Mr. C. A. Patiño, Jr.

March 24, 1980 Mr. C. A. Patio, Jr. Manager, Claims, Tax & Insurance Planters Products, Inc. Esteban St., Legaspi Village Makati, Metro Manila Sir : Your letter of March 19, 1980 and March 10, 1980, propose to adopt an optional redemption plan, in line with the objectives of LOI No. 178, which directed the then Secretary of Agriculture and Natural Resources to immediately take all steps necessary for the dispersal of ownership of the shares of Planters Products, Inc. among all fertilizer users. Your queries are restated and answered hereunder in the order they were presented: 1. Without amending our Articles of Incorporation, may PPI offer to buy from the then ESFAC shareholders their shareholdings? Would you consider amendment to PPI's Articles of Incorporation necessary in order to pursue that particular line of activity, i.e. repurchasing from original ESFAC shareholders and reselling it to Filipino farmers in obedience to LOI No. 178? We believe, there is no necessity of amending your articles of incorporation, in order that you can validly effect the repurchased of shares from the original ESFAC shareholders, for the reason that such corporate act is in pursuance of a legitimate government policy mandated in LOI No. 178, and because the option is placed with the shareholder, whether or not he is willing to sell his share to the corporation. Evidently, the right of ownership incident to shareholding is not thereby prejudiced. 2. Will there be a need for a SEC approval before buying the shares being referred to from the then ESFAC shareholders and the said shares' eventual sale to Filipino farmers? Will you not consider notice of that fact to the SEC sufficient? There is no need for SEC approval in the contemplated repurchase and resale of shares by the PPI, because this is precisely in obedience to the instructions laid down under LOI No. 178. In fact, the SEC is enjoined among other governmental agencies and instrumentalities, to extend all assistance and cooperation necessary for the implementation of the said letter of instruction. Of course, for information and record purposes, the SEC should accordingly be notified of such transaction. 3. What are the limitations, if any, to the company's repurchase of its own shares? A corporation, in the absence of express restriction, may purchase its own shares of stock only if: a) its capital is not thereby impaired; b) A legitimate and proper corporate object is advanced; c) the condition of corporate affairs warrants it; d) the transaction is designed and carried out in good faith; LibLex e) there is intended and there results no undue advantage to a few favored stockholders at the expense of the remainder; and f) the rights of creditors are not jeopardized. (SEC Folio 1960-76 pp. 35) 4. In order to effect the repurchased from the original ESFAC shareholders, is an individual notice to aforesaid shareholders mandatory? Would you consider notice by publication sufficient for that purpose? Please elaborate. While we are not aware of a statute requiring mandatorily notice by personal or individual service to stockholders in a similar transaction as this, equity demands that the shareholders concerned should be serviced with note individually so that they could appropriately be apprised of the reasons and purposes (such as those embodied in LOI No. 178) behind such corporate action to repurchase and resell shares of its stockholders. This way, the less informed may not be placed at a disadvantage, in surprise, and who, in a matter of fair play, deserve and shall be accorded consideration regarding the complex vicissitude of corporate existence. 5. Will it be legally alright for PPI to redeem those shares at P1.08 and later resell it to the farmers at P1.05 or with a loss of P0.03 per share? There is nothing wrong for PPI to redeem and then resell shares at prices quoted in the above query. However, in order to be legally justified, the requisites enumerated in our answer to query No. 3 above should first be satisfied. Furthermore, the intended resale of the share at a price of P1.05, which is P0.05 higher than the par value of your stock at P1.00 per share, is likewise legally permissible. Thus, when stock has been once issued and fully paid (assumed that shares subject of the instant transaction are fully paid) and reacquired by the corporation to be disposed of for its benefits, in such a case the corporation may dispose of the stock at less than its par value without violating statutory or constitutional provisions regulating the issue of stock . . . . (11 Fletcher 5237). Significantly, as aforecited, you are selling or reselling your shares beyond par. Please be guided accordingly. LibLex Very truly yours, (SGD.) ROSARIO N. LOPEZ Director Corporate and Legal Department