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1     These Guidelines are adopted pursuant to Articles 36 and 38 of the Securities and Exchange Law.
2     In compliance with the government's policy of encouraging mergers or splits among enterprises and to facilitate mergers or splits among listed, OTC, and emerging stock companies, these Guidelines shall be faithfully observed when carrying out consolidations or mergers [hereinafter, collectively, "mergers"] or splits among listed, OTC, and emerging stock companies to avoid affecting the rights and interests of shareholders and investors and to preserve order in securities markets.
3     Confidentiality Obligation Prior to Public Disclosure of Merger or Split Information
    All persons participating in or knowing of a company merger or split plan shall submit a written undertaking of nondisclosure. Prior to public disclosure of the merger or split information, such persons may not externally divulge any content of the merger or split plan, nor may they purchase in their own capacity or in the name of another person any shares, convertible corporate bonds (including certificates of entitlement to convert bonds into shares), depository receipts, call (put) warrants, subscription warrants, corporate bonds with warrants, preferred shares with warrants, or any other equity securities of any company connected with the merger or split plan (including participating companies and their main corporate shareholders).
4     Time, Method, and Content of Public Disclosure of Merger or Split Information
  1. Merger or split plans shall be publicly disclosed immediately after being passed by the boards of directors of the companies participating in the merger or split.
  2. The content of the publicly disclosed merger or split information shall include at least the following particulars:
    1. Merger Plans:
      Shall include the purpose of the merger, the anticipated benefits of the merger, share conversion rates and the basis upon which they were calculated, the scheduled consummation date of the merger, basic information of the participating companies (including company names and main content of business operations), effect of the merger on net value per share and earnings per share, matters related to assumption by the existing company or new company of rights and obligations of the extinguished company (including principles for handling treasury shares and already-issued equity securities), and other important stipulations.
    2. Split Plans:
      Shall include the purpose of the split, estimated value of the operations and assets planned to be assigned to the existing company or new company, share conversion rates and the basis upon which they were calculated, the total number and the types and quantities of the shares to be acquired by the split company or its shareholders, matters related to assumption by the existing company or new company of rights and obligations of the split company (including principles for handling treasury shares and already-issued equity securities), matters related to the reduction (if any) in capital of the split company, anticipated benefits of the split, and other important stipulations.
  3. If, after a merger or split plan has been made public, a participating company discovers any significant matter that could affect the merger or split plan, the company shall immediately make a public disclosure of such significant matter.
  4. Prior to convening the shareholders meeting, a company participating in a merger or split shall prepare a public document addressed to the shareholders stating the significant stipulations of the merger or split plan and related matters, and deliver it to the shareholders along with the notice of the shareholders meeting to provide the shareholders with a basis of reference for deciding whether to agree to the merger or split plan.
  5. Following a merger the surviving listed or OTC company, during the one-year period after completing registration pursuant to Article 398 of the Company Law, shall obtain, from the lead underwriter for the new shares issued as a result of the merger, quarterly appraisals and opinions on the effects of the merger on the company's business, finances, and shareholder equity and on matters such as whether the anticipated benefits of the merger have been realized, and shall enter it into the stock market monitoring station or internet information system within 10 days of the close of each quarter.
5     Setting and Changing of Share Conversion Rates
  1. Before holding their shareholders meetings, the companies participating in a merger or split shall engage independent experts (such as certified public accountants, attorneys at law, and securities underwriters) to give opinions on the share conversion rates, and shall submit the opinions to their shareholders meetings.
  2. In principle, the share conversion rates shall not be arbitrarily changed. However, a change may be made in cases where conditions for change have been provided in the letter of intent to merge or in the merger or split contract and where full public disclosure of the change has been made. Conditions under which conversion rates may be changed are as follows:
    1. Cash capital increase, issuance of convertible corporate bonds, distribution of stock dividends, and issuance of corporate bonds with warrants, preferred shares with warrants, subscription warrants, and other equity securities.
    2. Acts significantly affecting company finances or operations, such as disposal of major assets.
    3. Occurrence of major disasters, major technological transformations, or other events significantly affecting company shareholder equity or company securities prices.
    4. Adjustment of treasury shares duly repurchased by any company participating in the merger.
    5. Increase, decrease, or change in the entities, or number thereof, participating in the merger or split.
  3. Because a merger or split contract is a bilateral contract, no company participating in a merger or split may unilaterally change the share conversion rates.
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  1. Except under special circumstances and where advance permission has been obtained from the Securities and Futures Commission, the companies participating in a merger or split shall convene their board meetings and shareholders meetings and pass resolutions regarding merger or split matters on the same day; provided, this restriction shall not apply where the Company Law provides otherwise. Also, if the shareholders meeting of any company participating in the merger or split is unable to convene or to pass such a resolution because of inability to achieve a quorum or sufficient voting shares or because of other legal restrictions, or the merger or split plan is rejected by the shareholders meeting, the companies participating in the merger or split shall immediately make a public announcement of the reasons for such occurrence, the follow-up measures to be taken, and the anticipated date for convening of the shareholders meeting(s).
  2. Following public disclosure of merger or split information, if any company participating in a merger or split has an intention to undergo a further merger or split with another company, any procedures or legal actions (such as board resolutions or signing of a letter of intent to merge or split or a merger or split contract) already carried out by the companies participating in the merger or split under the original merger or split plan shall be carried out anew by all the companies participating in the merger(s) or split.
  3. Companies participating in a merger or split should preferably make public disclosures of merger or split information after closing of the stock market. If significant information related to a merger or split is to be announced during trading hours, the announcing company shall give advance notice to the Stock Exchange or Over-the-Counter Securities Exchange and shall handle the merger or split information disclosure matters in compliance with their rules.
  4. Merger or split contracts shall be drawn up with consideration to applicable laws and regulations, and in addition to specifying the rights and obligations of the companies participating in the merger or split, shall also specify the following particulars:
    1. Handling of breach of agreement.
    2. Principles for handling of equity securities already issued by, or treasury stock already repurchased by, the company(ies) extinguished in the merger or the split company.
    3. The quantity of treasury stock that a company participating in a merger or split may repurchase after the record date of calculation of the share conversion ratio, and relevant handling principles.
    4. Where there is an increase, decrease, or change in the entities, or number thereof, participating in the merger or split, all completed statutory procedures shall be carried out anew in full, except in the case of a decrease in the number of participants and where the shareholders meeting has resolved to alter the board of directors' authority and has authorized it, in which case a participating company(ies) may refrain from convening a shareholders meeting to pass a new resolution.
    5. The scheduled timetable for execution of the merger or split plan, scheduled timeframe for completion, and procedures for handling failure to complete within such timeframe.
  5. Directors agreeing to a merger or split shall observe Article 23 of the Company Law and take the greatest benefit of the shareholders as a whole as their consideration in all resolutions regarding such merger or split, and shall furthermore exercise all due care of a good administrator. A director who violates the above provisions thereby causing loss or damage to the company shall be liable to compensate the company.