Execution of Proposed Agreements Not Subject to Documentary Stamp Tax

November 29, 1999 BIR RULING NO. 188-99 Alba Romeo & Co . 7/F Don Chua Lambo Building H.V. dela Costa Street Salcedo Village Makati City Gentlemen : This refers to your letter dated February 12 1999 requesting confirmation of your opinion that the proposed agreements like Substituting the Pledgors under the New Pledge Agreement and the shares of stock under the Agreement on Substitution of Pledged Shares are within the coverage of BIR Ruling No. 015-99 dated February 3, 1999, where this Office ruled "In reply, please be informed that Pledge Agreement is subject to the payment of documentary stamp tax imposed under Section 195 of the Tax Code of 1997. However, the execution of a supplemental Pledge Agreement by TSI in favor of Qualcom which will only substitute the New Timco Shares pledged under the original pledge agreement with a corresponding number of Retelcom shares owned by New Timco, without any change in the terms and conditions of the pledge agreement as well as the amount of the loan of TSI from Citibank N.A. guaranteed by Qualcom is no longer subject to the documentary stamp tax imposed under Section 195 of the Tax Code of 1997. "xxx xxx xxx Documentary evidence submitted to the Office disclosed that on December 1, 1997, Qualcomm Incorporated (Qualcomm), Telectronic Systems, Inc. (TSI), Timco Holdings Inc. (formerly Pocketbell Philippines, Inc.) and Mr. Severo J. Santiago (TSI Shareholder) executed an Omnibus Agreement for a US$10,000,000 Bridge Loan from Citibank N.A.; that Qualcomm has agreed to assist TSI in financing TSI's cash call equity contribution in Republic Telecommunications Holdings, Inc. (Retelcom); that Qualcomm has guaranteed to Citibank, New York Branch the punctual payment of a US$10,000,000 bridge financing to be granted by Citibank, Manila Branch to TSI; that TSI proposes to use the proceeds of the Bridge Loan to answer the cash equity call of Retelcom; that on March 2, 1998, an additional US$3,600,000 bridge financing was extended by Citibank, Manila to TSI; that on April 6, 1998, a Promissory Note with Pledge was executed by TSI, as Borrower-Pledgor and Qualcomm as Lender-Pledgee whereby the latter has extended a US$83,082 loan to TSI to finance the payment of interest accrued on the US$10,000,000 Bridge Loan; that TSI has pledged certain of its shares in the outstanding capital stock of Timco to Qualcomm to secure (i) any and all amounts Qualcomm may be required to pay to Citibank, Manila and/or Citibank, New York under the Guarantee, and (ii) to secure the US$83,082 Loan; that the Bridge Loans and the US$83,082 Loan all matured on November 23, 1998 and TSI has requested for the granting of time or indulgence to pay said obligations; that Citibank, New York has agreed to cause Citibank, Manila to extend the time for the payment of the Bridge Loans for an additional three (3) months or until February 23, 1999; that Qualcomm has requested Citibank, New York to cause Citibank, Manila to extend the time of payment of the Bridge Loans and agreed to extend the time of payment of the $83,082 Loan to coincide with the payment of the Bridge Loans, subject to Timco pledging certain of its shares in the outstanding capital stock of Retelcom to Qualcomm to substitute for certain shares in the outstanding capital stock of Timco currently pledged by TSI to Qualcomm; and that Qualcomm, TSI and Timco have agreed to the substitution of pledged shares. In reply, please be informed that your opinion is hereby confirmed. The execution of the proposed agreements like Substituting the Pledgors under the New Pledge Agreement and the shares of stock under the Agreement on Substitution of Pledged Shares without any change in the terms and conditions of the original pledge agreement as well as the original amount of the loan secured are not subject to the documentary stamp tax imposed under Section 195 of the Tax Code of 1997. This ruling is being issued on the basis of the foregoing facts as represented. However. if upon investigation, it will be disclosed that the facts are different, then this ruling shall be considered null and void. Very truly yours, (SGD.) BEETHOVEN L. RUALO Commissioner of Internal Revenue