-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, TnTX85M6nw3AhgBbmxRS3qza3qlqeKdOcVzVXZafskJxKsZ4gSDnvrOLxYSa+3Vs mj5EBqzm1lSiXTjggTGpSQ== 0001144204-06-004321.txt : 20060207 0001144204-06-004321.hdr.sgml : 20060207 20060206174431 ACCESSION NUMBER: 0001144204-06-004321 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20060131 ITEM INFORMATION: Entry into a Material Definitive Agreement ITEM INFORMATION: Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant ITEM INFORMATION: Unregistered Sales of Equity Securities ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20060207 DATE AS OF CHANGE: 20060206 FILER: COMPANY DATA: COMPANY CONFORMED NAME: OneTravel Holdings, Inc. CENTRAL INDEX KEY: 0000722839 STANDARD INDUSTRIAL CLASSIFICATION: LAND SUBDIVIDERS & DEVELOPERS (NO CEMETERIES) [6552] IRS NUMBER: 232265039 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-08662 FILM NUMBER: 06583070 BUSINESS ADDRESS: STREET 1: 1150 HAMMOND DR NE STE C3200 CITY: ATLANTA STATE: 2Q ZIP: 30328-8143 BUSINESS PHONE: (404) 531-0432 MAIL ADDRESS: STREET 1: 1150 HAMMOND DR NE STE C3200 CITY: ATLANTA STATE: 2Q ZIP: 30328-8143 FORMER COMPANY: FORMER CONFORMED NAME: RCG Companies INC DATE OF NAME CHANGE: 20050526 FORMER COMPANY: FORMER CONFORMED NAME: RCG COMPANIES INC DATE OF NAME CHANGE: 20031223 FORMER COMPANY: FORMER CONFORMED NAME: ERESOURCE CAPITAL GROUP INC DATE OF NAME CHANGE: 20001113 8-K 1 v034694_8k.txt ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 --------------------------------- FORM 8-K --------------------------------- CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of report (Date of earliest event reported): January 31, 2006 --------------------------------- ONETRAVEL HOLDINGS, INC. (Exact Name of Registrant as Specified in its Charter) --------------------------------- Delaware 1-8662 23-2265039 (State or Other Jurisdiction (Commission (IRS Employer of Incorporation) File Number) Identification No.) 5775 Peachtree Dunwoody Road Building G, Suite 300 Atlanta, Georgia 30346 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (770) 730-2860 ----------------------------------------------------------------------- (Former Name or Former Address, if Changed Since Last Report) ================================================================================ Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) Item 1.01. Entry into a Material Definitive Agreement. Item 2.03. Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant. Item 3.02 Unregistered Sale of Equity Securities. On January 31, 2006, OneTravel Holdings, Inc. (the "Company") entered into a Waiver Agreement and Amendment to Debenture (the "Agreement") with respect to its 9% Convertible Secured Debentures due October 21, 2008 (the "Original Debentures"), with the institutional investors holding $10,000,000 of the $12,500,000 in aggregate principal amount of the Original Debentures issued by the Company. The purchasers of the Original Debentures who executed the Agreement (the "Holders") have agreed to (i) waive events of default currently existing or expected to exist under the Original Debentures and associated liquidated damage payments otherwise due from the Company with respect to the Company's failure to timely file and have declared effective a registration statement for the benefit of the purchasers of the Original Debentures, the Company's failure to timely file its annual and quarterly reports with the SEC, and material breaches of representations and warranties, (ii) extend the date by which the registration statement for the benefit of the purchasers of the Original Debentures must be declared effective, (iii) waive certain conditions relating to the Company's right to pay interest under the Original Debentures in shares of common stock in lieu of cash, and (iv) to make certain amendments to the Original Debentures, and, to the extent necessary the other transaction documents. Additionally, the Company is required to have filed all reports required under Rule 144(c)(1) of the Securities Act of 1934, as amended, and have filed and declared effective by the SEC a registration statement for the benefit of the purchasers effective no later than October 31, 2006. If the Company has filed all reports required to be filed by it under Rule 144(c)(1) and in the event that the Company does not meet the October 31, 2006 effectiveness deadline with respect to the registration statement, the Company has the ability to pay to the holders liquidated damages in the amount of 1.5% of the aggregate principal balance of the Original Debentures and Additional Debentures per month in exchange for an extension of this requirement until January 2, 2007. As consideration for entering into this Agreement, the Company paid an amount equal to the redemption premium of the Original Debentures by the issuance of debentures (the "Additional Debentures") to each Holder in a principal amount equal to 25% of the principal amount of the Original Debenture held by such Holder, which debenture contains the same terms and conditions as the Original Debentures, except that such debenture shall not be convertible into shares of common stock of the Company prior to obtaining any shareholder approval with respect to such conversion which may be required to comply with the listing requirements of the American Stock Exchange. The Agreement eliminated the original redemption or acceleration premium of 25% on the Original Debentures, so that on maturity or acceleration no premium is payable in excess of the principal amount, interest and other fees and expenses. The Additional Debentures were issued with an initial conversion price of $2.55 per share and provide for full ratchet anti-dilution protection, provided the exercise price will not be below $2.36 per share unless shareholder approval has been obtained. The Additional Debentures bear interest at 9% per annum, payable semi-annually on January 1 and July 1. Interest is payable in cash or, at the Company's option, in shares of common stock provided certain conditions are satisfied. The interest payment due July 1, 2006 on the Additional Debentures and the Original Debentures may however be paid in shares of common stock of the Company regardless of the satisfaction of any conditions. The Additional Debentures may be redeemed at the election of the Company at a price equal to 100% of the principal amount, plus accrued interest, subject to the satisfaction of certain conditions. Upon the occurrence of a change of control or fundamental transaction as set forth in the Additional Debentures, the holders may require the Company to redeem the Additional Debentures at a price equal to 100% of the principal amount, plus accrued interest, subject to the satisfaction of certain conditions. The purchasers of the Additional Debentures are granted a security interest in the assets of the Company and in the assets of two of the Company's subsidiaries, Farequest Holdings, Inc. and OneTravel, Inc. (the "Subsidiary Guarantors"), to the same extent as granted with respect to the Original Debentures, subject to the liens of holders of existing indebtedness other than the Original Debentures, permitted liens and permitted indebtedness. Additionally, the Subsidiary Guarantors have agreed to guarantee the obligations of the Company under the Additional Debentures to the same extent as under the Original Debentures. The transaction was approved by the Company's Board of Directors on January 12, 2006. The offering, sale and issuance of the Additional Debentures was effected pursuant to the exemption from registration provided by Rule 506 promulgated under the Securities Act of 1933, as amended. The Additional Debentures and the common stock issuable upon the conversion of or as interest on the Additional Debentures have not been registered under the Securities Act of 1933, as amended, and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. This summary description of the issuance of the Additional Debentures pursuant to the Agreement does not purport to be complete and is qualified in its entirety by reference to the copies of the Agreement and the form of Additional Debenture that are filed as exhibits hereto. Item 9.01. Financial Statements and Exhibits. (d) Exhibits. Exhibit No. Description ----------- ----------- 4.1 Form of Additional 9% Secured Convertible Debenture 10.1 Waiver Agreement and Amendment to Debenture dated January 31, 2006 among the OneTravel Holdings, Inc., Farequest Holdings, Inc. and OneTravel, Inc. and the purchasers identified on the signature pages thereto SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: February 6, 2006 ONETRAVEL HOLDINGS, INC. By: /s/ Marc E. Bercoon ---------------------- Marc E. Bercoon, President Exhibit Index ------------- Exhibit No. Description ----------- ----------- 4.1 Form of Additional 9% Secured Convertible Debenture 10.1 Waiver Agreement and Amendment to Debenture dated January 31, 2006 among the OneTravel Holdings, Inc., Farequest Holdings, Inc. and OneTravel, Inc. and the purchasers identified on the signature pages thereto EX-4.1 2 v034694_4-1.txt EXHIBIT A NEITHER THIS SECURITY NOR THE SECURITIES INTO WHICH THIS SECURITY IS CONVERTIBLE HAVE BEEN REGISTERED WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. THIS SECURITY AND THE SECURITIES ISSUABLE UPON CONVERSION OF THIS SECURITY MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN SECURED BY SUCH SECURITIES Original Issue Date: January __, 2006 Original Conversion Price (subject to adjustment herein): $2.55 $_______________(1) 9% SECURED CONVERTIBLE DEBENTURE DUE JANUARY __, 2009 THIS SECURED CONVERTIBLE DEBENTURE is one of a series of duly authorized and issued Secured Convertible Debentures of OneTravel Holdings, Inc., a Delaware corporation, having a principal place of business at 5775 Peachtree Dunwoody Road, Building G, Suite 300, Atlanta, GA 30346 (the "Company"), designated as its 9% Secured Convertible Debenture, due January __, 2009 (this debenture, the "Debenture" and collectively with the other such series of debentures, the "Debentures"). FOR VALUE RECEIVED, the Company promises to pay to ___________________ or its registered assigns (the "Holder"), or shall have paid pursuant to the terms hereunder, the principal sum of $_______________ by January __, 2009, or such earlier date as this Debenture is required or permitted to be repaid as provided hereunder (the "Maturity Date"), and to pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture in accordance with the provisions hereof. This Debenture is subject to the following additional provisions: - -------------------------------- (1) 25% of the principal amount of the 9% Secured Convertible Debenture due October 24, 2008 issued by the Company to the Holder on October 24, 2005. 1 Section 1. Definitions. For the purposes hereof, in addition to the terms defined elsewhere in this Debenture: (a) capitalized terms not otherwise defined herein have the meanings given to such terms in the Purchase Agreement, and (b) the following terms shall have the following meanings: "Alternate Consideration" shall have the meaning set forth in Section 5(d). "Base Conversion Price" shall have the meaning set forth in Section 5(b). "Business Day" means any day except Saturday, Sunday and any day which shall be a federal legal holiday in the United States or a day on which banking institutions in the State of New York are authorized or required by law or other government action to close. "Buy-In" shall have the meaning set forth in Section 4(d)(v). "Change of Control Transaction" means the occurrence after the date hereof of any of (i) an acquisition after the date hereof by an individual or legal entity or "group" (as described in Rule 13d-5(b)(1) promulgated under the Exchange Act) of effective control (whether through legal or beneficial ownership of capital stock of the Company, by contract or otherwise) of in excess of 40% of the voting securities of the Company, or (ii) the Company merges into or consolidates with any other Person, or any Person merges into or consolidates with the Company and, after giving effect to such transaction, the stockholders of the Company immediately prior to such transaction own less than 60% of the aggregate voting power of the Company or the successor entity of such transaction, or (iii) the Company sells or transfers its assets, as an entirety or substantially as an entirety, to another Person and the stockholders of the Company immediately prior to such transaction own less than 60% of the aggregate voting power of the acquiring entity immediately after the transaction, or (iv) a replacement at one time or within a two year period of more than one-half of the members of the Company's board of directors which is not approved by a majority of those individuals who are members of the board of directors on the date hereof (or by those individuals who are serving as members of the board of directors on any date whose nomination to the board of directors was approved by a majority of the members of the board of directors who are members on the date hereof), or (v) the execution by the Company of an agreement to which the Company is a party or by which it is bound, providing for any of the events set forth above in (i) through (iv). "Common Stock" means the common stock, par value $0.04 per share, of the Company and stock of any other class of securities into which such securities may hereafter have been reclassified or changed into. "Conversion Date" shall have the meaning set forth in Section 4(a). "Conversion Price" shall have the meaning set forth in Section 4(b). 2 "Conversion Shares" means the shares of Common Stock issuable upon conversion of this Debenture or as payment of interest in accordance with the terms. "Debenture Register" shall have the meaning set forth in Section 2(c). "Dilutive Issuance" shall have the meaning set forth in Section 5(b). "Dilutive Issuance Notice" shall have the meaning set forth in Section 5(b). "Effectiveness Period" shall have the meaning given to such term in the Registration Rights Agreement. "Equity Conditions" shall mean, during the period in question, (i) the Company shall have duly honored or cured all conversions and redemptions scheduled to occur or occurring by virtue of one or more Notice of Conversions of the Holder, if any, (ii) all liquidated damages and other amounts owing to the Holder in respect of this Debenture shall have been paid, (iii) there is an effective Registration Statement pursuant to which the Holder is permitted to utilize the prospectus thereunder to resell all of the shares issuable pursuant to the Transaction Documents or the Conversion Shares are available for resale under Rule 144(k) (and the Company believes, in good faith, that such effectiveness or availability, as the case may be, will continue uninterrupted for the foreseeable future), (iv) the Common Stock is trading on the Trading Market and all of the shares issuable pursuant to the Transaction Documents are listed for trading on a Trading Market (and the Company believes, in good faith, that trading of the Common Stock on a Trading Market will continue uninterrupted for the foreseeable future), (v) there is a sufficient number of authorized but unissued and otherwise unreserved shares of Common Stock for the issuance of all of the shares issuable pursuant to the Transaction Documents, (vi) there is then existing no Event of Default, and (vii) the issuance of the shares in question to the Holder would not violate the limitations set forth in Section 4(c). "Event of Default" shall have the meaning set forth in Section 8. "Exchange Act" means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder. "Fundamental Transaction" shall have the meaning set forth in Section 5(d). "Interest Conversion Rate" means 93% of the lesser of (a) the average of the 5 VWAPs immediately prior to the applicable Interest Payment Date or (b) the average of the 5 VWAPs immediately prior to the date the applicable interest payment shares are issued and delivered if after the Interest Payment Date. "Interest Conversion Shares" shall have the meaning set forth in Section 2(a). "Interest Notice Period" shall have the meaning set forth in Section 2(a). 3 "Interest Payment Date" shall have the meaning set forth in Section 2(a). "Interest Share Amount" shall have the meaning set forth in Section 2(a). "Late Fees" shall have the meaning set forth in Section 2(d). "Mandatory Default Amount" shall equal the sum of (i) the greater of: (A) 100% of the principal amount of this Debenture to be prepaid, plus all accrued and unpaid interest thereon, or (B) the principal amount of this Debenture to be prepaid, plus all other accrued and unpaid interest hereon, divided by the Conversion Price on (x) the date the Mandatory Default Amount is demanded or otherwise due or (y) the date the Mandatory Default Amount is paid in full, whichever is less, multiplied by the VWAP on (x) the date the Mandatory Default Amount is demanded or otherwise due or (y) the date the Mandatory Default Amount is paid in full, whichever is greater, and (ii) all other amounts, costs, expenses and liquidated damages due in respect of this Debenture. "New York Courts" shall have the meaning set forth in Section 9(d). "Notice of Conversion" shall have the meaning set forth in Section 4(a). "Optional Redemption" shall have the meaning set forth in Section 6(a). "Optional Redemption Amount" shall mean the sum of (i) 100% of the principal amount of the Debenture then outstanding, (ii) accrued but unpaid interest and (iii) all liquidated damages and other amounts due in respect of the Debenture. "Optional Redemption Date" shall have the meaning set forth in Section 6(a). "Optional Redemption Notice" shall have the meaning set forth in Section 6(a). "Optional Redemption Notice Date" shall have the meaning set forth in Section 6(a). "Original Issue Date" shall mean the date of the first issuance of the Debentures regardless of the number of transfers of any Debenture and regardless of the number of instruments which may be issued to evidence such Debenture. "Permitted Indebtedness" shall mean (a) the Indebtedness existing on the Original Issue Date and set forth on Schedule 3.1(aa) attached to the Purchase Agreement, (b) Indebtedness consisting of the Obligations, (c) Indebtedness incurred by the Company or the Subsidiaries that does not mature or require payments of principal prior to the Maturity Date and is made expressly subordinate in right of payment to the Indebtedness evidenced by this Debenture, as reflected in a written agreement reasonably acceptable to the Holder and approved by the Holder in writing, (d) Indebtedness consisting of reimbursement and other obligations, contingent or otherwise, under letters of credit, in an amount not to exceed $1 million more than that set forth therefor on Schedule 3.1(aa) attached to the Purchase Agreement, and (e) capital lease obligations and purchase money Indebtedness incurred in connection with the acquisition of capital assets and lease obligations with respect to newly acquired or leased assets, in an amount not to exceed $2,000,000 more than that set forth therefor on Schedule 3.1(aa) attached to the Purchase Agreement. 4 "Permitted Lien" shall mean the individual and collective reference to the following: (a) Liens for taxes, assessments and other governmental charges or levies not yet due or Liens for taxes, assessments and other governmental charges or levies being contested in good faith and by appropriate proceedings for which adequate reserves (in the good faith judgment of the management of the Company) have been established in accordance with GAAP, (b) Liens imposed by law which were incurred in the ordinary course of business, such as carriers', warehousemen's and mechanics' Liens, statutory landlords' Liens, and other similar Liens (including in connection with workers' compensation and unemployment insurance) arising in the ordinary course of business, and (x) which do not individually or in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Company and the Subsidiary Guarantors or (y) which are being contested in good faith by appropriate proceedings, which proceedings have the effect of preventing the forfeiture or sale of the property or asset subject to such Lien, (c) Liens incurred in connection with Permitted Indebtedness under clause (e) thereunder provided that such Liens are not secured by assets of the Company or the Subsidiary Guarantors other than the assets so acquired or leased, (d) Liens in favor of the holders of the Debentures, created under the Security Documents, (e) Liens in favor of the holders of the Seller Notes created under the Seller Note Documents as they exist on the Original Issue Date, (f) Liens in favor of the holder of the Farequest Note created under the Farequest Note Documents as they exist on the Original Issue Date, (g) Liens (other than any Lien imposed by ERISA) consisting of pledges or deposits required in the ordinary course of business in connection with workers' compensation, unemployment insurance and other social security legislation or to secure the performance of tenders, statutory obligations, surety, stay, customs and appeals bonds, bids, leases, governmental contracts, trade contracts, performance and return of money bonds and other similar obligations (exclusive of obligations for the payment of borrowed money) or to secure liability to insurance carriers, (h) Liens consisting of judgment or judicial attachment liens, provided that the enforcement of such Liens is effectively stayed and all such Liens secure claims in the aggregate at any time outstanding for the Company and its Subsidiaries do not exceed $150,000, (i) easements, rights-of-way, zoning and other restrictions, minor defects or other irregularities in title, and other similar encumbrances incurred in the ordinary course of business which, in the aggregate, do not in any case interfere in any material respect with the ordinary conduct of the businesses of the Company, (j) Liens arising from precautionary UCC financing statements filed under any lease permitted by the Transaction Documents, (k) Liens arising from travel agency regulations relating to customer funds, and (l) Liens set forth on Schedule 3.1 (aa) attached to the Purchase Agreement. 5 "Person" means a corporation, an association, a partnership, organization, a business, an individual, a government or political subdivision thereof or a governmental agency. "Purchase Agreement" means the Securities Purchase Agreement, dated as of October 24, 2005 to which the Company and the original Holder are parties, as amended on January __, 2006 pursuant to the Waiver Agreement and as may be further amended, modified or supplemented from time to time in accordance with its terms. "Registration Rights Agreement" means the Registration Rights Agreement, dated as of the date of the Purchase Agreement, to which the Company and the original Holder are parties, as amended, modified or supplemented from time to time in accordance with its terms. "Registration Statement" means a registration statement meeting the requirements set forth in the Registration Rights Agreement, covering among other things the resale of the Conversion Shares and naming the Holder as a "selling stockholder" thereunder. "Securities Act" means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder. "Trading Day" means a day on which the Common Stock is traded on a Trading Market. "Trading Market" means the following markets or exchanges on which the Common Stock is listed or quoted for trading on the date in question: the Nasdaq Capital Market, the American Stock Exchange, the New York Stock Exchange or the Nasdaq National Market. "Transaction Documents" shall have the meaning set forth in the Purchase Agreement. "VWAP" means, for any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a Trading Market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. Eastern Time to 4:00 p.m. Eastern Time or such other time as the Trading Market publicly announces as the official closing time of the Trading Market); (b) if the Common Stock is not then listed or quoted on a Trading Market and if prices for the Common Stock are then quoted on the OTC Bulletin Board, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the OTC Bulletin Board; (c) if the Common Stock is not then listed or quoted on the OTC Bulletin Board and if prices for the Common Stock are then reported in the "Pink Sheets" published by the Pink Sheets, LLC (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported; or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holder and reasonably acceptable to the Company. 6 "Waiver Agreement" means the Waiver Agreement and Amendment to Debenture, dated as of January __, 2006, by and among OneTravel Holdings, Inc., Farequest Holdings, Inc., OneTravel, Inc. and the Purchasers identified on the signature pages thereto. Section 2. Interest. a) Payment of Interest in Cash or Kind. The Company shall pay interest to the Holder on the aggregate unconverted and then outstanding principal amount of this Debenture at the rate of 9% per annum, payable semi-annually on January 1 and July 1, beginning on the first such date after the Original Issue Date, on each Optional Redemption Date (as to that principal amount being redeemed), on each Conversion Date (as to that principal amount being converted) and on the Maturity Date (except that, if any such date is not a Business Day, then such payment shall be due on the next succeeding Business Day) (each such date, an "Interest Payment Date"), payable in cash or in shares of Common Stock valued at the Interest Conversion Rate, or a combination thereof (the amount to be paid in shares, the "Interest Share Amount"); provided, however, (i) payment in shares of Common Stock may only occur if during the 20 Trading Days immediately prior to the applicable Interest Payment Date (the "Interest Notice Period") and through and including the date such shares of Common Stock are issued to the Holder all of the Equity Conditions, unless waived by the Holder in writing, have been met and the Company shall have given the Holder notice in accordance with the notice requirements set forth below (ii) Shareholder Approval shall have been obtained and deemed effective and (iii) as to such Interest Payment Date, prior to the such Interest Notice Period (but not more 5 Trading Days prior to the commencement of the Interest Notice Period), the Company shall have delivered to the Holder's account with The Depository Trust Company a number of shares of Common Stock to be applied against such Interest Share Amount equal to the quotient of (x) the applicable Interest Share Amount divided by (y) the average of the 5 consecutive VWAPs immediately prior to the 25 Trading Days immediately prior to the applicable Interest Payment Date (the "Interest Conversion Shares"). b) Company's Election to Pay Interest in Kind. Subject to the terms and conditions herein, the decision whether to pay interest hereunder in shares of Common Stock or cash shall be at the discretion of the Company. Prior to the commencement of an Interest Notice Period, the Company shall provide the Holder with written notice of its election to pay interest hereunder on the applicable Interest Payment Date either in cash, shares of Common Stock or a combination thereof (the Company may indicate in such notice that the election contained in such notice shall continue for later periods until revised) and the Interest Share Amount as to the applicable Interest Payment Date. During any Interest Notice Period, the Company's election (whether specific to an Interest Payment Date or continuous) shall be irrevocable as to such Interest Payment 7 Date. Subject to the aforementioned conditions, failure to timely provide such written notice shall be deemed an election by the Company to pay the interest on such Interest Payment Date in cash. At any time the Company delivers a notice to the Holder of its election to pay the interest in shares of Common Stock, the Company shall file a prospectus supplement pursuant to Rule 424 disclosing such election. The aggregate number of shares of Common Stock otherwise issuable to the Holder on an Interest Payment Date shall be reduced by the number of Interest Conversion Shares previously issued to the Holder in connection with such Interest Payment Date. c) Interest Calculations. Interest shall be calculated on the basis of a 360-day year and shall accrue daily commencing on the Original Issue Date until payment in full of the principal sum, together with all accrued and unpaid interest and other amounts which may become due hereunder, has been made. Payment of interest in shares of Common Stock (other than the Interest Conversion Shares issued prior to an Interest Notice Period) shall otherwise occur pursuant to Section 4(d)(ii) and only for purposes of the payment of interest in shares, the Interest Payment Date shall be deemed the Conversion Date. Interest shall cease to accrue with respect to any principal amount converted, provided that the Company in fact delivers the Conversion Shares within the time period required by Section 4(d)(ii). Interest hereunder will be paid to the Person in whose name this Debenture is registered on the records of the Company regarding registration and transfers of this Debenture (the "Debenture Register"). Except as otherwise provided herein, if at any time the Company pays interest partially in cash and partially in shares of Common Stock to the holders of the Debentures, then such payment shall be distributed ratably among the holders of the Debentures based on their (or their predecessor's) initial purchases of Debentures pursuant to the Purchase Agreement (adjusted proportionally in the event any Debentures are no longer outstanding. d) Late Fee. All overdue accrued and unpaid interest to be paid hereunder shall entail a late fee at the rate of 18% per annum (or such lower maximum amount of interest permitted to be charged under applicable law) ("Late Fees") which will accrue daily, from the date such interest is due hereunder through and including the date of payment. Notwithstanding anything to the contrary contained herein, if on any Interest Payment Date the Company has elected to pay interest in Common Stock and is not able to pay accrued interest in the form of Common Stock because it does not then satisfy the conditions for payment in the form of Common Stock set forth above, then, at the option of the Holder, the Company, in lieu of delivering either shares of Common Stock pursuant to this Section 2 or paying the regularly scheduled cash interest payment, shall deliver, within three Trading Days of each applicable Interest Payment Date, an amount in cash equal to the product of the number of shares of Common Stock otherwise deliverable to the Holder in connection with the payment of interest due on such Interest Payment Date and the highest VWAP during the period commencing on the Interest Payment Date and ending on the Trading Day prior to the date such payment is made. If any Interest Conversion Shares are issued to the Holder in connection with an Interest Payment Date and are not applied against an Interest Share Amount, then the Holder shall promptly return such excess shares to the Company. 8 e) Prepayment. Except as otherwise set forth in this Debenture, including, without limitation, in Section 6 hereof, the Company may not prepay any portion of the principal amount of this Debenture without the prior written consent of the Holder. Section 3. Registration of Transfers and Exchanges. a) Different Denominations. This Debenture is exchangeable for an equal aggregate principal amount of Debentures of different authorized denominations, as requested by the Holder surrendering the same. No service charge will be made for such registration of transfer or exchange. b) Investment Representations. This Debenture has been issued subject to certain investment representations of the original Holder set forth in the Purchase Agreement and may be transferred or exchanged only in compliance with the Purchase Agreement and applicable federal and state securities laws and regulations. c) Reliance on Debenture Register. Prior to due presentment to the Company for transfer of this Debenture, the Company and any agent of the Company may treat the Person in whose name this Debenture is duly registered on the Debenture Register as the owner hereof for the purpose of receiving payment as herein provided and for all other purposes, whether or not this Debenture is overdue, and neither the Company nor any such agent shall be affected by notice to the contrary. Section 4. Conversion. a) Voluntary Conversion. At any time after the date the Company obtains Shareholder Approval in accordance with the rules and regulations of the Trading Market until this Debenture is no longer outstanding, this Debenture shall be convertible into shares of Common Stock at the option of the Holder, in whole or in part at any time and from time to time (subject to the limitations on conversion set forth in Section 4(c) hereof). The Holder shall effect conversions by delivering to the Company the form of Notice of Conversion attached hereto as Annex A (a "Notice of Conversion"), specifying therein the principal amount of this Debenture to be converted and the date on which such conversion is to be effected (a "Conversion Date"). If no Conversion Date is specified in a Notice of Conversion, the Conversion Date shall be the date that such Notice of Conversion is provided hereunder. To effect conversions hereunder, the Holder shall not be required to physically surrender this Debenture to the Company unless the entire principal amount of this Debenture plus all accrued and unpaid interest thereon has been so converted. Conversions hereunder shall have the effect of lowering the outstanding principal amount of this Debenture in an amount equal to the applicable conversion. The Holder and the Company shall maintain records showing the principal amount converted and the date of such conversions. The Company shall deliver any objection to any Notice of Conversion within 1 Business Day of receipt of such notice. In the event of any dispute or discrepancy, the records of the Holder shall be controlling and determinative in the absence of manifest error. The Holder and any assignee, by acceptance of this Debenture, acknowledge and agree that, by reason of the provisions of this paragraph, following conversion of a portion of this Debenture, the unpaid and unconverted principal amount of this Debenture may be less than the amount stated on the face hereof. 9 b) Conversion Price. The conversion price in effect on any Conversion Date shall be equal to $2.55 (subject to adjustment herein)(the "Conversion Price"). c) Holder's Restriction on Conversion. The Company shall not effect any conversion of this Debenture, and the Holder shall not have the right to convert any portion of this Debenture, pursuant to Section 4(a) or otherwise, to the extent that after giving effect to such conversion, the Holder (together with the Holder's Affiliates), as set forth on the applicable Notice of Conversion, would beneficially own in excess of 4.99% of the number of shares of the Common Stock outstanding immediately after giving effect to such conversion. For purposes of the foregoing sentence, the number of shares of Common Stock beneficially owned by the Holder and its Affiliates shall include the number of shares of Common Stock issuable upon conversion of this Debenture with respect to which the determination of such sentence is being made, but shall exclude the number of shares of Common Stock which would be issuable upon (A) conversion of the remaining, nonconverted portion of this Debenture beneficially owned by the Holder or any of its Affiliates and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any other Debentures or the Warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its Affiliates. Except as set forth in the preceding sentence, for purposes of this Section 4(c), beneficial ownership shall be calculated in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. To the extent that the limitation contained in this section applies, the determination of whether this Debenture is convertible (in relation to other securities owned by the Holder) and of which a portion of this Debenture is convertible shall be in the sole discretion of such Holder. To ensure compliance with this restriction, the Holder will be deemed to represent to the Company each time it delivers a Notice of Conversion that such Notice of Conversion has not violated the restrictions set forth in this paragraph and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination as to any group status as contemplated above shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 4(c), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company's most recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice in writing or by e-mail by the Company or the Company's Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written or oral request of the Holder, the Company shall within two Trading Days confirm orally and in writing or by e-mail to the Holder the number of shares of Common Stock then outstanding. In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including this Debenture, by the Holder or its Affiliates since 10 the date as of which such number of outstanding shares of Common Stock was reported. The provisions of this paragraph shall be implemented in a manner otherwise than in strict conformity with the terms of this Section 4(c) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended 4.99% beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such 4.99% limitation. The limitations contained in this paragraph shall apply to a successor holder of this Debenture. d) Mechanics of Conversion i. Conversion Shares Issuable Upon Conversion of Principal Amount. The number of shares of Common Stock issuable upon a conversion hereunder shall be determined by the quotient obtained by dividing (x) the outstanding principal amount of this Debenture to be converted by (y) the Conversion Price. i. ii. Delivery of Certificate Upon Conversion. Not later than three Trading Days after any Conversion Date, the Company will deliver or cause to be delivered to the Holder (A) a certificate or certificates representing the Conversion Shares which shall be free of restrictive legends and trading restrictions (other than those required by the Purchase Agreement) representing the number of shares of Common Stock being acquired upon the conversion of this Debenture (including, if the Company has given continuous notice pursuant to Section 2(b) for payment of interest in shares of Common Stock at least 20 Trading Days prior to the date on which the Conversion Notice is delivered to the Company, shares of Common Stock representing the payment of accrued interest otherwise determined pursuant to Section 2(a) but assuming that the Interest Notice Period is the 20 Trading Days period immediately prior to the date on which the Conversion Notice is delivered to the Company and excluding for such issuance the condition that the Company deliver Interest Conversion Shares as to such interest payment) and (B) the amount of accrued and unpaid interest (if the Company is required to pay accrued interest in cash). The Company shall, if available and if allowed under applicable securities laws, use its commercially best efforts to deliver any certificate or certificates required to be delivered by the Company under this Section electronically through the Depository Trust Corporation or another established clearing corporation performing similar functions. iii. Failure to Deliver Certificates. If in the case of any Notice of Conversion such certificate or certificates are not delivered to or as directed by the applicable Holder by the third Trading Day after a Conversion Date, the Holder shall be entitled by written notice to the Company at any time on or before its receipt of such certificate or certificates thereafter, to rescind such conversion, in which event the Company shall immediately return the certificates representing the principal amount of this Debenture tendered for conversion. 11 iv. Obligation Absolute; Partial Liquidated Damages. If the Company fails for any reason to deliver to the Holder such certificate or certificates pursuant to Section 4(d)(ii) by the third Trading Day after the Conversion Date, the Company shall pay to such Holder, in cash, as liquidated damages and not as a penalty, for each $1000 of principal amount being converted, $5 per Trading Day (increasing to $10 per Trading Day after 5 Trading Days after such damages begin to accrue) for each Trading Day after such third Trading Day until such certificates are delivered. The Company's obligations to issue and deliver the Conversion Shares upon conversion of this Debenture in accordance with the terms hereof are absolute and unconditional (subject to the terms and provisions of the other Transaction Documents), irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other person, and irrespective of any other circumstance which might otherwise limit such obligation of the Company to the Holder in connection with the issuance of such Conversion Shares; provided, however, such delivery shall not operate as a waiver by the Company of any such action the Company may have against the Holder. In the event the Holder of this Debenture shall elect to convert any or all of the outstanding principal amount hereof, the Company may not refuse conversion based on any claim that the Holder or any one associated or affiliated with the Holder has been engaged in any violation of law, agreement or for any other reason, unless, an injunction from a court, on notice, restraining and or enjoining conversion of all or part of this Debenture shall have been sought and obtained and the Company posts a surety bond for the benefit of the Holder in the amount of 150% of the principal amount of this Debenture outstanding, which is subject to the injunction, which bond shall remain in effect until the completion of arbitration/litigation of the dispute and the proceeds of which shall be payable to such Holder to the extent it obtains judgment. In the absence of an injunction precluding the same, the Company shall issue Conversion Shares or, if applicable, cash, upon a properly noticed conversion. Nothing herein shall limit a Holder's right to pursue actual damages or declare an Event of Default pursuant to Section 8 herein for the Company's failure to deliver Conversion Shares within the period specified herein and such Holder shall have the right to pursue all remedies available to it at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief. The exercise of any such rights shall not prohibit the Holder from seeking to enforce damages pursuant to any other Section hereof or under applicable law. v. Compensation for Buy-In on Failure to Timely Deliver Certificates Upon Conversion. In addition to any other rights available to the Holder, if the Company fails for any reason to deliver to the Holder such certificate or certificates pursuant to Section 4(d)(ii) by the third Trading Day after the 12 Conversion Date, and if after such third Trading Day the Holder is required by its brokerage firm to purchase (in an open market transaction or otherwise) Common Stock to deliver in satisfaction of a sale by such Holder of the Conversion Shares which the Holder anticipated receiving upon such conversion (a "Buy-In"), then the Company shall (A) pay in cash to the Holder (in addition to any remedies available to or elected by the Holder) the amount by which (x) the Holder's total purchase price (including brokerage commissions, if any) for the Common Stock so purchased exceeds (y) the product of (1) the aggregate number of shares of Common Stock that such Holder anticipated receiving from the conversion at issue multiplied by (2) the actual sale price of the Common Stock at the time of the sale (including brokerage commissions, if any) giving rise to such purchase obligation and (B) at the option of the Holder, either reissue (if surrendered, or cancel the Conversion Notice so as to in effect reissue) this Debenture in a principal amount equal to the principal amount of the attempted conversion or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its delivery requirements under Section 4(d)(ii). For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted conversion of this Debenture with respect to which the actual sale price of the Conversion Shares at the time of the sale (including brokerage commissions, if any) giving rise to such purchase obligation was a total of $10,000 under clause (A) of the immediately preceding sentence, the Company shall be required to pay the Holder $1,000. The Holder shall provide the Company written notice indicating the amounts payable to the Holder in respect of the Buy-In together with applicable confirmation and other evidence reasonably requested by the Company. vi. Reservation of Shares Issuable Upon Conversion. The Company covenants that it will at all times reserve and keep available out of its authorized and unissued shares of Common Stock solely for the purpose of issuance upon conversion of this Debenture and payment of interest on this Debenture, each as herein provided, free from preemptive rights or any other actual contingent purchase rights of persons other than the Holder (and the other holders of the Debentures), not less than such number of shares of the Common Stock as shall (subject to the terms and conditions set forth in the Purchase Agreement) be issuable (taking into account the adjustments and restrictions of Section 5) upon the conversion of the outstanding principal amount of this Debenture and payment of interest hereunder. The Company covenants that all shares of Common Stock that shall be so issuable shall, upon issue, be duly and validly authorized, issued and fully paid, nonassessable and, if the Registration Statement is then effective under the Securities Act, registered for public sale in accordance with such Registration Statement. 13 vii. Fractional Shares. Upon a conversion hereunder the Company shall not be required to issue stock certificates representing fractions of shares of the Common Stock, but may if otherwise permitted, make a cash payment in respect of any final fraction of a share based on the VWAP at such time. If the Company elects not, or is unable, to make such a cash payment, the Holder shall be entitled to receive, in lieu of the final fraction of a share, one whole share of Common Stock. viii. Transfer Taxes. The issuance of certificates for shares of the Common Stock on conversion of this Debenture shall be made without charge to the Holder hereof for any documentary stamp or similar taxes that may be payable in respect of the issue or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder of this Debenture so converted and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid. Section 5. Certain Adjustments. a) Stock Dividends and Stock Splits. If the Company, at any time while this Debenture is outstanding: (A) pays a stock dividend or otherwise makes a distribution or distributions on shares of its Common Stock or any other equity or equity equivalent securities payable in shares of Common Stock (which, for avoidance of doubt, shall not include any shares of Common Stock issued by the Company pursuant to this Debenture, including as interest thereon), (B) subdivides outstanding shares of Common Stock into a larger number of shares, (C) combines (including by way of reverse stock split) outstanding shares of Common Stock into a smaller number of shares, or (D) issues by reclassification of shares of the Common Stock any shares of capital stock of the Company, then the Conversion Price shall be multiplied by a fraction of which the numerator shall be the number of shares of Common Stock (excluding treasury shares, if any) outstanding immediately before such event and of which the denominator shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to this Section shall become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution and shall become effective immediately after the effective date in the case of a subdivision, combination or re-classification. b) Subsequent Equity Sales. If the Company or any Subsidiary, as applicable, at any time while this Debenture is outstanding, shall sell, publicly offer, grant any option to purchase or publicly offer, sell or grant any right to reprice its securities, or otherwise dispose of or issue any Common Stock or Common Stock Equivalents entitling any Person to acquire shares of Common Stock, at an effective price per share less than the then Conversion Price (such lower price, the "Base Conversion Price" and such issuances collectively, a "Dilutive Issuance"), as adjusted hereunder (if 14 the holder of the Common Stock or Common Stock Equivalents so issued shall at any time, whether by operation of purchase price adjustments, reset provisions, floating conversion, exercise or exchange prices or otherwise, or due to warrants, options or rights per share which is issued in connection with such issuance, be entitled to receive shares of Common Stock at an effective price per share which is less than the Conversion Price, such issuance shall be deemed to have occurred for less than the Conversion Price on such date of the Dilutive Issuance), then the Conversion Price shall be reduced to equal the Base Conversion Price, provided, however, prior to the date the Company obtains Shareholder Approval in accordance with the rules and regulations of the Trading Market, in no event shall the Conversion Price be adjusted under this Section 5(b) to less than $2.36, subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar transactions of the Common Stock that occur after the date of this Debenture. Such adjustment shall be made whenever such Common Stock or Common Stock Equivalents are issued. Notwithstanding the foregoing, no adjustment will be made under this Section 5(b) in respect of an Exempt Issuance or in respect of shares of Common Stock issued in a firm commitment underwritten public offering with a nationally recognized and reputable investment bank with gross proceeds of at least $10,000,000. The Company shall notify the Holder in writing, no later than the Business Day following the issuance of any Common Stock or Common Stock Equivalents subject to this section, indicating therein the applicable issuance price, or of applicable reset price, exchange price, conversion price and other pricing terms (such notice the "Dilutive Issuance Notice"). For purposes of clarification, whether or not the Company provides a Dilutive Issuance Notice pursuant to this Section 5(b), upon the occurrence of any Dilutive Issuance, after the date of such Dilutive Issuance the Holder is entitled to receive a number of Conversion Shares based upon the Base Conversion Price regardless of whether the Holder accurately refers to the Base Conversion Price in the Notice of Conversion. c) Pro Rata Distributions. If the Company, at any time while this Debenture is outstanding, shall distribute to all holders of Common Stock (and not to the holders of the Debenture) evidences of its indebtedness or assets (including cash and cash dividends) or rights or warrants to subscribe for or purchase any security, then in each such case the Conversion Price shall be adjusted by multiplying such Conversion Price in effect immediately prior to the record date fixed for determination of stockholders entitled to receive such distribution by a fraction of which the denominator shall be the VWAP determined as of the record date mentioned above, and of which the numerator shall be such VWAP on such record date less the then fair market value at such record date of the portion of such assets or evidence of indebtedness so distributed applicable to one outstanding share of the Common Stock as determined by the Board of Directors in good faith. In either case the adjustments shall be described in a statement provided to the Holder of the portion of assets or evidences of indebtedness so distributed or such subscription rights applicable to one share of Common Stock. Such adjustment shall be made whenever any such distribution is made and shall become effective immediately after the record date mentioned above. 15 d) Fundamental Transaction. If, at any time while this Debenture is outstanding, (A) the Company effects any merger or consolidation of the Company with or into another Person, (B) the Company effects any sale of all or substantially all of its assets in one or a series of related transactions, (C) any tender offer or exchange offer (whether by the Company or another Person) is completed pursuant to which holders of Common Stock are permitted to tender or exchange their shares for other securities, cash or property, or (D) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (in any such case, a "Fundamental Transaction"), then upon any subsequent conversion of this Debenture, the Holder shall have the right to receive, for each Conversion Share that would have been issuable upon such conversion immediately prior to the occurrence of such Fundamental Transaction, the same kind and amount of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of one share of Common Stock (the "Alternate Consideration"). For purposes of any such conversion, the determination of the Conversion Price shall be appropriately adjusted to apply to such Alternate Consideration based on the amount of Alternate Consideration issuable in respect of one share of Common Stock in such Fundamental Transaction, and the Company shall apportion the Conversion Price among the Alternate Consideration in a reasonable manner reflecting the relative value of any different components of the Alternate Consideration. If holders of Common Stock are given any choice as to the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall be given the same choice as to the Alternate Consideration it receives upon any conversion of this Debenture following such Fundamental Transaction. To the extent necessary to effectuate the foregoing provisions, any successor to the Company or surviving entity in such Fundamental Transaction shall issue to the Holder a new debenture consistent with the foregoing provisions and evidencing the Holder's right to convert such debenture into Alternate Consideration. The terms of any agreement pursuant to which a Fundamental Transaction is effected shall include terms requiring any such successor or surviving entity to comply with the provisions of this paragraph (d) and insuring that this Debenture (or any such replacement security) will be similarly adjusted upon any subsequent transaction analogous to a Fundamental Transaction. e) Calculations. All calculations under this Section 5 shall be made to the nearest cent or the nearest 1/100th of a share, as the case may be. For purposes of this Section 5, the number of shares of Common Stock deemed to be issued and outstanding as of a given date shall be the sum of the number of shares of Common Stock (excluding treasury shares, if any) issued and outstanding. f) Notice to the Holder. i. Adjustment to Conversion Price. Whenever the Conversion Price is adjusted pursuant to any of this Section 5, the Company shall promptly mail to each Holder a notice setting forth the Conversion Price after such adjustment and 16 setting forth a brief statement of the facts requiring such adjustment. If the Company issues a variable rate security, despite the prohibition thereon in the Purchase Agreement, the Company shall be deemed to have issued Common Stock or Common Stock Equivalents at the lowest possible conversion or exercise price at which such securities may be converted or exercised in the case of a Variable Rate Transaction (as defined in the Purchase Agreement). ii. Notice to Allow Conversion by Holder. If (A) the Company shall declare a dividend (or any other distribution) on the Common Stock; (B) the Company shall declare a special nonrecurring cash dividend on or a redemption of the Common Stock; (C) the Company shall authorize the granting to all holders of the Common Stock rights or warrants to subscribe for or purchase any shares of capital stock of any class or of any rights; (D) the approval of any stockholders of the Company shall be required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, of any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property; (E) the Company shall authorize the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company; then, in each case, the Company shall cause to be filed at each office or agency maintained for the purpose of conversion of this Debenture, and shall cause to be mailed to the Holder at its last addresses as it shall appear upon the stock books of the Company, at least 10 calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided, that the failure to mail such notice or any defect therein or in the mailing thereof shall not affect the validity of the corporate action required to be specified in such notice. The Holder is entitled to convert this Debenture during the 10-day period commencing the date of such notice to the effective date of the event triggering such notice. Section 6. Redemption. a) Optional Redemption at Election of Company. Subject to the provisions of this Section 6, at any time after the Effective Date, the Company may deliver a notice to the Holder (an "Optional Redemption Notice" and the date such notice is deemed delivered hereunder, the "Optional Redemption Notice Date") of its irrevocable election 17 to redeem some or all of the then outstanding Debentures, for an amount, in cash, equal to the Optional Redemption Amount on (i) the 20th Trading Day following the Optional Redemption Notice Date, or (ii) the date of the closing date of a Fundamental Transaction so long as such closing date is no less than 20 Trading Days and no more than 30 Trading Days following the Optional Redemption Notice Date (such date, the "Optional Redemption Date" and such redemption, the "Optional Redemption"). The Optional Redemption Amount is due in full on the Optional Redemption Date. Other than in connection with an Optional Redemption of all of the then outstanding Debentures occurring immediately prior to or concurrently with the consummation of a Fundamental Transaction, the Company may only effect an Optional Redemption if during the period commencing on the Optional Redemption Notice Date through to the Optional Redemption Date and through and including the date such shares of Common Stock are issued to the Holder, each of the Equity Conditions shall have been met. If any of the Equity Conditions shall cease to be satisfied at any time during the required period, then the Holder may elect to nullify the Optional Redemption Notice by notice to the Company within 3 Trading Days after the first day on which any such Equity Condition has not been met (provided that if, by a provision of the Transaction Documents, the Company is obligated to notify the Holder of the non-existence of an Equity Condition, such notice period shall be extended to the third Trading Day after proper notice from the Company) in which case the Optional Redemption Notice shall be null and void, ab initio. The Company covenants and agrees that it will honor all Notices of Conversion tendered from the time of delivery of the Optional Redemption Notice through the date all amounts owing thereon are due and paid in full. b) Holder Redemption Right. Upon notice from the Company of, or the public announcement of, the occurrence of a Change of Control Transaction or a Fundamental Transaction, the Holder shall have the right to deliver a notice to the Company (a "Holder Redemption Notice" and the date such notice is deemed delivered hereunder, the "Holder Redemption Notice Date") of its irrevocable election to cause the Company to redeem some or all of the then outstanding principal amount of this Debenture for an amount, in cash, equal to (i) 100% of the principal amount of this Debenture then outstanding, (ii) accrued but unpaid interest and (iii) all liquidated damages and other amounts due in respect of this Debenture (the "Holder Redemption" and such amount the "Holder Redemption Amount"). The Holder Redemption Notice may be delivered any time after such notice or announcement until the 10th Trading Day prior to the consummation of the Fundamental Transaction or Change of Control Transaction provided that the Holder is given 30 Trading Days' prior written notice from the Company of the consummation of such transaction. The Holder Redemption Amount is due and payable on, and contingent upon, the closing or occurrence of the Fundamental Transaction or the Change of Control Transaction, provided that for a Change of Control Transaction pursuant to clause (v) therein, such payment shall be contingent upon, and occur on, the closing of the applicable agreement. 18 c) Redemption Procedure. The payment of cash pursuant to an Optional Redemption shall be made on the Optional Redemption Date. If any portion of the cash payment for an Optional Redemption or Holder Redemption shall not be paid by the Company by the respective due date, interest shall accrue thereon at the rate of 18% per annum (or the maximum rate permitted by applicable law, whichever is less) until the payment of the Optional Redemption Amount or Holder Redemption Amount, plus all amounts owing thereon is paid in full. Alternatively, if any portion of the Optional Redemption Amount or Holder Redemption Amount remains unpaid after such date, the Holders subject to such redemption may elect, by written notice to the Company given at any time thereafter, to invalidate ab initio such redemption, notwithstanding anything herein contained to the contrary, provided such Holders repay that portion of the Optional Redemption Amount or Holder Redemption Amount previously paid, if any, with respect to such invalidated Optional Redemption concurrently with delivery of such notice, the Company shall have no further right to exercise such Optional Redemption. Notwithstanding anything to the contrary in this Section 6, the Company's determination to redeem in cash pursuant to an Optional Redemption shall be applied among the Holders of Debentures ratably (based on the original principal amount purchased pursuant to the Purchase Agreement) adjusted proportionally in the event any Debentures are no longer outstanding. The Holder may elect to convert the outstanding principal amount of the Debenture pursuant to Section 4 prior to actual payment in cash for any redemption under this Section 6 by fax delivery of a Notice of Conversion to the Company. Section 7. Negative Covenants. So long as any portion of the Indebtedness existing under this Debenture is outstanding, the Company will not and will not permit any of the Subsidiary Guarantors to directly or indirectly, except as may be waived or consented to in writing by the holders of at least 66% of the then outstanding principal amount of the Debentures: a) other than Permitted Indebtedness, enter into, create, incur, assume, guarantee or suffer to exist any indebtedness for borrowed money of any kind, including but not limited to, a guarantee, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom; b) other than Permitted Liens, enter into, create, incur, assume or suffer to exist any liens of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom; c) amend its certificate of incorporation, bylaws or other charter documents so as to materially and adversely affect any rights of the Holder; d) repay, repurchase or offer to repay, repurchase or otherwise acquire more than a de minimis number of shares of its Common Stock or Common Stock Equivalents other than (i) the Seller Notes, (ii) as to the Conversion Shares to the extent permitted or required under the Transaction Documents or as otherwise permitted by the Transaction Documents or (iii) as to repurchases of shares of Common Stock or other equity securities of departing officers and directors of the Company; provided such repurchases shall not exceed $100,000, in the aggregate, for all officers and directors during the term of this Debenture or (iv) as otherwise permitted by the Transaction Documents; 19 e) enter into any agreement with respect to any of the foregoing; or f) pay cash dividends or distributions on any equity securities of the Company, other than cash dividends or distributions by a Subsidiary to the Company. Section 8. Events of Default. a) "Event of Default", wherever used herein, means any one of the following events (whatever the reason and whether it shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body): i. any default in the payment of (A) the principal amount of any Debenture, or (B) interest (including Late Fees) on, or liquidated damages in respect of, any Debenture, as and when the same shall become due and payable (whether on a Conversion Date or the Maturity Date or by acceleration or otherwise) which default, solely in the case of an interest payment or other default under clause (B) above, is not cured, within 3 Trading Days; ii. the Company shall materially fail to observe or perform in any material respect any other covenant or agreement contained in this Debenture or any other Debenture (other than a breach by the Company of its obligations to deliver shares of Common Stock to the Holder upon conversion which breach is addressed in clause (xi) below or failure to obtain Shareholder Approval) which failure has had or could reasonably be expected to have a Material Adverse Effect and is not cured, if possible to cure, within the earlier to occur of (A) 5 Trading Days after notice of such default sent by the Holder or by any other Holder and (B) 10 Trading Days after the Company shall become aware of such failure. iii. a default or event of default (subject to any grace or cure period provided for in the applicable agreement, document or instrument) shall occur under (A) any of the Transaction Documents, which default or event of default is not cured within 30 days or (B) any other material agreement, lease, document or instrument to which the Company or any Subsidiary Guarantor is bound which default or event of default materially restricts the ability of the Company or either of the Subsidiary Guarantors to operate their respective business thereof in the ordinary course; iv. any representation or warranty made herein, in any other Transaction Documents, in any written statement pursuant hereto or thereto, or in any other report, financial statement or certificate made or delivered to the Holder or any other holder of Debentures shall be untrue or incorrect in any material respect as of the date when made or deemed made; 20 v. (i) the Company or any Subsidiary Guarantor shall commence a case, as debtor, a case under any applicable bankruptcy or insolvency laws as now or hereafter in effect or any successor thereto, or the Company or any Subsidiary Guarantor commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or any Subsidiary Guarantor or (ii) there is commenced a case against the Company or any Subsidiary Guarantor, under any applicable bankruptcy or insolvency laws, as now or hereafter in effect or any successor thereto which remains undismissed for a period of 60 days; or (iii) the Company or any Subsidiary Guarantor is adjudicated by a court of competent jurisdiction insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or (iv) the Company or any Subsidiary Guarantor suffers any appointment of any custodian or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of 60 days; or (v) the Company or any Subsidiary Guarantor makes a general assignment for the benefit of creditors; or (vi) the Company shall fail to pay, or shall state that it is unable to pay, or shall be unable to pay, its debts generally as they become due; or (vii) the Company or any Subsidiary Guarantor shall call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts; or (viii) the Company or any Subsidiary Guarantor shall by any act or failure to act expressly indicate its consent to, approval of or acquiescence in any of the foregoing; or (ix) any corporate or other action is taken by the Company or any Subsidiary Guarantor for the purpose of effecting any of the foregoing; vi. the Company or any Subsidiary Guarantor shall default in any of its obligations under any mortgage, credit agreement or other borrowing facility, indenture agreement, factoring agreement or other instrument under which there may be issued, or by which there may be secured or evidenced any indebtedness for borrowed money or money due under any long term leasing or factoring arrangement of the Company in an amount exceeding $500,000, whether such indebtedness now exists or shall hereafter be created and such default shall result in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable; vii. the Common Stock shall not be eligible for quotation on or quoted for trading on a Trading Market and shall not again be eligible for and quoted or listed for trading thereon within five Trading Days; viii. shall agree to sell or dispose of all or in excess of 33% of its assets (other than FS SunTours, Inc.) in one or more transactions (whether or not such sale would constitute a Change of Control Transaction) or the Company shall 21 redeem or repurchase more than a de minimis number of its outstanding shares of Common Stock or other equity securities of the Company (other than redemptions of Conversion Shares and repurchases of shares of Common Stock or other equity securities of departing officers and directors of the Company; provided such repurchases shall not exceed $100,000, in the aggregate, for all officers and directors during the term of this Debenture); ix. a Registration Statement shall not have been declared effective by the Commission on or prior to (A) October 31, 2006, unless (I) the Company has filed all reports required to be filed by it under Rule 144(c)(1) of the Securities Act as of October 31, 2006, and (II) the Company has paid liquidated damages to each Purchaser on or prior to November 1, 2006 on account of the Company's failure to cause the initial Registration Statement to be declared effective on or before October 31, 2006 in an amount equal to 1.5% of the aggregate purchase price paid by such Purchaser pursuant to the Purchase Agreement for any Registrable Securities other than Warrant Shares then held by such Purchaser (assuming for such purpose only, that all Debentures have been converted), which payment shall be deemed by all Purchasers to satisfy the liquidated damages payment requirement of the Company pursuant to Section 2(b) of the Registration Rights Agreement with respect to the month of November 2006, (B) November 30, 2006, unless (I) the Company has filed all reports required to be filed by it under Rule 144(c)(1) of the Securities Act as of November 30, 2006, and (II) the Company has paid liquidated damages to each Purchaser on or prior to December 1, 2006 on account of the Company's failure to cause the initial Registration Statement to be declared effective on or before November 30, 2006 in an amount equal to 1.5% of the aggregate purchase price paid by such Purchaser pursuant to the Purchase Agreement for any Registrable Securities other than Warrant Shares then held by such Purchaser (assuming for such purpose only, that all Debentures have been converted), which payment shall be deemed by all Purchasers to satisfy the liquidated damages payment requirement of the Company pursuant to Section 2(b) of the Registration Rights Agreement with respect to the month of December 2006, or (C) January 2, 2007; x. if, during the Effectiveness Period (as defined in the Registration Rights Agreement), the effectiveness of the Registration Statement lapses for any reason or the Holder shall not be permitted to resell Registrable Securities (as defined in the Registration Rights Agreement) under the Registration Statement, in either case, for more than 60 consecutive Trading Days or 90 non-consecutive Trading Days during any 12 month period; provided, however, that in the event that the Company is negotiating a merger, consolidation, acquisition or sale of all or substantially all of its assets or a similar transaction and in the opinion of counsel to the Company, the Registration Statement, would be required to be amended to include information concerning such transactions or the parties thereto that is not available or may not be publicly disclosed at the time, the Company shall be permitted an additional 10 consecutive Trading Days during any 12 month period relating to such an event; or 22 xi. the Company shall fail for any reason to deliver certificates to a Holder prior to the fifth Trading Day after a Conversion Date pursuant to and in accordance with Section 4(d) or the Company shall provide notice to the Holder, including by way of public announcement, at any time, of its intention not to comply with requests for conversions of any Debentures in accordance with the terms hereof. b) Remedies Upon Event of Default. If any Event of Default occurs, the full principal amount of this Debenture, together with interest and other amounts owing in respect thereof, to the date of acceleration shall become, at the Holder's election, immediately due and payable in cash. The aggregate amount payable upon an Event of Default shall be equal to the Mandatory Default Amount. Commencing 5 days after the occurrence of any Event of Default that results in the eventual acceleration of this Debenture, the interest rate on this Debenture shall accrue at the rate of 18% per annum, or such lower maximum amount of interest permitted to be charged under applicable law. Upon the payment in full of the Mandatory Default Amount on this entire Debenture the Holder shall promptly surrender this Debenture to or as directed by the Company. The Holder need not provide and the Company hereby waives any presentment, demand, protest or other notice of any kind, and the Holder may immediately upon the expiration of any applicable grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such declaration may be rescinded and annulled by Holder at any time prior to payment hereunder and the Holder shall have all rights as a Debenture holder until such time, if any, as the full payment under this Section shall have been received by it. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. Section 9. Miscellaneous. a) Notices. Any and all notices or other communications or deliveries to be provided by the Holder hereunder, including, without limitation, any Notice of Conversion, shall be in writing and delivered personally, by facsimile, or sent by a nationally recognized overnight courier service, addressed to the Company, at the address set forth above, facsimile number (404) 943-1094, Attn: President, or such other address or facsimile number as the Company may specify for such purposes by notice to the Holder delivered in accordance with this Section. Any and all notices or other communications or deliveries to be provided by the Company hereunder shall be in writing and delivered personally, by facsimile or sent by a nationally recognized overnight courier service addressed to each Holder at the facsimile telephone number or address of such Holder appearing on the books of the Company, or if no such facsimile telephone number or address appears, at the principal place of business of the Holder. Any notice or other communication or deliveries hereunder shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is 23 delivered via facsimile at the facsimile telephone number specified in this Section prior to 5:30 p.m. (New York City time), (ii) the date after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile telephone number specified in this Section later than 5:30 p.m. (New York City time) on any date and earlier than 11:59 p.m. (New York City time) on such date, (iii) the second Business Day following the date of mailing, if sent by nationally recognized overnight courier service, or (iv) if sent other than by facsimile or courier, upon actual receipt by the party to whom such notice is required to be given. b) Absolute Obligation. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligation of the Company, which is absolute and unconditional (subject to the terms of the Transaction Documents), to pay the principal of, interest and liquidated damages (if any) on, this Debenture at the time, place, and rate, and in the coin or currency, herein prescribed. This Debenture is a direct debt obligation of the Company. This Debenture ranks pari passu with all other Debentures now or hereafter issued by the Company under the terms set forth herein and is subject to the terms of the Security Agreement. c) Lost or Mutilated Debenture. If this Debenture shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed but only upon receipt of evidence of such loss, theft or destruction of such Debenture, and of the ownership hereof, and indemnity, if requested, all reasonably satisfactory to the Company and, in the case of mutilation, delivery of such certificate or instrument to the Company. d) Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Debenture shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all legal proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by any of the Transaction Documents (whether brought against a party hereto or its respective affiliates, directors, officers, shareholders, employees or agents) shall be commenced in the state and federal courts sitting in the City of New York, Borough of Manhattan (the "New York Courts"). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, or such New York Courts are improper or inconvenient venue for such proceeding. Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party 24 at the address in effect for notices to it under this Debenture and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Debenture or the transactions contemplated hereby. If either party shall commence an action or proceeding to enforce any provisions of this Debenture, then the prevailing party in such action or proceeding shall be reimbursed by the other party for its reasonable attorneys' fees and other costs and expenses incurred with the investigation, preparation and prosecution of such action or proceeding. e) Waiver. Any waiver by the Company or the Holder of a breach of any provision of this Debenture shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Debenture. The failure of the Company or the Holder to insist upon strict adherence to any term of this Debenture on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Debenture. Any waiver must be in writing. f) Severability. If any provision of this Debenture is invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect, and if any provision is inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances. If it shall be found that any interest or other amount deemed interest due hereunder violates applicable laws governing usury, the applicable rate of interest due hereunder shall automatically be lowered to equal the maximum permitted rate of interest. The Company covenants (to the extent that it may lawfully do so) that it shall not at any time insist upon, plead, or in any manner whatsoever claim or take the benefit or advantage of, any stay, extension or usury law or other law which would prohibit or forgive the Company from paying all or any portion of the principal of or interest on this Debenture as contemplated herein, wherever enacted, now or at any time hereafter in force, or which may affect the covenants or the performance of this indenture, and the Company (to the extent it may lawfully do so) hereby expressly waives all benefits or advantage of any such law, and covenants that it will not, by resort to any such law, hinder, delay or impede the execution of any power herein granted to the Holder, but will suffer and permit the execution of every such as though no such law has been enacted. g) Next Business Day. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next succeeding Business Day. h) Headings. The headings contained herein are for convenience only, do not constitute a part of this Debenture and shall not be deemed to limit or affect any of the provisions hereof. 25 i) Assumption. Any successor to the Company or surviving entity in a Fundamental Transaction shall (i) assume in writing all of the obligations of the Company under this Debenture and the other Transaction Documents pursuant to written agreements in form and substance satisfactory to the Holder (such approval not to be unreasonably withheld or delayed) prior to such Fundamental Transaction and (ii) to issue to the Holder a new debenture of such successor entity evidenced by a written instrument substantially similar in form and substance to this Debenture, including, without limitation, having a principal amount and interest rate equal to the principal amounts and the interest rates of the Debentures held by the Holder and having similar ranking to this Debenture, and satisfactory to the Holder (any such approval not to be unreasonably withheld or delayed). The provisions of this Section 9(i) shall apply similarly and equally to successive Fundamental Transactions and shall be applied without regard to any limitations of this Debenture. ********************* 26 IN WITNESS WHEREOF, the Company has caused this Debenture to be duly executed by a duly authorized officer as of the date first above indicated. ONETRAVEL HOLDINGS, INC. By:__________________________________ Name: Marc E. Bercoon Title: President 27 ANNEX A NOTICE OF CONVERSION The undersigned hereby elects to convert principal under the 9% Secured Convertible Debenture of OneTravel, Holdings, Inc., a Delaware corporation (the "Company"), due on January __, 2009 into shares of common stock, par value $0.04 per share (the "Common Stock"), of the Company according to the conditions hereof, as of the date written below. If shares are to be issued in the name of a person other than the undersigned, the undersigned will pay all transfer taxes payable with respect thereto and is delivering herewith such certificates and opinions as reasonably requested by the Company in accordance therewith. No fee will be charged to the holder for any conversion, except for such transfer taxes, if any. By the delivery of this Notice of Conversion the undersigned represents and warrants to the Company that its ownership of the Common Stock does not exceed the amounts determined in accordance with Section 13(d) of the Exchange Act, specified under Section 4 of this Debenture. The undersigned agrees to comply with the prospectus delivery requirements under the applicable securities laws in connection with any transfer of the aforesaid shares of Common Stock. Conversion calculations: Date to Effect Conversion: Principal Amount of Debenture to be Converted: Payment of Interest in Common Stock __yes __no If yes, $___ of Interest Accrued on Account of Conversion at Issue. Number of shares of Common Stock to be issued: Signature: Name: Address: 28 Schedule 1 CONVERSION SCHEDULE The 9% Secured Convertible Debentures due on January __, 2009 in the aggregate principal amount of $____________ issued by OneTravel Holdings, Inc. This Conversion Schedule reflects conversions made under Section 4 of the above referenced Debenture. Dated:
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29 EX-10.1 3 v034694_ex10-1.txt WAIVER AGREEMENT AND AMENDMENT TO DEBENTURE THIS WAIVER AGREEMENT AND AMENDMENT TO DEBENTURE (this "Agreement") dated as of January 31, 2006 is by and among ONETRAVEL HOLDINGS, INC., a Delaware corporation (the "Company"), Farequest Holdings, Inc., a Delaware corporation ("Farequest"), OneTravel, Inc., a Texas corporation ("OneTravel"; Company, Farequest and OneTravel are sometimes referred to herein individually as a "Credit Party" and collectively, as the "Credit Parties"), and each Purchaser identified on the signature pages hereto (each, including its successors and assigns, a "Purchaser" and collectively the "Purchasers"). Capitalized terms used and not otherwise defined herein that are defined in the Securities Purchase Agreement, dated October 24, 2005 by and among the Company and the Purchasers (the "Purchase Agreement") or in any related Transaction Document (as defined in the Purchase Agreement) shall have the meanings given such terms in the Purchase Agreement or such Transaction Document, as applicable. Preliminary Statement: A. On October 24, 2005, the Company and Purchasers entered into the Purchase Agreement and the related Transaction Documents. B. The following Events of Default and related defaults exist and will exist under Section 8(a) of the Debentures and under Sections 2 and 3 of the Registration Rights Agreement: (i) the Company's failure to timely file an initial Registration Statement, and the Company's inability to have a Registration Statement declared effective by the Commission on or prior to the 240th calendar day after the Closing Date, (ii) the Company's failure to timely file its Annual Report on Form 10-K for the year ended June 30, 2005 and its Quarterly Report on Form 10-Q for the quarter ended September 30, 2005 and other reports required to be filed prior to the date hereof pursuant to the Securities Act or the Exchange Act, and the Company's inability to timely file its Quarterly Reports on Form 10-Q for the quarters ended December 31, 2005 and March 31, 2006, and (iii) the material inaccuracy or breach of certain representations and warranties of the Company and/or the other Credit Parties in the Transaction Documents (collectively, the "Existing Defaults"). C. Subject to the terms and conditions set forth herein, each Purchaser has agreed (i) to waive its available rights and remedies under the Purchase Agreement, any Transaction Document, any other agreement or at law or in equity arising as a result of the Existing Defaults (all such rights and remedies, the "Available Remedies"), (ii) to extend the date by which an initial Registration Statement must be filed and declared effective, (iii) to waive certain conditions contained in the Transaction Documents relating to the Company's right to pay interest in shares of Common Stock in lieu of cash and (iv) to make certain amendments to the Debentures, and, to the extent necessary the other Transaction Documents. D As consideration for entering into this Agreement, in accordance with and subject to the terms of this Agreement, the Company shall pay to each Purchaser the amount equal to the redemption premium of the Debentures in the form of a new convertible, secured debenture. NOW, THEREFORE, the parties to this Agreement, for adequate and sufficient consideration, the receipt of which is hereby acknowledged, do hereby agree as follows: 1. Waivers by Purchasers; Amendment to the Transaction Documents. (a) The Company hereby acknowledges the current and continuing existence of the Existing Defaults. (b) Subject to the terms and provisions of this Agreement, each Purchaser hereby irrevocably waives the Existing Defaults and waives, and agrees to permanently forbear from exercising, any Available Remedies it now has or may in the future have and any rights and remedies that will be available to such Purchaser as a result of the Existing Defaults. (c) The Company and each Purchaser amends and restates Section 8(a)(ix) of the Debentures as follows: "a Registration Statement shall not have been declared effective by the Commission on or prior to (A) October 31, 2006, unless (I) the Company has filed all reports required to be filed by it under Rule 144(c)(1) of the Securities Act as of October 31, 2006, and (II) the Company has paid liquidated damages to each Purchaser on or prior to November 1, 2006 on account of the Company's failure to cause the initial Registration Statement to be declared effective on or before October 31, 2006 in an amount equal to 1.5% of the aggregate purchase price paid by such Purchaser pursuant to the Purchase Agreement for any Registrable Securities other than Warrant Shares then held by such Purchaser (assuming for such purpose only, that all Debentures have been converted), which payment shall be deemed by all Purchasers to satisfy the liquidated damages payment requirement of the Company pursuant to Section 2(b) of the Registration Rights Agreement with respect to the month of November 2006, (B) November 30, 2006, unless (I) the Company has filed all reports required to be filed by it under Rule 144(c)(1) of the Securities Act as of November 30, 2006, and (II) the Company has paid liquidated damages to each Purchaser on or prior to December 1, 2006 on account of the Company's failure to cause the initial Registration Statement to be declared effective on or before November 30, 2006 in an amount equal to 1.5% of the aggregate purchase price paid by such Purchaser pursuant to the Purchase Agreement for any Registrable Securities other than Warrant Shares then held by such Purchaser (assuming for such purpose only, that all Debentures have been converted), which payment shall be deemed by all Purchasers to satisfy the liquidated damages payment requirement of the Company pursuant to Section 2(b) of the Registration Rights Agreement with respect to the month of December 2006, or (C) January 2, 2007." (d) Each Purchaser hereby irrevocably waives the payment of liquidated damages pursuant to Section 2(b) of the Registration Rights Agreement that would otherwise accrue and be payable prior to November 1, 2006 on account of (i) the Company's failure to file the initial Registration Statement on or before the Filing Date and (ii) the Company's failure to cause the initial Registration Statement to be declared effective on or before the Effectiveness Date. 2 (e) As to the July 1, 2006 Interest Payment Date only, each Purchaser hereby irrevocably waives the requirements of clause (iii) in the definition of Equity Conditions contained in the Debenture. Purchasers do not waive any other condition in the definition of Equity Conditions other than those set forth in clause (iii) thereof, nor do they waive clause (iii) in the definition of Equity Conditions as to any other Interest Payment Dates. (f) Except to the extent of the waiver and forbearance contained in this Section 1, each Purchaser reserves all of its rights, remedies, powers and privileges under the Purchase Agreement, Debentures and Transaction Documents and otherwise with respect to any Event of Default other than the Existing Defaults. Notwithstanding anything herein to the contrary and for purposes of clarification, an Event of Default under Section 8(a)(iii) of the Debentures held by a Purchaser executing this Agreement that is caused solely by the acceleration of the full principal amount of the Debentures held by another holder of the Debentures that is not a party to this Agreement due to the occurrence of an Existing Default that has not been waived by such holder is not waived by this Agreement and accordingly the signatories hereto shall also have the right to accelerate pursuant to Section 8(a)(iii)) upon such event. Except as expressly set forth in this Agreement, no waiver, consent, agreement, amendment, renewal, extension, modification, standstill, release or understanding of any kind or nature whatsoever shall be binding on Purchasers unless and until one or more counterparts of a document in writing specifically affirming the same has been executed by Purchasers. No failure or delay by Purchasers with respect to exercising any right, remedy, power or privilege under the Purchase Agreement, the Transaction Documents or otherwise shall operate as a waiver thereof or any acquiescence therein. 2. Issuance of Additional Debentures. As consideration for entering into this Agreement, the Company agrees to pay an amount equal to the redemption premium of the Debentures by the issuance, on the date hereof, of a debenture to each Purchaser in a principal amount equal to 25% of the principal amount of the Debenture now held by such Purchaser, which debenture shall contain the same terms and conditions as such Debenture as amended hereby (each such debenture, the "Additional Debenture" and collectively the "Additional Debentures"), except that such debenture shall not be convertible into shares of common stock of the Company prior to obtaining Shareholder Approval with respect to such conversion to the extent the rules and regulations of the American Stock Exchange require such Shareholder Approval. The Company's obligation to seek Shareholder Approval with respect to the Additional Debentures shall be as set forth in Section 4.11(d) of the Purchase Agreement. Each Purchaser acknowledges that the issuance of the Additional Debentures constitutes an Exempt Issuance as defined in the Purchase Agreement for the Purposes of Section 5(b) of the Debentures. 3. Grant of Security Interest in Connection with the Additional Debentures. In order to induce the Purchasers to waive and forbear on the terms and conditions in this Agreement, each Credit Party hereby grants a security interest in all Collateral (as defined in the Security Agreement) to each Purchaser to secure the prompt payment, performance and discharge in full 3 of all of the Company's obligations under the Additional Debentures on the same terms and conditions as the Collateral is pledged to the Purchasers under the Security Agreement to secure the "Obligations" defined therein. Each Credit Party hereby agrees that the obligations of the Company contained in the Additional Debentures will form a part of the obligations subject to (i) the Security Agreement, dated as of October 24, 2005, and (ii) the UCC Financing Statements listing the Company and Farequest as Debtors, as filed with the Secretary of State of Delaware on October 19, 2005, and the UCC Financing Statement listing OneTravel as Debtor, as filed with the Secretary of State of Texas on October 19, 2005 and be deemed to be included in the definition of "Obligations" thereunder. Furthermore, each of Farequest and OneTravel agrees that the Company's obligations, liabilities and indebtedness under the Additional Debentures shall constitute "Obligations" under and as defined in the Subsidiary Guarantee, subject to all guarantee obligations of such Credit Parties thereunder. 4. Additional Amendments to the Transaction Documents. (a) The Company and each Purchaser amends and restates the definition of "Optional Redemption Amount" contained in the Debentures as follows: "Optional Redemption Amount" shall mean the sum of (i) 100% of the principal amount of the Debenture then outstanding, (ii) accrued but unpaid interest and (iii) all liquidated damages and other amounts due in respect of the Debenture." (b) The Company and each Purchaser amends and restates the definition of "Mandatory Default Amount" contained in the Debentures as follows: "Mandatory Default Amount" shall equal the sum of (i) the greater of: (A) 100% of the principal amount of this Debenture to be prepaid, plus all accrued and unpaid interest thereon, or (B) the principal amount of this Debenture to be prepaid, plus all other accrued and unpaid interest hereon, divided by the Conversion Price on (x) the date the Mandatory Default Amount is demanded or otherwise due or (y) the date the Mandatory Default Amount is paid in full, whichever is less, multiplied by the VWAP on (x) the date the Mandatory Default Amount is demanded or otherwise due or (y) the date the Mandatory Default Amount is paid in full, whichever is greater, and (ii) all other amounts, costs, expenses and liquidated damages due in respect of this Debenture." (c) The Company and each Purchaser (i) amends Section 5(b) of the Debentures by deleting the amount "$1.94" appearing therein and replacing it with the amount "$2.36", (ii) amends Section 4.13(c) of the Purchase Agreement by deleting the amount "$1.94" appearing therein and replacing it with the amount "$2.36" and (iii) amends Section 3(b) of the Warrant by deleting the amount "$1.94" appearing therein and replacing it with the amount "$2.36". (d) The Company and each Purchaser amends and restates the first sentence of Section 6(b) of the Debentures as follows: 4 "Upon notice from the Company of, or the public announcement of, the occurrence of a Change of Control Transaction or a Fundamental Transaction, the Holder shall have the right to deliver a notice to the Company (a "Holder Redemption Notice" and the date such notice is deemed delivered hereunder, the "Holder Redemption Notice Date") of its irrevocable election to cause the Company to redeem some or all of the then outstanding principal amount of this Debenture for an amount, in cash, equal to (i) 100% of the principal amount of this Debenture then outstanding, (ii) accrued but unpaid interest and (iii) all liquidated damages and other amounts due in respect of this Debenture (the "Holder Redemption" and such amount the "Holder Redemption Amount")." 5. Incorporation of this Agreement. The rights and obligations of each Purchaser and of the Company with respect to the Additional Debentures and the shares of Common Stock issuable thereunder (the "Additional Underlying Shares") shall be identical in all respects to the rights and obligations of the Purchasers and of the Company with respect to the Debentures, the Warrants and the Underlying Shares issued and issuable pursuant to the Transaction Documents. Any rights of a Purchaser or covenants of the Company which are conditional on a Purchaser holding securities of the Company or which are determined in magnitude by such Purchaser's purchase of securities pursuant to the Transaction Documents shall be deemed to include any securities purchased or issuable pursuant to this Agreement. The Transaction Documents are hereby amended so that the term "Debentures" includes the Additional Debentures issued hereunder and "Underlying Shares" includes the Additional Underlying Shares. Additionally, the Registration Rights Agreement is hereby amended so that the term "Registrable Securities" includes in the calculation thereof the Additional Underlying Shares; provided, however, as to the Additional Underlying Shares only, "date hereof" where used shall be deemed the date hereof. 6. Representations and Warranties of the Credit Parties. Each Credit Party hereby makes to each Purchaser the following representations and warranties: (a) Authorization; Enforcement. Each Credit Party has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by this Agreement and otherwise to carry out its obligations hereunder and thereunder. The execution and delivery of this Agreement by such Credit Party and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary action on the part of such Credit Party and no further action is required by such Credit Party, its board of directors or its stockholders in connection therewith other than in connection with the Required Approvals. This Agreement has been duly executed by such Credit Party and, when delivered in accordance with the terms hereof will constitute the valid and binding obligation of such Credit Party enforceable against such Credit Party in accordance with its terms except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law. 5 (b) No Conflicts. The execution, delivery and performance of this Agreement by such Credit Party and the consummation by such Credit Party of the transactions contemplated hereby do not and will not: (i) conflict with or violate any provision of such Credit Party's certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, result in the creation of any Lien (except as contemplated by the Security Documents) upon any of the properties or assets of such Credit Party, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any material agreement, credit facility, debt or other material instrument (evidencing Credit Party debt or otherwise) or other material understanding to which such Credit Party is a party or by which any property or asset of such Credit Party is bound or affected, or (iii) subject to the Required Approvals, conflict with or result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which such Credit Party is subject (including federal and state securities laws and regulations), or by which any property or asset of such Credit Party is bound or affected; except in the case of each of clauses (ii) and (iii), such as could not have or reasonably be expected to result in a Material Adverse Effect. (c) Issuance of the Additional Debentures. The Additional Debentures are duly authorized and, upon the execution of this Agreement by a Purchaser, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents. The Additional Underlying Shares, when issued in accordance with the terms of the Additional Debentures, will be validly issued, fully paid and nonassessable, free and clear of all Liens imposed by the Company. The Company has reserved from its duly authorized capital stock a number of shares of Common Stock for issuance of the Additional Underlying Shares at least equal to the Required Minimum on the date hereof. (d) Equal Consideration. Except as set forth in this Agreement, no consideration has been offered or paid to any person to amend or consent to a waiver, modification, forbearance or otherwise of any provision of any of the Transaction Documents. (e) Other Events of Default. As of the date of this Agreement, to the knowledge of the Company, no Event of Default other than the Existing Defaults exists. 7. Representations and Warranties of the Purchasers. Each Purchaser hereby, for itself and for no other Purchaser, represents and warrants as of the date hereof to the Company as follows: i. Authority. The execution, delivery and performance by such Purchaser of the transactions contemplated by this Agreement have been duly authorized by all necessary corporate or similar action on the part of such Purchaser. This Agreement has been duly executed by such Purchaser, and when delivered by such Purchaser in accordance with the terms hereof, will constitute the valid and legally binding obligation of such Purchaser, enforceable against it in accordance with its terms, except (i) as limited by general equitable principles and applicable bankruptcy, insolvency, reorganization, moratorium and other laws of general application affecting enforcement of creditors' rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law. 6 ii. Own Account. Such Purchaser understands that the Additional Debentures are "restricted securities" and have not been registered under the Securities Act or any applicable state securities law and is acquiring the Additional Debenture as principal for its own account and not with a view to or for distributing or reselling such Additional Debentures or any part thereof in violation of the Securities Act or any applicable state securities law, has no present intention of distributing any of such Securities in violation of the Securities Act or any applicable state securities law and has no arrangement or understanding with any other persons regarding the distribution of such Additional Debentures (this representation and warranty not limiting such Purchaser's right to sell the Additional Underlying Shares pursuant to the Registration Statement or otherwise in compliance with applicable federal and state securities laws) in violation of the Securities Act or any applicable state securities law. Such Purchaser is acquiring the Additional Debentures hereunder in the ordinary course of its business. Such Purchaser does not have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Additional Debentures or Additional Underlying Shares. iii. Purchaser Status. Such Purchaser is an "accredited investor" as defined in Rule 501(a)(1), (a)(2), (a)(3), (a)(7) or (a)(8) under the Securities Act. Such Purchaser is not required to be registered as a broker-dealer under Section 15 of the Exchange Act. iv. General Solicitation. Such Purchaser is not purchasing the Additional Debentures as a result of any advertisement, article, notice or other communication regarding the Additional Debentures published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement. v. Affirmation of Prior Representations and Warranties. Such Purchaser hereby represents and warrants to the Company that its representations and warranties listed in Section 3.2 of the Purchase Agreement are true and correct as of the date hereof. 8. Delivery of Opinion. Concurrently herewith, the Company shall deliver to the Purchasers an opinion of outside counsel regarding this Agreement and the issuance of the Additional Debentures in form and substance reasonably acceptable to the Purchasers. 9. Public Disclosure. The Company shall, on or before the 4th Trading Day following the date hereof, issue a Current Report on Form 8-K, reasonably acceptable to the Purchasers, disclosing the material terms of the transactions contemplated hereby, and shall attach this Agreement thereto. The Company shall consult with the Purchasers in issuing any other press releases with respect to the transactions contemplated hereby. 10. Purchaser Acknowledgement. Each of the Purchasers hereby agrees and acknowledges that notwithstanding anything to the contrary in any of the Transaction Documents, the Company, without limitation and without notice to or the consent of, the Purchasers, may sell, transfer or otherwise dispose of all or any portion of the stock or assets of FS SunTours, Inc. 7 11. Effect on Transaction Documents. Except as expressly set forth above, all of the terms and conditions of the Transaction Documents shall continue in full force and effect after the execution of this Agreement and shall not be in any way changed, modified or superseded by the terms set forth herein, including but not limited to, any other obligations the Company may have to the Purchasers under the Transaction Documents. Notwithstanding the foregoing, this Agreement shall be deemed for all purposes as an amendment to any Transaction Document as required to serve the purposes hereof, and in the event of any conflict between the terms and provisions of the Debentures, the Registration Rights Agreement or any other Transaction Document, on the one hand, and the terms and provisions of this Agreement, on the other hand, the terms and provisions of this Agreement shall prevail. 12. Release of all Claims. THE COMPANY (FOR ITSELF AND ITS AFFILIATES) HEREBY UNCONDITIONALLY RELEASES AND FOREVER DISCHARGES EACH PURCHASER AND ITS RESPECTIVE SUCCESSORS, ASSIGNS, AGENTS, DIRECTORS, OFFICERS, EMPLOYEES, AFFILIATES, ACCOUNTANTS, CONSULTANTS, CONTRACTORS, ADVISORS AND ATTORNEYS (COLLECTIVELY, THE "BENEFITED PARTIES") FROM ALL CLAIMS (AS DEFINED BELOW) FROM THE BEGINNING OF TIME THROUGH THE DATE HEREOF. AS USED IN THIS AGREEMENT, THE TERM "CLAIMS" MEANS ANY AND ALL POSSIBLE CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTIONS, COSTS, EXPENSES AND LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, AT LAW OR IN EQUITY, WHICH THE COMPANY, OR ANY OF ITS AGENTS, EMPLOYEES OR AFFILIATES MAY HAVE AS OF THE DATE HEREOF, IRRESPECTIVE OF WHETHER ANY SUCH CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR OTHERWISE IN CONNECTION WITH ANY OF THE TRANSACTION AGREEMENTS, INCLUDING ANY CONTRACTING FOR, CHARGING, TAKING, RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE MAXIMUM RATE ON INTEREST CHARGEABLE UNDER APPLICABLE LAW AND ANY LOSS, COST OR DAMAGE, OF ANY KIND OR CHARACTER, ARISING OUT OF OR IN ANY WAY CONNECTED WITH OR IN ANY WAY RESULTING FROM THE ACTIONS OR OMISSIONS OF THE BENEFITED PARTIES, INCLUDING ANY BREACH OF FIDUCIARY DUTY, BREACH OF ANY DUTY OF GOOD FAITH OR FAIR DEALING, UNDUE INFLUENCE, DURESS, ECONOMIC COERCION, CONFLICT OF INTEREST, NEGLIGENCE, BAD FAITH, MALPRACTICE, VIOLATIONS OF THE RACKETEER INFLUENCED AND CORRUPT ORGANIZATIONS ACT, INTENTIONAL OR NEGLIGENT INFLICTION OF MENTAL DISTRESS, TORTIOUS INTERFERENCE WITH CONTRACTUAL RELATIONS, TORTIOUS INTERFERENCE WITH CORPORATE GOVERNANCE OR PROSPECTIVE BUSINESS ADVANTAGE, BREACH OF CONTRACT, DECEPTIVE TRADE PRACTICES, LIBEL, SLANDER, CONSPIRACY OR ANY CLAIM FOR WRONGFULLY ACCELERATING ANY OBLIGATIONS OR WRONGFULLY ATTEMPTING TO FORECLOSE ON ANY COLLATERAL. THE COMPANY (FOR ITSELF AND ITS AFFILIATES) AGREES THAT NONE OF THE BENEFITED PARTIES HAS FIDUCIARY OR SIMILAR OBLIGATIONS TO THE COMPANY OR ANY AGENTS, EMPLOYEES OR AFFILIATES OF THE COMPANY AND THAT THEIR RELATIONSHIPS ARE STRICTLY THAT OF CREDITOR AND DEBTOR. THIS RELEASE IS ACCEPTED BY PURCHASERS PURSUANT TO THIS AGREEMENT AND SHALL NOT BE CONSTRUED AS AN ADMISSION OF LIABILITY BY PURCHASERS OR ANY OTHER BENEFITED PARTY. 8 THE COMPANY (FOR ITSELF AND ITS AFFILIATES) ACKNOWLEDGES THAT THE FOREGOING PROVISIONS ARE INTENDED TO, AND THE TRANSACTION AGREEMENTS CONTAIN PROVISIONS WHICH, RELEASE PURCHASERS FROM LIABILITY AND/OR INDEMNIFY AND HOLD HARMLESS PURCHASERS FOR, AMONG OTHER THINGS, THE ORDINARY NEGLIGENCE OF PURCHASERS. THE COMPANY (FOR ITSELF AND ITS AFFILIATES) AGREES THAT THE RELEASE AND/OR INDEMNITY PROVISIONS CONTAINED IN THESE DOCUMENTS ARE CAPTIONED TO CLEARLY IDENTIFY THE RELEASE AND/OR INDEMNITY PROVISIONS AND, THEREFORE, ARE SO CONSPICUOUS THAT THE COMPANY AND ITS AFFILIATES HAVE FAIR NOTICE OF THE EXISTENCE AND CONTENTS OF SUCH PROVISIONS. 13. Expenses. The Company agrees to pay to Purchasers upon demand any and all reasonable out-of-pocket costs or expenses (including, without limitation, reasonable legal fees and disbursements) incurred or sustained by Purchasers, in connection with the preparation of this Agreement and related matters. 14. 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 Purchaser. 15. 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. 16. 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 Purchaser. The Company may not assign (except by merger) its rights or obligations hereunder without the prior written consent of all of the Purchasers of the then-outstanding Securities. Each Purchaser may assign their respective rights hereunder in the manner and to the Persons as permitted under the Purchase Agreement. 17. 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. 9 18. 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. 19. 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. 20. 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. 21. Independent Nature of Holders' Obligations and Rights. The obligations of each Purchaser hereunder are several and not joint with the obligations of any other Purchasers hereunder, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser hereunder. Nothing contained herein or in any other agreement or document delivered at any closing, and no action taken by any Purchaser pursuant hereto, shall be deemed to constitute the Purchasers as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert with respect to such obligations or the transactions contemplated by this Agreement. Each Purchaser 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 Purchaser to be joined as an additional party in any proceeding for such purpose. [SIGNATURE PAGE FOLLOWS] 10 IN WITNESS WHEREOF, the parties hereto have caused this Waiver Agreement and Amendment to Debenture to be duly executed by their respective authorized signatories as of the date first indicated above. ONETRAVEL HOLDINGS, INC. Address for Notice: ------------------- By:_____________________________ 5775 Peachtree Dunwoody Road Name: Marc E. Bercoon Building G, Suite 300 Title: President Atlanta, GA 30346 Attn: President Fax #: (404) 943-1094 FAREQUEST HOLDINGS, INC. Address for Notice: ------------------- By:_____________________________ 5775 Peachtree Dunwoody Road Name: Marc E. Bercoon Building G, Suite 300 Title: President Atlanta, GA 30346 Attn: President Fax #: (404) 943-1094 ONETRAVEL, INC. Address for Notice: ------------------- By:_____________________________ 5775 Peachtree Dunwoody Road Name: Marc E. Bercoon Building G, Suite 300 Title: President Atlanta, GA 30346 Attn: President Fax #: (404) 943-1094 [REMAINDER OF PAGE INTENTIONALLY LEFT BLANK SIGNATURE PAGE FOR PURCHASER FOLLOWS] 11 [PURCHASER SIGNATURE PAGES TO OTV WAIVER AGREEMENT AND AMENDMENT TO DEBENTURE] IN WITNESS WHEREOF, the undersigned have caused this Forbearance Agreement and Amendment to Debenture to be duly executed by their respective authorized signatories as of the date first indicated above. Name of Purchaser: ____________________________________________________________ Signature of Authorized Signatory of Purchaser: _______________________________ Name of Authorized Signatory: _________________________________________________ Title of Authorized Signatory: ________________________________________________ Email Address of Purchaser: ___________________________________________________ Address for Notice of Purchaser: [SIGNATURE PAGES CONTINUE] 12 -----END PRIVACY-ENHANCED MESSAGE-----