Securities code: 002664 securities abbreviation: Changying Xinzhi Technology Co.Ltd(002664) Announcement No.: 2022-005
Changying Xinzhi Technology Co.Ltd(002664)
About 2022 stock option incentive plan
Supplementary explanation announcement on the rationality of stock option exercise price
The company and all members of the board of directors guarantee that the information disclosed is true, accurate and complete without false records, misleading statements or major omissions.
Changying Xinzhi Technology Co.Ltd(002664) (hereinafter referred to as “the company”) the following relevant contents of the supplementary explanation on the rationality of the exercise price of the 2022 stock option incentive plan are not regarded as investment suggestions and commitments. Please pay attention to the risks!
The company held the 17th meeting of the 4th board of directors on January 24, 2022, deliberated and voted on the proposal on the company’s 2022 stock option incentive plan (Draft) and its summary and other relevant proposals, The rationality of the stock option exercise price determined in the company’s 2022 stock option incentive plan (Draft) (hereinafter referred to as “the incentive plan” or “the incentive plan”) is supplemented as follows:
1、 The main purpose of this incentive plan
The company is a listed company, a national high-tech enterprise, one of the top ten enterprises in China’s automotive electronics and electrical appliances industry, a green enterprise in Zhejiang Province and a high-level certification enterprise by the customs, which has long been committed to the supply of motors and their core parts based on independent innovation, product R & D and mold development.
As a listed company in Zhejiang Province, starting from deeply understanding the guiding spirit of “supporting enterprises to implement flexible and diverse equity incentive and employee stock ownership plans” mentioned in the implementation plan for high-quality development and construction of common prosperity demonstration zone in Zhejiang Province (2021-2025), and in order to better respond to and actively support the construction of “common prosperity” demonstration zone in Zhejiang Province, In order to further innovate and improve the company’s income distribution mechanism and give play to the leading and exemplary role of “three distributions”, the company plans to bind through this incentive plan, including directors, middle and senior managers The core technology (business) backbone (including 40 excellent skilled workers, accounting for 7.27% of all skilled workers at present, an increase of 4.73% compared with 2.54% of the restricted stock incentive objects in 2021, which is more inclined to the core backbone employees at the grass-roots level) shares the same frequency with the development of the enterprise, so as to promote the long-term sustainable development of the company and create more value and return for shareholders.
2、 Pricing of stock options
1. Exercise price of stock option
The company plans to adopt independent pricing method to determine the exercise price of incentive plan stock options. The exercise price of the stock option granted to the incentive object in the incentive plan is RMB 11.51 per share, that is, under the condition of meeting the exercise conditions, the incentive object can purchase one share of the company’s stock at the price of RMB 11.51 per share, and the source of the stock is the directional issuance of A-Shares of the company’s common stock to the incentive object.
2. The method of determining the exercise price of stock options
The exercise price of stock options granted under the incentive plan shall not be less than the par value of the stock, and shall not be less than 60% of the higher of the following prices:
(1) The average trading price of the company’s shares on the trading day before the announcement of the incentive plan (the total trading volume of shares on the previous trading day / the total trading volume of shares on the previous trading day) is 17.28 yuan per share;
(2) The average trading price of the company’s shares in the 20 trading days before the announcement of the incentive plan (total stock trading volume in the first 20 trading days / total stock trading volume in the first 20 trading days) is 19.18 yuan per share.
3、 Pricing compliance description
1. The exercise price of the company’s stock option this time complies with the relevant provisions of Article 29 of the administrative measures for equity incentive of listed companies (hereinafter referred to as the “administrative measures”) “if a listed company uses other methods to determine the exercise price, it shall explain the pricing basis and pricing method in the equity incentive plan”, The pricing basis and method are described in detail in this draft incentive plan.
2. In accordance with the relevant provisions of Article 36 of the administrative measures, “if the grant price of restricted shares or the exercise price of stock options are determined by other methods, independent financial consultants shall be employed” in the incentive plan of the company, and independent financial consultants with securities practice qualification are employed, In addition, the independent financial advisor’s report issued by the independent financial advisor has expressed professional opinions on the pricing method of the incentive plan.
4、 Description of pricing necessity
The company adopts the above independent pricing method to determine the exercise price of stock options to promote the smooth and effective implementation of the incentive plan, which is mainly based on the following necessity factors:
1. The competition in the motor industry in which the company is engaged is becoming increasingly fierce, and various risks superimposed by human capital factors are increasing. There is an urgent need for more effective incentive methods to attract and motivate excellent talents.
The increase of various risk factors puts forward higher requirements for human resource capacity. Although the company has strengthened the construction of talent team conducive to future development by formulating corresponding human resource policies and strengthening recruitment, training and other measures, it also improves productivity and reduces the risk of human resources through the automatic and intelligent transformation of production line. In addition to the above routine work, in order to realize the stability, introduction and incentive of excellent talents, the key is to timely promote the implementation of the new phase of equity incentive plan, and determine the exercise price of stock options in this incentive plan by using the above independent pricing method, so as to improve the incentive effect and avoid the risk of insufficient talent reserve and loss, Through the circular rolling implementation of the medium and long-term equity incentive plan, it can effectively bind the interests of the core operation and management team, the company and shareholders, and promote the realization of win-win results.
2. Equity incentive is an important means for the company to realize long-term development as a medium and long-term incentive
As an important medium and long-term incentive means of the company, equity incentive can further stabilize the core backbone team of the company, improve the cohesion and centripetal force of employees, and help to realize the long-term and sustainability of incentive. At the same time, equity incentive can enhance the attraction to industry talents, and then continuously expand the core talent team, enhance the company’s competitive advantage, and provide a strong guarantee for the sustainable, healthy and stable development of the company. Therefore, an attractive equity incentive scheme is very important, so the company adopts the above independent pricing method to determine the exercise price of stock options.
3. The company still has a large number of key personnel without equity incentive, so it needs to adopt a more effective medium and long-term incentive method. The company was listed on the small and medium-sized board of Shenzhen Stock Exchange in March 2012. After listing, the company has not carried out equity incentive until February 2021. However, due to the relatively limited total amount of incentives, the number of incentives is relatively small and narrow. In fact, in the nine years since the listing of the company, the number of the company’s teams has increased significantly. In particular, the newly introduced core talents who decide to realize the transformation and development process are the main objects of poaching by competitors. At present, the newly introduced core talents have not participated in the company’s equity incentive plan, which is not conducive to the company’s retention and incentive of talents.
In addition, due to the needs of business and strategic development, the remaining old employees with long service life and high loyalty did not participate in the 2021 restricted stock incentive plan, or received relatively small shares when participating. This time, the company adopts the incentive tool of stock option and determines the exercise price of stock option through independent pricing. The main purpose is to take into account the actual situation of the above two types of personnel, not only realize the long-term binding of core talents, avoid brain drain to the greatest extent, but also realize the effective integration of incentive and restraint through performance assessment, Promote the sustained and rapid growth of the company’s performance.
4. Companies listed on the gem of Shenzhen stock exchange that have implemented the registration system have launched competitive equity incentive schemes (using “class II restricted stocks”) to compete for talents. Compared with enterprises in the same industry listed on the gem, if the company does not launch attractive equity incentive schemes accordingly, it will face greater pressure of personnel loss.
5、 Explanation of pricing rationality
1. From the perspective of incentive effect, if there is no discount on the exercise price of stock option, it is difficult to ensure the employee income and produce better incentive effect.
If stock options are granted to employees according to the market price, the incentive effect on employees is low because there is no price discount space. From the historical situation of market practice, some stock option incentive cases lose incentive effect due to the upside down of stock market price and option exercise price; Even if the exercise conditions are met, if the company’s share price has no growth space or less growth space due to the fluctuation of the secondary market, it will have less income for employees, and there are tax costs, so it is impossible to achieve a good incentive effect.
2. Compared with the launch time of the restricted stock incentive plan in 2021, the company’s share price is relatively high, and the exercise risk in the future is relatively high.
As of the deliberation date of the board of directors of the draft incentive plan, the closing price of the company’s shares was 17.30 yuan / share; The closing price of the company’s shares at the time of announcement of the draft restricted stock incentive plan in 2021 was 11.68 yuan / share. In view of the relatively high share price of the company at present, if there is no room for price discount, there will be great pressure on employees’ funds, which will also increase the risk that they will not be able to exercise their rights in the future, or the income after exercise will be low, and the expected incentive effect will not be achieved. Therefore, based on the principle of effective incentive and giving consideration to internal balance, the company adopts the above independent pricing method to determine the exercise price of stock options in this incentive plan.
3. The company sets strict assessment conditions and assessment system, and there is no benefit transfer
In view of the above determined independent pricing method of stock options, the company’s equity incentive plan will set relatively strict assessment conditions and assessment system, including performance assessment on the net profit attributable to shareholders of listed companies deducting non recurring profits and losses from 2022 to 2024 at the company level; At the same time, at the individual level, the individual exercisable amount will be determined according to the assessment methods formulated by the company and the individual performance evaluation of incentive objects. There is no transfer of interests to relevant employees and does not damage the interests of listed companies and shareholders.
The stock options granted by the incentive plan shall be subject to annual performance evaluation and exercise in the three assessment fiscal years of the exercise period, so as to meet the performance evaluation objectives as the exercise conditions of the incentive object. If the company fails to meet the performance assessment objectives as a whole, the stock options of all incentive objects corresponding to the exercisable rights in the assessment year shall not be exercised and shall be cancelled by the company. Therefore, if the incentive object fails to bring performance growth to the company and increase the rights and interests of shareholders, the incentive object will not be able to obtain and realize the corresponding rights and interests granted.
4. After 12 months from the date of grant, the stock option granted to the incentive object will be exercised in three phases in the next 36 months, with the exercise proportion of 50%, 30% and 20% respectively. In case of personal changes such as resignation of the incentive object, according to the provisions of the incentive plan, the unexercised part of the granted shares will be cancelled. The incentive object needs to continue to work and serve in the company and meet the requirements of performance and performance appraisal in order to obtain corresponding rights and interests. The setting of the exercise period and proportion will promote the incentive objects to invest in management, R & D and production more safely and stably, and create long-term sustainable returns and values for the company and shareholders, which is in line with the interests of the company, shareholders and all parties in the market.
5. There have been many relevant practice cases of determining the exercise price independently in the market
In the listed companies of Shanghai Stock Exchange and Shenzhen Stock Exchange, there have been many cases in which the exercise price of stock options has been determined by independent pricing; In practice, it is feasible to determine the exercise price of options through independent pricing.
6. Using independent pricing method to determine the exercise price of stock options has limited impact on the cost of the company
According to the relevant provisions of accounting standards for Business Enterprises No. 11 – share based payment and accounting standards for Business Enterprises No. 22 – recognition and measurement of financial instruments, the company determines the fair value of stock options on the grant date according to relevant valuation instruments, and finally confirms the share based payment expenses of the incentive plan. Using the above independent pricing method to determine the exercise price of stock options will lead to a relative increase in the total cost of share payment compared with the market price grant, but the amount of increase is small. Combined with the above performance evaluation objectives, the impact on the company’s financial statements and daily operation is relatively limited. Based on the current information, the company preliminarily estimates that the amortization of stock option expenses will have an impact on the net profit of each year within the validity period without considering the stimulating effect of the incentive plan on the company’s performance, but the impact is small. If we consider the positive effect of this incentive plan on the development of the company, so as to stimulate the enthusiasm of the management team, improve business efficiency and reduce agent costs, the improvement of the company’s performance brought by this incentive plan will be much higher than the increase of expenses brought by it. 6、 Summary
In the special period of the epidemic, under the background of the construction of the “common prosperity” demonstration area and the transformation of the national new energy strategy, the company has formulated this incentive plan to better bind and motivate the company’s directors, middle and senior managers, core technology (business) backbone talents and attract excellent industry talents for the consideration of seeking opportunities in danger and stable and sustainable development. Compliance in stock option pricing procedures, necessary and reasonable pricing basis and methods are conducive to the sustainable development of the company and will not damage the interests of listed companies and shareholders.
It is hereby announced.
Changying Xinzhi Technology Co.Ltd(002664) board of directors
January 25, 2022
