PacificNet reaches settlement in bondholder suit

(China).- PacificNet announced last week that it has entered into a Settlement Agreement with certain bondholders who had filed an involuntary petition seeking Chapter 11 relief in Delaware federal bankruptcy court earlier this year.

2008-09-08

United States

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Pursuant to the terms of the Settlement Agreement, the company has amended and restated the terms of certain convertible debentures in the aggregate principal amount of approximately us$ 6.2 million. Upon entering into the Settlement Agreement, the company paid us$ 150,000 of the obligations under the Debentures in cash and issued 668,322 shares of common stock to the bondholders upon conversion of a portion of the Debentures.

The remaining outstanding Debentures in the aggregate principal amount of approximately us$ 5.5 million are convertible at a conversion price of us$ 2 per share, subject to the terms and conditions of the Debentures.

The Settlement Agreement provides that the company shall make ten monthly payments under the Debentures and also apply sums due under certain receivables toward payment. All obligations of the company to the bondholders under the Debentures are due on or before July 15, 2009. Additionally, pursuant to the terms of the Settlement Agreement, the bondholders have received a security interest and collateral assignment in receivables of the company and certain of its subsidiaries.

Besides, it has issued to the bondholders new debentures representing additional amounts owed to them, which will be due in the event that the firm does not comply with the terms of the Debentures. The parties have further agreed that the bankruptcy action and all related pending litigation will be dismissed without prejudice immediately. On December 15, 2008, provided there are no defaults under the settlement documents, these dismissals would be with prejudice.

The complete text of the Settlement Agreement, the Debentures and related documents may be found in the Form 8-K that the Company will file with the U.S. Securities and Exchange Commission.

Victor Tong, President of the company, stated: “We are very glad to settle our differences with the bondholders so we can move forward to focus on the Asian Gaming Technology Strategy. We'd like to thank them for their support while PacificNet has been transforming itself throughout the years. We will continue to strive for the best return for our shareholders in this turbulent market. We believe gaming is recessionary proof due to the increased wealth across Asia and China and that PacificNet is well-positioned to take advantage of the market in the future.”