Employee Stock Options Q & A
（Updated March 2013）
Table of Contents
Page
1. Articles of Incorporation（Q1 ~ Q2） ------------------------------------------------ 1
2. Optionee（Q3 ~ Q7） ------------------------------------------------------------------- 1
3. Application Documents（Q8 ~ Q10） ------------------------------------------------ 2
4. Employee Stock Option Plan（Q11 ~ Q18） ---------------------------------------- 3
5. Exercise Price（Q19 ~ Q20） ---------------------------------------------------------- 6
6. Certification & Centralized Depositing（Q21） ------------------------------------ 7
7. Listing of Certificate of Payment for Exercise of Options （Q22） ------------- 8
8. Mandatory Information in the Certificates（Q23） --------------------------------- 9
9. Total Number of Options to be Granted （Q24 ~ Q27） -------------------------- 9
10. Options granted prior to retroactive handling of public issuance
procedures(Q28~ Q32) ----------------------------------------------------------------- 11
Appendix Example Employee Stock Option Plan ------------------------------------- 13
Employee Stock Options Q & A
（Updated March 2013）
1. Articles of Incorporation
1.
Where shares subscribed through Options issued by an
exchange-listed or OTC-listed company are to be met by the
company’s issued shares, is the company required to document such
matter in its articles of incorporation?
A:
In the situation where the subscription to new shares through Options
are to be met by previously issued shares instead of new shares to be
issued in the future, an exchange-listed or OTC-listed company does not
need to set out the number of shares subscribable through Options in its
articles of incorporation as such subscription will not impact the
company’s authorized capital, being the maximum amount of share
capital that the company is authorized to issue to shareholders.
2.
Pursuant to Article 60-8 of the “Regulations Governing the Offering
and Issuance of Securities by Securities Issuers” (referred to as the
“Regulations Governing Offering and Issuance of Securities”
hereinafter), the total number of shares subscribable through
Options issued and outstanding from all previous issues may not
exceed 15 percent of the total number of the issuer’s issued shares.
Shall the number of shares subscribable through Options stated in
the company’s articles of incorporation in accordance with Article
28-3 of the Securities and Exchange Act then exceed 15 percent of
the total number of the issuer’s issued shares?
A:
Article 28-3 of the Securities and Exchange Act stipulates that public
companies that offer or issue stock options, preferred shares with
warrants or corporate bonds with warrants shall state in the articles of
incorporation the number of shares to be subscribed for under the
subscription rules prescribed by the companies. Where the articles of
incorporation do not stipulate the subscription rule, a company may set
aside the maximum number of shares subscribable through the Options.
The number of shares subscribable through Options registered for
issuance by a securities issue shall still satisfy the criteria set out in
Article 60-8 of the “Regulations Governing Offering and Issuance of
1
Securities”.
2. Optionee
3. In addition to treasury stocks, can the company extend the offer of
Options to employees of its domestic and offshore subsidiaries as an
incentive to source talents?
A:
As part of the company’s incentive scheme to source talents, in adidtion
to the company’s employees, employees of the company’s domestic and
offshore subsidiaries are also eligible Optionees, provided that the provisions
set forth in Jin-Kuan-Cheng Tze (1) Order No. 0960073134 published on
December 26, 2007 are complied. The Company shall stipulate the rights and
eligibility criteria of the optionee in the Employee Stock Option Plan (referred
to as the “Plan” hereinafter).
4.
Are directors or supervisors of the company eligible for the granting
of Options issued by the company?
A:
Directors and supervisors of the company are not employees of the
company and hence are not eligible for the granting of Options except
where a director is concurrently serving as the company’s employee.
5.
Does the term “employee” include employees who have ceased to be
employed by the company on account of redundancy or disability as
a result of an occupational injury?
A:
Article 28-3 of the Securities and Exchange Act provides that a
company may issue Options to employees as an incentive to source and
retain talents in order to increase a company’s competitiveness. As such,
a company shall ensure that Options are only granted to “employees” at
the time of grant and shall also stipulate the eligibility criteria clearly in
its Employee Stock Option Plan and adhere to the Plan accordingly.
6.
Are employees required to complete certain years of service prior to
being eligible for granting of Options?
A:
The Plan does not limit the granting of Options on the basis of the year
of service completed by an employee. The company shall decide and
state clearly the purpose of the grant in the Plan and adhere to the
condition that such options shall only be granted to employees.
7. Can the Options be granted to part-time employees?
2
A:
Options issued by the company shall only be granted to full-time
employees of the company to protect the rights and interest of the
company’s shareholders.
3. Application Documents
8.
Can the company void or revoke the issuance of Options after the
effective date due to special circumstances (such as: termination of
the optionee’s employment at the company or market-price related
factor etc.)? Can the options be voided or revoked after the issuance
date? Will the revocation affect the next issuance of Options?
A:
9.
(1)
If any of the circumstances described in Article 11 of the
“Regulations Governing the Issuance and Offering of
Securities” are found to be in connection with the issuance of
employee stock employees, the Financial Supervisory
Commission may void or revoke its effective registration or
approval. In the event a company is unable to issue the options
accordingly due to special circumstances other than those
described above after the FSC effected the issuance, the
issuance will automatically become void upon expiration of the
issuance period as set forth in paragraph 2, Article 56 of the
Regulations Governing the Issuance and Offering of Securities.
A company shall not revoke options already granted to its
employees due to the fact that a contractual relationship
between the company and its employees is established once
options are issued.
(2)
Public offering or reissuance of revoked Options previously
filed for issuance under circumstances other than that described
in subparagraph 2(1), paragraph 1, Article 6 of the “Regulations
Governing the Issuance and Offering of Securities” shall not be
bound by the 3-month waiting period requirement stipulated in
Subparagraph 6, Paragraph 7 of the Regulations and the
20-buisness-day waiting period requirement stipulated in
subparagraph 2, paragraph 1, Article 13 of the Regulations for
the issuance to become effective.
What are the procedures for filing an application with the
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Competent Authority where Options are to be covered by treasury
stock?
A:
An exchange-listed or OTC-listed company planning to use its treasury
stock to cover Options upon exercising of the options shall apply to the
FSC in accordance with the following procedures:
(1)
The company shall register the issuance of such Options in
accordance with the procedures stipulated in the “Regulations
Governing the Issuance and Offering of Securities” and state
clearly in the Employee Stock Option Plan that the performance
of contract will be met by “delivery of already issued shares”
according to subparagraph 5, paragraph 1 of Article 56 of the
Regulations.
(2)
After the registration for the issuance of “Options” with the
FSC becomes effective, a company repurchasing its shares at a
centralized securities exchange market or at the place of
business of a securities firm to meet its contractual obligations
in connection with the issuance shall, in accordance with
Article 28-2 of the Securities and Exchange Act and Article 2 of
the “Regulations Governing Share Repurchase by
Exchange-Listed and OTC-Listed Companies” within two days
counting from and inclusively of the day on which the
resolution was made at a meeting of the board of directors,
announce the repurchase, and report the below listed items to
the FSC. A company repurchasing its own shares by means of
public tender (not at a centralized securities exchange market or
at the place of business of a securities firm) shall report to the
FSC and make public notice pursuant to the Regulations
Governing Tender Offers for Purchase of the Securities of a
Public Company.
(3)
Pursuant to Paragraph 4 Article 28-2 of the “Securities and
Exchange Act”, shares bought back by a company for
transferring to employees under an employee stock option
agreement shall be transferred within three years from the date
of buyback. The shares not transferred within the said time
limit shall be deemed as not issued by the company, and the
registration of such shares shall be voided. In addition, Article
54 of the “Regulations Governing the Issuance and Offering of
4
Securities” stipulates that an employee may request that the
stock options after 2 full years since the issuance of the Options
and the term of the options may not exceed 10 years. As such, a
company shall plan for the buyback of its shares according to
the fulfillment of its obligations based on the exercising of the
options.
10. Where the exercising of Options are to be met by the issuance of
new shares, is the company required to register the issuance of new
shares with the competent authority and submit a prospectus?
A:
Issuance of new shares to cover the exercising of Options under an
“Employee Stock Option Plan” shall be carried out in accordance with
the procedures governing the conversion of convertible corporate bonds
to shares. The company is not required to register the issuance of new
shares with the FSC.
4. Employee Stock Option Plan
11. As part of a long-term plan, can the company administer more
than two different types of employee stock option plans (e.g.
different exercise term, exercise price or different service-based
conditions)? If not, can the company stipulate two different
exercising criteria under one plan?
A:
The company can only register one plan with each issuance of Options.
However, the plan may stipuate more than two different types of
exercising criteria to suit different categories of optionees provided that
such criteria and the planned issue date are clearly stated in the plan and
in compliance with the “Regulations Governing the Issuance and
Offering of Securities”. The restriction on the number of shares for each
issuance of Options pursuant to Article 51 of the “Regulations
Governing the Issuance and Offering of Securities” is calculated
seperately on a per-issuance basis.
12.
Can the company stipulate the terms and conditions governing
non-exercise of options in the event of resignation,
under-performance, or declaration by an employee to forfeit his or
her rights to exercise the Employee Stock Option Plan and adjust
the list of eligible optionees upon occurrence of the aforementioned
events? What are the procedures to report the company’s
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resolutions to the competent authority? In the event an optionee
forfeits his or her rights to exercise, can the company arrange for
other employees to acquire the shares based on the exercise price
prevailing at the time of exercise?
A:
(1)
The company’s obligations and employees’ rights relating to
Options shall be stipulated clearly in the Employee Stock
Option Plan according to the company’s circumstances at the
time of issuance without violating subparagraphs 4 to 10,
paragraph 1 of Article 56 of the “Regulations Governing the
Issuance and Offering of Securities”. After the registration of
issuance of Options with the FSC becomes effective but prior
to the granting of options, the company may amend the terms
and conditions of the existing Employee Stock Option Plan in
accordance with paragraph 4, Article 57 of the “Regulations
Governing the Issuance and Offering of Securities” where the
status of the company’s business operations warrants such
amendment.
(2)
After Options are granted to an employee, should the
occurrence of any event as stipulated in the Employee Stock
Plan render the issuance void, the options granted to the
employee shall be annulled and as such, the forfeited number of
shares the optionee was entitled to acquire shall not be
allocated to other employees.
13.
Pursuant to Article 56 of the “Regulations Governing the Issuance
and Offering of Securities”, the Employee Stock Option Plan
shall state an optionee’s rights and obligations after exercising
the stock options. Can the company stipulate restrictions on the
optionee’s voting rights, rights to dividend payments and rights
to acquire new shares in the Plan?
A:
A company may stipulate the rights and entitlements of an optionee
after exercising the stock options in the Employee Stock Option Plan,
provided that it does so in accordance with the Company Act or other
relevant laws and regulations. As such, a company shall not restrict an
optionee’s rights as a common shareholder (such as voting rights, rights
to dividend payments and rights to acquire new shares) after exercising
6
his or her rights to acquire common shares of the company.
14. What shall be stipulated in a company’s Employee Stock Option
Plan in accordance with paragraph 1, Article 56 of the
“Regulations Governing the Issuance and Offering of Securities”?
A:
Companies issuing Options shall formulate an Employee Option Plan
under which matters prescribed by paragraph 1, Article 56 of the
“Regulations Governing the Issuance and Offering of Securities” shall
be set forth accordingly (see attached for an example Employee Stock
Option).
15.
Paragraph 3, Article 56 of the “Regulations Governing the
Issuance and Offering of Securities” provides that any change to
the terms and conditions set out in the Employee Stock Option
Plan shall be made only after being approved by majority vote in
a meeting of the Board of Directors at which two-thirds or more
of directors are present; whereas in some companies, the Board of
Directors’ meeting is convened only once per quarter and as such,
any required amendment to the terms and conditions of a plan
submitted for approval by the competent authority cannot be
amended in time with the approval of directors. Can the Board of
Directors authorize the Chairman to approve any interim
amendment requested by the competent authority at the time of
assessment and have the Board of Directors approve such
amendments subsequently when the next meeting is convened?
A:
To ensure timely execution of the plan, the company may, at the time
the Board of Directors resolves to adopt the Employee Stock Option
Plan, authorize the Board of Executive Directors or the Chairman to
make amendments to the plan requested by the FSC at the time of
assessment. Notwithstanding the forgoing, Options may only be issued
after subsequent approval by the Board of Directors of such changes.
16. Can the company make retroactive adjustments to the terms and
conditions of the Employee Stock Option Plan after the options
are granted?
A:
(1)
After the registration of the issuance of Options with the FSC is
approved and becomes effective but prior to the issuance of the
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options, any changes to the main contents of the Employee
Stock Option Plan shall be made in accordance with paragraph
3, Article 56 of the Regulations Governing the Issuance and
Offering of Securities, with the approval of the majority of votes
in a meeting of the Board of Directors at which two-thirds or
more of directors are present; the minutes of the meeting of the
Board of Directors as well as relevant materials after
amendments shall be submitted as supplementary documents for
approval by the FSC, after which the plan may be publicly
announced.
(2)
A contractual relationship between the company and its
employees is established after Options are granted. Should there
be a need to make changes to the existing Employee Stock
Option Plan, the issuer shall clarify the legality of such changes
and the impact of such changes on the employees’ rights.
Changes may be made with the approval of the majority of
votes in a meeting of the Board of Directors at which two-thirds
or more directors are present and shall be handled legally upon
consultation with employees, provided that shareholders’ rights
are not impaired in any way. The changes to the Plan shall be
publicly announced after the amendment and be presented in the
next shareholders’ meeting. FSC approval is not required in this
case.
17.
If the company includes in its Employee Stock Option Plan the
clause “upon capitalization of retained earnings or capitalization
of capital reserves, additional Options may be issued or the
number of shares subscribable may be adjusted…” as set out in
subparagraph 7, paragraph 1, Article 56 of the “Regulations
Governing the Issuance and Offering of Securities”, can the
company decide at the time of capitalization of retained earnings
or capitalization of capital reserves to issue additional Options or
adjust the number of shares subscribable?
A:
Pursuant to Subparagraph 7, paragraph 1, Article 56 of the
“Regulations Governing the Issuance and Offering of Securities”
companies issuing Options may stipulate a clause giving it the option to
issue additional Options or adjust the number of shares subscribable
upon capitalization of retained earnings or capitalization of capital
8
reserves in the Employee Stock Option Plan prior to the actual
capitalization of retained earnings or capitalization of capital reserves
taking place to avoid potential disputes.
18.
Public companies issuing Options shall do so in accordance with
the “Regulations Governing the Issuance and Offering of
Securities” and the Employee Stock Option Plan shall state that
the grant period is for one year and that the options may be
issued in instalments. How does the company formulate the
exercise price of unissued Options if its shares begin trading on
the stock exchange or OTC exchange before expiration of the
grant period?
A:
To ensure that the increase in the market value of the company’s shares
is ultimately passed onto employees, public companies issue Options in
accordance with the “Regulations Governing the Issuance and Offering
of Securities” with the Employee Stock Option Plan specifying a
one-year grant period and that options are to be issued in installments.
Where the company organizes the lead advising securities firm or a
recommended securities firm to propose the advising agreement and
the advising plan for listing the company’s shares on the stock
exchange or OTC exchange to the Taiwan Stock Exchange Corporation
or Gretai Securities Market, the company shall stipulate a clause in the
Employee Stock Option Plan stating that “the exercise price of options
issued prior to the date on which the company’s shares become traded
on the stock exchange or OTC exchange shall be no less than the
earnings per share reported in the company’s most recently audited
financial statements and the exercise price of options issued after the
date on which the company’s shares become traded on the stock
exchange or OTC exchange shall be no less than the closing price of
the underlying security prevailing on the issue date” to ensure that the
increase in the market value of the company’s shares is ultimately
passed onto employees.
5. Exercise Price
19. Can the company stipulate a separate clause specifying the setting
of the exercise price (that is, other than adjusting the exercise price
due to change in capital, can the company adjust the exercise price
according to market conditions or for other reasons) giving it the
9
right to adjust the exercise price of the Options under circumstances
other than a change in capital? If the value of shares subscribable
remains unchanged after adjustment in exercise price, can the
company adjust the number of shares subscribable accordingly or
issue additional Options?
A:
(1)
The company may stipulate in the Employee Stock Option plan
the method by which the exercise price will be adjusted “where
there is a change in capital” (such as capital increase by cash,
recapitalization of retained earnings, recapitalization of capital
surplus, merger, or share split or capital increase by cash to
sponsor issuance of overseas depositary receipts). The company
shall not adjust the exercise price as a result of change in
market conditions or under other circumstances.
(2)
In relation to the question of whether the company shall adjust
the number of shares subscribable through the options, in order
to avoid a depreciation in the value of the company’s Options
as a result of a bonus issue and hence to retain employees in the
long term, the company’s Employee Stock Option Plan may
include a clause stating that “upon capitalization of retained
earnings or capitalization of capital reserves, additional Options
may be issued or the number of shares subscribable may be
adjusted; however, this shall apply only where the articles of
incorporation at the time of subscription expressly provide that
there is a sufficient number of shares to be made available for
subscription.”
(3)
If the company’s Employee Stock Option Plan includes the
aforesaid clause, the following matters shall also be addressed
when the proposal of a capital increase by capitalization of
earnings and capitalization of capital surplus is tabled for
discussion in the meeting of the Board of Directors and
shareholders:
1
The number of issued shares subscribable through Options,
additional Options issued according to the percentage of change
in capital or the number of additional shares issued to be made
available for increase in number of shares subscribable and the
10
impact of these events on the rights of shareholders.
2
20.
Whether the increase in the number of shares due to issuance of
additional Options or increase in the number of shares
subscribable through the options has exceeded the number of
shares available for subscription as stipulated in the company’s
articles of incorporation in accordance with paragraph 3, Article
28 of the Securities and Exchange Act. If yes, the issuing
company shall first amend the contents of the articles of
incorporation to comply with the provision of paragraph 3,
Article 28 of the Securities and Exchange Act before proceeding
with the aforesaid.
Can the company still adjust the exercise price in the event where
after such adjustment, the exercise price is lower than the closing
price of the underlying security on the date of issue?
A: Pursuant to Article 56 of the Regulations Governing the Offering and
Issuance of Securities by Securities Issuers, a company may stipulate the
terms and conditions for the adjustment of the exercise price of the
Employee Stock Option Plan. As such, the exercise price may be adjusted
after issuance in accordance with the terms and conditions stated in the
Plan.
6. Certification & Centralized Depository
21.
Are option certificates and certificates of payment for exercise of
the stock options required to be certified by a certifying
organization? If no physical certificates are printed, does the
company need to organize the securities and certificates to be
centrally deposited?
A:
(1)
Certification: Employee stock option agreement constitutes a
contractual relationship between the company and its
employees. The options are not offered to the public and are
non-transferrable. As such, options need not be certified for
cost-saving purposes. The company may design the hardcopy
format of its Options. If physical securities are printed, they
shall be duly certified according to Article 60 of the
“Regulations Governing the Issuance and Offering of
11
Securities”. No certification is required if neither the option
certificates nor the certificates of payment for exercise of the
stock options are printed.
(2)
Centralized depository: Where the physical certificates of
Options and certificates of payment for exercise of the options
are printed, it is not mandatory to organize the securities to be
centrally deposited under the “Regulations Governing
Book-Entry Operations for Centrally Deposited Securities”.
However, securities issued without printing the physical
securities shall be delivered by book-entry transfer according to
Article 8 of the “Securities and Exchange Act” and are thus
required to be centrally deposited. As such, the company shall
contact the Taiwan Depository & Clearing Corporation directly
when securities are required to be centrally deposited
irrespective of whether physical securities are printed.
7. Listing of Certificate of Payment for Exercise of
Options
22.
Are the certificates of payment for exercise of options treated
similarly to the certificate of payment for shares acquired
through capital increase and hence can be jointly listed with the
common shares for trading on the exchange? Or are the aforesaid
certificates considered similar to convertible corporate bonds and
may thus be separately listed for trading?
A:
(1)
Article 54 of the “Regulations Governing the Issuance and
Offering of Securities” stipulates that “an employee may
request exercise of stock options pursuant to the terms and
conditions set by the company 2 full years after the issuance of
the Options. The term of the Options may not be more than 10
years”. As such, employees who are granted the Options have
the right to exercise the options 2 full years after the issuance of
the options.
Although Article 54 of the “Regulations
Governing the Issuance and Offering of Securities” prohibits
the exercise of options during the closed period, if an employee
exercises his or her options during the period after the
shareholders’ meeting and prior to the ex-dividend date of a
12
capital increase by cash or recapitalization of earnings, and was
issued a certificate of payment for exercise of options, the
dividend-paying (placing) rate resolved by shareholders in the
shareholders’ meeting will be affected and so will the rights and
obligations attached to the securities. As such, the Company
shall assess whether the holders of the certificates of payment
for exercise of the options and holders of the Company’s
common shares have the same rights and obligations, to
determine whether the payment certificates are to be jointly or
separately listed with the common shares for trading. The
grantor shall design an appropriate certificate of payment for
exercise of options for inclusion in the Plan to ensure holders of
the certificates have the same rights and obligations as those of
common shareholders, and as such, avoid separate listing in the
future for cost-saving.
(2)
The Options may only be exercised 2 (two) years after the date
of grant. As such, the procedures for listing shall be followed
with reference to the applicable rules of the Taiwan Stock
Exchange Corporation and Gretai Securities Market prevailing
at that time.
8. Mandatory Information in the Certificates
23. What is the required format of an employee stock option certificate
and what is the mandatory information to be printed in the
certificate?
A:
Options constitute an agreement between the company and its
employees. The information printed in the certificates shall clearly
inform both parties of their rights and obligations. The company has
the discretion to determine whether to include other non-mandatory
information in the certificate; however, the following information is
mandatory for printing in the certificates.
(1)
Grantor.
(2)
Issue Date.
(3)
Optionee.
(4)
The type and numbers of shares subscribable.
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(5)
Exercise price and any adjustment.
(6)
Grant period.
(7)
Performance of contract.
9. Total Number of Options to be Granted
24.
A:
Article 60-8 of the “Regulations Governing the Issuance and
Offering of Securities” stipulates that “the total number of
shares subscribable through Options issued and outstanding
from all previous issues may not exceed 15 percent of the total
number of the issuer’s issued shares”. At the time when the
company files the issuance of Options, shall new shares issued
due to increase of capital by cash that were fully paid up be
included as “issued shares” for computation of the maximum
number of shares subscribable through the Options?
Article 60-8 of the “Regulations Governing the Issuance and Offering
of Securities” stipulates that the total number of shares subscribable
through Options issued and outstanding from all previous issues may
not exceed 15 percent of the total number of the issuer’s issued shares.
The term “the total number of issued shares” refers to the total number
of registered paid-up capital approved by the competent authoirty.
25. After the issuance of Options becomes effective upon approval by
the competent authority, but prior to the options being issued,
should the number of shares subscribable through the options
exceed 15 percent of the total number of the company’s issued
shares due to a decrease in capital, is the company required to
reduce the number of Options?
A:
In the situation where after the issuance of Options becomes effective
upon approval by the competent authority, but prior to the options being
issued, should the number of shares subscribable through the options
exceed 15 percent of the total number of the company’s issued shares
due to a decrease in capital, the company is not required to reduce the
number of Options, but shall ensure that the requirement of Article 60-8
of the “Regulations Governing the Issuance and Offering of Securities”
is met when the company subsquently registers the issuance of options.
26.
Paragraph 2, Article 56 of the “Regulations Governing the
Issuance and Offering of Securities” stipulates that the grant
14
period shall be no more than 1 year starting from the date of
receipt of the notice of effective registration. Can the company
apply to the competent authority for another grant of Options
prior to expiration of the previous grant period or before all
effectively registered options are granted?
A:
Prior to expiration of the previous grant period or before all effective
registered options are granted, the company may apply to the FSC for
grant of options designed with different eligibility criteria as incentives
to source talents, provided that the restriction on the number of shares
issued through options Article 60-8 of the aforesaid regulations is
adhered to. The planned number of Options previously registered for
grant are used for computation.
27.
How is the cumulative number of shares subscribable by a single
option holder of the Options stipulated in Article 60-9 of the
“Regulations Governing the Issuance and Offering of
Securities” computed?
A:
(1)
Article 60-9 of the “Regulations Governing the Issuance and
Offering of Securities” stipulates that “where an issuer issues
Options under Article 56-1, paragraph 1, the cumulative number
of shares subscribable by a single optionee, in combination with
the cumulative number of new restricted employee shares
obtained by the single optionee, may not exceed 0.3 percent of the
issuer’s total issued shares; and the above, in combination with
the cumulative number of shares subscribable by the single holder
of Options issued by an issuer under Article 56, paragraph 1, may
not exceed 1 percent of the issuer’s total issued shares”.
(2)
While computing the maximum cumulative number of shares
subscribable of a single optionee, the company shall compute the
sum of both the cumulative number of shares subscribable by the
optionee and the cumulative number of new restricted shares
obtained by the optionee (e.g. for an employee who resigned and
was re-employed by the company, the number of shares
subscribable and the number of new shares obtained prior to
resignation shall also be included). The cumulative number of
shares subscribable through options and the cumulative number of
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new restricted shares are computed as follows:
1. Shares subscribable through Options: the cumulative number
of shares obtained upon exercise of options and the number of
shares subscribable through the options during the effective term
of the Option. Previously granted options voided by the
company with the consent of employees may be excluded from
the computation of the cumulative number of shares
subscribable by a single optionee.
2. New restricted shares include the total number of shares both
qualified or not yet qualified for exercise. Already-issued new
restricted employee shares redeemed or bought back by the
company, and where the company has applied for alteration of
the corporate registration in respect of the shares accordingly in
accordance with paragraphs 2 and 3, Article 60-1 of the
“Regulations Governing the Issuance and Offering of
Securities” as a result of the optionee failing to meet the vesting
conditions, may be excluded from the computation of the
cumulative number of new restricted shares obtained by a single
optionee.
10. Options granted prior to retroactive handling of
public issuance procedures
28.
Prior to the retroactive handling of the public issuance of the
company’s shares, if the company has granted employee stock
options in accordance with the terms and conditions attached in
accordance with Article 167-2 of the Company Act that differ
from those set forth under the “Regulations Governing the
Issuance and Offering of Securities”, is the company required to
amend the terms and conditions of previously granted options
retroactively?
A:
Options granted prior to public issuance of the company’s shares were
granted in accordance with the provisions set forth in Article 167-2 of
the Company Act. As such, the terms and conditions attached to options
granted prior to retroactive handling of public issuance need not be
amended retroactively to comply with the rules set forth in the
“Regulations Governing the Issuance and Offering of Securities”,
provided that the aforesaid terms and conditions do not significantly
16
impair the rights of the company’s shares, otherwise the FSC shall
enforce amendments accordingly.
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Where an Employee Stock Option Plan was stipulated in
accordance with Article 167-2 of the Company Act prior to the
retroactive handling of the public issuance of the company’s shares,
if retroactive handling of public issuance procedures is to take
place prior to the expiration of the grant period, can the
undistributed portion of the options be granted to employees after
retroactive handling of public issuance?
A:
Where the Employee Stock Option Plan was put in place in accordance
with Article 167-2 of the Company Act prior to retroactive handling of
the public issuance procedures and where the application for retroactive
handling of public issuance was filed with the FSC prior to the
expiration of the grant period, options granted after the FSC’s consent
to the public issuance shall also be subject to the retroactive public
issuance procedures. After the company’s shares are publicly traded on
the stock exchange, the undistributed portion of options provided under
the existing Employee Stock Option Plan in accordance with Article
167-2 of the Company Act shall be made effective by filing registration
with the FSC in accordance with the Securities and Exchange Act and
the Regulations Governing the Issuance and Offering of Securities, and
shall no longer be granted to employees after the company’s shares
become publicly traded.
30. Where the total number of shares subscribable through employee
stock options granted to employees in accordance with Article 167-2
of the Company Act prior to public issuance of the company’s
shares exceed 15% of the company’s issued shares, can the number
of shares in excess of 15% of the issued shares as stipulated in the
“Regulations Governing the Issuance and Offering of Securities” be
incorporated for public issuance?
A:
Options granted to employees prior to the public issuance of the
company’s shares are granted on the basis of Article 167-2 of the
Company Act. As such, the number of shares subscribable through the
options in excess of 15% of the total issued shares shall be filed for
public issuance in accordance with Article 66 of the “Regulations
Governing the Issuance and Offering of Securities”.
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31. Shall employee stock options granted to employees prior to public
issuance be filed for effective registration with the FSC, or is Article
22-2 of the Securities and Exchange Act not binding because the
options were granted prior to public issuance of the company’s
shares?
A:
Article 22-2 of the Securities and Exchange Act is still binding on
employee stock options granted to employees prior to the public
issuance of the company shares in accordance with the Company Act at
the time of exercise. As such, the options shall be filed for public
issuance with the FSC in accordance with Article 66 of the
“Regulations Governing the Issuance and Offering of Securities" prior
to being exercised. Any shares subscribed through options provided
under the Employee Stock Option Plan after the retroactive handling of
public issuance procedures need not be filed with the FSC for effective
registration.
32. Where the total number of shares subscribable through employee
stock options granted to employees in accordance with Article 167-2
of the Company Act prior to public issuance of the company’s
shares exceed 15% of the company’s issued shares, can the company
apply to the competent authority to further issue options after the
company’s shares become publicly traded?
A:
After the company’s shares become publicly traded, options shall be
granted in accordance with the Securities and Exchange Act and the
Regulations Governing the Issuance and Offering of Securities. As such,
if the number of shares subscribable through issued and outstanding
employee stock options already exceeds 15% of the total number of the
company’s issued shares, the FSC shall reject any application for
further granting of options as this is in breach of Article 60-8 of the
“Regulations Governing the Issuance and Offering of Securities”.
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Appendix:
Example Employee Stock Option Plan XXX Co., Ltd.
1. Purpose
The Company has put in place the Employee Stock Option Plan in
accordance with Article 28-3 of the Securities and Exchange Act and
the “Regulations Governing the Offering and Issuance of Securities by
Securities Issuers” promulgated by the Financial Supervisory
Commission as an incentive schedule to attract and retain employees,
revive staff morale and maximize returns for both the Company and
shareholders.
2.
Grant period
The “Options” (referred to as the “Options” hereinafter) shall be
granted within one (1) year from the date when the application of this
Plan filed with the competent authority becomes effective. The
Chairman of the Company is authorized to determine the actual grant
date.
3.
Optionee
Full-time employees who have completed XX years of service prior to
the record date for the grant. (Note: the Company shall carefully
formulate the eligibility of optionees in accordance with the purpose of
the grant. The Chairman shall not be authorized to make a decision on
the actual eligibility of Optionees and the quantity of Options to be
issued). The number of Options granted to any single employee shall
not be in excess of 1% of the total number of issued shares.
4.
Total Number of Options to be Granted
The total number of Options to be granted is ○○units. Each unit of
Option will entitle the holder to acquire ○ unit of the Company’s
Shares. The total number of new common shares (or to be repurchased
in accordance with Article 28-2 of the Securities and Exchange Act) to
be made available for subscription upon exercising of the options is ○○
shares.
5.
Conditions of Exercise
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(1) Exercise Price: The Exercise Price shall not be lower than the closing
price of the Company’s common shares (for emerging stocks or
non-publicly trades shares or shares not traded at the business
premise of a securities firm, the exercise price shall not be lower than
the earnings per share reported in the most recently audited financial
statements on the filing date) on the date of grant.
(2) Effective Term of the Options: An Optionee may exercise his or her
Options on the 2nd anniversary of the grant date. The term of the
Options shall be no more than ten (10) years. The Options are not
transferrable except to a person who acquires the right to exercise the
Options.
(3) Types of Shares: Common shares of the Company.
(4) Termination of employment or death. (The Company may set out the
terms and conditions applicable in the various circumstances)
6.
Performance of Contract
The Company shall issue the new Shares as underlying shares of the
Options (Note: exchange-listed or OTC-listed companies shall either
issue new shares or deliver issued shares. Emerging companies or
companies of which the shares are non-publicly traded or not traded at
the business premise of a securities firm shall issue new shares
available for subscription and stipulate this condition in the Plan).
7.
Adjustment of the Exercise Price
After the Options have been granted, except as otherwise provided in
this Plan, in case of any change in the number of the Shares, such as
recapitalization from retained earnings, recapitalization from Capital
Reserve, capital increase by cash, bonus issue, stock split, or
participation in the offering of overseas depositary receipt through
capital increase by cash or private placement, the Exercise Price shall
be adjusted based on the following formula (to be formulated by the
Company).
8.
Issuance of Additional Options or Adjustment of the
Number of Shares Subscribable
(to be formulated by the Company).
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After the Options are granted, the Company may issue additional
Options or adjust the number of shares subscribable according to the
percentage of change in capital such as recapitalization from retained
earnings or recapitalization from capital surplus provided that the
articles of incorporation at the time of subscription expressly provide
that there is a sufficient number of shares to be made available for
subscription.
9.
Procedures for Exercise of Options
(1)
Except for the closed period in accordance with the applicable law,
the Optionee may exercise the Option in accordance with the Plan.
The Optionee shall fill out an exercise notice and submit it to the
department in charge of stock options or the securities agent of
the Company (or the Company).
(2)
After the receipt of the aforesaid exercise notice, the department
in charge of stock options or the securities agent of the Company
(or the Company) shall notify the Optionee to make payment for
the Shares to a designated bank.
(3)
After collecting full payment for the Shares, the department in
charge of stock options or the securities agent of the Company
shall deliver such Optionee the newly issued Shares within five (5)
business days by means of book-entry system.
(4)
The certificates of payment for exercise of the Options may be
traded on the Taiwan Stock Exchange Corporation (TSEC) or
Gretai Securities Market (GTSM) on the date of delivery. Where
the common shares of the Company are traded on the TSEC or
the GTSM according to the applicable law, the certificates of
payment for exercise of the options may be traded on the
exchange from the date of delivery to such Optionee.
(5)
The record date for the application of the issuance of the new
common shares is dd/mm/yy in each fiscal year. The Company
will apply to the competent authority for registering the change in
its share capital, as well as the issuance of the new Shares
accordingly.
(6)
The Company will handle the relevant matters such as the
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registration of the change in its share capital and printing and
certification of share certificates prior to issuance of the
company’s common shares.
10. The Exercise Limitation of the Vested Options and the
Limitation after the Option is exercised
(The Company may formulate the terms in accordance with the Company
Act or other applicable laws)
11.
Other Important Matters
(1) These Regulations and any amendment made prior to their
promulgation shall be approved by the Board of Directors and shall
come into effect upon approval by the Central Competent Authority.
(2) Any other matters not set forth herein or any inconsistency between
this Plan and the Applicable Laws and/or the Articles shall be dealt
with in accordance with the applicable laws and regulations.
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