SAFE must be notified within three months in the event of any material amendment to the Plan. Following the initial approval, quarterly reports are required to be provided to SAFE on the status of the Plan. Obtaining approval for the Plan may be time-consuming and costly. The Subsidiary will also be required to establish a special onshore account through which all Plan-related payments must be made. The approval of the State Administration of Foreign Exchange (" SAFE") is likely to be required to operate the Plan. In practice, there is currently no formal process in place to obtain CSRC Approval for the grant of Options by a foreign company to Chinese resident employees. If Options are issued to more than 200 employees or officers of the Subsidiary, this may constitute a "public offering." A public offering is subject to approval from the China Securities Regulatory Commission (the " CSRC Approval"). Plan documents must be translated into Mandarin and submitted for approvals and Government filings. A disclaimer should be included in the award agreement that acknowledges each employee's receipt of the Plan documents and the discretionary nature of the Plan and confirms that termination of employment will result in the loss of unvested rights.
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