-term compensation strategy for employees and directors and determining the types of shares and other compensation plans to be used by us and our affiliates; •Overseeing the administration of our equity incentive plans; •Reviewing and making recommendations to the Board of Directors with respect to director compensation; •Overseeing the management of risks relating to our executive compensation and overall compensation and benefits strategies, plans, arrangements, practices, and policies; •Evaluating and assessing legal counsel, compensation consultants, and other advisors in accordance with the applicable requirements in the Nasdaq listing rules; •Retaining and approving the compensation of any outside advisors to the Compensation Committee; •Preparing the compensation committee report required by SEC rules to be included in our annual proxy statement or Annual Report on Form 10-K; and •Reviewing and discussing with management the compensation discussion and analysis to be included in our annual proxy statement or Annual Report on Form 10-K. The Compensation Committee held five meetings in 2022. Nominating and Corporate Governance Committee Leon O. Moulder, Jr., John Diekman, and William Lis currently serve on the Nominating and Corporate Governance Committee, which is chaired by Leon O. Moulder, Jr. The Board of Directors has determined that each member of the Nominating and Corporate Governance Committee is “independent” as that term is defined in the Nasdaq and HK listing rules. The Nominating and Corporate Governance Committee’s responsibilities include: •Identifying and recommending candidates for membership of the Board of Directors and committees to the Board of Directors in accordance with criteria approved by the Board of Directors; -31- •Recommending to the Board of Directors or to the appropriate committee thereto processes for annual evaluation of the performance of the Board of Directors, the Chairperson of the Board of Directors, the Chief Executive Officer, and appropriate committees of the Board of Directors; •Reviewing our practices and policies with respect to the Board of Directors and the functions, duties, and composition of the committees thereto; •Developing and recommending to the Board of Directors a set of corporate governance principles and reviewing the principles on an annual basis, or more frequently if appropriate; •Overseeing the maintenance and presentation of the Board of Directors or management’s plans for succession to our senior management positions; and •Overseeing the Company’s environmental, social, and governance (“ESG”) strategy, commitments, goals, and activities. The Nominating and Corporate Governance Committee held four meetings in 2022. Research and Development Committee Richard Gaynor, Kai-Xian Chen, Samantha Du, William Lis, and Michel Vounatsos currently serve on the Research and Development Committee, which is chaired by Richard Gaynor. The Research and Development Committee’s responsibilities include: •Reviewing and discussing with management our strategic research and development objectives, goals, and priorities, identifying opportunities for further research and development projects, and assessing, informing, and recommending to the Board of Directors such strategies and opportunities that it deems suitable for the Company; •Overseeing, assessing, and, where applicable, approving any ongoing Company research and development programs; and •Providing feedback and advice to the Board of Directors regarding our ongoing research and development programs and activities. The Research and Development Committee held eight meetings in 2022. Commercial Committee Michel Vounatsos, William Lis, and Leon O. Moulder, Jr. currently serve on the Commercial Committee, which is chaired by Michel Vounatsos. The Commercial Committee’s responsibilities include: •Overseeing our commercialization strategy including reviewing and discussing with management our product commercialization plans and efforts and competitiveness of our commercial programs; •Overseeing commercial risk management, including reviewing and discussing with management our risk assessment and risk management policies and procedures relating to commercial programs; •Reviewing the organization, implementation, and effectiveness of our compliance programs with respect to commercial programs and activities and the adequacy of the resources for those programs; and •Providing feedback and advice to the Board of Directors regarding commercial performance goals, the capabilities and performance of our commercial personnel. The Commercial Committee was established in January 2023 and thus no meetings were held in 2022. Board Leadership Structure and Role in Risk Oversight Our Founder and Chief Executive Officer, Samantha (Ying) Du, is the Chairperson of the Board of Directors. The Board of Directors believes that Dr. Du is the director best suited to identify strategic opportunities for the Company -32- and areas of focus for the Board of Directors due to her extensive understanding of our business as our founder and Chief Executive Officer and her deep knowledge of our industry. The Board of Directors also believes that the combined role of Chairperson and Chief Executive Officer promotes effective execution of strategic initiatives and facilitates the flow of information between management and the Board of Directors. In July 2022, the Board of Directors decided to further enhance our corporate governance by establishing a lead independent director and appointed John Diekman to serve in this important position. While the roles of Chairperson of the Board and Chief Executive officer are combined, our lead independent director will, among other things, lead meetings of the Board when the Chairperson is not present, serve as liaison between the Chairperson and independent directors, have the authority to call meetings of the independent directors, and, if requested by a significant portion of our shareholders, be available for consultation and direct communication. The Board of Directors oversees the management of risks inherent in the operation of our business and the implementation of our business strategies. The Board of Directors performs this oversight role by using several different levels of review. In connection with its reviews of our operations and corporate functions, the Board of Directors addresses the primary risks associated with those operations and corporate functions. In addition, the Board of Directors reviews the risks associated with our business strategies periodically throughout the year. Each of the Board Committees also oversees risk management within its areas of responsibility. In performing this function, each committee has full access to management, as well as the ability to engage advisors. For example, the Audit Committee oversees the operation of our enterprise risk management program, including the identification of the primary risks associated with our business and periodic updates to such risks, and reports to the Board of Directors regarding these activities. The Audit Committee also oversees risks related to our financial reporting, compliance with applicable laws and regulations, and our IT systems, processes, and data. In connection with its risk management role, the Audit Committee meets privately with representatives from our independent registered public accounting firms and receives regular reporting from management, including our Chief Financial Officer and Chief Compliance Officer. Our Chief Financial Officer is responsible for identifying, evaluating, and implementing risk management controls and methodologies to address financial reporting risks, and our Chief Compliance Officer is responsible for enterprise risk management program more broadly. The Compensation Committee considers risks related to our compensation policies and practices, and the Commercial Committee oversees risks related to our commercial programs. Shareholder Communications The Board of Directors provides every shareholder the ability to communicate with the Board of Directors, as a whole, and with individual directors on the Board of Directors through an established process for shareholder communication. For a shareholder communication directed to the Board of Directors as a whole, shareholders may send such communication to the attention of our Corporate Secretary via regular mail or expedited delivery service to: Zai Lab Limited, 314 Main Street, Fourth Floor, Suite 100, Cambridge, MA 02142, Attention: Board of Directors c/o Corporate Secretary. For a shareholder communication directed to an individual director in his or her capacity as a member of the Board of Directors, shareholders may send such communication to the attention of the individual director via Regular Mail or Expedited Delivery Service to: Zai Lab Limited, 314 Main Street, Fourth Floor, Suite 100, Cambridge, MA 02142, Attention: [Name of Individual Director]. Communications will be distributed to the Board of Directors, or to any individual director or directors as deemed appropriate, depending on the facts and circumstances outlined in the communications. Items that are unrelated to the duties and responsibilities of the Board of Directors may be excluded, such as junk mail and mass mailings, resumes, and other forms of job inquiries, surveys, and solicitations or advertisements. Environmental, Social, and Governance Practices We remain committed to strong ESG practices and being a company that you can trust. Since hiring our Chief Sustainability Officer and releasing our first ESG report in 2021, we have continued to focus on developing our ESG program. -33- ESG Oversight and Governance The Nominating and Corporate Governance Committee provides guidance and oversight to management with respect to ESG matters. Our executive leadership team, led by our CEO and Founder, monitors the development and execution of our overall corporate business strategy, including our ESG strategy and activities, and our Chief Sustainability Officer maintains responsibility for the day-to-day management of the enterprise ESG program. Materiality Assessment In 2022, with guidance from Business Social Responsibility (BSR), we conducted our first ESG materiality assessment to help us identify, understand, organize, and prioritize the ESG themes, opportunities, and risks that are most important to our business. The results of this analysis informed the development of our ESG strategy, which we refer to as Trust for Life because, as a company that works in the delicate space of human health, we understand the importance of being a company you can trust. Trust for Life ESG Strategy Our Trust for Life ESG strategy supports our core business of discovering, developing, and commercializing therapies that improve the lives of patients in China and worldwide. Through our ESG strategy, we continue to focus on the quality of our products and manufacturing processes, minimizing our environmental footprint, supporting our employees and communities, and promoting honest and ethical business practices. In our effort to deliver value to our patients, workforce, healthcare professionals, communities, and shareholders, we have made three Trust for Life commitments – Improve Human Health, Create Better Outcomes, and Act Right Now – which we seek to build upon in the coming years, including our goal of reaching one million patients by 2030. ESG Reporting In developing our ESG program and evaluating and reporting our progress with respect to our ESG commitments and goals, we have aligned with industry appropriate sustainability reporting standards from the Global Reporting Initiative (GRI) and Sustainability Accounting Standards Board (SASB). We have also considered other sources, including the United Nations Sustainable Development Goals (SDGs), the Task Force on Climate-Related Financial Disclosures (TCFD) framework, HK Listing Rules, and feedback from industry-leading raters and rankers, including CDP (formally the Carbon Disclosure Project), the 2022 S&P Corporate Sustainability Assessment (CSA), and the Dow Jones Sustainability Index (DJSI). Additional information on our ESG program, strategy, activities, and progress in 2022, is included in our 2022 Trust for Life ESG Report, which is available on our website at https://www.zailaboratory.com/sustainability. Code of Conduct and Ethics We have adopted a written Code of Business Conduct and Ethics (the “Code”) that applies to our directors, officers, and employees. The Code defines the Company’s culture and beliefs and how it expects its employees to conduct business worldwide, treat people with respect, protect information and property, and comply with applicable laws and regulations, among other things. Everyone at the Company, including our senior executives and financial officers, receive annual training and are required to sign an annual acknowledgment that they have read the Code and agree to abide by it and will report suspected deviations. A copy of the Code is posted on our website at https://ir.zailaboratory.com/corporate-governance/highlights.” If we make any substantive amendments to, or grant any waivers from, the Code for any officer, we will disclose the nature of such amendment or waiver on our website. -34-
The following table sets forth the name, age, and position of each of our executive officers as of April 1, 2023:
Biographical information for our executive officers as of April 1, 2023 is set forth below: The biographical information of Samantha (Ying) Du, Ph.D. isset forth above under Matters Requiring Shareholder Action – Proposals 1-10 – Election of Directors.” Billy Cho, M.B.A., M.A. joined our Company as Chief Financial Officer in March 2018. Prior to joining our Company, Mr. Cho served as Managing Director and Head of Asia Healthcare Investment Banking at Citigroup. Based in Hong Kong since 2011, Mr. Cho was responsible for healthcare client coverage at Citigroup across the Asia Pacific region and led many biopharma transactions in China, including Zai Lab’s U.S. initial public offering. Prior to this, he was based in New York in healthcare M&A investment banking and also spent time in corporate development for a pharmaceutical services company. Mr. Cho started his career at Ernst & Young LLP performing financial audits of U.S.-based healthcare companies. Mr. Cho earned an MBA. from the Wharton School of the University of Pennsylvania, an M.S. in Accounting from the University of Virginia, and a B.S. in Business Administration from the University of Southern California’s Marshall School of Business. Rafael G. Amado joined our Company as President, Head of Global Oncology Research and Development in December 2022. Dr. Amado joined Zai Lab from Allogene Therapeutics, Inc., where he had served as Executive Vice President, Head of Research and Development and Chief Medical Officer since September 2019. Prior to Allogene, he served as President of Research and Development and Chief Medical Officer of Adaptimmune, LLC from August 2018 to July 2019 and as Chief Medical Officer from March 2015 to July 2018. In these roles, he was responsible for directing discovery and clinical development strategy as well as execution activities for several gene-engineered cell therapies, chairing the R&D leadership team and providing medical guidance for pipeline prioritization. Prior to Adaptimmune, Dr. Amado held various roles of increasing responsibility at GlaxoSmithKline from 2008 to 2015, most recently as Senior Vice President and Global Head of Oncology Research and Development, and at Amgen Inc. from 2003 to 2008, where he was last Executive Director of Clinical Research and Global Development in Therapeutic Oncology. In these roles, he has been instrumental in the development of multiple medicines across therapeutic modalities. Prior to joining Amgen, he held academic roles at the University of California, Los Angeles (UCLA) in the Department of Medicine, Division of Hematology / Oncology. Dr. Amado received an M.D. from the University of Seville School of Medicine in Seville, Spain and completed his internship and residency in Internal Medicine at the Michael Reese Hospital and Medical Center and a fellowship in Hematology / Oncology at UCLA. F. Ty Edmondson joined our Company as Chief Legal Officer in August 2020. Mr. Edmondson joined our company from Biogen Inc. where he served in various legal and compliance roles during his tenure beginning in 2014, including Senior Vice President, Chief Corporation Counsel, and Assistant Secretary from November 2019 to August 2020 and in several roles of increasing responsibility, including Chief Compliance Officer, Chief Commercial Counsel, Chief International Counsel, and Chief US Counsel from August 2014 to November 2019. -35- Prior to Biogen, Mr. Edmondson served as Vice President, Associate General Counsel, and Corporate Secretary for Sepracor Inc. from 2005 until its acquisition by Sumitomo Dainippon Pharma Co., Ltd. in 2010. He then served with Sumitomo in various senior legal and compliance roles in Japan, China, and the United States until August 2014. Before Sumitomo, Mr. Edmondson served in various legal roles with life sciences companies with a focus on international and U.S. FDA work, including Eisai, Inc. from 2004 to 2005, Boston Scientific from 1999 to 2004, and Bristol-Myers Squibb from 1997 to 1999. Before his work in the life sciences industry, he was an associate with the admiralty law firm, Royston Rayzor in Houston, Texas from 1993 to 1997. Mr. Edmondson received a B.A. in History from Washington & Lee University and a J.D. from the Widener University School of Law. Harald Reinhart, M.D. joined our Company in 2017 and currently serves as President, Head of Global Development, Neuroscience, Autoimmune and Infectious Diseases. He is Adjunct Clinical Professor of infectious diseases at Yale School of Medicine. Prior to joining the Company, Dr. Reinhart worked at Shionogi US from 2011 to 2013 as the US Head of Clinical Development and Medical Affairs, directing a broad portfolio of drug candidates in anti-infectives, diabetes, allergy, GI, and pain medications. He guided several compounds through regulatory meetings and obtained approval for ospemifene. Between 2003 and 2010, he held increasingly senior roles at Novartis where he oversaw successful filings of SNDAs and NDAs for Coartem, Famvir, Sebivo, and Cubicin and managed global clinical development groups for infectious disease, immunity, transplantation, and renal disease. At NIBR (Novartis Institutes for Biomedical Research), he supervised the transitioning of research projects into clinical development. From 1991 until 2003, he worked as the International Clinical Project Manager in charge of ciprofloxacin and acarbose at Bayer Corp. with several successful SNDAs and approvals. Dr. Reinhart holds a medical degree from the University of Würzburg in Germany where he trained in anesthesiology. He completed his medical specialty training in the United States with board-certifications in internal medicine and infectious diseases. He has been a Yale faculty member since 1992. Joshua Smiley was appointed in March 2022 as our Chief Operating Officer, effective in August 2022 following the completion of his leave with his prior employer, and was promoted to President, Chief Operating Officer in April 2023. Mr. Smiley is responsible for our corporate strategy and for overseeing our commercial, manufacturing, business development, finance, human resources, information technology, and corporate affairs functions. Mr. Smiley brings to the Company over 26 years of experience working in the biopharmaceutical industry, including experience leading finance, corporate strategy, business development, venture capital, and global business services operations. Prior to joining the Company, Mr. Smiley worked for Eli Lilly and Company (Lilly) from 1995 to March 2022. While at Lilly, he held various global leadership roles with responsibility over finance, corporate strategy, business development, and capital markets activities, including Senior Vice President and Chief Financial Officer from January 2018 to February 2021. Prior to joining Lilly, he worked in investment banking and consulting. Mr. Smiley earned a B.A. in History from Harvard University. -36-
Review and Approval of Transactions with Related Parties The Audit Committee has adopted a written policy and procedures for review and approval or ratification of transactions involving the Company and related parties, including executive officers, directors, beneficial owners of more than ten percent of our voting securities, and immediate family members or certain related entities of such persons. The policy covers any related party transaction that meets the minimum threshold for disclosure in this proxy statement under relevant SEC rules, which generally include transactions involving amounts exceeding $120,000 in which a related party has a direct or indirect material interest. Pursuant to the related party transaction policy and procedures, management determines whether a transaction requires review by the Audit Committee, in which case the transaction, along with all material information, will be provided to the Audit Committee for review, approval, ratification, or termination. The Audit Committee will review the material terms and relevant factors to determine whether the transaction would be on an arms’ length basis and in the ordinary course of business. Subject to certain exceptions, related party transactions must be pre-approved by the Audit Committee, Board of Directors, or shareholders, as described below: •Audit Committee: The Audit Committee will determine whether to approve the transaction if: (1) the Audit Committee has determined that the transaction is on an arms’ length basis and in the ordinary course of business and (2) the amount, individually or in the aggregate, does not exceed the lesser of (i) 1% of annual consolidated operating expenses per the last audited annual financial statements and (ii) $1,000,000. If prior Audit Committee approval is not feasible, the Audit Committee will consider the transaction and determine whether to ratify the transaction at its next regularly scheduled meeting. In the event that a related party transaction was not previously approved or ratified under this policy, the Chair of the Audit Committee will be notified promptly. The Audit Committee or, if it is not practicable for the entire Audit Committee to consider the matter, the Chair of the Audit Committee, will consider whether the related party transaction should be ratified or rescinded or other action be taken. •Board of Directors: The Board of Directors will determine whether to approve the transactions if: (1) the transactions would not be in the ordinary course of business or on an arms’ length basis or (2) the amount, individually or in the aggregate, would exceed the lesser of (i) 1% of annual consolidated operating expenses per the last audited annual financial statements and (ii) $1,000,000. •Shareholders: If the Board of Directors determines that a related party transaction should be brought before the Company’s shareholders, then approval of such related party transaction shall be presented to the shareholders for approval through a resolution at a general meeting of shareholders or pursuant to any other method consistent with applicable law. •No director will participate in any communication, discussion, or decision with respect to a transaction for which he or she is a related party, other than to provide all material information concerning the related party transaction to the Company and Audit Committee. Similarly, shareholders will abstain from voting on any resolution presented to shareholders with respect to a transaction for which they are a related party. •Certain types of transactions with related parties do not require approval under this policy, such as the employment or compensation of executive officers or directors and transactions where the related party’s interest arises solely from ownership in our securities and all shareholders receive proportional benefits. -37- In determining whether to approve a related party transaction, the Audit Committee, Board of Directors, or shareholders, as applicable, should consider the material facts and relevant factors, including the following: •the related party’s interest in the transaction; •whether the terms and conditions are fair and on an arm’s length basis and are in the ordinary course; •whether there are appropriate business reasons for entering into the transaction; •whether the transaction is on terms no less favorable than those that could have been reached with an unrelated party; •the potential for the transaction to affect the independence of an independent director or lead to reputational risk or an actual or apparent conflict of interest for our executive officers or directors; and •any other information regarding the transaction or the related party that would be material to investors in light of the circumstances of the particular transaction. The related party transaction should only be approved if it is determined to be consistent with the interests of the Company and its shareholders. If a related party transaction is ongoing, the Audit Committee may establish guidelines for management to follow in its ongoing dealings with the related party and may periodically review and assess such ongoing transaction to determine whether it remains fair and reasonable to the Company. Transactions with Related Persons The following transactions require disclosure in this proxy statement pursuant to Regulation S-K Item 404(a). We believe that the transactions described below were made on terms no less favorable to us than could have been obtained from unaffiliated third parties. MEDx (Suzhou) Translational Medicine Co., Ltd. (MEDx) provides product research and development services to the Company. We paid MEDx $359,000 for services rendered in 2022 and nil for January 1 to April 1, 2023. Mr. Zhang, the Founder, Chief Executive Officer, and member of the Board of Directors of MEDx is an immediate family member of Dr. Samantha (Ying) Du, our Founder, Chief Executive Officer, and Chairperson of the Board of Directors. The related party arrangement with MEDx was approved by the Audit Committee in accordance with our related party transaction policy. Indemnification Cayman law does not limit the extent to which a company’s articles of association may provide indemnification of officers and directors, except to the extent any such provision may be held by the Cayman Islands courts to be contrary to public policy, such as providing indemnification against civil fraud or the consequences of committing a crime. Our Current Articles provide that each director and officer shall be indemnified and secured harmless out of the assets and funds of our Company against all actions, proceedings, costs, charges, expenses, losses, damages, or liabilities incurred or sustained by him or her in connection with the execution or discharge of his or her duties, powers, authorities, or discretions as a director or officer of our Company, including without prejudice to the generality of the foregoing, any costs, expenses, losses, or liabilities incurred by him or her in defending (whether successfully or otherwise) any civil proceedings concerning the Company or its affairs in any court whether in the Cayman Islands or elsewhere. We have entered into indemnification agreements to indemnify our directors and executive officers that will provide such persons with additional indemnification beyond that provided in our Current Articles. These agreements, among other things, indemnify our directors and executive officers against certain liabilities and expenses incurred by such persons in connection with claims made by reason of their being such a director or executive officer. -38-
None of the members of the Compensation Committee has at any time during 2022 been an officer or employee of the Company. None of our executive officers currently serves, or in the past fiscal year has served, as a member of the board of directors or compensation committee of any entity that has one or more executive officers serving on the Board of Directors or the Compensation Committee. -39-
Section 16(a) of the Exchange Act requires our officers and directors and persons who beneficially own more than 10% of our ordinary shares (collectively, “Reporting Persons”) to file reports of beneficial ownership and changes in beneficial ownership with the SEC. Reporting Persons are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file. Based solely on our review of such reports received or written representations from certain Reporting Persons during the fiscal year ended December 31, 2022, we believe that all Reporting Persons complied with all Section 16(a) reporting requirements, with the exception of: one Form 5 for John D. Diekman filed on February 14, 2022 to report three transactions that occurred on March 4, 2021, June 16, 2021, and August 17, 2021; one Form 5 for William Lis filed on February 14, 2022 to report a transaction that occurred on January 5, 2021; one Form 4 for Kai-Xian Chen filed on February 15, 2022 to report a transaction that occurred on January 3, 2022; one Form 4/A for F. Ty Edmondson filed on August 22, 2022 to report a transaction that occurred on April 1, 2022; one Form 4 for Harald Reinhart filed on November 17, 2022 to report a transaction that occurred on April 1, 2022; one Form 5 for Samantha (Ying) Du filed on December 9, 2022 to report a transaction that occurred on December 31, 2021; and one Form 4 for Samantha (Ying) Du filed on December 9, 2022 to report three transactions that occurred on January 5, 2022 and three transactions that occurred on January 28, 2022, April 1, 2022, and June 21, 2022. -40-
The Audit Committee operates under a written charter approved by the Board of Directors, which provides that its responsibilities include oversight of the integrity of our consolidated financial statements, compliance with legal and regulatory requirements, independent auditor qualifications and independence, performance of our independent auditors and the internal audit function, our compliance programs, and our risk management and internal control over financial reporting. The Audit Committee is also responsible for the appointment of our independent auditor and for pre-approving audit and non-audit services to be provided by the independent auditors. With respect to financial reporting, the Audit Committee’s role is one of oversight. Management has the primary responsibility for the financial statements and the financial reporting process, including the related internal controls and procedures. Our independent auditor, KPMG LLP, is responsible for auditing our consolidated financial statements for the year ended December 31, 2022 filed with the SEC, the effectiveness of our internal control over financial reporting as of December 31, 2022 in accordance with the Exchange Act, and our consolidated financial statements for the year ended December 31, 2022 submitted to the Hong Kong Stock Exchange in accordance with the HK Listing Rules. The Audit Committee reviewed and discussed with management and our independent auditor the audited financial statements in our Annual Report on Form 10-K for the year ended December 31, 2022. The Audit Committee also discussed with the independent auditor the matters required to be discussed with the Audit Committee by the PCAOB and SEC. The Audit Committee has received and considered the written disclosures and the letter from the independent auditor required by applicable requirements of the PCAOB regarding communications with the Audit Committee concerning independence and has discussed with the independent auditor its independence from the Company and our management. The Audit Committee has determined that KPMG LLP has not provided any non-audit services and that KPMG LLP is independent with respect to the Company. Based on the review and discussions referred to above, the Audit Committee recommended to the Board of Directors that such audited financial statements be included in our Annual Report on Form 10-K for the year ended December 31, 2022, which was filed with the SEC on March 1, 2023. The Audit Committee Scott Morrison, Chair John Diekman Peter Wirth -41-
Prior Year Auditors Deloitte Touche Tohmatsu Certified Public Accountants LLP, an independent registered public accounting firm in China, and Deloitte Touche Tohmatsu, an independent registered public accounting firm in Hong Kong (together, “Deloitte”), were appointed as our independent registered public accounting firms and auditors for the fiscal year ended December 31, 2021. Additionally, Deloitte Touche LLP, a U.S. firm, provided tax advisory services for our U.S. tax filings in 2021 and 2022. Deloitte Touche Tohmatsu Certified Public Accountants LLP audited our financial statements filed with the SEC and our internal controls over financial reporting for the fiscal years ended December 31, 2021 and 2020. Deloitte Touche Tohmatsu audited our annual financial statements for the fiscal years ended December 31, 2021 and 2020 filed with the Hong Kong Stock Exchange in accordance with the Hong Kong Listing Rules, following our secondary listing on Hong Kong Stock Exchange. In April 2022, the Audit Committee notified Deloitte that Deloitte would be dismissed from auditing our annual consolidated financial statements, effective after Deloitte’s completion of its services as the Company’s independent registered public accounting firms for the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2022 and the Company’s receipt of the requisite approvals from the Hong Kong Stock Exchange and the Financial Reporting Council of Hong Kong for the appointment of KPMG LLP. Deloitte’s dismissal as our independent registered public accounting firm became effective on May 25, 2022. Deloitte’s reports on the Company’s consolidated financial statements for the fiscal years ended December 31, 2021 and 2020 do not contain any adverse opinion or disclaimer of opinion, nor are qualified or modified as to uncertainty, audit scope or accounting principles. During the fiscal years ended December 31, 2020 and 2021 and the subsequent interim period through the effective date of Deloitte’s dismissal as our independent registered public accounting firm, the Company had (i) no disagreements with Deloitte in any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreement(s), if not resolved to the satisfaction of Deloitte, would have caused it to make reference to the subject matter of the disagreement(s) in connection with its reports for such years and interim period and (ii) no reportable events within the meaning of Item 304(a)(1)(v) of Regulation S-K. Additionally, there are no matters in respect of the change of the Company’s auditor that need to be brought to the attention of the shareholders of the Company. We do not expect representatives of Deloitte Touche Tohmatsu Certified Public Accountants LLP or Deloitte Touche Tohmatsu to be available at the Annual Meeting in person or virtually and available to respond to appropriate questions. In accordance with Item 304(a)(3) of Regulation S-K, the Company has provided Deloitte a copy of the disclosures contained herein prior to its filing with the SEC and requested that Deloitte furnish the Company with a letter addressed to the SEC stating whether Deloitte agrees with the above statements. A copy of that letter, dated May 2, 2022, is filed as Exhibit 16.1 to the Amendment to Company’s Current Report on Form 8-K filed with the SEC on May 2, 2022. -42- Auditor Fees The following table presents the fees billed to the Company by KPMG LLP and its affiliates for 2022 (in thousands). KPMG LLP has been our independent registered public accounting firm and auditor since 2022.
(1)Audit fees consist of fees for the audit of our consolidated financial statements, reviews of our interim financial statements, and the audit of the effectiveness of our internal control over financial reporting. Audit fees also include services that are normally provided in connection with statutory and regulatory filings. (2)KPMG LLP and its affiliates did not provide any audit-related, tax advisory, or other services in 2022. Pre-Approval Policies The Board of Directors has adopted policies and procedures for the pre-approval of audit and non-audit services by the Audit Committee for the purpose of maintaining the independence of our independent auditors. The Audit Committee pre-approves all auditing services, internal control-related services, and permitted non-audit services to be performed for the Company by its independent auditor. Consistent with any applicable SEC rules on auditor independence, the Audit Committee annually may establish ceilings on the level of fees and costs of generally pre-approved and sufficiently defined services that may be performed without seeking additional approval from the Audit Committee. The Audit Committee may delegate pre-approval authority to one or more of its members. The member (or members) to whom such authority is delegated must report, for informational purposes only, any pre-approval decisions to the Audit Committee at its next regularly scheduled meeting. No fees for services to KPMG LLP in 2022 were approved pursuant to any waivers of the pre-approval requirement. -43-
This Compensation Discussion and Analysis (“CD&A”) describes our compensation strategy, philosophy, and practices with respect to our executive compensation program for 2022. It also provides information regarding the compensation decisions made with respect to our named executive officers for 2022 and gives context for the information included in the tables that follow this discussion. For 2022, our named executive officers were: •Samantha (Ying) Du, Founder, Chief Executive Officer, and Chairperson of the Board of Directors; •Billy Cho, Chief Financial Officer; •Rafael G. Amado, President, Head of Global Oncology Research and Development; •Harald Reinhart, President, Head of Global Development, Neuroscience, Autoimmune, and Infectious Diseases; •Joshua Smiley, President, Chief Operating Officer; and •Alan Bart Sandler, former President, Head of Global Development, Oncology. The Compensation Committee, either on its own, or, as appropriate, together with the Board of Directors, reviews and approves the Company’s compensation structure, including all forms of compensation relating to our directors and executive officers, including our named executive officers. 2022 Business Highlights 2022 marked another year of strong growth and execution for Zai Lab. Despite challenges from the COVID-19 pandemic in China, our commercial operations continued to drive momentum, and our four commercial products that are marketed in Greater China – ZEJULA, Optune, QINLOCK, and NUZYRA – each had substantial sales growth. Our total revenue for 2022 was $215.0 million, compared to $144.3 million in 2021, representing 49% growth. We also continued to focus on improved access and affordability. As a result of our efforts, QINLOCK and NUZYRA were added to China’s National Reimbursement Drug List (NRDL) in January 2023, joining ZEJULA which was first added in December 2020, and we increased the number of supplemental insurance plan listings for Optune from 33 to 87 during 2022. Our product pipeline continues to demonstrate potential best-in-class and/or first-in-class profiles globally. Since January 2022, we have had numerous positive late-stage data readouts, including adagrasib in non-small cell lung cancer, KarXT in schizophrenia, and efgartigimod in primary immune thrombocytopenia and generalized myasthenia gravis. We also contributed to several successful registrational studies, including the Tumor Treating Fields LUNAR study and the repotrectinib TRIDENT-1 study. We expanded our portfolio of potential first-in-class and/or best-in-class assets through our strategic collaboration with Seagen Inc. for TIVDAK®, which further deepened our women’s cancer franchise. We also made advances with our pipeline of assets with global rights, including ZL-1102, our internally developed anti-IL-17A Humabody® for chronic plaque psoriasis, and ZL-1218 (CCR8). For example, we expect to initiate a Phase I study for ZL-1218 in the first half of 2023. Our portfolio now includes 22 product candidates, including 13 in late-stage clinical development. With this robust product pipeline, we expect to launch eight additional products in the next 2-3 years. -44- To sustain our growth, we expanded our talented global team both in the United States and China. For example, Josh Smiley joined us as Chief Operating Officer in August, Dr. Peter Huang as Chief Scientific Officer in November, and Dr. Rafael Amado as President, Head of Global Oncology Research & Development in December. Our expanded global leadership team will help us drive innovation in China and beyond. To further strengthen governance and oversight, we engaged KPMG LLP, a U.S. auditor, to be our independent registered public accounting firm and auditor in May, and our Board of Directors established a lead independent director role, appointing Dr. John Diekman to serve in this important position, in July. We also launched our ESG strategy, which we refer to as our Trust for Life strategy, which is focused on three commitments – to improve human health, create better outcomes, and act right now – each of which is intended to further strengthen our foundation for continued growth and strong execution. Further, to improve access to our business for investors in Greater China, we completed our conversion to primary listing on the Hong Kong Stock Exchange and our ordinary shares have been included in the Shanghai and Shenzhen Stock Connect Programs. We continued to align our executive compensation programs in 2022 with shareholder interests by linking a significant portion of executive compensation to both corporate and individual performance. As summarized in the “2022 Corporate Goals” table, we exceeded our clinical development and regulatory goals and we showed strong commitment to overcome challenges presented by the COVID-19 pandemic, which more than offset some shortfalls in certain research, business development, and commercial goals during 2022. Payouts to our named executive officers for 2022 reflected such performance. About Our 2022 Executive Compensation Program Our executive compensation program is designed to support our pay-for-performance culture, reflect the competitive market for skilled executives in both China and the United States, meet the unique characteristics of our Company, and have strong alignment with the interests of our shareholders. Our shareholders will have an opportunity to cast a non-binding advisory vote to approve our executive compensation program at the Annual Meeting. The Compensation Committee will review and consider the results of the shareholder advisory vote from the Annual Meeting when making future compensation decisions. Compensation Practices and Policies In developing our compensation programs, the Compensation Committee seeks to achieve the following outcomes: •Offer market-competitive benefits for our executive officers; •Evaluate how each executive assisted the Company in achieving its corporate goals; •Calibrate executive compensation based on the success of corporate objectives as well as each executive’s achievement of his or her individual performance goals; •Maintain an industry-specific peer group that we will consider when evaluating our executive compensation programs and decisions; •Consult with an independent compensation advisor on peer group analysis, other market data, and recommendations with respect to our compensation programs and decisions; and •Consider peer group compensation when determining target pay for our executive officers to the extent such a comparison reflects the competitive market dynamics unique to us and is consistent with our corporate goals and objectives. -45- Roles and Responsibilities Role of Compensation Committee. The Compensation Committee reviews, on an annual basis, our executive compensation program in light of our business goals and objectives and the business results and corporate performance goals we achieved for the year in order to establish the compensation for our named executive officers. The Compensation Committee may, in its discretion, adopt or recommend to the Board of Directors the adoption of, new or amended elements of our executive compensation program, to the extent our business goals and objectives have changed. The Compensation Committee shall have the authority to delegate to subcommittees of the Committee any of the responsibilities of the full Committee and to officers of the Company such responsibilities of the full Committee as may be permitted by applicable laws, rules, or regulations and in accordance with the listing rules and standards set forth by the Nasdaq and the Hong Kong Stock Exchange. The Compensation Committee currently consists of three independent directors, Peter Wirth (Chair), John Diekman, and Leon O. Moulder, Jr. In making executive compensation decisions, the Compensation Committee reviews a variety of factors and compensation-related data, including information obtained from our peer group companies, and other market data such as compensation surveys comprising companies with a similar size, complexity, and industry focus as us. The Compensation Committee also considers our Company’s performance and whether we achieved or exceeded our annual corporate performance goals as well as the individual performance of each named executive officer. Based on this corporate and individual performance assessment, the Compensation Committee will then determine or recommend the amount of total compensation that it deems appropriate for each executive officer as well as how such compensation should be allocated between cash and non-cash compensation and among the different forms of non-cash compensation. In addition, the Compensation Committee reviews our annual bonus plan and our equity incentive plan, assesses the business achievements relevant to granting awards under these plans, and makes recommendations to the Board of Directors with respect to the Company’s overall compensation policies and practices. The Compensation Committee retains the right to hire outside advisors as needed to assist it in reviewing and making modifications to our executive compensation program. The Compensation Committee works closely with our independent compensation consultants, as well as with management, to examine the effectiveness of the Company’s executive compensation program. The duties and responsibilities of the Compensation Committee are documented in the Compensation Committee’s written charter, which was adopted by the Board of Directors and can be found on our website, www.zailaboratory.com, under the “Corporate Governance” subsection of the “Investors” section. The Compensation Committee also serves, along with the Board of Directors, as the administrator of our equity incentive plans. Role of the Independent Compensation Consultant. The Compensation Committee believes that independent advice is important in developing and overseeing our executive compensation program. The Compensation Committee has engaged Pearl Meyer to provide consulting services in relation to executive and director compensation decisions. Pearl Meyer reports directly to the Compensation Committee and only provides services to us on such matters as needed and as directed solely by the Compensation Committee. These services include providing guidance on trends in CEO, executive, and non-employee director compensation; the development of the specific components of our executive compensation program; and the composition of our compensation peer group. For 2022, Pearl Meyer prepared a report that compared each element of compensation – including base salary, target annual bonus, and target long-term incentive value – for our CEO and other named executive officers to that of CEOs and executive officers with similar positions at companies in our compensation peer group. Based on the relative positioning of our executive officer compensation compared to market, and using this and other compensation and performance information described above, the Compensation Committee approved (or, in the case of the CEO, recommended to the Board of Directors for approval) the elements and target levels of executive compensation. The Board of Directors subsequently approved such recommendation regarding CEO compensation. The Compensation Committee has assessed the independence of Pearl Meyer in accordance with applicable SEC and Nasdaq rules and confirmed that Pearl Meyer’s work does not raise any conflicts of interest and that Pearl Meyer remains independent under applicable rules. -46- Role of our CEO.Each year, our CEO provides an assessment of the prior year’s company performance relative to its corporate goals as well as the individual performance of each named executive officer, other than herself, and recommends to the Compensation Committee the compensation to be paid or awarded to each named executive officer, other than herself. The Compensation Committee makes the final determinations regarding the compensation of our named executive officers, other than our CEO. Our CEO’s recommendations are based on numerous factors, including: •Company, team, and individual performance; •internal pay comparisons; •potential for future contributions; •leadership competencies; •external market competitiveness; and •any other factors deemed relevant. The Compensation Committee also considers our CEO’s compensation recommendations and assessment of the Company’s performance when assessing the CEO’s performance. The Compensation Committee makes a recommendation to the Board of Directors for the compensation to be paid or awarded to our CEO, and the Board of Directors makes the final determination regarding our CEO’s compensation. Our CEO does not participate in any deliberations regarding her own compensation. Principal Objectives of Our 2022 Compensation Program Our executive compensation program is designed to drive the creation of long-term shareholder value by awarding compensation that will attract, retain, and motivate strong leaders who perform at high levels, help us deliver on our corporate mission and objectives, and succeed in a demanding international business environment. Specifically, our executive compensation program in 2022 was: •Mission Focused and Business Driven. Our executive compensation program focused on whether each named executive officer achieved his or her individual performance goals which support the annual and long-term objectives of our business, including the discovery, development, and commercialization of innovative products to address unmet medical needs in our key therapeutic areas. Our objective is to provide an executive compensation program that contributes to building and sustaining a foundation for long-term success. •Market Competitive. While we do not benchmark our compensation, or its components, to a specific market percentile of compensation within our peer group, we consider the executive compensation programs of our peer group in making executive compensation determinations. Broader market data, as further described below, is also considered in order to provide additional context for our executive compensation decisions. Peer group and market practices are among the many factors we take into account in developing an executive compensation program that we believe will enable us to recruit, retain, and motivate our leadership team to achieve our business objectives and enhance shareholder value. •Performance Focused. We believe strongly in pay-for-performance and endeavor to provide our named executive officers with higher levels of compensation when our business goals and their personal performance objectives are met or exceeded and with lower levels of compensation when such corporate or individual performance does not meet our expectations and goals. Each performance factor is weighted separately in determining whether target bonuses have been achieved. -47- •Aligned with Shareholders. We believe every employee contributes to our success and, as such, we have endeavored to create a compensation program that provides every employee with a vested interest in our success. For members of our executive team, including our named executive officers, who set and lead our future strategic direction, a significant portion of their total pay opportunities are equity-based to promote alignment between the interests of our executive officers and our shareholders. •Flexible. We are committed to providing flexible benefits designed to allow our diverse global workforce to have rewarding opportunities that meet their varied needs so that they are inspired to maximize their performance on behalf of patients and shareholders. External Market Competitiveness and Compensation Peer Group We consider market practices and trends when designing our executive compensation programs and determining executive compensation levels. We do not target a specific market percentile or simply replicate market practice. Instead, we review external market practices as a reference point to assist us in designing an executive compensation program that is tailored to the unique characteristics of our Company and is intended to attract, retain, and inspire talented leaders, and we consider competitive ranges for each position when we make executive compensation decisions. To understand the external market competitiveness of the compensation for our named executive officers, the Compensation Committee reviews reports analyzing publicly available information and surveys prepared by Pearl Meyer. These reports compare the compensation of each named executive officer to data available for comparable positions at companies in our peer group and, in certain circumstances, the broader market, by compensation element. To determine our 2022 peer group, we identified comparable companies that approximate (i) our scope of business, including revenues and market capitalization, (ii) our global geographical reach, (iii) our research-based business with multiple marketed products, and (iv) a comparable pool of talent for which we compete. In 2021, the Compensation Committee, with support from our independent compensation consultant, conducted an analysis to determine the appropriate peer group to establish 2022 target compensation in the context of the Company’s business strategy and operating parameters. The purpose of the peer group analysis was to enable the Company to use the appropriate comparator group and third-party data sources for our annual assessment of executive compensation. Following this analysis, the Compensation Committee determined that our peer group should be updated to reflect the Company’s evolution over the prior year and better approximate the current size and scope of our business. The peer group used to establish 2022 target compensation consisted of the following 15 comparator companies:
For each of the companies in our peer group, we analyze available data to identify comparable executive officers. We then compile and analyze the data for each comparable position. Our competitive analysis includes the structure and design of the executive compensation programs as well as the targeted value of the compensation under these programs. For our executive officers, we may supplement the data from our peer group with published compensation surveys. -48- Principal Elements of Compensation Our executive compensation objectives are achieved through the following principal elements of pay:
Annual Base Salary The Compensation Committee seeks to maintain the annual base salaries that we pay to our new and existing named executive officers at competitive levels. This fixed component of executive compensation constitutes a relatively small percentage of the executive’s total compensation. The majority of total compensation for named executive officers is variable and depends on the achievement of both corporate and individual performance goals and stock price performance, thus promoting alignment between the interests of our named executive officers and shareholders. For 2022, the Board of Directors, in consideration of the recommendation by the Compensation Committee, reviewed the base salaries of chief executive officers in our peer group relative to Dr. Du’s compensation and considered Dr. Du’s capabilities, performance, and future expected contributions. Based on this analysis, the Board of Directors approved an increase to Dr. Du’s base salary to reflect her continued positive contributions in 2021 and to better align this element of her compensation with the market. The Compensation Committee undertook a similar, individualized review of each other named executive officer’s capabilities, performance, roles and responsibilities, and future expected contributions, as well as considering their base salaries compared to peer group compensation data, when approving the base salaries for our other named executive officers. Based on this analysis, the Compensation Committee approved increases to base salary for Mr. Cho and Drs. Reinhart and Sandler, in light of their continued positive contributions in 2021 and to better align this element of their compensation with the market, with a larger increase for Dr. Reinhart in light of his promotion to President, Head of Global Development, Neuroscience, Autoimmune and Infectious Diseases in December 2021. Below is a table of the annual base salaries for our named executive officers in 2022 and 2021 and the percentage changes in annual base salary, where applicable.
(1)The annual base salary for Drs. Du and Sandler and Mr. Cho was effective as of April 1, 2022. The annual base salary for Dr. Reinhart was effective as of January 1, 2022, in connection with his promotion in December 2021. The annual base salary for Dr. Amado and Mr. Smiley was effective upon the commencement of their employment with the Company on December 30, 2022 and August 1, 2022, respectively. -49- Cash Sign-On Awards for New Named Executive Officers We may provide cash sign-on awards to new named executive officers, such as to attract and motivate strong leaders and in recognition of forfeited compensation at their prior employer. Mr. Smiley received a total cash sign-on award of $400,000, which was payable in two installments: $250,000 was paid in August 2022 and $150,000 will be paid in August 2023, subject to his relocation to the Boston area. Dr. Amado received a total cash sign-on award of $600,000, which was paid in two equal installments of $300,000 in January 2023 and March 2023. If we terminate Dr. Amado’s employment for cause within one year of the effective date of his employment, he will be required to repay the full amount of this sign-on award, and if Dr. Amado resigns from the Company within one year of the effective date of his employment, he will be required to repay a pro-rated portion of the sign-on bonus award based on the number of full and partial months remaining in such one-year period. For more information on what constitutes termination for cause, see CD&A – Potential Payments Upon Termination or Change of Control. Annual Incentive Awards (Bonus) Our annual bonus program is designed to motivate and reward our named executive officers for achievement of performance that supports short- and long-term value creation for the Company. Target annual bonus opportunities are based on a percentage of the named executive officer’s base salary, and actual awards are determined based on the Compensation Committee’s assessment of corporate and individual performance. The annual incentive award for our CEO is weighted 75% for corporate performance and 25% for individual performance, and the target bonus percentage of annual base salary is 90%, an increase from 80% in 2021 to bring her target closer to that of other CEOs in our peer group. The annual incentive awards for our other named executive officers are weighted 60% for corporate performance and 40% for individual performance. The target bonus percentages range from 45% to 50% of annual base salary, which were unchanged from 2021 other than the target for Dr. Reinhart which increased from 40% to 50% in connection with his promotion and to bring his target closer to comparable executives in our company and peer group. The Compensation Committee reviewed our Company’s performance with respect to our 2022 corporate goals and concluded that the Company had achieved and, in some cases, exceeded its 2022 corporate goals. Based on this level of achievement, the Compensation Committee then determined that the company multiplier for purposes of the corporate performance element of annual incentive awards for our named executive officers was 105%. The table below outlines the Company’s progress and achievement with respect to its 2022 corporate goals.
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Upon review of the individual performance of each named executive officer, the Compensation Committee agreed that individual performance goals had been met and, in some cases, exceeded for the 2022 performance year. Individual performance ratings were determined by the Board of Directors for our CEO, in consideration of the recommendation from the Compensation Committee, and by the Compensation Committee for the other named executive officers, in consideration of the recommendation from our CEO. Bonuses were then determined based on the corporate and individual performance ratings. Actual award payouts ranged between approximately 110% and 123% of target bonuses. The table below shows the 2022 target annual bonus for each named executive officer and the actual bonuses earned by each named executive officer.
(1)Dr. Amado joined the Company on December 30, 2022 and will be eligible for an annual bonus beginning with the 2023 performance year. (2)Mr. Smiley joined the Company effective August 1, 2022, and his annual bonus was pro-rated for his period of service. (3)Dr. Sandler resigned from the Company, effective October 28, 2022. In accordance with the terms of his severance agreement and general release, a portion of the severance payment he received related to a pro-rated 2022 target annual bonus. For more information regarding the severance agreement and general release, see CD&A – Employment Agreements. -53- Equity Incentive Compensation Equity compensation directly aligns the interests of the named executive officers with those of our shareholders. We granted equity incentive compensation (“EIC”) awards during 2022 using a mix of time-based share options and restricted share units (“RSUs”).
In determining the total amount and mix of annual equity grants to our named executive officers, in April 2022, the Compensation Committee (or the Board of Directors with respect to the CEO) considered corporate and individual performance, the EIC awards granted to comparable executive officers of our peer group companies and, in certain circumstances, broader market data, as well as the retentive value of outstanding equity. In general, EIC awards constitute the largest component of our executive compensation program in order to better align the interests of our executives with those of our shareholders. In addition to the annual equity incentive awards in April 2022, the Compensation Committee (or the Board of Directors with respect to the CEO) approved a retention award for our named executive officers in June 2022. This award was given in light of strong commitment and performance in the face of challenging market conditions and geopolitical uncertainty we have faced as a cross-border company, which conditions and uncertainty have adversely impacted share price and employee retention. In recognition of the dedication and contributions of our executive officers as they navigated challenges from the ongoing effects of the COVID-19 pandemic, including government actions and quarantine measures taken in response, particularly in mainland China where our operations are primarily located, the Compensation Committee and Board of Directors determined that it was in the best interests of the Company and its shareholders to make these retention awards. The Compensation Committee (and the Board of Directors for the CEO) considered peer group and other market data when determining the size of the awards, as well as that the retentive value of the awards would be more appropriately achieved if the awards vest ratably over a four-year period (rather than a five-year vesting period that has applied to previous RSU grants), subject to the named executive officer’s continued employment with the Company on the vesting date. The Compensation Committee also approved sign-on equity awards for Mr. Smiley and Dr. Amado, which were granted upon the commencement of their employment with the Company in August 2022 and December 2022, respectively. We may provide sign-on equity awards, like these, to new named executive officers for a variety of reasons, including to help attract and motivate strong leaders, in recognition of forfeited compensation, and to help align their interests with those of our shareholders. The Compensation Committee determined that having 21,000 of the RSUs awarded to Dr. Amado vest in full on the first anniversary of the date of grant, subject to the named executive officer’s continued employment with the Company on the vesting date was necessary to attract Dr. Amado to the Company and compensate him for forfeiture of equity awards at his previous employer. -54- The equity incentive awards granted during 2022 to our named executive officers are set forth in the table below:
(1)The stock options are exercisable for ADSs, and each RSU represents a contingent right to receive one ADS. As a result, the number of shares in these columns are represented in terms of ADSs. Each ADS represents ten ordinary shares. For more information on how the RSU awards were allocated between the annual equity incentive awards in April 2022, the retention awards in June 2022, and the sign-on awards for Mr. Smiley in August 2022 and Dr. Amado in December 2022, see Executive Compensation Tables – Grants of Plan-Based Awards. Employment Agreements We have entered into employment agreements with each of our named executive officers that govern the terms and conditions of their service relationship with us, including the terms and conditions related to their compensation and benefits. Dr. Du is employed by Zai Lab Limited, pursuant to an amended and restated employment agreement that became effective on December 1, 2018. Dr. Du also is a party to an employment agreement with Zai Lab (Shanghai) Co., Ltd. In addition, Dr. Du has entered into an agreement with our U.S. subsidiary, Zai Lab (US) LLC, pursuant to which a portion of her base salary is paid by Zai Lab (US) LLC based on the level of services that she provides to this entity. The term of Dr. Du’s employment is without a fixed period and subject to a specified notice period only. Mr. Cho is employed by Zai Lab (Hong Kong) Limited pursuant to an amended and restated employment agreement dated March 22, 2019. Mr. Smiley and Drs. Amado and Reinhart are each employed by Zai Lab (US) LLC pursuant to agreements that became effective on August 1, 2022, December 30, 2022, and December 1, 2018, respectively. The compensation received by our named executive officers in accordance with these employment agreements is disclosed elsewhere in this CD&A. Each of our named executive officers is afforded severance protection through his or her employment agreement. These severance protections are described in more detail below under “Potential Payments Upon Termination or Change in Control.” Dr. Sandler was also employed by Zai Lab (US) LLC pursuant to an agreement that became effective on December 1, 2020. He resigned from the Company, effective October 28, 2022, to pursue another professional opportunity, and the Company entered into a Severance Agreement and General Release in connection with his resignation. In light of Dr. Sandler’s commitment and contributions to the Company, this agreement provided Dr. Sandler with a payment equal to his annual base salary, a pro-rated bonus, and a low six-figure additional severance payment. Other Benefits and Perquisites We provide standard group health and welfare benefits, including medical, life, and disability insurance to our employees located in the United States, including our named executive officers, as applicable. We also provide benefits required by statute to our employees, including our named executive officers, located outside of the United States. In addition, Drs. Du, Amado, and Reinhart and Mr. Smiley participate, and Dr. Sandler participated, in our tax-qualified 401(k) plan, a broad-based, defined contribution retirement plan in which all of our employees who are United States taxpayers and who meet certain age and service requirements are eligible to participate. We make a matching contribution equal to 50% of the first 5% of the employee’s elective contributions under the plan, up to -55- 2.5% of an employee’s eligible compensation. We also provide required Mandatory Provident Fund payments for our employees located in Hong Kong, including our named executive officers, as applicable. The annual value of the contributions to our retirement plan for 2022 for each named executive officer is reflected in the “All Other Compensation” column of the Summary Compensation Table below. We do not maintain a defined benefit pension plan or supplemental executive retirement plan. During 2022, we did not provide our named executive officers with any perquisites. Share Ownership Guidelines On April 1, 2021, we adopted a policy with share ownership guidelines for our executive officers to strengthen and reinforce the link our compensation programs create between our executive officers and our shareholders. A summary of our share ownership guidelines is set forth below.
Executive officers have five years from their initial appointment to comply with this policy. Only shares beneficially owned and vested are included in the share ownership calculation. Shares underlying unvested options or RSUs are not included in the calculation. All of our named executive officers currently meet the applicable share ownership guideline or are still within the five-year period to meet such guideline. Once an executive officer’s level of share ownership satisfies the applicable guideline, the executive officer is expected to continue to comply with the guideline amount for as long as the individual is subject to this policy. Future declines in share price will not affect the covered person’s compliance with this policy as long as the covered person holds a number of shares equal to or greater than the number of shares he or she held at the time he or she achieved compliance. Policies on Clawback and Recovery of Compensation We do not currently have a formal policy that provides us with the right to recover amounts paid on the basis of financial results that are subsequently restated. However, we intend to adopt a policy that addresses recovery of erroneously awarded incentive compensation in compliance with the requirements of the Dodd-Frank Act, SEC rules, and applicable listing standards. In addition, under the provisions of the Sarbanes-Oxley Act, the chief executive officer and chief financial officer of a public company may be required to forfeit certain equity- or incentive-based compensation in the event of an accounting restatement due to the material noncompliance of the issuer, as a result of misconduct, with respect to one or more reporting requirements under the securities laws. These Sarbanes-Oxley requirements would be enforced as a matter of law if the circumstances arose that warranted it. Hedging and Pledging Prohibitions In accordance with the Company’s insider trading policy, our executive officers are prohibited from engaging in pledging or hedging transactions with respect to our shares. Compensation Risk Management The Compensation Committee has reviewed our compensation policies and practices and does not believe that these policies and practices create risks that are reasonably likely to have a material adverse effect on us. Tax and Accounting Treatment The Compensation Committee believes that shareholder interests are best served if the Compensation Committee retains the discretion to approve compensation arrangements that support our corporate objectives, even if an arrangement does not qualify for full or partial tax deductibility under U.S. or other tax law or results in adverse accounting consequences to the Company. -56-
The Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management. Based upon such review and discussion, the Compensation Committee recommended to the Board of Directors that such section be included in this Proxy Statement and incorporated by reference in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, which was filed with the SEC on March 1, 2023. The Compensation Committee Peter Wirth, Chair John Diekman Leon O. Moulder, Jr.
Summary Compensation Table The following table sets forth the compensation paid to, received by or earned during each of the fiscal years set forth below by our named executive officers:
(1)Reflects the aggregate grant date fair value of restricted share awards, restricted share unit awards, performance share unit awards, and stock options granted during the applicable fiscal year, computed in accordance with ASC Topic 718. The underlying valuation assumptions for equity awards granted during 2022 are further discussed in Note 15 in our 2022 Annual Report on Form 10-K. (2)Reflects amounts earned by each of the named executive officers under our annual bonus plan for the applicable fiscal year. (3)Reflects the value of company matching contributions to the Zai Lab US 401(k) Plan and, for Dr. Sandler, the payment made in accordance with his Severance Agreement and General Release upon his resignation from the Company in October 2022. (4)Salaries for Dr. Amado and Mr. Smiley were pro-rated for their periods of service in 2022, which commenced on December 30, 2022 and August 1, 2022, respectively. (5)Reflects a one-time discretionary bonus payment awarded in connection with Dr. Reinhart’s promotion. (6)Reflects a cash sign-on award paid in August 2022 in connection with the commencement of Mr. Smiley’s employment. -58- Grants of Plan-Based Awards The following table reports potential payouts for awards made under our annual cash bonus plan for our named executive officers in 2022 and stock option and restricted share unit awards (“RSUs”) that were granted during 2022 to our named executive officers:
(1)Non-Equity Incentive Plan amounts above reflect short-term cash incentive opportunities granted under our annual bonus plan, which is discussed in more detail in CD&A – Annual Incentive Awards. Actual amounts earned by each of the named executive officers under our annual bonus plan for 2022 are disclosed above in the Summary Compensation Table. (2)Each RSU represents a contingent right to receive one ADS, and the stock options are exercisable for ADSs. As a result, the number of shares and exercise price in these columns are represented in terms of ADSs. Each ADS represents ten ordinary shares. (3)Amounts reflect the aggregate grant date fair value of restricted share unit awards and stock options granted during 2022, computed in accordance with ASC Topic 718. The underlying valuation assumptions for equity awards granted during 2022 are further discussed in Note 15 in our 2022 Annual Report on Form 10-K (4)Dr. Amado will be eligible for an annual bonus beginning in 2023. Each of our named executive officers has entered into an employment agreement that governs the terms and conditions of their employment relationship with us, including the terms and conditions with respect to their compensation and benefits. Among other items, the employment agreements set out the annual bonus targets, as a percentage of base salary, for each of our named executive officers. Please see CD&A – Annual Incentive Awards above for the 2022 bonus targets applicable to our named executive officers. -59- Outstanding Equity Awards at December 31, 2022 The following table provides information on the outstanding stock options, restricted share units, and performance share units, in each case held as of December 31, 2022 by our named executive officers:
(1)The stock options are exercisable for ADSs, and each of the stock awards represents a contingent right to receive one ADS. As a result, the number of shares and exercise price in these columns are represented in terms of ADSs. Each ADS represents ten ordinary shares. (2)Unless otherwise noted, all option awards have a maximum term of ten years from the grant date and vest in equal annual installments over five years, beginning on the first anniversary of the grant date, subject to the executive remaining in continuous service with us on each such vesting date. -60- (3)Restricted share awards and restricted share unit awards vest in equal annual installments over five years, beginning on the first anniversary of the grant date, subject to the executive remaining in continuous service with us on the vesting date, other than (i) the restricted share unit awards granted on June 25, 2022, which vest in equal amounts over four years, beginning on the first anniversary of the grant date, subject to the executive remaining in continuous service with us on the vesting date, and (ii) a one-time restricted share unit award of 21,000 shares granted to Dr. Amado on December 30, 2022 in connection with the commencement of his employment, which vests in full on the first anniversary of the grant date, subject to the executive remaining in continuous service with us on the vesting date. (4)Market values reflect the closing price of our ADSs on Nasdaq on December 30, 2022, which was $30.70. (5)Performance based share units vest based on the satisfaction of specified product advancement milestones over the performance period beginning December 1, 2021 and ending on December 31, 2025. (6)Option has a maximum term of ten years from the grant date and vested as to 20% of the number of shares subject to the option on the first anniversary of the grant date, with the remaining portion of the award vesting over 48 months in equal monthly installments. (7)The unvested portions of equity awards previously granted to Dr. Sandler were forfeited in connection with his resignation from the Company in October 2022. Under the 2017 Plan, the vested and unexercised portion of equity awards previously granted to Dr. Sandler remained exercisable for a period of three months from the date of Dr. Sandler’s resignation from the Company in October 2022. Options Exercised and Shares Vested During 2022 The following table provides information relating to stock option exercises and stock award vesting for our named executive officers during the year ended December 31, 2022.
(1)The stock options are exercisable for ADSs, and each of the stock awards represents a contingent right to receive one ADS. As a result, the number of shares in these columns are represented in terms of ADSs. Each ADS represents ten ordinary shares. (2)Represents the price of our ADSs on Nasdaq at exercise minus the stock option exercise price multiplied by the number of ADSs acquired on exercise. (3)Represents the fair market value of the shares on the vesting date, calculated as the closing price of our ADSs on Nasdaq on the vesting date (or the previous business day if vesting occurred during a weekend) multiplied by the number of shares vesting. -61- Potential Payments Upon Termination or Change of Control
Each of our named executive officers is entitled to receive certain benefits upon a qualifying termination of employment, including following a change in control of the Company, or in the event of a termination of employment due to the executive’s death or disability, in each case as described below. Under the terms of their respective employment agreements, in the event of a termination of employment, each of our named executive officers will be entitled to receive any accrued but unpaid base salary, reimbursement for unpaid business expenses incurred prior to termination, and any additional compensation as may be expressly required under applicable law, including accrued but unused vacation time (the “Final Compensation”). In addition to the Final Compensation, upon termination of the named executive officer’s employment by us without “cause” or by the executive for “good reason” (each as defined in the respective employment agreement and collectively, a “qualifying termination”), Drs. Du, Amado, and Reinhart and Mr. Cho will be entitled to receive the following severance benefits, subject to the executive’s timely execution of a separation agreement and a general release of claims in a form reasonably satisfactory to the Company: (i) an amount equal to 12 months (18 months, in the case of Dr. Du) of base salary and 12 months (18 months, in the case of Dr. Du) of the Company’s portion of monthly premiums with respect to health, dental and vision coverage or COBRA continuation coverage, as applicable, and in each case payable as salary continuation over the 12 months (18 months, in the case of Dr. Du) following the effective date of the qualifying termination (collectively, “Base Severance”) and (ii) for each executive other than Mr. Cho, a pro-rated bonus based on the number of days that the executive worked in the year of termination, payable at the same time as bonuses are paid to other senior executives of the Company (the “Pro-Rated Bonus”). In the event of a qualifying termination, Dr. Du will also receive full accelerated vesting of any then-outstanding unvested stock options, restricted share, or other equity awards held by the executive (“Equity Acceleration”). -62- In the event of a qualifying termination within 12 months following a change in control (a “change in control termination”), in addition to the Final Compensation, the Base Severance, and the Equity Acceleration but in lieu of the Pro-Rated Bonus, Dr. Du will receive a payment equal to the sum of (x) six month of base salary, (y) two times the executive’s target bonus, and (z) six months of the Company’s portion of monthly premiums payable immediately prior to the effective date of such termination with respect to health, dental, and vision insurance coverage (the “CiC Payment”). In the event of a change in control termination and in addition to the Final Compensation, Messrs. Cho and Smiley and Drs. Amado and Reinhart will receive Base Severance over a 12-month period, the Pro-Rated Bonus, and the Equity Acceleration. In addition to the Final Compensation, upon termination of an executive’s employment as a result of her or his death or disability, each named executive officer will be entitled to receive an amount equal to one month of base salary and one month of the Company’s portion of monthly premiums with respect to health, dental, and vision coverage or COBRA continuation coverage, as applicable. In addition, upon termination of Dr. Du’s employment as a result of her death or disability, she would be entitled to the Equity Acceleration. Dr. Sandler resigned from the Company, effective October 28, 2022. Upon his resignation, and in consideration of his commitments and contributions to the Company as well as the Severance Agreement and General Release he entered into with the Company, we paid Dr. Sandler $1.1 million. For more information regarding the Severance Agreement and General Release, see CD&A – Employment Agreements. -63-
CEO to Median Employee Pay Ratio We determined that the annual total compensation of our median compensated employee was $106,671 for 2022. The annual total compensation of our CEO, Samantha (Ying) Du, was $20,212,141 for 2022, as reported in the “Total” column of the Summary Compensation Table. We calculated the median compensated employee’s annual total compensation using the same methodology required for calculating total annual compensation for our CEO (and other named executive officers) for purposes of the Summary Compensation Table. The ratio of these two amounts was 1 to 189. To identify the median compensated employee, we used cash compensation consisting of base salary and allowance paid with respect to 2022 (annualized for those individuals who were not employed for the full year) and annual cash bonus or incentives paid with respect to 2022. We then identified the employee closest to the median that had been employed for the full year to serve as our median compensated individual for purposes of this analysis. We believe this pay ratio is a reasonable estimate calculated in a manner consistent with SEC rules based on our payroll and employment records and the methodology described above. Because the SEC rules for identifying the median compensated employee and calculating the pay ratio based on that employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply certain exclusions, and to make reasonable estimates and assumptions that reflect their compensation practices, the pay ratio reported by other companies may not be comparable to the pay ratio reported above. Pay Versus Performance In accordance with the pay versus performance (“PvP”) disclosure requirements in Item 402(v) of Regulation S-K, this section presents information that describes the relationship between Compensation Actually Paid (“CAP”), as that term is defined under the rules prescribed by Item 402(v), to the Company’s CEO, other named executive officers (“NEOs”) as a group, and certain financial performance measures of the Company. While the Compensation Committee (or Board of Directors for our CEO) makes executive compensation decisions after considering a variety of factors, including corporate and individual performance, the decisions of the Compensation Committee and Board of Directors in 2022 were made independently of these PvP disclosure requirements. For more information regarding our executive compensation program and related decisions, please refer to Executive Compensation – Compensation Disclosure & Analysis. Pay Versus Performance Table The following table sets forth information for each applicable year regarding the CAP of our CEO, Samantha (Ying) Du, and of our other NEOs as a group, as well as certain Company financial performance measures, including our total shareholder return (“TSR”), the TSR of the NASDAQ Biotechnology Index (our Company-Selected Peer Group), our net income, and our revenue growth. We selected revenue growth to be our Company-Selected Measure as it represents the most important financial performance measure used to link CAP for 2022 to Company financial performance for purposes of this disclosure. -64-
(1) Samantha (Ying) Du has been the CEO of the Company since 2014. (2) Deductions from, and additions to, total compensation in the Summary Compensation Table by year to calculate Compensation Actually Paid include:
(3) The valuation assumptions for stock option awards included in Compensation Actually Paid are as follows: •The expected life of each stock option, which is determined using the “simplified method” and which takes into account the average of the remaining vesting period and remaining term as of the vest or fiscal year end date. •The exercise price and the asset price, which are based on the closing price for our ADSs on Nasdaq on the vest and fiscal year end date, respectively. •The risk-free rate, which is based on the Treasury Constant Maturity rate closest to the remaining expected life as of the vest or fiscal year end date. •Our historical volatility, which is based on the daily price history for our ADSs traded on Nasdaq for each expected life prior to each vest or fiscal year end date. •The annual dividend yield, which for Zai Lab was zero as we did not pay dividends and do not expect to pay any in the foreseeable future. (4) The Non-CEO NEOs included the following executives by year: -65- 2022: Billy Cho, Rafael Amado, Harald Reinhart, Alan Bart Sandler, and Josh Smiley; 2021: Billy Cho, F. Ty Edmondson, Harald Reinhart, and Alan Bart Sandler; and 2020: Billy Cho, F. Ty Edmondson, Alan Bart Sandler, and Tao Fu. (5) TSR is determined based on the value of an initial fixed investment of $100, and the reinvestment of all dividends are assumed. The TSR peer group consists of the NASDAQ Biotechnology Index. (6) Revenue growth is calculated as follows: (total revenues from our audited annual consolidated statements of operations for the current year - total revenues from our audited annual consolidated statements of operations for the prior year) / total revenues from our audited annual consolidated statements of operations for the prior year. Financial Performance Measures The most important financial performance measures identified by the Company as linking executive compensation actually paid to our NEOs, for the most recently completed fiscal year, to our performance are as follows: •Revenue growth •Product revenues •Year-end cash and cash equivalents Pay Versus Performance: Graphical Description The illustrations below provide a graphical description of CAP (as calculated in accordance with the SEC rules) compared to: (1) our cumulative TSR and the cumulative TSR of the Peer Group, (2) our net income, and (3) revenue growth. Since a significant portion of compensation for our CEO and other NEOs consists of equity awards, the change in value of Compensation Actually Paid is directionally aligned with changes in our TSR, net income, and revenue growth. -66- CAP Versus Cumulative TSR for the Company and Cumulative TSR of the Peer Group ![]() CAP Versus Net Income ![]() -67- CAP Versus Revenue Growth ![]() -68-
For 2022, each member of our Board of Directors who is not an employee of the Company or one of our affiliates was entitled to the following compensation under our non-employee director compensation policy: •Annual cash retainer of $50,000 for each non-employee director; •Additional annual cash retainer of $35,000 for the Lead Independent Director; •Additional annual cash retainer of $20,000 for the Audit Committee chair; •Additional annual cash retainer of $10,000 for each Audit Committee member; •Additional annual cash retainer of $15,000 for the Compensation Committee chair; •Additional annual cash retainer of $7,500 for each Compensation Committee member; •Additional annual cash retainer of $10,000 for the Nominating and Corporate Governance Committee chair; •Additional annual cash retainer of $5,000 for each Nominating and Corporate Governance Committee member; •Additional annual cash retainer of $10,000 for the Research and Development Committee chair through October 19, 2022, upon which date this retainer was increased to $15,000 in recognition of the time commitment of the committee and in consideration of market practices; •Additional annual cash retainer of $5,000 for each Research and Development Committee member through October 19, 2022, upon which date this retainer was increased to $7,500 in recognition of the time commitment of the committee and in consideration of market practices; and •An annual grant of restricted shares under our 2022 Equity Plan. In accordance with our non-employee director compensation policy, each non-employee director, other than Dr. Gaynor and Mr. Morrison, received an annual grant of a number of shares of Restricted Shares (as defined in the 2022 Equity Plan) equal to $500,000 divided by the Nasdaq closing price of the Company’s ADS on the date of grant (or on the next succeeding business day if Nasdaq is not open for trading on the date of grant), rounded down to the nearest whole number, which vests in full on the first anniversary of the date of grant, subject to continued service as a member of the Board of Directors through such date. Dr. Gaynor and Mr. Morrison were not eligible to receive an annual director grant in 2022 pursuant to the non-employee director compensation policy as their appointment date was within 180 days of the date of grant of the annual equity award. Our non-employee directors are also reimbursed by the Company for reasonable and customary expenses incurred in connection with attendance at board of director and committee meetings, in accordance with the Company’s policies. Dr. Du and Ms. Leung do not receive separate compensation for their service as directors. -69- The following table provides information concerning compensation for our non-employee directors for 2022. This table does not include Michel Vounatsos as he was appointed to the Board of Directors in January 2023.
(1)Reflects the grant date fair value of restricted share awards granted during 2022 in accordance with ASC Topic 718. The underlying valuation assumptions for equity awards granted during 2022 are further discussed in Note 15 in our 2022 Annual Report on Form 10-K. (2)As of December 31, 2022, our non-employee directors held unvested restricted shares representing the following number of ADSs, each of which represents 10 ordinary shares: Dr. Chen 7,763; Dr. Diekman 7,763; Dr. Gaynor 5,942; Ms. Leung 0; Mr. Lis 7,763; Mr. Morrison 4,897; Mr. Moulder 7,763; and Mr. Wirth 7,763. (3)The additional annual cash retainers for the Chair and members of the Research and Development Committee increased from $10,000 to $15,000 and from $5,000 to $7,500, respectively, as of October 19, 2022. (4)Dr. Diekman was appointed Lead Independent Director and stepped down from his role as Chair of the Audit Committee, effective July 21, 2022. He continues to serve as a member of the Audit Committee. Dr. Diekman’s annual cash retainer was pro-rated for his periods of service in these roles. (5)Mr. Morrison was appointed Chair of the Audit Committee, effective July 21, 2022. He previously served as a member of the Audit Committee. His annual cash retainer was pro-rated for his periods of service in these roles.
The Company may satisfy SEC rules regarding delivery of proxy materials, including this Proxy Statement, by delivering a single set of proxy materials to an address shared by two or more Company shareholders. This delivery method can result in meaningful cost savings for the Company. In order to take advantage of this opportunity, the Company may deliver only a single set of proxy materials to multiple shareholders who share an address, unless contrary instructions are received prior to the mailing date. Similarly, if you share an address with another shareholder and have received multiple copies of our proxy materials, you may write or call us at the address and phone number below to request delivery of a single copy of the proxy materials in the future. We undertake to deliver promptly upon written or oral request a separate copy of the proxy materials, as requested, to a shareholder at a shared address to which a single copy of the proxy materials was delivered. If you hold ordinary shares as a record shareholder in Hong Kong or Cayman Islands and prefer to receive separate copies of proxy materials either now or in the future, please contact Zai Lab Limited at
-70- Generally, shareholders who have questions or concerns should contact our Investor Relations department at 4560 Jinke Road, Bldg. 1, Fourth Floor, Pudong, Shanghai, China 201210. However, shareholders who wish to communicate directly with , as appropriate. EACH SHAREHOLDER IS URGED TO COMPLETE, DATE, SIGN, AND PROMPTLY RETURN THE ENCLOSED PROXY CARD
-71- ZAI LAB LIMITED (Stock Code: Nasdaq: ZLAB | HKEX: 9688) (the “Company”)
FORM OF PROXY
Please Print Name(s)
being (a) shareholder(s) of the Company, hereby appoint
of the Annual Meeting. The Board of Directors of the Company (the “Board of Directors”) recommends a vote FOR resolutions 1 to 15. My/Our proxy is instructed to vote on the resolutions specified below:
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Please tick to indicate your voting preference. This proxy, when properly executed, will be voted in the manner directed herein. If you do not complete this section, your proxy will vote or abstain at his/her discretion with respect to any other matters properly presented at the Annual Meeting.
NOTES 1.This proxy is solicited by the Board of Directors. A proxy need not be a shareholder of the Company. A member may appoint a proxy of his/her own choice. The Chairperson of the meeting or F. Ty Edmondson will act as your proxy, if no other name is inserted. If you wish to vote less than all of the ordinary shares held by you, please delete the words “all of my/our ordinary shares” and insert the number of the ordinary shares that you wish to vote. If you wish to use less than all your votes, or to cast some of your votes “FOR” and some of your votes “AGAINST” a particular resolution and some of your votes “ABSTAIN” from voting on a particular resolution, you must write the number of votes in the relevant box(es). 2.If this form is returned without an indication as to how the proxy shall vote, the proxy will vote or abstain at his/her discretion with respect to any other matters properly presented at the Annual Meeting. 3.If you mark the box “abstain,” it will mean that your proxy will abstain from voting and, accordingly, your vote will not be counted either for or against the relevant resolution. Abstentions will be counted for the purpose of determining the presence or absence of a quorum. 4.This form of proxy is for use by shareholders only. If the appointor is a corporate entity, this form of proxy must either be under its seal or under the hand of an officer or attorney duly authorized for that purpose. -74- 5.To be valid, this form must be properly executed, dated, and lodged (together with a duly signed and dated power of attorney or other authority (if any) under which it is executed (or a notarized certified copy of such 6.Any alterations made to this form must be initialed by you. 7.You may revoke a previously submitted proxy in any one of the following ways: •.You may submit another properly completed proxy card with a later date. •You may grant a subsequent proxy through the Internet. •You may send a timely written notice that you are revoking your proxy to Zai Lab Limited, 314 Main Street, Fourth Floor, Suite 100, Cambridge, MA 02142, Attention: Corporate Secretary. •You may attend the Annual Meeting and vote electronically. Simply attending the Annual Meeting will not, by itself, revoke your proxy. Your most current proxy card or Internet proxy is 8.The completion and return of this form will not prevent you from attending the Annual Meeting and voting in person or virtually should you so wish, although attendance at the Annual Meeting will not in and of itself revoke this proxy. 9.In the case of joint holders, signature of any one holder will be sufficient, but the names of all the joint holders should be stated. The vote of the senior holder (according to the order in which the names stand in the register of members in respect of the holding) who tenders a vote in person, virtually or by proxy will be PERSONAL INFORMATION COLLECTION STATEMENT Your supply of your and your proxy’s (or proxies’) name(s) and address(es) is on a voluntary basis for the purpose of processing your request for the appointment of a proxy (or proxies) and your voting instructions for the Annual Meeting of the Company (the “Purposes”). We may transfer your and your proxy’s (or proxies’) name(s) and address(es) to our agent, contractor, or third-party service provider who provides administrative, computer, and other services to us for use in connection with the Purposes and to such parties who are authorized by law to request the information or are otherwise relevant for the Purposes and need to receive the information. Your and your proxy’s -75- (or proxies’) name(s) and address(es) will be retained for such period as may be necessary to fulfill the Purposes. Request for access to and/or correction of the relevant personal data can be made in accordance with the
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