EXHIBIT 4.18
FORM OF CONVERTIBLE SUBORDINATED
PROMISSORY DEBENTURE
________________, 2008 $___________
FOR VALUE RECEIVED, the undersigned, SPARE BACKUP, INC. ("Maker"),
having its principal business address at 00-000 Xxxx Xxxxxx Xxxxx, Xxxx Xxxxxx,
Xxxxxxxxxx 00000, hereby promises to pay to the order of ____________ ("Payee"
or "Holder"), at the date of maturity set forth below, the principal amount of
___________dollars ($_______), 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 Xxxxx 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, Xxxxx 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, directors, and consultants that are
unanimously approved by the Board of Directors. In addition, the reset provision
shall not apply with respect to any securities approved by a majority in
interest of the principle amount of the Debentures issued in this Offering. All
price information is subject to adjustment as provided in Section 5 above.
7. SUBORDINATION/REDEMPTION: The Debentures will be subordinated in
right of payment to all indebtedness to banks and other financial institutions.
In the event the Debenture is not converted or redeemed by the end of the term
and the Maker raises new debt which is senior to the Debenture then the Maker
will redeem the Debenture for 110% of Par plus accrued interest. If the
Debenture is not converted or redeemed by the end of the Term, the Issuer may
redeem the remaining principal of the Debenture for 110% of Par plus accrued
interest.
8. DEFAULT. The occurrence of any of the following shall constitute an
event of default ("Event of Default") provided such default is declared by the
holders of at least forty percent (40%) of the principal amount of the
Debentures issued in this Offering and then outstanding:
a. Failure to Pay. Maker fails to pay, when due, any of the
obligations provided for in this Debenture at their due date
or under any other debenture or obligations of Maker to the
Payee
b. Denominated Events. The occurrence of any event expressly
denominated as an Event of Default in this Debenture;
c. Failure to Perform. Maker fails to perform or observe any
material covenant, term or condition of this Debenture, or any
other debenture or obligation issued or owing in respect to
Payee and to be performed or observed by Maker, and such
failure continues unremedied for a period of two (2) days
after written or facsimile notice from Payee to Maker of such
failure;
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d. Petition By or Against Maker. There is filed by or against
Maker any petition or complaint with respect to its own
financial condition under any state or federal bankruptcy law
or any amendment thereto (including, without limitation, a
petition or reorganization, arrangement or extension of debts)
or under any other similar or insolvency laws providing for
the relief of debtors;
e. Appointment of Receiver. A receiver, trustee, conservator
or liquidator is appointed for Maker, or for all or a
substantial part of its assets, or Maker shall be adjudicated
bankrupt or in need of any relief provided to debtors by any
court; or
f. Material Misstatements. The written materials furnished
with respect to the Maker contain a material misstatement of a
material fact or omits to state a material fact relevant to
the Maker, its management, or the operations of the Maker.
9. REMEDIES.
a. Acceleration. Upon the occurrence of an Event of Default
and for so long as such default is continuing:
(i) The total amount of (a) of this Debenture
and all other sums owing to Payee which are
(i) then due and unpaid or (ii) thereafter
to become due and payable; and (b) interest
on the foregoing sums, at the rate of one
and one-half percent (1 1/2%) per month, but
not greater than the highest rate permitted
by law, from said occurrence until paid in
full (the "Default Amount") shall, at the
option of Payee, become immediately due and
payable without notice or demand; and
(ii) Payee may exercise any of the other remedies
provided under applicable laws.
10. CUMULATIVE REMEDIES; WAIVERS. No remedy referred to herein is
intended to be exclusive, but each shall be cumulative and in addition to any
other remedy referred to above or otherwise available to Payee at law or in
equity. No express or implied waiver by Xxxxx of any default or Event of Default
hereunder shall in any way be, or be construed to be, a waiver of any future or
subsequent default or Event of Default. The failure or delay of Payee in
exercising any rights granted it hereunder under any occurrence of any of the
contingencies set forth herein shall not constitute a waiver of any such right
upon the continuation or recurrence of any such contingencies or similar
contingencies, and any single or partial exercise of any particular right by
Payee shall not exhaust the same or constitute a waiver of any other right
provided herein.
11. COSTS AND EXPENSES. Maker shall be liable for all costs, charges
and expenses incurred by Xxxxx by reason of the occurrence of any Event of
Default or the exercise of Xxxxx's remedies with respect thereto.
12. NO MARSHALLING. Payee shall be under no obligation to proceed
against any or all of the collateral before proceeding directly against Maker.
Payee shall be under no obligation whatsoever to proceed first against any of
the Collateral before proceeding against any other of the Collateral. It is
expressly understood and agreed that all of the Collateral stands as equal
security for all obligations described above, and that Payee shall have the
right to proceed against any or all of the Collateral in any order, or
simultaneously, as in its sole discretion it shall determine. It is further
understood and agreed that Xxxxx shall have the right, as it, in its sole
discretion, shall determine to retain, sell or dispose of any or all of the
Collateral in any order or simultaneously.
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13. OTHER REMEDIES. The remedies granted to Payee herein upon an Event
of Default are not restrictive of any and all other rights and remedies of Payee
provided for by this Agreement, any of the relevant documents and applicable
law.
14. MISCELLANEOUS.
a. Waivers. No waiver of any term or condition of this
Debenture shall be construed to be a waiver of any succeeding
breach of the same term or condition. No failure or delay of
Payee to exercise any power hereunder, or it insists upon
strict compliance by Maker of any obligations hereunder, and
no custom or other practice at variance with the terms hereof
shall constitute a waiver of the right of Payee to demand
exact compliance with such terms.
b. Invalid Terms. In the event any provision contained in this
Debenture shall, for any reason, be held invalid, illegal or
unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provision of this
Debenture, and this Debenture shall be construed as if such
invalid, illegal or unenforceable provision had never been
contained herein.
c. Successors. This Debenture shall be binding upon Maker, its
legal representatives, successors and assigns, and inure to
the benefit of Payee, its legal representatives, successors
and assigns.
d. Controlling Law. This Debenture shall be read, construed
and governed in all respects in accordance with the laws of
the State of California.
e. Amendments. This Debenture may be amended only by an
instrument in writing and executed by the party against which
enforcement of the amendment is sought. The holders of in
excess of 50% of the Debentures then outstanding shall have
the right to amend, modify and make any changes in the terms
of the Debentures, which shall be binding on the remaining
balance of the principal amount of Debentures then
outstanding, except for those provisions hereof relating to
payment of principal and interest.
15. NOTICES. All notices, request, demands and other communications
required or permitted to be given hereunder shall be sufficiently given if
address to:
Maker: Spare Backup, Inc.
00-000 Xxxx Xxxxxx Xxxxx
Xxxx Xxxxxx, XX 00000
Payee: ____________________
____________________
posted in the U.S. Mail by certified or registered mail, return receipt
requested or by overnight mail, including appropriate receipts. Any party may
change said address by giving the other party hereto notice of such change of
address. Notice given as hereinabove prescribed shall be deemed given on the
date of its deposit in the U.S. Mail or with the overnight delivery service.
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16. HEADINGS. All section and subsection headings herein, wherever they
appear, are for convenience only and shall not affect the construction of any
terms herein.
IN WITNESS WHEREOF, the undersigned has caused this Debenture to be
executed by its duly authorized officer and its seal affixed hereto, as of the
day and year first above written.
SPARE BACKUP, INC.
By: _________________________
Xxxx Xxxxx, President/CEO
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