EXHIBIT 4.13
THIS DEBENTURE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE
OFFERED, SOLD OR OTHERWISE TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER THE ACT AND UNDER ANY SUCH APPLICABLE STATE LAWS.
FURTHERMORE, THIS DEBENTURE MAY BE OFFERED, SOLD OR TRANSFERRED ONLY IN
COMPLIANCE WITH THE CONDITIONS SPECIFIED IN THE SECURITIES PURCHASE AGREEMENT
HEREINAFTER REFERRED TO, A COMPLETE AND CORRECT COPY OF WHICH IS AVAILABLE FOR
INSPECTION AT THE PRINCIPAL OFFICE OF THE ISSUER HEREOF, AND WILL BE FURNISHED
WITHOUT CHARGE TO THE HOLDER OF THIS DEBENTURE UPON WRITTEN REQUEST.
SPARE BACKUP, INC.
SENIOR UNSECURED CONVERTIBLE
PROMISSORY DEBENTURE
DATE May 12, 2008 [$745,000]
FOR VALUE RECEIVED, the undersigned, SPARE BACKUP, INC. ("Spare Backup"
or the "Company"), having its principal business address at 00-000 Xxxx Xxxxxx
Xxxxx, Xxxx Xxxxxx, Xxxxxxxxxx 00000, hereby promises to pay to the order of
__________________, or its registered assigns (collectively, the "Holder"), at
the address set forth on the signature page of the Securities Purchase Agreement
(as defined below), or at such other place as the Holder of this Debenture shall
from time to time have designated to the Company in writing at the date of
maturity set forth below, the principal amount of ___________________________
dollars ($____________), together with interest on the unpaid principal amount
at the rate of ten percent (10%) per annum (the "Debenture"), and, subject to
Section 5 hereof, with the principal balance and all accrued interest being due
and payable three (3) months from the final closing date (the "Closing") of the
Offering (the "Offering") pursuant to which this Debenture is issued. This
Debenture is a senior unsecured convertible debenture of the Company issued
pursuant to the Securities Purchase Agreement dated as of May [12], 2008 among
the Company and the Purchasers, as defined therein (as from time to time in
effect, the "Securities Purchase Agreement"). Certain terms defined in the
Securities Purchase Agreement and not otherwise defined herein are used herein
as so defined.
1. PAYMENTS OF INTEREST AND PRINCIPAL.
a. Interest. Company shall pay interest to Holder on the unpaid
outstanding principal balance of the Debenture hereunder at the rate of
ten percent (10%) per annum to be paid quarterly with the first payment
commencing for the quarter ended June 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. In the event that the
Company elects to pay any interest payment date in shares of Company
common stock, the number of shares of common stock to be issued to each
Holder as such interest shall be determined by dividing the aggregate
amount of interest then payable to the Holder by the Market Price (as
defined below) as of the applicable interest payment date, and rounding
up to the nearest whole share. Residual interest will be paid in cash.
The term "Market Price" shall mean (i) thirty cents ($0.30) in the
event there is no public market for the common stock or (ii) the volume
weighted average price (as determined by using the `VAP' function on
Bloomberg "VWAP") for the common stock for the ten (10) trading days
preceding the interest payment date in the event a market exists for
the common stock. 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 issued in connection herewith to be reduced
by ten percent (10%) from the current conversion price or exercise
price per each such occurrence;
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b. Maturity. Company shall have no duty or obligation to pay any
portion of the outstanding principal amount owed hereunder during the
term of the Debenture which will run for three (3) months from the
Closing pursuant to which this Debenture is issued ("Maturity"). At
Maturity, the Company will pay the entire principal amount of this
Debenture then outstanding, together with all accrued and unpaid
interest thereon. If the Debentures have not converted or been repaid
by the Maturity date then the Debenture will be subject to the Default
Amortization, as defined in Section 5; 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. PREPAYMENT. From and after the date hereof until Maturity, Company
shall have the option to prepay all, but not in part, the remaining principal
balance of the Debenture. To prepay the Debenture the Company will pay the
Holder 110% of the face value of the remaining principal balance of the
Debenture plus any accrued and unpaid interest on the principal amount. Written
notice of each voluntary prepayment pursuant to this Section 2 shall be given
not fewer than ten (10) days prior to the prepayment date by mailing to each
Holder at such Holder's address on the books of the Company, by first class
certified mail, postage prepaid, return receipt requested, a notice of intention
to prepay, specifying the date of prepayment, the principal amount of this
Debenture to be prepaid on such date and the accrued and unpaid interest
applicable to such prepayment. The Company will not, and will not permit any of
its Subsidiaries or Affiliates to, purchase, redeem or otherwise acquire any
Debenture except upon the payment or prepayment thereof in accordance with the
terms hereof or pursuant to an offer made to all Holders.
3. REGISTRATION RIGHTS. The Company agrees to extend registration rights
for all of the shares of Common Stock received upon conversion of this Debenture
or exercise of the Warrant issued pursuant to the Securities Purchase Agreement,
and use its "best efforts" after the Closing 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 Warrants. In the event
that Spare Backup completes the raise of any additional monies prior to filing a
registration statement for the Common Stock received upon conversion of this
Debenture or exercise of the Warrant issued pursuant to the Securities Purchase
Agreement, with the Securities Exchange Commission, Spare Backup agrees to offer
the same registration rights and securities pricing to the Holder if either is
more favorable to the Holder.
4. CONVERSION. At any time after the Closing, the Holder may convert all or
any amount of the principal amount and any accrued and unpaid interest on the
Debenture into common stock of the Company at a conversion price of thirty cents
($0.30) per share of common stock (the "Initial Fixed Debenture Conversion
Price"), subject to adjustment as described in Section 1.a above and below. In
the event the outstanding common stock of the Company is hereafter changed into
or exchanged for a different number or kind of shares, or other securities of
the Company, 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 the
event the Company shall declare a distribution payable in securities of the
Company other than shares of common stock, securities of other entities,
securities evidencing indebtedness issued by the Company or other entities,
assets (excluding cash dividends) or options or rights, then, in each such case
for the purpose of this Section 4, upon conversion of this Debenture the Holder
of this Debenture shall be entitled to a proportionate share of any such
distribution as though such Holder were the holder of the number of shares of
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common stock into which this Debenture (or portion then being converted) is
convertible as of the record date fixed for the determination of the holders of
common stock entitled to receive such distribution. In addition, at the option
of the Holder, Holder may convert all or any amount of the principal amount of
the Debenture and any accrued and unpaid interest into the securities offered by
the Company in a subsequent financing of $5,000,000 or more completed by the
Company (the "Subsequent Financing") on the same terms and conditions as the
other investors in the Subsequent Financing or be redeemed for cash by the
Company at the face value of the Debenture plus accrued interest at the time of
closing of the Subsequent Financing.
5. DEFAULT AMORTIZATION. In the event the Debenture is not converted into
a Subsequent Financing because the Subsequent Financing has not closed within
the term of this Debenture, the Company will redeem 1/12th of the principal
amount of the outstanding Debentures every month beginning on August 1, 2008, at
a redemption price equal to the face value of the Debenture plus accrued and
unpaid interest in either cash or Company common stock. The Holders may make an
election on a monthly basis to receive the monthly redemption payment in cash or
Company common stock. If the Holder elects to be repaid in Company common stock
the redemption price will be equal to the lesser of the Initial Fixed Debenture
Conversion Price (as adjusted from time to time) or 90% of the 10 day VWAP
market price prior to the redemption date. Alternatively, beginning on August 1,
2008 Holders will have the right to convert the entire principal amount of the
Debenture plus accrued and unpaid interest into Company Common Stock at the
Initial Fixed Debenture Conversion Price (as adjusted from time to time) at any
time.
6. SPECIAL RESET TERMS. In the event the Company 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 Company at an
exercise or conversion price per share less than Initial Fixed Debenture
Conversion Price then in effect, within fifteen (15) months following the
Closing, then the exercise price or conversion price, as the case may be, of
this Debenture and Warrants shall be reset to such lower price, but with no
floor, notwithstanding the provision for adjustment provided for in Section 1a
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, this reset provision shall not apply with respect to the issuance of
any securities approved in writing by the Holders of more than a super-majority
(67%) interest of the principal amount of the Debentures.. All price information
is subject to adjustment as provided in Section 5 above.
7. SENIORITY. The Debentures will be senior in right of payment to all
existing indebtedness of the Company. In the event the Debenture is not
converted or redeemed prior to Maturity and the Company issues new debt which is
senior to the Debenture then the Company will immediately redeem the Debenture
for 110% of the face value of the remaining principal balance of the Debenture
plus accrued and unpaid interest. The Company agrees to not issue any senior
debt prior to Maturity unless it is a part of the Subsequent Financing.
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. The Company 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 the Company to the Holder
following two (2) days after written or facsimile notice from the
Holder to the Company
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b. Denominated Events. The occurrence of any event expressly
denominated as an Event of Default in this Debenture;
c. Failure to Perform. The Company fails to perform or observe any
material covenant, term or condition of this Debenture, the Warrants or
the Securities Purchase Agreement or any other debenture or obligation
issued or owing in respect to Holder and to be performed or observed by
the Company, and such failure continues unremedied for a period of two
(2) days after written or facsimile notice from the Holder to the
Company of such failure;
d. Petition By or Against the Company. There is filed by or against the
Company 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 the Company, or for all or a substantial
part of its assets, or the Company shall be adjudicated bankrupt or in
need of any relief provided to debtors by any court;
f. Material Misstatements. The written materials furnished with respect
to the Company contain a material misstatement of a material fact or
omits to state a material fact relevant to the Company, its management,
or the operations of the Company;
g. Breach of Representation. Any written representation or warranty of
or with respect to the Company made in connection with this Debenture
shall prove to have been false in any material respect on the date as
of which it was made without reference to whether such representation
or warranty was made with knowledge or without knowledge;
h. Reservation of Shares. The Company shall fail to keep reserved a
sufficient number of shares of common stock (or such other security as
the case may be) for issuance upon conversion of the Debentures or
shall fail to issue an amount of shares of common stock (or such other
security as the case may be) upon the conversion by the Holder; or
i. The Company sells all or a substantial portion of its assets or
mergers with or consolidates into any other corporation (other than a
merger of a wholly-owned subsidiary of the Company into the Company),
or dissolves or liquidates.
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 Holder 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 Holder, become
immediately due and payable without notice or demand; and
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(ii) Holder may exercise any of the other remedies provided under
applicable laws or in equity.
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 Holder at law or in equity.
No express or implied waiver by Holder 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 Holder 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
Holder shall not exhaust the same or constitute a waiver of any other right
provided herein.
11. COSTS AND EXPENSES. The Company shall be liable for all costs, charges
and expenses incurred by Holder by reason of the occurrence of any Event of
Default or the exercise of Holder's remedies with respect thereto.
12. NO MARSHALLING. Holder shall be under no obligation to proceed against
any or all of the collateral before proceeding directly against the Company.
Holder 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 Holder 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 Holder 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.
13. OTHER REMEDIES. The remedies granted to Holder herein upon an Event of
Default are not restrictive of any and all other rights and remedies of Holder
provided for by this Debenture, 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 Holder to exercise any power
hereunder, or it insists upon strict compliance by the Company of any
obligations hereunder, and no custom or other practice at variance with
the terms hereof shall constitute a waiver of the right of Holder 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 the Company, its
legal representatives, successors and assigns, and inure to the benefit
of Holder, its legal representatives, successors and assigns.
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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 67% of the principal
amount of 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:
Company: Spare Backup, Inc.
00-000 Xxxx Xxxxxx Xxxxx
Xxxx Xxxxxx, XX 00000
Holder: __________________________
__________________________
__________________________
__________________________
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.
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:
-------------------------
Cery Perle, President/CEO
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