1.
The Company defines the Regulations in accordance with the "Guidelines for Lending of Capital, Endorsements and Guarantees by Public Companies" promulgated by Financial Supervisory Commission, Executive Yuan to help the control over endorsements/guarantees. The Company shall follow the Regulations for making endorsements/ guarantees.
2.
The counterpart to whom the Company may make endorsements/ guarantees:
(1)
Any company which has a business relationship with the Company;
(2)
Any company in which the Company holds more than 50% of the shares with voting right directly or indirectly;
(3)
Any company which holds more than 50% of the Company's shares with voting right directly or indirectly;
Subsidiaries in which Tatung Company(hereinafter referred to as "the Company") holds, directly and indirectly, 90% or more of the voting shares could provide endorsements or guarantees for each other and the total amount of endorsements or guarantees which one subsidiary provides for another shall not exceed ten percent of the net value of the Company. However, such limitation of the amount shall not be applicable to subsidiaries in which the Company holds, directly and indirectly, 100% of the voting shares. Endorsement and guarantee may be made among the intercompanies in which the Company holds 100% of the shares with voting right. The mutual guarantees in the same trade required by construction cocontractors’ contracts or the endorsements/guarantees made by the whole shareholders of the joint venture subject to their shareholding for investees shall be free from the restrictions referred to in the preceding two paragraphs. The capital contribution means that the Company makes the investment directly, or via any company in which the Company holds 100% of the shares with voting right.
3.
The scope of endorsements/guarantees made by the Company:
(1)
Financing endorsement and/or guarantee: The endorsement/guarantee made by the Company or investees of the Company for financing needs.
(2)
Endorsement/guarantee of customs duties due from the Company: The endorsement/guarantee made by the Company or investees of the Company for custom duties.
(3)
Other endorsements/guarantees: The endorsements/guarantees other those referred to in the preceding two paragraphs.
4.
Ceilings on the amount of endorsements or guarantees:
(1)
The total amount of endorsements or guarantees which the Company provides shall not exceed fifty percent of the net value of the Company based on its latest financial statements. The amount of endorsements or guarantees which the Company provides for any single enterprise shall not exceed twenty five percent of the net value of the Company based on its latest financial statements.
(2)
The total amount of endorsements or guarantees which the Company and its subsidiaries provide jointly shall not exceed one hundred and eighty percent of the net value of the Company based on its latest financial statements. The amount of endorsements or guarantees which the Company and its subsidiaries provide jointly for any single enterprise shall not exceed one hundred percent of the net value of the Company based on its latest financial statements.
(3)
If the total amount of endorsements or guarantees which the Company and its subsidiaries provide jointly exceeds fifty percent of the net value of the Company based on its latest financial statements, the Company shall explain necessity and reasonableness of endorsements or guarantees in the shareholders' meeting.
5.
Hierarchy of decision-making and authority on endorsements or guarantees:
(1)
Any endorsement and/or guarantee to be made by the Company shall be reported to and subject to the resolution of the board of directors’ Meeting, or each time a predetermined amount which is limited by thirty percent of specified amount in each item of the preceding article may be delegated to the Chairman by the board of directors to facilitate execution and such endorsement/guarantee shall be reported to the most upcoming board of directors' Meeting for ratification. Meanwhile, the development at the endorsement/ guarantee shall be reported at the shareholders' meeting for record.
(2)
Before subsidiaries in which the Company holds, directly and indirectly, 90% or more of the voting shares provide endorsements or guarantees for each other in accordance with Section 2, Article 2, a resolution must be passed by the Board of Directors of the Company firstly. However, such limitation is not applicable to subsidiaries in which the Company holds, directly and indirectly, 100% of the voting shares.
(3)
If the Company's investee asks the Company for endorsement/ guarantee or the Company asks any investee for endorsement/ guarantee, the Chairman of the Board and President of the Company or invesetee shall be the joint guarantors for the relevant endorsement/guarantee and affix the official seals therein, and the Company's responsible unit shall submit the application to the Chairman of the Board for approval on the endorsement/guarantee.
6.
Procedures for making endorsements or guarantees and review:
(1)
Upon making endorsements or guarantees for others, the Company shall implement detailed review procedures, including:
(A)
The necessity of and reasonableness of endorsements/ guarantees.
(B)
Credit status and risk assessment of the entity for which the endorsement/guarantee is made.
(C)
The impact on the company's business operations, financial condition, and shareholders' equity.
(D)
Whether collateral must be obtained and appraisal of the value thereof.
(2)
If the Company provides or its subsidiaries provide endorsements or guarantees for another subsidiary of which the net value is lower than one-half of its paid-in capital, the Company shall demand the borrower to submit a specific improvement plan and to report its operational results for the Board of Director's review on quarterly basis.
(3)
Financial Department shall establish the memorandum book for its endorsement/guarantee activities and record in detail the following information for the record: the entity for which the endorsement/ guarantee is made, the amount, the date of passage by the Board of Directors or by authorization of the Chairman of the Board, the date the endorsement/guarantee is made.
(4)
Finance Department shall follow up the matured notes that have not been collected or were stated as liability periodically and report the cause thereof. It shall also evaluate and recognize the contingent loss of the endorsement/guarantee and disclose the information about endorsement/guarantee in the financial report. It shall recall and cancel the guarantee notes to be extended and then re-issue the new guarantee notes.
7.
Custody of official seals:
The seal exclusive for endorsement/guarantee shall be the Company’s official corporate seal registered with the Ministry of Economic Affairs. The official corporate seal shall be kept by the Company’s Secretariat exclusively. The custodian of the seal shall be subject to approval of the Board of Directors. The same shall apply where the custodian is changed. Blank notes shall be managed by the Company’s Finance Department exclusively.
8.
Internal audit:
The Company's internal auditors shall perform the audit on the Company's endorsement/guarantee profile at least per quarter, and produce written auditing reports. Should there be any violation found, it is necessary to report to the Board of Directors and take the necessary response actions. In the case of material violation, a written notice is needed to notify the supervisors.
9.
Response action against excess of limit:
Should the counterpart fail to comply with the Regulations or there be any excess over the limit of amount due to unexpected changes of the Company, a plan to correct the situation has to be provided to the supervisors and the correction shall be completed as scheduled by the plan.
10.
Where it is necessary for the Company to exceed the limit of endorsement/guarantee defined herein to meet the need in accordance with the Regulations, it shall be subject to approval of the Board of Directors and joint guarantees made by a majority of the directors towards the potential loss of the excess, and the Regulations shall be amended subject to ratification of the shareholders’ meeting. If the shareholders’ meeting disapproves it, the excess shall be discharged within a given time limit. The directors’ meeting referred to in the preceding paragraph shall take into full consideration each independent director's opinion and include independent directors' opinions specifically expressing assent or dissent and their reasons for dissent into the minutes of the directors' meeting.
11.
Procedure for announcement and report:
(1)
The Company shall announce and report the previous month's balance of endorsements/guarantees of itself and its subsidiaries, as well as its turnover by the 10th day of each month.
(2)
In addition to disclosing the balance of endorsement and guarantee on a monthly basis, the Company whose balance of endorsements/guarantees reaches one of the following levels shall announce and report such event within two days from its occurrence.
(A)
The balance of endorsements/guarantees made by the Company and its subsidiaries exceed more than 50% of the net worth of the Company specified in its latest financial statement.
(B)
The balance of endorsements/guarantees to any single enterprise by the Company and its subsidiaries exceed more than 20% of the net worth of the Company specified in its latest financial statement.
(C)
The balance of endorsements/guarantees to any single enterprise by the Company and its subsidiaries reaches NT$10 million or more and the balance of endorsements/guarantees, long-term investment and funds lent to the enterprise exceed more than 30% of the net worth of the Company specified in its latest financial statement.
(D)
The increase of endorsements/guarantees made by the Company or its subsidiaries reaches NT$30 million or more, and is more than 5% of the net worth of the Company specified in its latest financial statement.
(3)
The Company shall announce and report on behalf of any subsidiary thereof that is not a public company of the Republic of China any matters that such subsidiary is required to announce and report pursuant to the subparagraph (4).
12.
The Company's subsidiaries shall comply with the following requirements:
(1)
Where a subsidiary of the Company intends to make endorsements/ guarantees for others, the Company shall instruct it to formulate its own Operational Procedures for Endorsements/Guarantees in compliance with "Regulations Governing Loaning of Funds and Making of Endorsements/ Guarantees by Public Companies".
(2)
The subsidiaries shall comply with the regulations when making endorsements/guarantees.
(3)
The subsidiaries that are not public companies of the Republic of China, when the endorsements/guarantees made by them meet the requirements for announcement and report defined in the “Guidelines for Lending of Capital, Endorsements and Guarantees by Public Companies”, shall report the amount, counterpart and time limit of the endorsements/guarantees to the parent company on a monthly basis, and the parent company shall announce and report such matters on behalf of the subsidiaries.
13.
The Operational Procedures shall be enforced upon resolution of the board of directors and be approved at the shareholders' meeting. The same shall apply to any amendments to the Procedures.
14.
Bylaw:
In accordance with the Company’s Personnel Management Regulations, managers and persons-in-charge who violate the Operational Procedures shall be punished based on the suffering condition.