Mr. Rolando A. Olegario

December 14, 1981 Mr. Rolando A. Olegario 921 Paquita St., Sampaloc Metro Manila Sir : This has reference to your query dated November 27, 1978 regarding the rights, preferences and privileges of preferred shares of VOLCANO LAKEVIEW RESORTS, INC. cdlex The rule is that, preferred shares of stock enjoy the same preferences or privileges unless a classification of the said shares is provided in the Articles of Incorporation. There are generally three accepted classes of preferred shares, namely: a) shares which enjoy preference in the payment of dividend; b) those which enjoy preference in the payment of dividend with the additional privilege to participate with common stocks in the balance of the surplus profits in a stated proportion, usually after the common shares are paid in dividends equal to the preferred dividends or under conditions specified in the Articles of Incorporation; and c) those which enjoy preference in the payment of dividends and in the refund of investment in case of liquidation. The Articles of Incorporation of the VOLCANO LAKEVIEW RESORTS, INC. provides, to wit: ARTICLE 6. PREFERRED STOCKS a. Holders of Preferred shares shall be entitled to receive dividends at the rate of eight (8%) per cent per annum on the par value thereof for each shares, in Philippine currency, such dividend to be paid out of the surplus profits of the corporation as long as said preferred shares are outstanding and shall be payable annually; b. Dividends on said preferred shares shall be cumulative but non-participating; c. Accumulation of dividends on the preferred shares shall not bear interest; LexLib d. Holders of Preferred shares "shall not be entitled to vote except in those cases expressly provided for by law, nor to be voted for in the election of directors; Provided, however, that if the corporation fails to declare and pay dividends for three (3) consecutive years from the date of the actual commercial operations for any cause other than force majeure without the fault of the corporation, and provided furthermore that such declaration and payment of dividends shall come from the surplus profits of the corporation or which shall not adversely affect or impair the capital of the corporation, the holders of Preferred shares shall acquire temporary voting rights until the corporation shall be able to declare and pay at least one, fiscal year's dividends, in which case the voting rights so acquired of the holders of preferred shares shall automatically cease and terminate and the holders of common shares shall exclusively exercise the rights to vote except as otherwise provided for by law; e. Subject only to the foregoing limitation, dividends, in cash or in shares (stock dividends) or otherwise, may be paid from time to time to the holders of common stocks from the surplus profits of the corporation in such amount as and when declared by the Board of Directors and the holders of said preferred stocks shall not be entitled any such dividends paid to the holders of common stock; f. In the event of liquidation, receivership, dissolution, bankruptcy, or winding up of the affairs of the corporation, voluntary or involuntary, except in connection with merger or consolidation, the holders of preferred shares shall be entitled to be paid at its par value or ratably in so far as the assets of the corporation will permit, together with the accrued and unpaid dividends thereon before any distribution shall be made to the holders of common stocks. The holders of preferred shares, shall not be entitled to any other distribution. g. Preferred stocks shall not be convertible into any other types or class of stocks of the corporation. Other than those privileges provided in the above-mentioned provisions, the VOLCANO LAKEVIEW RESORT, INC. is not empowered to grant different privileges or preferences on its preferred shares. Since the Articles of Incorporation of the said corporation does not distinguish between those preferred shares subscribed from the corporation and those acquired by other modes, as far as preferences in said shares are concerned, it cannot therefore consider the former to enjoy privileges different from that of the latter. prcd Very truly yours, (SGD.) ROSARIO N. LOPEZ Associate Commissioner