EXHIBIT 4.18
FORM OF CONVERTIBLE SUBORDINATED
PROMISSORY DEBENTURE
________________, 2008
$___________
FOR VALUE RECEIVED, the undersigned, SPARE BACKUP, INC.
("Maker"),
having its principal business address at 72-757 Fred Waring Drive,
Palm Desert,
California 92260, hereby promises to pay to the order of
____________ ("Payee"
or "Holder"), at the date of maturity set forth below, the
principal amount of
___________dollars ($_______), together with interest on the unpaid
principal
amount at the rate of ten percent (10%) per annum, and with the
principal
balance and all accrued interest being due and payable twelve (12)
months from
the final closing date of the Offering ("Offering") pursuant to
which this
Debenture is issued.
1. PAYMENTS OF INTEREST AND PRINCIPAL.
a. Interest. Maker shall pay interest to Payee on the unpaid
outstanding principal
balance owed to Payee hereunder at the
rate of ten percent (10%) per annum to be paid quarterly
commencing the quarter ended September 30, 2008, payable
within thirty (30) days of the end of the quarter. Interest
may be paid in cash or common stock at the option of the
Company. Common stock will be calculated at twenty-five cents
($0.25) in the event there is no public market for the common
stock. In the event a market exists for the common stock, it
will be calculated at the average closing price for the common
stock for the five (5) trading days preceding the interest
payment date. Interest not paid within thirty (30) days
following the end of each quarter shall cause the conversion
price of both the Debentures and the warrants to be issued in
connection herewith to be reduced by ten percent (10%) from
the current conversion price or exercise price per each such
occurrence;
b. Maturity. Maker shall have no duty or obligation to pay any
portion of the
outstanding principal amount owed hereunder,
except as hereinafter provided, twelve (12) months from the
final closing date of the Offering pursuant to which this
Debenture is issued ("Maturity"). At Maturity, all accrued
interest and outstanding principal shall be due and payable,
and shall be paid to Payee; and
c. Payments. All payments made hereunder shall be applied as
made first to the payment of interest then due, and the
balance of said payment shall be applied to the payment of the
principal sum.
2. PLACEMENT OF PAYMENT. So long as Payee shall hold this
Debenture,
all payments of principal and interest shall be made at the address
of Maker as
specified herein upon presentment of this Debenture.
3. PREPAYMENT. From and after the date hereof, Maker shall have
the
option to prepay all, but not in part, the principal balance,
together with
accrued interest on the principal amount, of this Debenture. There
is no
prepayment penalty.
4. REGISTRATION RIGHTS. Spare Backup, Inc. agrees to extend
registration rights for all of the shares of Common Stock received
as part of
this offering, and use its "best efforts" after the closing of this
offering and
any additional financings to file a registration statement. This
registration
statement shall cover the resale of the shares of all Common Stock
as well as
the underlying Investor Warrants. In the event that Spare Backup
completes the
raise of any additional monies prior to filing a registration
statement for the
securities in this offering with the Securities Exchange
Commission, Spare
Backup agrees to offer the same registration rights and securities
pricing to
the investor if either is more favorable to the investor.
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5. CONVERSION. The Payee may convert all or any amount of the
principal
amount and any accrued and unpaid interest on the Debenture into
the common
stock of the Maker at a conversion price of twenty-five cents
($0.25) per share
of common stock, subject to adjustment as hereinafter provided. In
the event the
outstanding common stock of the Maker is hereafter changed into or
exchanged for
a different number or kind of shares, or other securities of the
Maker, or of
another corporation, by reason of merger, consolidation, other
reorganization,
recapitalization, reclassification, combination of shares, stock
split-up,
reverse stock split, forward stock split, stock dividend, or
otherwise, the
aggregate number, price and kind of securities subject to the
conversion rights
of this Debenture shall be adjusted appropriately. In addition,
Payee may
convert into the proposed PIPE offering at the same terms as the
PIPE Investors
or be redeemed for cash at PAR plus accrued interest at the time of
closing of
the proposed PIPE offering. Terms on the PIPE have not yet been
finalized.
However, timing is expected in four to six weeks from the close of
the
Debenture.
6. SPECIAL RESET TERMS. In the event the Maker issues any shares of
its
common stock or issues any options, warrants, convertible preferred
stock or
convertible debt issuable or convertible into common stock of the
Maker at an
exercise or conversion price per share less than thirty cents
($0.25) per share
(or lesser price resulting from any subsequent reset price below
$0.25) within
twelve (12) months following the final closing date of the
Offering, then the
exercise price or conversion price, as the case may be, of this
Debenture shall
be reset to such lower price, but with no floor, notwithstanding
the provision
for adjustment provided for in Section 1.a hereof. This reset
provision shall
not apply with regard to stock options and warrants covered by a
Form S-8
Registration Statement for employees, directo
