PSE Circular for Brokers No. 293-99

February 18, 1999 PSE CIRCULAR FOR BROKERS NO. 293-99 February 16, 1999 PHILIPPINE STOCK EXCHANGE PSE Center, Exchange Road Ortigas Center, Pasig City Attention: Ms . Grace B . De Guia and/or Ms . Janet J . Alcala Disclosure Department RE : KPPI US$50 Million Convertible Bond Issue Gentlemen : In respect of your telefax dated 12 February 1999 requesting us to provide you with additional information regarding the above-captioned matter, please find enclosed a copy of a summary of the terms and conditions of the issue. Should you have further questions on the same, please do not hesitate to call. LLjur Very truly yours, (SGD.) FEDERICO G. NOEL, JR. Corporate Secretary US$50 Million Convertible Bond Issuer Kuok Philippine Properties, Inc. Advisor BPI Capital Corporation Instrument US dollar-denominated, transferable, registered and Convertible Bond ("Bond")constituting the direct, unconditional and unsecured obligations of the Issuer ranking at all times pari passu among themselves and at least equally with all its other present and future direct, unsecured and unsubordinated obligations. The Bonds may be offered outside the Philippine to any number of Investors and not more than 19 Investors in the Philippines. Issue Amount US$50 million Issue Price At par of US$1,000 each per Bond Issue Date __ January 1999 or such later date as the Lead Investor or Investors may agree Final Redemption Date Unless previously purchased and canceled, converted or redeemed the Bond shall be redeemed on the date failing three (3) years from the Issue Date. Use of Proceeds General Working Capital Net Coupon Rate Fixed rate of 12% p.a. of which 8% p.a. is payable quarterly in arrears on each of the indicated payment dates and the balance 4% p.a. is accrued quarterly in arrears and payable upon conversion or redemption of the Bond (the Deferred Interest). Withholding taxes are for the account of the Issuer who will gross up any payment from which withholding taxes are deducted. The Bond will cease to bear interest on conversion (but subject to actual conversion pursuant to the terms of the Bond), redemption or maturity (unless payment is improperly withheld or default is made in respect of payment) Final Redemption Any Bond the conversion option of which has not been exercised within the Conversion Period will be redeemed on the Final Redemption Date at its par amount together with the 8% p.a. accrued interest plus 4% p.a. accrued Deferred Interest giving the equivalent of an all-in-yield from issue to maturity of 12% p.a. paid quarterly. Conversion Option The Investor have the option to convert each Bond into the appropriate number of Common Shares at any time during the Conversion Period by giving the Issuer written notice (the Conversion Notice"). The Issuer undertakes to use its best endeavors to issue and the Common Shares to each Converting Investor, to arrange for the same to be listed on the Philippine Stock Exchange ("PSE") and to arrange for approvals from the Securities and Exchange Commission of the Philippines (SEC) and all other approvals as soon as possible and in any event, not more than 90 days from the date of the Conversion Notice (the "Conversion Notice Period"). If the Issuer is unable, having used its best endeavors, to issue and deliver the Common Shares to obtain the SEC and all the other approvals and to list the same on the PSE within the Conversion Notice Period, it will be a Conversion Default. The Common Shares shall be issued the Conversion Notice Period The Investor's Conversion Option subsists and overrides the Issuer's request of Early Redemption Conversion Period Beginning on Issue Date up to the Final Redemption Date Conversion Price Each KPPI Common Share shall be acquired at PhP1.00 per share on conversion. Each Bond of US$1,000 plus accrued interest plus accrued Deferred Interest shall be convertible into such number of Common Shares computed as follows: US$ amount to be converted x exchange rate (as defined below) _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _____________________ No. of Common Shares = PhP 1 subject to adjustment for events such as declaration of stock dividends, alteration in par value, normal anti- dilution provisions, etc. The US$ amount shall be equal to the Bond par value plus accrued interest plus accrued Deferred Interest at the conversion date. The exchange rate shall be the mid-rate of that quoted on the Reuters "PHP =" page at 11:00 a.m. on the conversion date (the "Exchange Rate"). Subsequent Listing At the request of the Lead Investor (after consultation with the Issuer) application may subsequently be made to list the Bond on the PSE. The Issuer undertakes to use its best endeavors to arrange for such listing. Conversion Default If for any reason whatsoever, the Issuer is unable, having used its best endeavors, to convert any Bond into Common Shares, to obtain the SEC approval and all other necessary approval and list such Common Shares on the PSE within the Conversion Notice Period, it will be a conversion default. Upon conversion default relevant Investor will have the following options: A. To require the Issuer to pay to such relevant Investor on the day following the expiry of the Conversion Notice Period an amount equal to the higher of: (i) the market value of those Common Shares which such Investor would otherwise be entitled to, and (ii) the aggregate of the principal amount of the Bonds together with 8% p.a. accrued interest and the accrued Deferred Interest, or, B. To give notice in writing to the Issuer to withdraw the relevant Conversion Notice. The market value will be determined using the weighted average closing price of the KPPI Common Shares for 10 consecutive trading days immediately preceding and including the Conversion Notice Period expiry date. The amount paid in respect of market value shall be in US$'s at the prevailing Exchange Rate which shall be the mid-rate of the quoted Reuters "PHP" = page at 11:00A.M. on the actual payment date. Early Redemption The Issuer may wholly or partially redeem the Bonds by paying the principal amount of the Bond plus accrued interest plus accrued Deferred Interest thereon on any Banking Day starting from the 2nd anniversary of the Issue Date and up to 45 days prior to the Final Redemption Date, by giving at least 30 calendars days prior written notice (the "Early Redemption Notice"), provided that: (i) The Closing Price of the KPPI common shares exceeds 130% of the Conversion Price during the 30 consecutive trading days preceding the Early Redemption Notice, and (ii) The Issuer does not receive Conversion Notice prior to the Early Redemption Date The Investor has the overriding Conversion Option which if exercised, will mean that the Early Redemption Notice in relation to that Investor will become null void. The Investor has the overriding Conversion Option which if exercised, will mean that the Early Redemption Notice in relation to that Investor will become null and void. Financial Covenants A. The Issuer will ensure that at all times: (i) Its Consolidated Tangible Net Worth plus Minority Interest is not less than Pesos 4,800 million. (ii) Its Consolidated Total Financial Indebtedness plus Contingent Liabilities (which are quantified in the accounts by reference to which compliance with this covenant is tested) does not exceed 75% of the aggregate of its Consolidated Tangible Net Worth plus Minority Interest (iii) Its Consolidated Total Liabilities is not more than 100% of its Consolidated Tangible Net Worth plus Minority Interest, i.e. a debt equity ratio of not more than 1:1 (see attachment - Definition of financial terms) B. The Issuer will not declare or pay any cash dividend or interim dividend or make any other distribution or interim distribution to its shareholders other than stock dividend i.e., capitalization of retained earnings if the amount, when added to the amount of each dividend and other distribution previously declared, paid or made in respect of that financial year, exceeds 50% of the net profits of the Issuer for the financial year, or the relevant portion of the financial year (in the case of interim payment). Negative Pledge The Issuer undertakes not to allow any of its or its subsidiaries undertaking, assets or revenues present or future (the 'Assets') to be subject to any lien without the prior written approval of the Investors determined by Extraordinary Resolution (as defined below) and on such terms as they may determine. Covenants of the Issuer KPPI Common Shares to remain listed on the PSE Various other positive and negative covenants Events of Default Including, but not limited to: Payment default; Covenants default; Representation/Warranty default; Other provisions default; Cross default; Expropriation default; Insolvency default; Judgment default; Foreclosure default; Non-convertibility of the PH Peso, or other changes to exchange controls; Force Majeure. Consequence of Default If any one or more of the Events of Default occurs, the principal of the Bond plus all accrued interest plus accrued Deferred Interest and other charges will become capable of being declared immediately due and payable. And, if there is a default by the Issuer in redemption of any Bond on its due date, the Investors Conversion Option is revived. Meetings & Extraordinary Resolutions The Investors may deal with certain matters as specified in the Bond issue documents by a resolution passed at a meeting of the Investors (the "Extraordinary Resolution") carried by a majority consisting of not less than 67% of the persons voting upon a show of hands or if a poll is demanded, by at least 67% of the principal of outstanding. Payment All payment shall be free from set-off, counterclaim and shall be made free and clear of any deduction of any tax Limitation on Foreign Ownership The Issuer is registered owner of land. Under Philippine law companies that are registered owners of land must at least be 60% owned by Philippine nationals. As of 31 October 1998, 39.97% of the outstanding common shares of the Company were registered in names of persons who were non-Philippine nationals. If any Bond is converted into KPPI common shares, the total KPPI common shares issued and outstanding could represent more than 40% of the Issuer share capital of the Issuer. Such investor will not be able to obtain common shares on exercise of its conversion rights. In such event, the relevant Investor shall have the same option as in the case of a Conversion Default. Cost All cost and expenses relating to the issue of the Bonds and/or the preparation, negotiation or registration of any documents relating thereto shall be for the Issuer's account Stamp Duty Initial stamp duty (if any) on the issue of the Bonds shall be for the account of the Issuer. Assignability The Investor shall have the right at any time to transfer all or any of its Bonds to any party (whether to Philippine or non-Philippine nationals) by entry in the register of Bonds which shall be maintained throughout the duration of the Bond issue by the Issuer. Any stamp duty arising from any such transfer shall be borne by the transferor or transferee as they may agree. Governing Law English Law Documentation The issue shall be subject to documentation in all respects satisfactory to the Investors. Documentation to include, but not limited to, Note Deed and Subscription Agreement, including terms and conditions customary for this type of financing including, but not limited to, those set out above. Attachment Definition of financial terms Unless otherwise stated, figures are based on Kuok Philippine Properties, Inc. ("KPPI") audited consolidated financial statements. Consolidated Tangible Net Worth share capital, reserves and retained profits, less intangible assets Minority Interest minority interest in consolidated subsidiaries Total Consolidated Indebtedness all debt obligations excluding proportionate loans from minority interests. Total Consolidated Indebtedness plus Contingent Liabilities Total Consolidated Indebtedness plus contingent liabilities. Consolidated Total Liabilities as defined by Generally Accepted Accounting Principles, i.e. liabilities plus current liabilities plus deferred liabilities but excluding proportionate subordinated minority interest loans. cdll