FORM OF REGISTRATION RIGHTS AGREEMENT
EXHIBIT
4.8
FORM
OF REGISTRATION RIGHTS AGREEMENT
This
Registration Rights Agreement (this “Agreement”)
is
made and entered into as of February 28, 2006, among Pacificnet, Inc., a
Delaware corporation (the “Company”),
and
the several purchasers signatory hereto (each such purchaser is a “Purchaser”
and
collectively, the “Purchasers”).
This
Agreement is made pursuant to the Securities Purchase Agreement, dated as of
the
date hereof between the Company and each Purchaser (the “Purchase
Agreement”).
The
Company and each Purchaser hereby agrees as follows:
1. Definitions
Capitalized
terms used and not otherwise defined herein that are defined in the Purchase
Agreement shall have the meanings given such terms in the Purchase
Agreement.
As used
in this Agreement, the following terms shall have the following
meanings:
“Advice”
shall
have the meaning set forth in Section 6(d).
“Effectiveness
Date”
means,
with respect to the initial Registration Statement required to be filed
hereunder, the 90th
calendar
day following the date here of (the 120th
calendar
day in the case of a “full
review”
by
the
Commission of the initial Registration Statement) and, with respect to any
additional Registration Statements which may be required pursuant to Section
3(c), the 60th calendar day following the date on which the Company first knows,
or reasonably should have known, that such additional Registration Statement
is
required hereunder; provided,
however,
in the
event the Company is notified by the Commission that one of the above
Registration Statements will not be reviewed or is no longer subject to further
review and comments, the Effectiveness Date as to such Registration Statement
shall be the fifth Trading Day following the date on which the Company is so
notified if such date precedes the dates required above.
“Effectiveness
Period”
shall
have the meaning set forth in Section 2(a).
“Event”
shall
have the meaning set forth in Section 2(b).
“Event
Date”
shall
have the meaning set forth in Section 2(b).
“Filing
Date”
means,
with respect to the initial Registration Statement required hereunder, the
earlier of (i) April 30, 2006 or (ii) the 30th calendar day following the date
the Company files its Form 10-KSB (or Form 10-K) for the year ended December
31,
2005 and, with respect to any additional Registration Statements which may
be
required pursuant to Section 3(c), the 30th day following the date on which
the
Company first knows, or reasonably should have known that such additional
Registration Statement is required hereunder.
“Holder”
or
“Holders”
means
the holder or holders, as the case may be, from time to time of Registrable
Securities.
“Indemnified
Party”
shall
have the meaning set forth in Section 5(c). “Indemnifying
Party”
shall
have the meaning set forth in Section 5(c). “Losses”
shall
have the meaning set forth in Section 5(a).
“Plan
of Distribution”
shall
have the meaning set forth in Section 2(a).
“Prospectus”
means
the prospectus included in a Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a
prospectus filed as part of an effective registration statement in reliance
upon
Rule 430A promulgated under the Securities Act), as amended or supplemented
by
any prospectus supplement, with respect to the terms of the offering of any
portion of the Registrable Securities covered by a Registration Statement,
and
all other amendments and supplements to the Prospectus, including post-effective
amendments, and all material incorporated by reference or deemed to be
incorporated by reference in such Prospectus.
“Registrable
Securities”
means
(i) all of the shares of Common Stock issuable upon conversion in full of the
Debentures, (ii) all shares issuable as interest or principal on the Debentures
assuming all permissible interest and principal payments are made in shares
of
Common Stock and the Debentures are held until maturity, (iii) all Warrant
Shares, (iv) any additional shares issuable in connection with any anti-dilution
provisions in the Debentures or the Warrants (in each case, without giving
effect to any limitations on conversion set forth in the Debenture or
limitations on exercise set forth in the Warrant), (v) shares of Common Stock
underlying warrants issued to the placement agent or its designees and (vi)
any
securities issued or issuable upon any stock split, dividend or other
distribution, recapitalization or similar event with respect to the
foregoing.
“Registration
Statement”
means
the registration statements required to be filed hereunder and any additional
registration statements contemplated by Section 3(c), including (in each case)
the Prospectus, amendments and supplements to such registration statement or
Prospectus, including pre- and post-effective amendments, all exhibits thereto,
and all material incorporated by reference or deemed to be incorporated by
reference in such registration statement.
“Rule
415”
means
Rule 415 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same purpose and
effect as such Rule.
“Rule
424”
means
Rule 424 promulgated by the Commission pursuant to the Securities Act, as such
Rule may be amended from time to time, or any similar rule or regulation
hereafter adopted by the Commission having substantially the same purpose and
effect as such Rule.
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“Selling
Shareholder Questionnaire”
shall
have the meaning set forth in Section 3(a).
2. Shelf
Registration
(a) On
or
prior to each Filing Date, the Company shall prepare and file with the
Commission a “Shelf”
Registration Statement covering the resale of 150% of the Registrable Securities
on such Filing Date for an offering to be made on a continuous basis pursuant
to
Rule 415. The Registration Statement shall be on Form S-3 (except if the Company
is not then eligible to register for resale the Registrable Securities on Form
S-3, in which case such registration shall be on another appropriate form in
accordance herewith) and shall contain (unless otherwise directed by at least
an
85% majority in interest of the Holders) substantially the “Plan
of Distribution”
attached hereto as Annex A. Subject to the terms of this Agreement, the Company
shall use its best efforts to cause a Registration Statement to be declared
effective under the Securities Act as promptly as possible after the filing
thereof, but in any event prior to the applicable Effectiveness Date, and shall
use its best efforts to keep such Registration Statement continuously effective
under the Securities Act until all Registrable Securities covered by such
Registration Statement have been sold, or may be sold without volume
restrictions pursuant to Rule 144(k), as determined by the counsel to the
Company pursuant to a written opinion letter to such effect, addressed and
acceptable to the Company’s transfer agent and the affected Holders (the
“Effectiveness
Period”).
The
Company shall telephonically request effectiveness of a Registration Statement
as of 5:00 pm Eastern Time on a Trading Day. The Company shall immediately
notify the Holders via facsimile of the effectiveness of a Registration
Statement on the same Trading Day that the Company telephonically confirms
effectiveness with the Commission, which shall be the date requested for
effectiveness of a Registration Statement. The Company shall, by 9:30 am Eastern
Time on the Trading Day after the Effective Date (as defined in the Purchase
Agreement), file a final Prospectus with the Commission as required by Rule
424.
Failure to so notify the Holder within 1 Trading Day of such notification of
effectiveness or failure to file a final Prospectus as a foresaid shall be
deemed an Event under Section 2(b).
(b) If:
(i) a
Registration Statement is not filed on or prior to its Filing Date (if the
Company files a Registration Statement without affording the Holders the
opportunity to review and comment on the same as required by Section 3(a),
the
Company shall not be deemed to have satisfied this clause (i)), or (ii) the
Company fails to file with the Commission a request for acceleration in
accordance with Rule 461 promulgated under the Securities Act, within five
Trading Days of the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that a Registration Statement will
not
be “reviewed,”
or
not
subject to further review, or (iii) prior to its Effectiveness Date, the Company
fails to file a pre-effective amendment and otherwise respond in writing to
comments made by the Commission in respect of such Registration Statement within
10 Trading Days after the receipt of comments by or notice from the Commission
that such amendment is required in order for a Registration Statement to be
declared effective, or (iv) a Registration Statement filed or required to be
filed hereunder is not declared effective by the Commission by its Effectiveness
Date, or (v) after the Effectiveness Date, a Registration Statement ceases
for
any reason to remain continuously effective as to all Registrable Securities
for
which it is required to be effective, or the Holders are otherwise not permitted
to utilize the Prospectus therein to resell such Registrable Securities for
more
than 15 consecutive calendar days or more than an aggregate of 30 calendar
days
during any 12-month period (which need not be consecutive calendar days), (any
such failure or breach being referred to as an “Event”,
and
for purposes of clause (i) or (iv) the date on which such Event occurs, or
for
purposes of clause (ii) the date on which such five Trading Day period is
exceeded, or for purposes of clause (iii) the date which such 10 Trading Day
period is exceeded, or for purposes of clause (v) the date on which such 15
or
30 calendar day period, as applicable, is exceeded, being referred to as
“Event
Date”),
then
in addition to any other rights the Holders may have hereunder or under
applicable law, on each such Event Date and on each monthly anniversary of
each
such Event Date (if the applicable Event shall not have been cured by such
date)
until the applicable Event is cured, the Company shall pay to each Holder an
amount in cash, as partial liquidated damages and not as a penalty, equal to
2.0% of the aggregate purchase price paid by such Holder pursuant to the
Purchase Agreement for any Registrable Securities then held by such Holder,
up
to a maximum of 20% per Holder of the aggregate purchase price paid by such
Holder pursuant to the Purchase Agreement. If the Company fails to pay any
partial liquidated damages pursuant to this Section in full within seven days
after the date payable, the Company will pay interest thereon at a rate of
18%
per annum (or such lesser maximum amount that is permitted to be paid by
applicable law) to the Holder, accruing daily from the date such partial
liquidated damages are due until such amounts, plus all such interest thereon,
are paid in full. The partial liquidated damages pursuant to the terms hereof
shall apply on a daily pro-rata basis for any portion of a month prior to the
cure of an Event.
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3. Registration
Procedures.
In
connection with the Company’s registration obligations hereunder, the Company
shall:
(a) Not
less
than five Trading Days prior to the filing of each Registration Statement and
not less than one Trading Day prior to the filing of any related Prospectus
or
any amendment or supplement thereto (including any document that would be
incorporated or deemed to be incorporated therein by reference), the Company
shall, (i) furnish to each Holder copies of all such documents proposed to
be
filed, which documents (other than those incorporated or deemed to be
incorporated by reference) will be subject to the review of such Holders, and
(ii) cause its officers and directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of respective counsel to each Holder to conduct a reasonable
investigation within the meaning of the Securities Act. The Company shall not
file a Registration Statement or any such Prospectus or any amendments or
supplements thereto to which the Holders of a majority of the Registrable
Securities shall reasonably object in good faith, provided that, the Company
is
notified of such objection in writing no later than 5 Trading Days after the
Holders have been so furnished copies of a Registration Statement or 1 Trading
Day after the Holders have been so furnished copies of any related Prospectus
or
amendments or supplements thereto. Each Holder agrees to furnish to the Company
a completed Questionnaire in the form attached to this Agreement as Annex B
(a
“Selling
Shareholder Questionnaire”)
not
less than two Trading Days prior to the Filing Date or by the end of the fourth
Trading Day following the date on which such Holder receives draft materials
in
accordance with this Section.
(b) (i)Prepare
and file with the Commission such amendments, including post-effective
amendments, to a Registration Statement and the Prospectus used in connection
therewith as may be necessary to keep a Registration Statement continuously
effective as to the applicable Registrable Securities for the Effectiveness
Period and prepare and file with the Commission such additional Registration
Statements in order to register for resale under the Securities Act all of
the
Registrable Securities; (ii) cause the related Prospectus to be amended or
supplemented by any required Prospectus supplement (subject to the terms of
this
Agreement), and as so supplemented or amended to be filed pursuant to Rule
424;
(iii) respond as promptly as reasonably possible to any comments received from
the Commission with respect to a Registration Statement or any amendment thereto
and as promptly as reasonably possible provide the Holders true and complete
copies of all correspondence from and to the Commission relating to a
Registration Statement (provided that the Company may excise any information
contained therein which would constitute material non-public information as
to
any Holder which has not executed a confidentiality agreement with the Company);
and (iv) comply in all material respects with the provisions of the Securities
Act and the Exchange Act with respect to the disposition of all Registrable
Securities covered by a Registration Statement during the applicable period
in
accordance (subject to the terms of this Agreement) with the intended methods
of
disposition by the Holders thereof set forth in such Registration Statement
as
so amended or in such Prospectus as so supplemented.
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(c) If
during
the Effectiveness Period, the number of Registrable Securities at any time
exceeds 90% of the number of shares of Common Stock then registered in a
Registration Statement, then the Company shall file as soon as reasonably
practicable but in any case prior to the applicable Filing Date, an additional
Registration Statement covering the resale by the Holders of not less than
150%
of the number of such Registrable Securities.
(d) Notify
the Holders of Registrable Securities to be sold (which notice shall, pursuant
to clauses (iii) through (vi) hereof, be accompanied by an instruction to
suspend the use of the Prospectus until the requisite changes have been made)
as
promptly as reasonably possible (and, in the case of (i)(A) below, not less
than
one Trading Day prior to such filing) and (if requested by any such Person)
confirm such notice in writing no later than one Trading Day following the
day
(i)(A) when a Prospectus or any Prospectus supplement or post-effective
amendment to a Registration Statement is proposed to be filed; (B) when the
Commission notifies the Company whether there will be a “review”
of
such
Registration Statement and whenever the Commission comments in writing on such
Registration Statement; and (C) with respect to a Registration Statement or
any
post-effective amendment, when the same has become effective; (ii) of any
request by the Commission or any other Federal or state governmental authority
for amendments or supplements to a Registration Statement or Prospectus or
for
additional information; (iii) of the issuance by the Commission or any other
federal or state governmental authority of any stop order suspending the
effectiveness of a Registration Statement covering any or all of the Registrable
Securities or the initiation of any Proceedings for that purpose; (iv) of the
receipt by the Company of any notification with respect to the suspension of
the
qualification or exemption from qualification of any of the Registrable
Securities for sale in any jurisdiction, or the initiation or threatening of
any
Proceeding for such purpose; (v) of the occurrence of any event or passage
of
time that makes the financial statements included in a Registration Statement
ineligible for inclusion therein or any statement made in a Registration
Statement or Prospectus or any document incorporated or deemed to be
incorporated therein by reference untrue in any material respect or that
requires any revisions to a Registration Statement, Prospectus or other
documents so that, in the case of a Registration Statement or the Prospectus,
as
the case may be, it will not contain any untrue statement of a material fact
or
omit to state any material fact required to be stated therein or necessary
to
make the statements therein, in light of the circumstances under which they
were
made, not misleading; and (vi) the occurrence or existence of any pending
corporate development with respect to the Company that the Company believes
may
be material and that, in the determination of the Company, makes it not in
the
best interest of the Company to allow continued availability of a Registration
Statement or Prospectus; provided that any and all of such information shall
remain confidential to each Holder until such information otherwise becomes
public, unless disclosure by a Holder is required by law; provided, further,
notwithstanding each Holder’s agreement to keep such information confidential,
the Holders make no acknowledgement that any such information is material,
non-public information.
(e) Use
its
best efforts to avoid the issuance of, or, if issued, obtain the withdrawal
of
(i) any order suspending the effectiveness of a Registration Statement, or
(ii)
any suspension of the qualification (or exemption from qualification) of any
of
the Registrable Securities for sale in any jurisdiction, at the earliest
practicable moment.
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(f) Furnish
to each Holder, without charge, at least one conformed copy of each such
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference to the extent requested by such Person, and
all exhibits to the extent requested by such Person (including those previously
furnished or incorporated by reference) promptly after the filing of such
documents with the Commission.
(g) Subject
to the terms of this Agreement, the Company hereby consents to the use of such
Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto, except
after
the giving of any notice pursuant to Section 3(d).
(h) If
NASDR
Rule 2710 requires any broker-dealer to make a filing prior to executing a
sale
by a Holder, the Company shall (i) make an Issuer Filing with the NASDR, Inc.
Corporate Financing Department pursuant to proposed NASDR Rule
2710(b)(10)(A)(i), (ii) respond within five Trading Days to any comments
received from NASDR in connection therewith, (iii) and pay the filing fee
required in connection therewith.
(i) Prior
to
any resale of Registrable Securities by a Holder, use its commercially
reasonable efforts to register or qualify or cooperate with the selling Holders
in connection with the registration or qualification (or exemption from the
Registration or qualification) of such Registrable Securities for the resale
by
the Holder under the securities or Blue Sky laws of such jurisdictions within
the United States as any Holder reasonably requests in writing, to keep each
registration or qualification (or exemption therefrom) effective during the
Effectiveness Period and to do any and all other acts or things reasonably
necessary to enable the disposition in such jurisdictions of the Registrable
Securities covered by each Registration Statement; provided, that the Company
shall not be required to qualify generally to do business in any jurisdiction
where it is not then so qualified, subject the Company to any material tax
in
any such jurisdiction where it is not then so subject or file a general consent
to service of process in any such jurisdiction.
(j) If
requested by the Holders, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Registrable Securities
to
be delivered to a transferee pursuant to a Registration Statement, which
certificates shall be free, to the extent permitted by the Purchase Agreement,
of all restrictive legends, and to enable such Registrable Securities to be
in
such denominations and registered in such names as any such Holders may
request.
6
(k) Upon
the
occurrence of any event contemplated by this Section 3, as promptly as
reasonably possible under the circumstances taking into account the Company’s
good faith assessment of any adverse consequences to the Company and its
stockholders of the premature disclosure of such event, prepare a supplement
or
amendment, including a post-effective amendment, to a Registration Statement
or
a supplement to the related Prospectus or any document incorporated or deemed
to
be incorporated therein by reference, and file any other required document
so
that, as thereafter delivered, neither a Registration Statement nor such
Prospectus will contain an untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. If the Company notifies the Holders in accordance with clauses
(iii) through (vi) of Section 3(d) above to suspend the use of any Prospectus
until the requisite changes to such Prospectus have been made, then the Holders
shall suspend use of such Prospectus. The Company will use its best efforts
to
ensure that the use of the Prospectus may be resumed as promptly as is
practicable. The Company shall be entitled to exercise its right under this
Section 3(k) to suspend the availability of a Registration Statement and
Prospectus, subject to the payment of partial liquidated damages pursuant to
Section 2(b), for a period not to exceed 60 calendar days (which need not be
consecutive days) in any 12 month period.
(l) Comply
with all applicable rules and regulations of the Commission.
(m) The
Company may require each selling Holder to furnish to the Company a certified
statement as to the number of shares of Common Stock beneficially owned by
such
Holder and, if required by the Commission, the natural persons thereof that
have
voting and dispositive control over the Shares. During any periods that the
Company is unable to meet its obligations hereunder with respect to the
registration of the Registrable Securities solely because any Holder fails
to
furnish such information within three Trading Days of the Company’s request, any
liquidated damages that are accruing at such time as to such Holder only shall
be tolled and any Event that may otherwise occur solely because of such delay
shall be suspended as to such Holder only, until such information is delivered
to the Company.
4. Registration
Expenses.
All
fees and expenses incident to the performance of or compliance with this
Agreement by the Company shall be borne by the Company whether or not any
Registrable Securities are sold pursuant to a Registration Statement. The fees
and expenses referred to in the foregoing sentence shall include, without
limitation, (i) all registration and filing fees (including, without limitation,
fees and expenses (A) with respect to filings required to be made with any
Trading Market on which the Common Stock is then listed for trading, (B) in
compliance with applicable state securities or Blue Sky laws reasonably agreed
to by the Company in writing (including, without limitation, fees and
disbursements of counsel for the Company in connection with Blue Sky
qualifications or exemptions of the Registrable Securities) and (C) if not
previously paid by the Company in connection with an Issuer Filing, with respect
to any filing that may be required to be made by any broker through which a
Holder intends to make sales of Registrable Securities with NASD Regulation,
Inc. pursuant to the NASD Rule 2710, so long as the broker is receiving no
more
than a customary brokerage commission in connection with such sale, (ii)
printing expenses (including, without limitation, expenses of printing
certificates for Registrable Securities), (iii) messenger, telephone and
delivery expenses, (iv) fees and disbursements of counsel for the Company,
(v)
Securities Act liability insurance, if the Company so desires such insurance,
and (vi) fees and expenses of all other Persons retained by the Company in
connection with the consummation of the transactions contemplated by this
Agreement. In addition, the Company shall be responsible for all of its internal
expenses incurred in connection with the consummation of the transactions
contemplated by this Agreement (including, without limitation, all salaries
and
expenses of its officers and employees performing legal or accounting duties),
the expense of any annual audit and the fees and expenses incurred in connection
with the listing of the Registrable Securities on any securities exchange as
required hereunder. In no event shall the Company be responsible for any broker
or similar commissions of any Holder or, except to the extent provided for
in
the Transaction Documents, any legal fees or other costs of the
Holders.
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5. Indemnification
(a) Indemnification
by the Company. The Company shall, notwithstanding any termination of this
Agreement, indemnify and hold harmless each Holder, the officers, directors,
members, partners, agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure
to
perform under a margin call of Common Stock), investment advisors and employees
(and any other Persons with a functionally equivalent role of a Person holding
such titles, notwithstanding a lack of such title or any other title) of each
of
them, each Person who controls any such Holder (within the meaning of Section
15
of the Securities Act or Section 20 of the Exchange Act) and the officers,
directors, members, shareholders, partners, agents and employees (and any other
Persons with a functionally equivalent role of a Person holding such titles,
notwithstanding a lack of such title or any other title) of each such
controlling Person, to the fullest extent permitted by applicable law, from
and
against any and all losses, claims, damages, liabilities, costs (including,
without limitation, reasonable attorneys’ fees) and expenses (collectively,
“Losses”),
as
incurred, arising out of or relating to (1) any untrue or alleged untrue
statement of a material fact contained in a Registration Statement, any
Prospectus or any form of prospectus or in any amendment or supplement thereto
or in any preliminary prospectus, or arising out of or relating to any omission
or alleged omission of a material fact required to be stated therein or
necessary to make the statements therein (in the case of any Prospectus or
form
of prospectus or supplement thereto, in light of the circumstances under which
they were made) not misleading or (2) any violation or alleged violation by
the
Company of the Securities Act, the Exchange Act or any state securities law,
or
any rule or regulation thereunder, in connection with the performance of its
obligations under this Agreement, except to the extent, but only to the extent,
that (i) such untrue statements or omissions are based solely upon information
regarding such Holder furnished in writing to the Company by such Holder
expressly for use therein, or to the extent that such information relates to
such Holder or such Holder’s proposed method of distribution of Registrable
Securities and was reviewed and expressly approved in writing by such Holder
expressly for use in a Registration Statement, such Prospectus or such form
of
Prospectus or in any amendment or supplement thereto (it being understood that
the Holder has approved Annex A hereto for this purpose) or (ii) in the case
of
an occurrence of an event of the type specified in Section 3(d)(iii)-(vi),
the
use by such Holder of an outdated or defective Prospectus after the Company
has
notified such Holder in writing that the Prospectus is outdated or defective
and
prior to the receipt by such Holder of the Advice contemplated in Section 6(d).
The Company shall notify the Holders promptly of the institution, threat or
assertion of any Proceeding arising from or in connection with the transactions
contemplated by this Agreement of which the Company is aware.
(b) Indemnification
by Holders. Each Holder shall, severally and not jointly, indemnify and hold
harmless the Company, its directors, officers, agents and employees, each Person
who controls the Company (within the meaning of Section 15 of the Securities
Act
and Section 20 of the Exchange Act), and the directors, officers, agents or
employees of such controlling Persons, to the fullest extent permitted by
applicable law, from and against all Losses, as incurred, to the extent arising
out of or based solely upon: (x) such Holder’s failure to comply with the
prospectus delivery requirements of the Securities Act or (y) any untrue or
alleged untrue statement of a material fact contained in any Registration
Statement, any Prospectus, or any form of prospectus, or in any amendment or
supplement thereto or in any preliminary prospectus, or arising out of or
relating to any omission or alleged omission of a material fact required to
be
stated therein or necessary to make the statements therein not misleading (i)
to
the extent, but only to the extent, that such untrue statement or omission
is
contained in any information so furnished in writing by such Holder to the
Company specifically for inclusion in such Registration Statement or such
Prospectus or (ii) to the extent that such information relates to such Holder’s
proposed method of distribution of Registrable Securities and was reviewed
and
expressly approved in writing by such Holder expressly for use in a Registration
Statement (it being understood that the Holder has approved Annex A hereto
for
this purpose), such Prospectus or such form of Prospectus or in any amendment
or
supplement thereto or (ii) in the case of an occurrence of an event of the
type
specified in Section 3(d)(iii)-(vi), the use by such Holder of an outdated
or
defective Prospectus after the Company has notified such Holder in writing
that
the Prospectus is outdated or defective and prior to the receipt by such Holder
of the Advice contemplated in Section 6(d). In no event shall the liability
of
any selling Holder hereunder be greater in amount than the dollar amount of
the
net proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.
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(c) Conduct
of Indemnification Proceedings. If any Proceeding shall be brought or asserted
against any Person entitled to indemnity hereunder (an “Indemnified
Party”),
such
Indemnified Party shall promptly notify the Person from whom indemnity is sought
(the “Indemnifying
Party”)
in
writing, and the Indemnifying Party shall have the right to assume the defense
thereof, including the employment of counsel reasonably satisfactory to the
Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any Indemnified
Party to give such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except (and only) to
the
extent that it shall be finally determined by a court of competent jurisdiction
(which determination is not subject to appeal or further review) that such
failure shall have prejudiced the Indemnifying Party.
An
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (1) the Indemnifying Party has agreed in writing to pay such fees and
expenses; (2) the Indemnifying Party shall have failed promptly to assume the
defense of such Proceeding and to employ counsel reasonably satisfactory to
such
Indemnified Party in any such Proceeding; or (3) the named parties to any such
Proceeding (including any impleaded parties) include both such Indemnified
Party
and the Indemnifying Party, and counsel to the Indemnified Party shall
reasonably believe that a material conflict of interest is likely to exist
if
the same counsel were to represent such Indemnified Party and the Indemnifying
Party (in which case, if such Indemnified Party notifies the Indemnifying Party
in writing that it elects to employ separate counsel at the expense of the
Indemnifying Party, the Indemnifying Party shall not have the right to assume
the defense thereof and the reasonable fees and expenses of no more than one
separate counsel shall be at the expense of the Indemnifying Party). The
Indemnifying Party shall not be liable for any settlement of any such Proceeding
effected without its written consent, which consent shall not be unreasonably
withheld or delayed. No Indemnifying Party shall, without the prior written
consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from
all
liability on claims that are the subject matter of such Proceeding.
Subject
to the terms of this Agreement, all reasonable fees and expenses of the
Indemnified Party (including reasonable fees and expenses to the extent incurred
in connection with investigating or preparing to defend such Proceeding in
a
manner not inconsistent with this Section) shall be paid to the Indemnified
Party, as incurred, within ten Trading Days of written notice thereof to the
Indemnifying Party; provided, that the Indemnified Party shall promptly
reimburse the Indemnifying Party for that portion of such fees and expenses
applicable to such actions for which such Indemnified Party is judicially
determined to be not entitled to indemnification hereunder.
9
(d) Contribution.
If the indemnification under Section 5(a) or 5(b) is unavailable to an
Indemnified Party or insufficient to hold an Indemnified Party harmless for
any
Losses, then each Indemnifying Party shall contribute to the amount paid or
payable by such Indemnified Party, in such proportion as is appropriate to
reflect the relative fault of the Indemnifying Party and Indemnified Party
in
connection with the actions, statements or omissions that resulted in such
Losses as well as any other relevant equitable considerations. The relative
fault of such Indemnifying Party and Indemnified Party shall be determined
by
reference to, among other things, whether any action in question, including
any
untrue or alleged untrue statement of a material fact or omission or alleged
omission of a material fact, has been taken or made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and
the
parties’ relative intent, knowledge, access to information and opportunity to
correct or prevent such action, statement or omission. The amount paid or
payable by a party as a result of any Losses shall be deemed to include, subject
to the limitations set forth in this Agreement, any reasonable attorneys’ or
other fees or expenses incurred by such party in connection with any Proceeding
to the extent such party would have been indemnified for such fees or expenses
if the indemnification provided for in this Section was available to such party
in accordance with its terms.
The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5(d) were determined by pro rata allocation or by
any
other method of allocation that does not take into account the equitable
considerations referred to in the immediately preceding paragraph.
Notwithstanding the provisions of this Section 5(d), no Holder shall be required
to contribute, in the aggregate, any amount in excess of the amount by which
the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that
such
Holder has otherwise been required to pay by reason of such untrue or alleged
untrue statement or omission or alleged omission, except in the case of fraud
by
such Holder.
The
indemnity and contribution agreements contained in this Section are in addition
to any liability that the Indemnifying Parties may have to the Indemnified
Parties.
6. Miscellaneous
(a) Remedies.
In the event of a breach by the Company or by a Holder, of any of their
respective obligations under this Agreement, each Holder or the Company, as
the
case may be, in addition to being entitled to exercise all rights granted by
law
and under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement. The Company and each
Holder agree that monetary damages would not provide adequate compensation
for
any losses incurred by reason of a breach by it of any of the provisions of
this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall not assert or shall
waive the defense that a remedy at law would be adequate.
(b) No
Piggyback on Registrations. Except as set forth on Schedule 6(b) attached
hereto, neither the Company nor any of its security holders (other than the
Holders in such capacity pursuant hereto) may include securities of the Company
in the initial Registration Statement other than the Registrable Securities.
The
Company shall not file any other registration statements until the initial
Registration Statement required hereunder is declared effective by the
Commission, provided that this Section 6(b) shall not prohibit the Company
from
filing amendments to registration statements already filed.
10
(c) Compliance.
Each Holder covenants and agrees that it will comply with the prospectus
delivery requirements of the Securities Act as applicable to it in connection
with sales of Registrable Securities pursuant to a Registration
Statement.
(d) Discontinued
Disposition. Each Holder agrees by its acquisition of Registrable Securities
that, upon receipt of a notice from the Company of the occurrence of any event
of the kind described in Section 3(d)(iii) through (vi), such Holder will
forthwith discontinue disposition of such Registrable Securities under a
Registration Statement until it is advised in writing (the “Advice”)
by the
Company that the use of the applicable Prospectus (as it may have been
supplemented or amended) may be resumed. The Company will use its best efforts
to ensure that the use of the Prospectus may be resumed as promptly as it
practicable. The Company agrees and acknowledges that any periods during which
the Holder is required to discontinue the disposition of the Registrable
Securities hereunder shall be subject to the provisions of Section
2(b).
(e) Piggy-Back
Registrations. If at any time during the Effectiveness Period there is not
an
effective Registration Statement covering all of the Registrable Securities
and
the Company shall determine to prepare and file with the Commission a
registration statement relating to an offering for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-4 or Form S-8 (each as promulgated under the Securities
Act) or their then equivalents relating to equity securities to be issued solely
in connection with any acquisition of any entity or business or equity
securities issuable in connection with the stock option or other employee
benefit plans, then the Company shall send to each Holder a written notice
of
such determination and, if within fifteen days after the date of such notice,
any such Holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
Holder requests to be registered; provided, however, that, the Company shall
not
be required to register any Registrable Securities pursuant to this Section
6(e)
that are eligible for resale pursuant to Rule 144(k) promulgated under the
Securities Act or that are the subject of a then effective Registration
Statement.
(f) Amendments
and Waivers. The provisions of this Agreement, including the provisions of
this
sentence, may not be amended, modified or supplemented, and waivers or consents
to departures from the provisions hereof may not be given, unless the same
shall
be in writing and signed by the Company and each Holder of the then outstanding
Registrable Securities (provided, however, if the outstanding principal amount
of Holder’s Debenture is less than $50,000, such Holder’s written consent shall
not be required to amend this Agreement unless the principal amount of each
Debenture then outstanding is less than $50,000, in which case the written
consent of the Holders of a majority of the then outstanding Registrable
Securities shall be required to effect amendments to this Agreement).
Notwithstanding the foregoing, a waiver or consent to depart from the provisions
hereof with respect to a matter that relates exclusively to the rights of
Holders and that does not directly or indirectly affect the rights of other
Holders may be given by Holders of all of the Registrable Securities to which
such waiver or consent relates; provided, however, that the provisions of this
sentence may not be amended, modified, or supplemented except in accordance
with
the provisions of the immediately preceding sentence.
11
(g) Notices.
Any and all notices or other communications or deliveries required or permitted
to be provided hereunder shall be delivered as set forth in the Purchase
Agreement.
(h) Successors
and Assigns. This Agreement shall inure to the benefit of and be binding upon
the successors and permitted assigns of each of the parties and shall inure
to
the benefit of each Holder. The Company may not assign (except by merger) its
rights or obligations hereunder without the prior written consent of all of
the
Holders of the then-outstanding Registrable Securities. Each Holder may assign
their respective rights hereunder in the manner and to the Persons as permitted
under the Purchase Agreement.
(i) No
Inconsistent Agreements. Neither the Company nor any of its Subsidiaries has
entered, as of the date hereof, nor shall the Company or any of its
Subsidiaries, on or after the date of this Agreement, enter into any agreement
with respect to its securities, that would have the effect of impairing the
rights granted to the Holders in this Agreement or otherwise conflicts with
the
provisions hereof. Except as set forth on Schedule 6(i), neither the Company
nor
any of its subsidiaries has previously entered into any agreement granting
any
registration rights with respect to any of its securities to any Person that
have not been satisfied in full.
(j) Execution
and Counterparts. This Agreement may be executed in two or more counterparts,
all of which when taken together shall be considered one and the same agreement
and shall become effective when counterparts have been signed by each party
and
delivered to the other party, it being understood that both parties need not
sign the same counterpart. In the event that any signature is delivered by
facsimile transmission or by e-mail delivery of a “.pdf’ format data file, such
signature shall create a valid and binding obligation of the party executing
(or
on whose behalf such signature is executed) with the same force and effect
as if
such facsimile or “.pdf’ signature page were an original thereof.
(k) Governing
Law. All questions concerning the construction, validity, enforcement and
interpretation of this Agreement shall be determined in accordance with the
provisions of the Purchase Agreement.
(l) Cumulative
Remedies,. The remedies provided herein are cumulative and not exclusive of
any
other remedies provided by law.
(m) Severability.
If any term, provision, covenant or restriction of this Agreement is held by
a
court of competent jurisdiction to be invalid, illegal, void or unenforceable,
the remainder of the terms, provisions, covenants and restrictions set forth
herein shall remain in full force and effect and shall in no way be affected,
impaired or invalidated, and the parties hereto shall use their commercially
reasonable efforts to find and employ an alternative means to achieve the same
or substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be
hereafter declared invalid, illegal, void or unenforceable.
12
(n) Headings.
The headings in this Agreement are for convenience only, do not constitute
a
part of the Agreement and shall not be deemed to limit or affect any of the
provisions hereof.
(o) Independent
Nature of Holders’ Obligations and Rights. The obligations of each Holder
hereunder are several and not joint with the obligations of any other Holder
hereunder, and no Holder shall be responsible in any way for the performance
of
the obligations of any other Holder hereunder. Nothing contained herein or
in
any other agreement or document delivered at any closing, and no action taken
by
any Holder pursuant hereto or thereto, shall be deemed to constitute the Holders
as a partnership, an association, a joint venture or any other kind of entity,
or create a presumption that the Holders are in any way acting in concert with
respect to such obligations or the transactions contemplated by this Agreement.
Each Holder shall be entitled to protect and enforce its rights, including
without limitation the rights arising out of this Agreement, and it shall not
be
necessary for any other Holder to be joined as an additional party in any
proceeding for such purpose.
********************
13
IN
WITNESS WHEREOF, the parties have executed this Registration Rights Agreement
as
of the date first written above.
| PACIFICNET, INC. | ||
| By: | ||
|
Name: Xxxxxx Xxxx |
||
| Title: President | ||
[SIGNATURE
PAGE OF HOLDERS FOLLOWS]
14
[SIGNATURE
PAGE OF HOLDERS TO PACT RRA]
Name
of
Holder: _________________________________
Signature
of Authorize Signatory Holder: __________________________________
Name
of
Authorized Signatory: _______________________________
Title
of
Authorized Signatory: ________________________________
15
