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[Party to this Contract] (hereinafter referred to as Party A) and the Stock Exchange Corporation (hereinafter referred to as Party B) have agreed to enter into this Contract relating to the opening of a credit account by Party A with Party B for handling margin purchases and short sales in securities trading, as follows:
Article 1
The Parties' rights and obligations in connection with margin purchases and short sales in securities trading are governed by securities and exchange laws and regulations, Operating Rules for Securities Firms Handling Margin Purchases and Short Sales of Securities (the "Operating Rules"), relevant rules and announcements, letter directives, terms and conditions of this Contract and contract for consignment trading of securities, as may be amended from time to time. Party A agrees that the TWSE, GTSM, and institutions designated by the competent authority may, in accordance with laws and regulations, collect, computer-process, internationally transmit and use its personal information and that Party B may transmit Party A's personal information to the TWSE and GTSM.
Party A and its joint and several guarantor agree that Party B may obtain their credit information from the Joint Credit Information Center if such information is required by Party B for the business activities that are registered or that are identified in its articles.
Article 2
The receipt and delivery of funds and securities for margin purchases and short sales between the Parties shall be processed through the credit account.
Article 3
Party B may not use proceeds derived from short sales or margins for short sales that are deposited in Party A's credit account for any purpose other than those listed below:
- As a source of funds for margin purchases;
- As collateral for refinancing with securities finance enterprises; and
- Bank deposits.
Article 4
Party B may not use the securities deposited in Party A's credit account for purposes other than the following, and shall deliver the same to a central depository for deposit:
- As a source of securities for short sales.
- As collateral for refinancing with other securities finance enterprises.
If the rate of bonus shares or stock dividend shares distributed on securities acquired through margin purchase or additional collateral securities obtained by Party A is 20 percent or higher, all such new shares shall serve as collateral; or where the issuing company of the securities acquired through margin purchase or additional collateral securities obtained by Party A conducts a demerger and capital reduction, and its resumption of trading after capital reduction is on the same day as the TWSE or GTSM listing of the shares of the transferee company of the demerger, then the shares of such transferee company of the demerger shall all be used as collateral if none of the circumstances prescribed in subparagraph 2, paragraph 2, Article 26 of the Operating Rules applies to it.
All such new shares or shares of the transferee company of the demerger referred to in the preceding paragraph shall serve as collateral, and the right to defer income tax shall be waived. The central securities depository shall transfer the shares by book-entry transfer into the segregated loan collateral account opened by Party B.
When utilizing securities pursuant to the first paragraph, Party B shall be responsible for delivering the same category and quantity of securities when the margin purchase or short sale position is closed, and no objection shall be raised by Party A.
Article 5
Where Party A places an order for a margin purchase and short sale, it shall calculate whether the balance of such margin purchase and short sale transaction exceeds the stipulated limit and, when it orders for return, shall verify whether the category and quantity of securities exceed the balance in the credit account; for any exceeded amount, Party A shall be responsible for redemption by cash payment or delivery of spot securities.
Article 6
Party B shall calculate the ratio of the collateral value of the credit account to Party A' debts accrued through margin purchases and short sales every day, and Party A shall immediately make up the shortfall within the period prescribed by Party B if it is lower than the ratio prescribed by Party B.
The time limit for making up the shortfall in the preceding paragraph shall be determined in accordance with Article 23 of the Operating Rules.
Article 7
In the circumstance where Party A fails to cover the shortfall in accordance with paragraph 1 of the preceding article, Party B may dispose of Party A's collateral in accordance with Article 24 of the Operating Rules.
Article 8
Where any circumstance under paragraph 1, Article 38, and paragraph 1 or 2, Article 39, of the Operating Rules applies to Party A, Party B may dispose of the collateral in accordance with paragraph 3, Article 39 of the same Operating Rules.
When the TWSE or GTSM has ratified and publicly announced the delisting from the stock exchange or termination of GTSM trading of a security obtained by Party A through margin purchase or short sale, the delisting or termination date is deemed the expiration date of the term of the credit transaction, and Party B shall request Party A to repay the margin loans or return the borrowed securities before the tenth business day before the delisting or the termination of GTSM trading, unless:
- the issuing company has applied for conversion of its GTSM listed securities to TWSE listed securities.
- The securities of a TWSE or GTSM listed company are delisted due to the company's merger, and the surviving company uses the securities which are eligible for margin purchase and short sale transactions for payment of all or part of the consideration to shareholders of the non-surviving company.
- The securities of a TWSE or GTSM listed company are delisted due to a share conversion, and the shares after conversion are still eligible for margin purchase and short sale transactions.
If Party A fails to liquidate a margin purchase or short sale within the deadline under the preceding paragraph, Party B may dispose of its collateral beginning from the next business day by the mutatis mutandis application of paragraph 3, Article 39 of the Operating Rules.
Article 9
When Party B dispose of the collateral under the preceding two paragraphs, no objection shall be raised by Party A to the disposal time and price, and Party A shall bear the disposal costs.
Income derived from disposal of collateral under the preceding paragraph shall be used to offset against Party A's outstanding obligations relating to margin purchases and short sales, and any remaining surplus shall be returned to the principal. Party A shall settle immediately if the disposal proceeds are insufficient to satisfy the obligation, or Party B may seek recovery in accordance with the law. Party A may not refuse to settle its obligations if Party B fails to dispose of the collateral and obtain compensation due to special circumstances.
Article 10
Where Party A fails to settle a margin purchase or short sale by the due date, Party B may, for a period starting from the due date and ending on the day disposal is completed, charge Party A a margin purchase default penalty at 10 percent of the stated interest rate on the margin loan, or a short sale default penalty equivalent to a one-time handling fee based on the stated amount of the short sale handling fee.
Article 11
Securities sold by Party A for short selling shall be covered and closed out within the specified time limit prior to the book closure of the issuing company, provided this shall not apply where the issuing company closes its books for a reason such as convening of a special shareholders' meeting or that will not affect the exercise of shareholders' rights.
Before book closure of the issuing company, Party B shall transfer on behalf of Party A securities that are purchased on margin and those that are deposited as collateral to offset against margin collateral requirements, provided where the issuing company closes its books because of a special shareholders meeting, the number of shares of the issuing company's stock held in Party A's margin accounts that are purchased on margin shall, for the purposes of share transfer, be calculated by Party B in accordance with the Operation Directions for the Calculation of the Number of Shares of Margin Buyers for the Purposes of Share Transfers Upon Special Shareholders Meetings as prescribed by the TWSE in consultation with the GTSM.
Article 12
The rights and obligations of the Parties under this Contract shall not be assigned to any third party except for reasons of consolidation and merger or transfer of business of Party B.
Article 13
This Contract will terminate ipso facto if any circumstance under Article 10; paragraph 1, Article 12; paragraph 1, Article 38; paragraph 1 or 2, Article 39; or Article 41 of the Operating Rules applies to Party A, or in case of the death of Party A.
Party A may notify Party B of the termination of this Contract at any time after the full discharge of obligations of the margin purchases and short sales.
In the event of the ipso facto termination of this Contract upon Party A's death, Party B may, by the mutatis mutandis application of paragraph 3, Article 39 of the Operating Rules, settle the balance of its margin purchases and short sales and dispose of its collaterals to the extent required for the discharge of obligations.
Article 14
If Party A fails to promptly notify Party B in writing of any change to the information contained in the Margin Account Application Form with respect to the name, national ID number or juristic person's uniform serial number, domicile or residence, mailing address, or telephone number of Party A or its agent, representative or authorized personnel, Party B may halt margin purchases and short sales by Party A.
Article 15
All notices that Party B is required to give to Party A under this Contract and the relevant rules shall be delivered by mail or by personal delivery against a receipt signed by Party A. Where a notice mailed by Party B cannot be delivered in time as a result of any of the circumstances under the preceding article applying, or other reasons attributable to Party A, the notice shall be deemed to take effect from the day of the first delivery attempt by the post office. In the case of a notice given by personal delivery against a receipt signed by Party A, its signature or seal impression shall match the specimen signature or seal appearing in this Contract and be dated personally by Party A.
Article 16
Party B's place of business shall be the place of performance for this Contract. The Parties agree that any dispute arising out of or in connection with this Contract shall be submitted to the court for the place of performance designated as the court of first instance.
Article 17
This Contract shall be effective as of the date of execution and remain in effect for a period of three years.
This Contract is executed in duplicate, with each Party holding one copy as evidence.
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