Mr. Luis C. Liwanag II

June 11, 1986 Mr. Luis C. Liwanag II Officer-in-Charge Finance, Legal & Administration Office Philippine Ports Authority B.F. Condominium Building Aduana, Intramuros, Manila Sir : This refers to your letter dated May 21, 1986 requesting for clarification on the following: "1. The meaning of Merger and/or Consolidation within the SEC context. What are the effects on the merged/consolidated companies? 2. The SEC requirements, if any, with respect to the integration of cargo handling companies. 3. The rights and obligations of the individual stockholders in the merged/consolidated companies." Merger and Consolidation are defined as follows. Merger is the absorption of one or more corporations by another existing corporation, which retains its identity and takes over the rights, privileges, franchises, and properties of the absorbed corporation(s).The absorbing corporation continues its existence while the life or lives of the other corporation(s) is/or are terminated. Consolidation is the union of two or more corporations to form a new corporation, having the combined rights, privileges, franchises and properties of the constituent companies, all combining to lose their corporate existence. Briefly, it is described as the union of two or more corporations into a single new corporation, all the constituent corporations thereby ceasing to exist as separate entities. Merger or consolidation shall have the following effects: 1. The constituent corporations shall become a single corporation which, in case of merger, shall be the surviving corporation designated in the plan of merger; and in case of consolidation, shall be the consolidated corporation designated in the plan of consolidation; cdll 2. The separate existence of the constituent corporations shall cease, except that of the surviving or the consolidated corporation; 3. The surviving or the consolidated corporation shall possess all the rights, privileges, immunities and powers shall be subject to all the duties and liabilities of a corporation organized under this Code; 4. The surviving or the consolidated corporation shall thereupon and thereafter possess all the rights, privileges, immunities and franchises of each of the constituent corporations; and all property, real or personal, and all receivables due on whatever account, including subscriptions to shares and other choses in action, and all and every other interest of, or belonging to, or due to each constituent corporation, shall be deemed transferred to and vested in such surviving or consolidated corporation without further act or deed; and 5. The surviving or consolidated corporations shall be responsible and liable for all the liabilities and obligations of each of the constituent corporations in the same manner as if such surviving or consolidated corporation had itself incurred such liabilities or obligations; and any pending claim, action or proceeding brought by or against any of such constituent corporations may be prosecuted by or against the surviving or consolidated corporation. The rights of creditors or liens upon the property of any of such constituent corporations shall not be impaired by such merger or consolidation. Relative to your second query, if the integration of cargo handling companies would result into merger or consolidation contemplated by the foregoing definitions, the corporations involved are required to submit the following documents: FOR MERGER : 1) Articles of Merger signed by the President or Vice-President and certified under oath by the Secretary or Assistant Secretary of the constituent corporations setting forth the following: a) The plan of merger; b) As to stock corporations, the number of shares outstanding, or in the case of non-stock corporations, the number of members; and c) As to each corporation, the number of outstanding shares or members voting for and the names of stockholders or members voting against such plan, respectively. 2) Copies of the minutes of the board of directors' meeting and minutes of the stockholders' or members' meeting of the constituent corporations, approving and ratifying the plan of merger, certified under oath by their respective secretaries or assistant secretaries; 3) List of creditors of the absorbed corporations as of the date of approval of the plan of merger with their addresses and the amounts owing to each; 4) Audited financial statements (Balance Sheet and related statement of income and expenses) of the constituent corporations as of a date not earlier than 120 days prior to the date of filing of the application with the Commission. The financial statements shall be accompanied by a long form audit report of a certified public accountant; 5) Amended articles of incorporation and by-laws of the surviving corporation, whenever necessary in accordance with the terms of the plan of merger such as change of name of the surviving corporation, increase of capital stock, etc. FOR CONSOLIDATION : 1) Articles of Consolidation signed by the President or Vice-President and certified under oath by the Secretary or Assistant Secretary of the constituent corporations setting forth the following: a) The plan of consolidation; b) As to stock corporations, the number of shares outstanding of the constituent corporations or in the case of non-stock corporations, the number of members; and c) As to each corporation, the number of outstanding shares or members voting for and the names of stockholders or members voting against such plan respectively. 2) Copies of the minutes of the board of directors' meeting and minutes of the stockholders' meeting of each of the constituent corporations, approving and ratifying the plan of consolidation, certified under oath by their respective secretaries or assistant secretaries; 3) List of the creditors of the constituent corporations as of the date of approval of the plan of consolidation with their addresses and the amounts owing to each; 4) Audited financial statements (Balance Sheet and related statement of Income and Expenses) of each of the constituent corporations as of a date not earlier than 120 days prior to the date of filing of the application with; the Commission. The financial statements shall be accompanied by a long form audit report of a certified public accountant; 5) Articles of Incorporation, By-laws and supporting documents of the proposed or consolidated corporation. Regarding your last query, the rights of stockholders of the combining corporations are defined and regulated by the governing statute and the consolidation or merger agreement made in conformity with such statute. When they become stockholders in the new company, these rights as such are, of course, largely determined by their relation to such company. (15 Fletcher, Sec. 7134 Ch. 61, p. 219, 1973 edition). A stockholder who voted against the plan of merger or consolidation has the right to demand payment of the fair value of his shares in accordance with the provisions of Section 82 of the Corporation Code of the Philippines. Please be advised accordingly. Very truly yours, (SGD.) JULIO A. SULIT, JR. Acting Chairman