Southern Broadcasting Network, Inc.

December 1, 1995 Southern Broadcasting Network, Inc. 3881 E. Vallejo St., Santol, Sta. Mesa Manila Attention : Mr . Jesus B . Pacquing Chairman S i r : This refers to the increase of capital stock of Southern Broadcasting Network, Inc. from P100,000,000.00 to P150,000,000.00 wherein the increase of P50,000,000.00 was fully subscribed and fully paid through assignment of the intangible assets consisting of " goodwill ", " client listing ", and " legislative franchise ". prcd Section 62 of the Corporation Code provides: "SECTION 62. Consideration for stocks . Stocks shall not be issued for a consideration less than the par or issued thereof. Consideration for the issuance of stock may be any or a combination of any two or more of the following: xxx xxx xxx 2. Property, tangible or intangible, actually received by the corporation and necessary or convenient for its use and lawful purposes at a fair valuation equal to the par or issued value of the stock issued: 3. Labor performed for or services actually rendered to the corporation: xxx xxx xxx Shares of stock shall not be issued in exchange for promissory notes or further services . . . ." (Emphasis supplied) Under the aforecited provision, while intangible properties may be used as payment in exchange for shares of stock, the law requires that they must be of such character that it can be transferred and must be actually received by the corporation. In the case of " legislative franchise " the Commission is not aware of any franchise granted by law which is transferable. We believe that legislative franchise can only be transferred by legislative approval . As to " client listing ", the same cannot be considered as actually received since earnings from prospective clients would still be in the future and there is no assurance that they will be actually earned. Thus, the Commission, in its meeting of November 29, 1995, resolved to disallow " client listing " and " legislative franchise " as payment to subscription. Therefore, the corporation is hereby advised to substitute the same with other forms of payment acceptable under the law. Pending compliance herewith, action on the increase of capital stock of the corporation will be held in abeyance. cdll Very truly yours, (SGD.) FE ELOISA C. GLORIA Associate Commissioner