Huaye Flavors (300886): Beijing Tianyuan Law Firm’s legal opinion on Anhui Huaye Flavors Co., Ltd.’s invalidation of some of the restricted shares that have been granted but have not vested yet – CFi.CN China Finance Network

Original title: Huaye Flavors: Beijing Tianyuan Law Firm’s legal opinion on Anhui Huaye Flavors Co., Ltd.’s invalidation of some of the restricted stocks that have been granted but have not vested

Beijing Tianyuan Law Firm
About Anhui Huaye Flavors Co., Ltd.
The voided portion of the restricted stock that has been granted but has not yet vested
legal advice
Jingtianguzi (2024) No. 171
To: Anhui Huaye Flavors Co., Ltd.
According to the “Special Legal Service Agreement” signed between Beijing Tianyuan Law Firm (hereinafter referred to as the “Firm”) and Anhui Huaye Fragrances Co., Ltd. (hereinafter referred to as the “Company”), the Firm is responsible for the company’s 2022 restricted stock incentive plan (hereinafter referred to as the “Incentive Plan”) as a dedicated Chinese legal advisor and issue legal opinions.

Our firm and our handling lawyers comply with the Company Law of the People’s Republic of China (hereinafter referred to as the “Company Law”), the Securities Law of the People’s Republic of China (hereinafter referred to as the “Securities Law”), and the Measures for the Administration of Equity Incentives of Listed Companies. 》 (hereinafter referred to as the “Administrative Measures”), the “Administrative Measures for Law Firms Engaging in Securities Legal Business” and other laws, regulations, normative documents and the relevant provisions of the “Articles of Association” and those that have occurred or existed before the date of issuance of this legal opinion This legal opinion is issued in accordance with the recognized business standards, ethics and diligence of the legal profession.

In order to issue this legal opinion, our lawyers reviewed the “Anhui Huaye Fragrances Co., Ltd. 2022 Restricted Stock Incentive Plan (Draft)” (hereinafter referred to as the “Incentive Plan (Draft)”) prepared by the company and our lawyers Other documents deemed necessary for review were verified and verified with respect to relevant facts.

Our lawyers make the following statement:
1. The firm and its handling lawyers comply with the provisions of the Securities Law, the Administrative Measures for Law Firms Engaging in Securities Legal Business, the Rules for the Practice of Securities Legal Business of Law Firms (Trial) and other provisions and have occurred before the date of issuance of this legal opinion. or facts that exist, we have strictly performed our statutory duties, followed the principles of diligence and good faith, and conducted sufficient verification and verification to ensure that the facts identified in this legal opinion are true, accurate, and complete, and the concluding opinions issued are legal and accurate. , there are no false records, misleading statements or major omissions, and corresponding legal liability shall be borne.

2. The lawyers of our firm have used methods such as written review, inquiry, calculation, and review in accordance with the business rules formulated in accordance with the law, and have diligently performed their verification and verification obligations diligently and prudently.

3. When issuing this legal opinion, our lawyers have fulfilled the special duty of care of legal professionals on legal-related business matters, and have fulfilled the general duty of care of ordinary people on other business matters.

4. Our lawyers handle documents directly obtained from state agencies, organizations with the function of managing public affairs, accounting firms, asset appraisal agencies, credit rating agencies, notary agencies and other public institutions, and perform legal work on legal-related business matters. The special duty of care of professionals is used as the basis for issuing legal opinions after fulfilling the general duties of attention of ordinary people on other business matters; for documents that are not obtained directly from public institutions, it is used as the basis for issuing legal opinions after verification and verification.

5. The firm agrees to regard this legal opinion as a necessary legal document for the company’s incentive plan, report or announce it together with other materials, and assume corresponding legal responsibilities in accordance with the law.

6. This legal opinion can only be used by the company for the purpose of this incentive plan and may not be used by anyone for any other purpose.

Based on the above, our lawyers issued the following legal opinions:
1. Relevant approval procedures that have been completed for this incentive plan
1. On November 30, 2022, the company held the 15th meeting of the 4th board of directors and the 12th meeting of the 4th board of supervisors, and reviewed and approved the “About 2022 Restricted Stock Incentives of Anhui Huaye Fragrances Co., Ltd.” Plan (Draft)> and its Summary, “Proposal on the Implementation Assessment and Management Measures for the 2022 Restricted Stock Incentive Plan of Anhui Huaye Fragrance Co., Ltd.” and other proposals, the company’s independent directors issued a statement on this equity incentive plan Independent opinion.

2. From December 1, 2022 to December 10, 2022, the company publicized within the company the list and positions of some of the incentive objects first granted under the 2022 restricted stock incentive plan. During the publicity period, no organization or individual There is no feedback record when raising objections or negative feedback. On December 15, 2022, the company disclosed the “Explanation on the Review Opinions and Publicity of the Board of Supervisors on the List of Partial Incentive Objects First Granted to the Company’s 2022 Restricted Stock Incentive Plan”.

3. On December 20, 2022, the company’s second extraordinary general meeting of shareholders in 2022 reviewed and approved the “Proposal on the 2022 Restricted Stock Incentive Plan (Draft) of Anhui Huaye Flavors Co., Ltd.” and its summary. Proposal on the “Assessment and Management Measures for the Implementation of the 2022 Restricted Stock Incentive Plan of Anhui Huaye Flavors Co., Ltd.” and “Proposal on Proposing to the General Meeting of Shareholders to Authorize the Board of Directors to Handle Matters Related to the Company’s Restricted Stock Incentive Plan.”

4. On January 6, 2023, the company held the 16th meeting of the fourth board of directors and the 13th meeting of the fourth board of supervisors, and reviewed and approved the “Proposal on the First Grant of Restricted Stocks to Incentive Objects” and agreed to the company’s Taking January 6, 2023 as the first grant date, 1.24 million Class II restricted shares will be granted to 45 incentive targets. The company’s independent directors expressed their independent opinions in agreement, and the company’s board of supervisors verified the list of incentive targets for this restricted stock grant.

5. On April 22, 2024, the company held the second meeting of the fifth session of the Board of Directors and the second meeting of the fifth session of the Supervisory Board, and reviewed and approved the “Proposal on Voiding Part of the Restricted Stocks that have been granted but have not yet vested”.

In summary, as of the date of issuance of this legal opinion, the company has obtained the necessary approvals and authorizations at this stage for the cancellation of the partially granted restricted stocks that have not yet vested, in compliance with the “Management Measures”, “Articles of Association” and “Incentive Plan” ( Draft)” relevant provisions.

2. Details of the invalidated restricted shares that have been granted but have not yet vested.
1. Restricted stocks are voided due to the resignation of the incentive target.
According to the relevant provisions of the company’s “Incentive Plan (Draft)”: “The resignation of the incentive target includes voluntary resignation, resignation due to company layoffs, expiration of the labor contract/employment agreement without renewal, dismissal by the company due to personal fault, and termination through negotiation. The vested stocks of labor contracts or employment agreements will not be processed. Restricted stocks that have been granted to the incentive target but have not yet vested since the date of resignation shall not be vested and will become invalid. The vested restrictions must be paid to the company before the incentive target resigns. The personal income tax involved in the restricted stocks.” Since the two incentive targets who were first granted restricted stocks resigned due to personal reasons and were not qualified as incentive targets, a total of 120,000 restricted stocks that had been granted but had not yet vested were invalidated.

2. Some restricted stocks will be invalidated due to failure to meet company-level performance assessment standards.
According to the company’s “Incentive Plan (Draft)” and “2022 Restricted Stock Incentive Plan Implementation Assessment Management Measures”: the performance assessment target for the first vesting period of the first grant is “The company needs to meet one of the following two conditions: (1) Taking the operating income in 2022 as the base, the operating income growth rate in 2023 shall not be less than 10%; (2) Using the net profit in 2022 as the base, the net profit growth rate in 2023 shall be not less than 10%. The ‘operating income’ shall be the company’s. The calculation basis is based on the audited consolidated financial statement data; ‘net profit’ is calculated based on the net profit attributable to shareholders of the listed company after deducting non-recurring gains and losses, and excludes all equity incentive plans and employee holdings of the company within the validity period. The numerical value of the impact of share-based payment expenses involved in the share plan shall be used as the basis for calculation.”
According to the “2023 Audit Report of Anhui Huaye Flavors Co., Ltd.” issued by Dahua Accounting Firm (Special General Partnership), the company’s operating income in 2023 will be 269.4184 million yuan, and the non-recurring gains and losses attributable to shareholders of the listed company in 2023 will be The net profit of the company is -7.2479 million yuan. The company’s operating income and net profit growth rate in 2023 do not meet the performance assessment targets for the first vesting period of the first grant. Therefore, 43 incentive objects (excluding the above-mentioned incentive objects who resigned) were granted for the first time. No restricted stock that vests under a vesting period plan can vest. The company’s initial grant of 336,000 restricted shares to the 43 incentive targets that could not vest in the first vesting period was invalidated.

Therefore, the company has invalidated a total of 456,000 unvested restricted shares this time. After this invalidation, the company’s 2022 restricted stock incentive plan first granted incentive objects to 43 people from 45 people, and the number of remaining restricted shares granted but not vested by the first incentive objects changed from 1.240 million shares to 784,000 shares.

According to the authorization of the company’s second extraordinary general meeting of shareholders in 2022, the cancellation of the restricted shares that have been granted and have not vested does not need to be submitted to the general meeting of shareholders for review.

In summary, our lawyers believe that the invalidated portion of the restricted shares that have been granted but have not vested are in compliance with the relevant provisions of the “Administrative Measures” and other laws, regulations and normative documents, as well as the “Articles of Association” and “Incentive Plan (Draft)”.

3. Concluding observations
In summary, our lawyers believe that the company has obtained the necessary approvals and authorizations at this stage regarding the cancellation of the restricted shares that have been granted but not yet vested. The cancellation of the restricted shares that have been granted but not yet vested is in compliance with the “Administrative Measures”, etc. Laws, regulations and normative documents as well as relevant provisions of the “Articles of Association” and “Incentive Plan (Draft)”.

This legal opinion will take effect after it is signed by the firm’s handling lawyer and stamped with the firm’s official seal.

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Beijing Tianyuan Law Firm (stamped)

principal:______________
Zhu Xiaohui

Handling lawyer:_______________
Wang Zhiqiang

_______________
Wang Yang

Our firm’s address: No. 35, Financial Street, Xicheng District, Beijing, China
Unit 509, Building A, International Enterprise Building, Postal Code: 100033

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