Amended Rules Governing Warrants

September 15, 1993 AMENDED RULES GOVERNING WARRANTS In the interest and for the protection of investors, the Securities and Exchange Commission, pursuant to the powers vested in it under existing laws, particularly the Batas Pambansa Blg. 178 (Revised Securities Act), Republic Act No. 1143, and P.D. 902-A, hereby promulgates the following rules: cdll SECTION 1. Definitions . When used under these Rules, the following terms shall have the meaning indicated, unless the context provides otherwise: (1) " Commission " means the Securities and Exchange Commission . (2) "Warrant" a type of security which entitles the holder the right to subscribe to, the unissued capital stock of a corporation or to purchase issued shares in the future, evidenced by a Warrant Certificate, whether detachable or not, which may be sold or offered for sale to the public but does not apply to a right granted under an Option Plan duly approved by the Commission for the benefit of employees, officers and/or directors of the issuing corporation. A warrant may either be: a. Subscription Warrant a warrant which entitles the holder thereof the right to subscribe to a pre-determined number of shares out of the unissued capital stock of the Issuer ; b. Covered Warrant a warrant which entitles the holder thereof the right to purchase, from the Issuer a pre-determined number of existing shares . (3) "Warrant Certificate" the certificate representing the right to a Warrant which may be detachable or not, duly issued by the Issuer to the Warrantholder. (4) "Warrantholder" the registered owner of a Warrant as reflected in the Warrant Registry Book maintained by the Issuer. (5) "Warrant Instrument" the written document or deed containing the terms and conditions for the issue and exercise of a Warrant, which terms and conditions shall include; (i) the maximum Underlying Shares that can be purchased upon exercise or the Exchange Ratio; (ii) the Exercise Period; (iii) the Exercise Price; and (iv) such other terms and conditions as the Commission may require. (6) "Warrants Registrar" a person, other than the Issuer, tasked with maintaining an Issuer's Warrants Registry Book. (7) "Warrants Registry Book" a registry book maintained in behalf of the Issuer, duly stamped by the Commission, showing the authority for the issuance of the Warrants. (8) "Detachable Warrant" a Warrant that may be sold, transferred or assigned to any person by the Warrantholder separate from, and independent of, the corresponding Beneficiary Securities. (9) "Non-detachable Warrant" A Warrant that shall not be sold, transferred or assigned to any person by the Warrantholder separate from, or independent of, the Beneficiary Securities. (10) "Beneficiary Securities" the shares of stock or other securities of the Issuer which form the basis of the entitlement in a warrant. (11) "Issuer" shall mean : a. A duly registered domestic corporation which issues or proposes to issue Subscription Warrants ; or b. a person or a group of persons who issue(s) or propose(s) to issue Covered Warrants . As herein construed, a "person" or "persons" shall mean natural person(s) or registered domestic corporation(s) . (12) "Exercise Period" the period of time during which the Warrantholder may exercise the right in the Warrant, which shall not be less than one (1) year nor more than five (5) years from the date of issuance of the Warrant. (13) "Exercise Price" the price per share at which the Issuer of a Warrant is required to sell the Underlying Shares , upon the exercise of the rights granted in a Warrant, which shall be at a price fixed at the time of application for registration of the Warrant or computed using the stated formula approved by the Commission. (14) "Underlying Shares" the shares, unissued or issued as the case may be, of a corporation which may be subscribed to or purchased by the Warrantholder upon the exercise of the right granted under a Warrant. (15) " Issue Price " the price at which a Warrant is originally sold by the Issuer . (16) " Exchange Ratio " the number of Underlying Shares which may be purchased upon the exercise of the right granted in a Warrant which may be fixed upon issue or adjusted based on pre-determined formula approved by the Commission . SECTION 2. Issuance of Warrants or Covered Warrants . Any corporation upon proper application and prior authority from the Commission, may issue Warrants. Warrants may be issued together with, or independent of, the offering of the capital stock or other securities of the Issuer. Any person owning a substantial number, as may be determined by the Commission, of fully paid, non-assessable and unencumbered listed shares of stock of a corporation may issue Covered Warrants . No Warrants (i) that shall be sold or offered for sale to the public, or (ii) whose Beneficiary Securities shall be sold or offered for sale to the public, shall be issued unless such Warrants (whether detachable or non-detachable), together with all of the authorized capital stock (if unclassified), or all of the authorized capital stock of the same class as the Underlying Shares (if classified), have been registered under the Revised Securities Act: Provided, that if the Underlying Shares are exempt from registration under the Revised Securities Act, the issuance of the Warrants covering the same shall likewise be exempt from registration. SECTION 3. Kinds of Warrants . Warrants may be either Detachable or Non-detachable. SECTION 4. Registration Requirements . (a) Any person or corporation proposing to issue Warrants shall file an application for registration of the same with the Commission. (b) The application for registration of Warrants shall be in the prescribed form which shall be under oath and signed by the Issuer or the President or any other officer so authorized by the Board of Directors to act on behalf of the Issuer. (c) The application for registration of Warrants shall state, among others, the following: 1. Name of the Issuer ; 2. Address or principal office of the Issuer ; 3. A sample form of the Warrant Certificate to be issued; 4. Original signed copy of the Warrant Instrument; 5. The consideration, if any, which may or may not be separate from the price of the Beneficiary Securities; and 6. Such other data or information which the applicant believes necessary to support its petition, or which the Commission may require. prcd The application for registration of Warrants shall likewise state the following : 1. Principal line of business of the Issuer ; 2. A list of the members of the Board of Directors, executive officers and other officials performing similar functions; 3. Reasons for the entitlement, and the use of the proceeds; 4. Three (3) copies each of the resolutions approved by the majority vote of applicant's Board of Directors and stockholders owning at least two-thirds (2/3) of the total outstanding stock at the time of the application, authorizing the issuance of the Warrants, the terms of such issuance and exercise thereof; 5. A detailed statement of the plan, and the terms and conditions for the exercise thereof, which shall include among others, the features of the Warrant, the Exercise Period and Expiry Date thereof, the Exercise Price, Exchange Ratio, the total number of Warrants to be issued, the aggregate issue value of the Warrants, and the number of Underlying Shares covered by each Warrant; 6. Latest audited financial statements, as of a date not more than ninety (90) days prior to filing of the application; or if not available, the latest audited financial statements as of a date not more than one (1) year from the date of filing, accompanied by interim financial statements as of a date not earlier than 90 days prior to filing, duly certified under oath, by a responsible officer of the applicant; and 7. Statement of management responsibility on the financial statements submitted. In the case of Covered Warrants, the application shall further contain the following : 1. A description of the Underlying Shares, including the certificate number(s) evidencing; the same, duly certified by the Transfer Agent/Corporate Secretary of the corporation to which the shares form part of a copy or copies of which must be attached to the application ; 2. If the applicant is a corporation, three (3) copies each of the resolutions approved by the majority vote of applicant's Board of Directors/Trustees authorizing the issuance of the Covered Warrants, the terms of such issuance and exercise thereof ; 3. A detailed statement of the plan, and the terms and conditions for the exercise thereof, which shall include, among others the features of the Covered Warrant, the Exercise Period and the Exercise Price ; Provided, that, if the Underlying Shares are not listed in the local stock exchanges, the following information on the corporation to which the Underlying Shares form part of the issued and outstanding capital of, shall also be supplied ; 1. Principal line of business of the corporation ; 2. A list of the members of the Board of Directors/Trustees, executive officers and other officials performing similar functions ; 3 . Latest audited financial statements as of a date not more than ninety (90) days prior to filing of the application; or if not available, the latest audited financial statements as of a date not more than one (1) year from the date of filing, accompanied by interim financial statements as of a date not earlier than ninety (90) days prior to filing duly certified under oath by a responsible officer of the corporation; and 4. Statement of management responsibility on the financial statements submitted . In addition to the foregoing requirements, it shall be necessary, for purposes of approval of the application, that: 1. At the time of the filing of the application for registration of Warrants, (a) the applicant must have unissued authorized capital stock sufficient to cover the Warrants if fully exercised; and (b) the total issue of the Warrants shall not exceed Twenty-Five (25%) percent of the corporation's total outstanding capital stock at full dilution; or 2. Subject to the approval of the Commission, the applicant for registration of Covered Warrants must enter into an Escrow or Custodian Account arrangement with a reputable commercial bank in the Philippines the terms of which shall provide, among others, the physical deposit of the original certificate(s) representing the Underlying Shares for the duration of the Exercise Period and such other terms sufficient to guarantee the issuance, transfer and conveyance of all the exercisable Underlying Shares, if the Covered Warrants are fully exercised . The applicant must undertake to increase its authorized capital stock should that be necessary in the future. SECTION 5. Filing Fee . The applicant shall pay a fee of one-tenth of one percent of the issue value of the Warrants, which in no case shall be less than P10,000.00. If the Warrants have no issue value, the filing fee shall be P10,000.00. SECTION 6. Publication . Notice of filing of an application to issue Warrants shall be immediately published at the expense of the applicant once a week for two (2) consecutive weeks in two (2) newspapers of general circulation in the Philippines, reciting among others, that an application for authority to issue Warrants has been filed with the Commission, and that the aforesaid application, as well as the papers attached thereto, are open for inspection during business hours, by interested parties; and copies thereof, photostatic or otherwise, shall be furnished to any interested party at such reasonable charge as the Commission may prescribe. Any opposition to the application must be filed within ten (10) days after the date of last publication. The corresponding Affidavit of Publication shall be submitted to the Commission. cdlex SECTION 7. Form and Contents of Warrant Certificates . All Warrants authorized for issuance by the Commission shall be evidenced by Warrant Certificates in such form as may be approved by the Commission, and must be signed by the President (or such other officer as may be authorized by the Board of Directors) and the Corporate Secretary of the Issuer. In case of Detachable Warrants, the Warrant Certificate shall state the following on its face: "The Warrant contained herein does NOT represent shares of stock, but a mere right to purchase shares of stock in the Issuer under the terms and conditions stated herein". In case of Non-detachable Warrants, the right granted under the Warrant shall be described in the stock certificate or instrument evidencing the Beneficial Securities. A Warrant Certificate or the stock certificate or instrument evidencing the Beneficial Securities where the Non-detachable Warrant is described, shall also state the following (whether on its face or on its reverse side): (a) The Warrant Certificate Number; (b) The par or issued value, class and number of the corresponding Underlying Shares; (c) The Exercise Price, or the formula for computing the same, or adjustments thereto; (d) Exercise Period and the Expiry Date of the Warrant; (e) The procedure for the exercise; (f) Summary of the provisions contained in the Warrant Instrument; and (g) The Exchange Ratio or the number of Underlying Shares which may be purchased by each Warrant. The Warrant Certificates for Covered Warrants shall comply with the form and contents prescribed herein, except that in case of Detachable Covered Warrants, the Covered Warrant Certificate must state on its face : " The Covered Warrant contained herein does NOT represent shares of stock, but a mere right to purchase (class or type of stock) shares of stock of (name of corporation) owned by the Issuer under the terms and conditions stated herein ." SECTION 8. Warrant Instrument . The Warrant Instrument must be signed by the Issuer; provided, that, if the Issuer is a corporation, the Warrant Instrument must be signed by the President or Vice President of the Issuer, and attested to by the Corporate Secretary, and sealed with the corporate seal. The Warrant Instrument shall include the information required under Section 7 hereof, and other terms and conditions for the exercise of the right granted in the Warrant. The terms of the Warrant Instrument for Covered Warrants shall contain provisions sufficient to guarantee the issuance transfer and conveyance of all the exercisable Underlying Shares, if the Covered Warrants are fully exercised . The terms of the Warrant Instrument shall constitute a direct obligation of the Issuer to the Warrantholders. An original signed copy of the Warrant Instrument shall be under the custody of the Warrants Registrar, and shall be available for inspection during business hours by any interested party. SECTION 9. Exercise Period . Warrantholders may exercise the right granted under a Warrant within the period approved by the Commission, which shall not be less than one (1) year, nor more than five (5) years from the date of issue of the Warrant. Within thirty (30) days from the date of availment, the Issuer shall submit to the Commission a list of those who exercised their rights under the Warrant, the total number of shares issued resulting from such exercise, and total amount of proceeds received therefrom. cdll SECTION 10. Exercise Price . The Exercise Price shall be at a price fixed at the time of application for registration of the Warrant or computed using the stated formula approved by the Commission. The Exercise Price must be paid in full upon exercise, and shall not be less than the par value of the Underlying Shares, or not less than P5.00 per share, if the Underlying Shares are without par value. The Exercise Price may be adjusted only if the Warrant Instrument provides for (i) the conditions under which adjustments in Exercise Price can be made, and (ii) the formula under which the adjusted Exercise Price can be determined. The Exercise Price may be adjusted only in any of the following circumstances occurring after the issuance of the Warrant: a. a change in the par value of the Underlying Shares; b. a declaration of stock dividends; c. an offering of additional shares at a price different from the original exercise price; d. merger, consolidation or quasi-reorganization; e. a disposition of a substantial portion of the assets of the corporation; and f. such other similar instances as may be approved by the Commission. SECTION 11. Warrants Registry Book . An Issuer must have a Warrants Registry Book maintained by the Warrants Registrar independent of the Issuer. The Stock and Transfer Agent of the Issuer shall be preferred in the appointment of the Warrants Registrar. Upon the exercise of the right granted under a Warrant, a notation to this effect shall be duly recorded in the Warrants Registry Book, and the purchase of the Underlying Shares shall be recorded in the Stock and Transfer Book of the Issuer. SECTION 12. Transferability of Warrants . All Warrants authorized for issuance by the Commission shall be transferable without need of approval from the Commission. In case of Non-detachable Warrants, they shall be transferred only together with the Beneficiary Securities. Any sale, transfer, or assignment of a Warrant must be duly recorded in the Warrants Registry Book, including the names of the transferor and transferee, the number of Warrants transferred and the number of Underlying Shares covered by said transfer. Unless recorded in the Warrants Registry Book, the transfer of Warrants shall not be binding on the Issuer. SECTION 13. Listing Requirements . Warrants authorized for issuance by the Commission may be listed in the Stock Exchanges together with the Beneficiary Securities under existing rules for listing of securities, and under such other rules as the Stock Exchanges may adopt with the approval of the Commission, provided however, that the Warrants shall be automatically delisted upon the lapse of the Exercise Period. However, the listing of Warrants issued by listed companies shall be mandatory. SECTION 14. Penalty for Violation . Any Issuer which violates any of the provisions of these Rules, or any person who, in the application for issuance of Warrants filed under these Rules, makes any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading, shall be liable for a fine of not less than five thousand (P5,000.00) pesos, nor more than five hundred thousand (P500,000.00) pesos. SECTION 15. Existing Warrants or Covered Warrants . All corporations which have issued Warrants without approval from the Commission prior to, but are to be exercised after the effectivity of these Rules are required to report the same to the Commission within thirty (30) days after these Rules shall become effective, showing: a. Name of Issuer; b. Address or principal office of the corporation; c. Terms and Conditions of the Warrants; d. List of Warrantholders, together with their address and the number of Underlying Shares to which they are entitled. SECTION 16. Repealing Clause . All rules and regulations, circulars, orders and rulings contrary to, or inconsistent with any of the foregoing provisions are hereby repealed or modified accordingly. SECTION 17. Effectivity . These amended rules shall take effect fifteen (15) days after publication in two (2) newspapers of general circulation in the Philippines. (SGD.) ROSARIO N. LOPEZ Chairman (SGD.) RODOLFO L. SAMARISTA (SGD.) MERLE O. MANUEL Associate Commissioner Associate Commissioner (SGD.) FE ELOISA C. GLORIA (SGD.) PERFECTO R. YASAY, JR. Associate Commissioner Associate Commissioner