Chinese multi-platform media company SearchMedia Holdings Limited says it has reached settlement agreements for the arbitration between the company and certain of its predecessor shareholders.
The arbitration was filed between SearchMedia Holdings Limited versus two groups composed first of settling defendants China Seed Ventures, LP; Qinying Liu; Deutsche Bank AG Hong Kong Branch; and Le Yang; and second, a group of Nan Fung entities composed of Sun Hing Associates Ltd. and Vervain Equity Investments. The matters are related to a share exchange agreement which closed on October 30, 2009.
The settlement agreements with CSV, Qinying Liu and Le Yang are reportedly effective immediately, while the settlement agreement with Deutsche Bank is conditional upon certain determinations by the arbitration panel. In addition, SearchMedia has reached an agreement with Linden Ventures II BVI Ltd., a pre-merger investor, in which SearchMedia will apparently repurchase all of their shares outstanding.
The company says it intends to vigorously continue its claims against the Nan Fung entities, the remaining party in the arbitration.
Subject to certain conditions, as part of the settlement with the settling defendants and Linden, 2.5 million shares will be repurchased by SearchMedia at an average price per share of USD0.25 and such shares will be retired. In addition, 2.0 million shares will be surrendered and cancelled without consideration, and 1.6 million warrants will be surrendered and cancelled without consideration. The cancelled warrants have strike prices ranging from USD0.0001 to USD7.88 per share.
Upon completion of the transactions contemplated by the settlement agreements, SearchMedia says it will have 17.4 million shares outstanding, including 0.8 million shares recently issued to subsidiaries of SearchMedia in settlement of certain earnout obligations.
In addition, as part of the settlement, the settling defendants have agreed to forego their right, under a voting agreement, to nominate four members to the SearchMedia board of directors, and Qinying Liu resigned her position as a member of the SearchMedia Board of Directors effective January 23, 2012.
Paul Conway, CEO of SearchMedia, commented, "We are happy to reach these settlement agreements to resolve a long standing issue. As part of the settlement we will eliminate 4.5 million outstanding shares, significantly reduce our overhang of warrants, and facilitate the appointment of additional directors. As we continue to move beyond the complications that we inherited, our current management team will be able to better focus on execution of our business strategy to capture the exciting opportunities in China's advertising market."