Via ODiSy March 22, 2012 PHILIPPINE STOCK EXCHANGE ... - BDO

- 130 -Sale of BankardBDO (as successor in interest of EPCIB), as respondent, and RCBC CapitalCorporation (“RCBC Capital”), as claimant, were involved in international arbitrationproceedings.The arbitration proceedings arose from the Sale and Purchase Agreement (“SPA”)executed between RCBC Capital and EPCIB in May 2000, whereby EPCIB sold toRCBC Capital its 67% stake in the outstanding capital stock of Bankard, Inc.(“Bankard”). RCBC Capital claims an alleged breach of the BDO’s warranty onBankard’s financial statements and asked for rescission of its purchase and restitution ofall amounts paid to EPCIB with damages or, if rescission cannot be granted, damagesof at least P586. EPCIB was of the position that RCBC Capital’s claim is one foroverpayment or price reduction that is time-barred since the SPA requires that demandfor price reduction be presented in writing on or before December 31, 2000. Despiteactual due diligence, no such demand had been submitted.With one of the three arbitrators dissenting, the Arbitral Tribunal issued two partial awards(dated September 27, 2007 and May 28, 2008) and a Final Award dated June 16, 2010awarding to RCBC P349 and reimbursement of arbitration costs.In December 2010, the Court of Appeals (CA) reversed and set aside the confirmationof the Second Partial Award, which ordered BDO to reimburse the costs advanced byRCBC and deemed BDO’s counterclaim waived due to alleged non-payment of costs.RCBC Capital has appealed this reversal to the Supreme Court where the matterremains pending.On July 1, 2010, BDO filed a petition to vacate the Final Award in accordance with lawand the rules of court applicable to arbitration. The Final Award was vacated or setaside by the Regional Trial Court of Makati (RTC Makati) in February 2011. RCBCCapital has appealed this to the Court of Appeals where the case remains pending.RCBC Capital sought to confirm the same Final Award in a separate proceeding in RTCMakati on July 28, 2010. Despite questions on jurisdiction, RTC Makati (Branch 148)confirmed the final award last November 10, 2010. It also denied BDO’s motion forreconsideration in August 2011 and added interest charges not awarded by theArbitration Tribunal. Execution pending appeal was also swiftly awarded andimplemented last September 2011 in highly questionable and irregular procedure. BDOappealed the confirmation and questioned the execution of the Final Award before theCA. In order to stop the implementation of the said writ of execution, BDO opted totender on September 13, 2011 the amount of P638, presented as part of Accountsreceivable under Loans and Other Receivables (see Note 10), without prejudice to theoutcome of the pending appeals and cases.Management believes that RCBC Capital’s claim is baseless and without merit and thatBDO’s position will be sustained in the final resolution of the cases pending with theCA. In any case, the resulting liability, if any, from such a claim, will not have a materialadverse effect on the financial position and performance of the BDO Unibank Group.