Rules Governing Warrants

March 26, 1992 RULES GOVERNING WARRANTS In the interest and for the protection of investors, the Securities and Exchange Commission ("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. No. 902-A, hereby promulgates the following rules: SECTION 1. Definitions . When used under these Rules, the following terms shall have the meaning indicated, unless the context provides otherwise: (1) "Warrant" a type of security which entitles the holder the right to subscribe to, or purchase from, the unissued capital stock of a corporation 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. (2) "Warrant Certificate" the certificate representing the right to a Warrant, which may be detachable or not, duly issued by the Issuer to the Warrantholder. (3) "Warrantholder" the registered owner of a Warrant as reflected in the Warrant Registry Book maintained by the Issuer. (4) "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; (ii) the Exercise Period; (iii) the Exercise Price; and (iv) such other terms and conditions as the Commission may require. (5) "Warrants Registrar" a person tasked with maintaining a corporation's Warrants Registry Book. (6) "Warrants Registry Book" a registry book maintained by the Issuer, duly stamped by the Commission, showing the authority for the issuance of the Warrants. (7) "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. (8) "Nondetachable 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. (9) "Beneficiary Securities" the shares of stock or other securities of the Issuer which form the basis of the entitlement in a Warrant. (10) "Issuer" a duly registered domestic corporation which issues or proposes to issue Warrants. (11) "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. (12) "Exercise Price" the purchase price per share, which a Warrantholder shall be required to pay to the Issuer upon the exercise of the right 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. (13) "Underlying Shares" the unissued shares of a corporation which may be purchased by the Warrantholder upon the exercise of the right granted under the Warrant. cdll SECTION 2. Issuance of Warrants . Any corporation expressly allowed under its Articles of Incorporation and 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. No corporation shall issue 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, unless such Warrant (whether detachable or nondetachable), together with all of its 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. 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 Nondetachable. SECTION 4. Registration Requirements . A corporation proposing to issue Warrants shall file an application with the Commission in the prescribed form which shall be under oath and signed by the President or any other officer so authorized by the Board of Directors to act on behalf of the Issuer, stating among others, the following: a. Name of the corporation; b. Address or principal office of the corporation; c. Principal line of business of the corporation; d. A list of the members of the Board of Directors, executive officers and other officials performing similar functions; e. A list of all persons in whose favor the Warrants will be issued, indicating the number of shares to be given to each, or if this could not yet be ascertained, then the formula to be used in determining the number of Underlying Shares covered by the Warrant, and the Exercise Price thereof; f. Reasons for the entitlement, and the use of the proceeds; g. Three (3) copies each of the resolutions approved by the majority vote of applicant's Board of Directors and stockholders owning at least two-third (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; h. 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. i. A sample form for the Warrant Certificate to be issued; j. Original signed copy of the Warrant Instrument; k. The consideration, if any, which may or may not be separate from the price of the Beneficiary Securities; l. Latest audited financial statements, as of a date not more than 90 days prior to filing of the application; or if not available, the latest audited financial statements as of a date not more than 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; m. Statement of management responsibility on the financial statements submitted; and n. Such other data or information which the applicant believes necessary to support its petition, or which the Commission may require. cdll In addition to the foregoing requirements, it shall be necessary, for purposes of approval of the application, that: a. At the time of the filing of the application, the applicant must have unissued authorized capital stock sufficient to cover the Warrants if fully exercised; and b. The total issue of the Warrant shall not exceed Twenty Five (25%) percent of the corporation's total outstanding capital stock; 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. 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. SECTION 8. Warrant Instrument . The Warrant Instrument must be signed by the President or Vice President of the Issuer, attested to by the Corporate Secretary, and sealed with the corporate seal, and must 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 shall constitute direct obligation of the corporation executing the same, 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. LexLib 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. 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 . Any corporation authorized to issue Warrants shall have a Warrants Registry Book maintained by the Warrants Registrar. 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. 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 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. 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 . 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 rules shall take effect fifteen (15) days after publication in at least two (2) newspapers of general circulation in the Philippines. (SGD.) ROSARIO N. LOPEZ Chairman