Offering Price (2)

Memorandum No: ____________        

 

	Offering Price (2)	Commissions (4)	Proceeds to Company (5)
Per Unit	$1.50	--	$1.50
Minimum Purchase (20,000 Units	$30,000 (3)	--	$30,000
Total Maximum (1)	$3,000,000	--	$3,000,000

 

 

 

·	An automatic installation process that requires absolutely no user interaction

·	Simple file selection - Spare Backup scans the user's computer and has a number of pre selected file types and locations (Presets) which it backs up automatically, such as:

·	All contacts, email messages and attachments, address book, contacts, folders and contents, signature files from Microsoft Outlook

·	Microsoft Word, Microsoft Excel, Microsoft PowerPoint files, templates and settings from Microsoft Office

·	My Documents, My Music, My Pictures, Quicken, QuickBooks, Microsoft Money, Turbo Tax and Tax Cut

·	All desktop files and folders

·	The ability to manually include any files that are not within a present group

·	Simple, fast data recovery of individual files or the complete computer

·	Open file backup, giving the user the ability to back up while the file is still in use

·	Embedded reports which are automatically updated and available to users within the in Spare Backup client software

·	File revisions – Spare Backup provides the ability to select and restore from the last five revisions of a file included within the backup

·	Provides files security via file encryption using 256 Rijndael AES 256 block cipher with unique user encryption key “Spare Key”

·	Online file retrieval from an Internet connection anywhere in the world – Recovery is only possible when using your “Spare Key”

·	A secure decryption process. Our “Spare Key” management protects the process. The user is protected and able to recover all files that have been backed up in the event of a total system failure or loss of the computer

·	Secure Online transactions. Our web site displays the VeriSign/Starfield Technology high assurance certificates, which provide authenticity for all web-based transactions.

Ease-of-use - Spare Backup provides fast, easy and fully automated data protection. Users benefit from automated data file selection, which distinguishes user data files from operating system and application files. As a result, users do not have to remember where all of their data files are stored. Spare Backup allows users to quickly and easily retrieve either a single file or multiple past versions of a file, not just the most recently backed-up version.

Impenetrable Security and Protection of Corporate Data - Spare Backup ensures that all data is encrypted with advanced 256-bit encryption on the user's machine using a user provided "key" or password. The encryption we use for ensuring privacy is the 256 Rijndael AES, a block cypher adopted as an encryption standard by the U.S. Government. The data is protected in transit and communication via Secure Sockets Layer (SSL), a cryptographic protocol that provides secure communications over the public Internet.

SSL Support - SSL based protocol enhancements to address security parameters during: registration, upgrade, backup and retrieve. The data is encrypted a second time using SSL, or secure sockets layer, while it is being transmitted and a third time before it is stored on the RAID, or redundant array of independent disc, servers using a strong private key.

Spare Backup software comes with the both a monthly and annual service option and enables users to also back up to local storage devices with or without using the online service.

Our service offers vary depending on partnerships, in some cases, we offer new users a free 14-day trial, and other’s could be an allocation of space of 1 gigabyte. Spare Backup services cost $6.99 per month for up to 50 gigabytes of data storage bought directly from the Company, along with annual plans that are available.

Spare Switch® enables users to complete the transfer of personal files from an old personal computer (PC) to a new one via a high speed Internet connection. Spare Switch locates packs and transfers files securely without the need for transfer cables or other accessories. Spare Switch, designed for both individual and business use, ensures that not only the files transfer easily, but that they will look, feel and work on the new computer in the same manner with all the personal settings and layouts built into them. We launched Spare Switch in August 2005.

Spare Room® is designed to complement the Spare Backup® software. We are currently in the development and anticipate launching this product in the second quarter of fiscal year 2009. This is a first step to digital content management and cloud computing for Spare Backup users. This feature will be distributed and available to our active Spare backup users by downloading and installing the software which will be obtainable from our website.

The Spare Backup software easily and automatically backs up a user’s files from the user’s desktop to the Spare Backup’s cloud. Once files are stored securely in the cloud, the Spare Room application allows a user to take advantage of a wide range of sharing and social networking tools. The solution allows the user to get the most out of available tools and services on the Internet while providing the security of online backup.  Spare Backup is the start, cloud computing and services are the goal.

The first version of the Spare Room application will include the Photo Page where users can manage and share photos as well as photo processing and retouching. Future versions of Spare Room will include additional features beyond photo sharing to include Video, Contact Management, Synchronization, Mobile, and Calendar management. These features will be displayed on the Spare Room Dashboard allowing a user to easily navigate Spare Room and manage their digital data stored in the Spare cloud from a variety of devices.

 

 

Spare Mobile® was launched in the beginning of second quarter of fiscal 2009 in a limited beta form with a full version expected to launch in the second quarter of fiscal year 2009. For the initial phase of Spare Mobile, a user must first have an active Spare Backup account and have access to Spare Room®. The installation will be readily available to anyone from the Spare room and or the Spare Mobile® website. We are currently in the development stage for the last six months on this version along with Spare Room.

Spare Mobile will provide a user with the ability to backup data and settings from their phone to the Spare cloud without the need to connect the mobile device to a PC via a cable.

·	Backup will be performed via the users mobile network.

o	Mobile network usage charges may apply.

·	Backup will capture data stored both on the Mobile devices onboard memory as well as any add on memory devices such as a memory card.

·	Backup will capture all pertinent user data and configuration if feasible

·	A user will have the ability to configure the frequency that backups occur

·	The Spare Mobile software will detect files that should be backed up automatically

·	Users will have the ability to customize which files will be backed up.

·	A user will have the ability to recover a backed up file(s) to their mobile device

If a user also has a Spare Backup account, the user will have the ability to retrieve mobile files to their desktop PC.

 

Spare Mobile® User Interface

 

 

·	Spare Mobile will support the following Mobile device operating systems:

o	Windows Mobile

o

Java

o

RIM

o	Apples iPhone

o	Carry specific OS platforms

***NOTE: Due to differences in OS functionality the Spare Mobile application may differ slightly in appearance between each supported OS. The functionality however shall remain static

 

Spare Mobile will work in conjunction with a user’s Spare Backup and Spare Room account. Spare Room will provide an interface for a user to manage their mobile device and the files contained on their mobile device.

Spare Sync®. was developed in order to take advantage of the synchronization functionality, the user must first possess an active Spare Backup account with Spare Room. Synchronization will be an add-on product to a users standard Family Pack account. We are currently in the development stage for the last six months on this feature along with Spare Room and the Spare family of products.  Spare Sync is defined as the mirroring or synchronization of content across multiple machines. Spare Backup defines synchronization rules based on file types. A user who chooses to synchronize pictures will synchronize all pictures that exist on two machines. Photos on both machines will be replicated bet ween the two machines so that when the synchronization process is complete the same files will exist on both machines.

The user will configure their Synchronization preferences from within Spare Room. Each machine that is to be synchronized must have the Spare Backup client software installed and have an active connection to the Internet.

 

 

 

·	In store The Tech Guys Branded 1 year Subscription  of Online Backup

 

·	Inclusion within PCW product warranty - PC Performance Package UK

 

·	Online distribution through The Tech Guys (TTG’s) websites

 

 

The following graph represents the initial PCP/Curry’s launch, this show how easy the start up is which is now able to be modeled across the launch of other retailers.

* Product is sold for 29.99 (GBP)

 

 

 

 

·	Co – Branded solution

 

·	Included as an icon on the desktop within all laptops sold by Car Phone Warehouse.

 

 

 

·	Private Label branding on Viao Computers– My Memory Center

 

·	Corporate Sony with Enterprise solution

 

·	Data migration and Backup offered as a part of the Out Of Box Experience (OOBE)

 

 

Title of Security:	Spare Backup Inc., Inc. Common Stock and warrants to purchase Common Stock
Type of Security:	Units of the Company’s securities (the “Units”), each Unit consisting of (9)nine shares of the Company’s Common Stock (the “Shares”) and (5)five, two-year warrants, each to purchase one share of the Company’s Common Stock exercisable at $0.20 per share (the “Investor Warrants”).
Issue Price:	$1.50 per Unit.
Minimum Subscription:	20,000 Units for $30,000, subject to the right of the Company to accept a lesser amount of Units.
Investors:	Accredited Investors only as that term is defined in Rule 501(a) under the Securities Act of 1933, as amended (collectively the “Investors” or individually an “Investor”).
Use of Proceeds:	Payment of debt, taxes, general corporate purposes, infrastructure, marketing, staff, business development, and general working capital.
Aggregate Amount:	Up to a maximum of $3,000,000 (the “Maximum Offering”). In the event this Offering is fully subscribed, the Company has the right to increase the Maximum Offering to $5,000,000.
Shares Outstanding:	Prior to this Offering, there are 116,124,326 shares of Common Stock outstanding as of August 12, 2009 and 50,000 shares of newly created Series A Preferred stock.
Investor Warrants:	Included in each Unit are five (5) two-year warrants, each to purchase one share of Common Stock (“Warrant Shares”) exercisable at $0.20 per share and callable by the Company the first date after the 10 trading day average price of the Common Stock exceeds $0.50 per share (the “Investor Warrants”).
Commissions:	The Company reserves the right to pay a sales commission of 8% and a due diligence allowance of 1% and a non-accountable expense allowance of 1% to broker-dealers registered with FINRA.  Such broker-dealers will also receive (i) warrants to purchase the number of shares of Common Stock equal to 10% of the number of Shares sold by the Company and issuable at each closing (the “Placement Agent Warrants”); (ii) a cash commission of 10% of the total funds received by the Company upon any exercise of the Investor Warrants; and (iii) warrants to purchase the number of shares of Common Stock of the Company equal to 10% of the total number of shares of Common Stock issued by the Company upon exercise of Investor Warrants (the “Exercise Warrants”).  The Placement Agent Warrants and the Exercise Warrants shall have an exercise price of $0.20 per Share and shall expire two years after the date of issuance.  Such broker-dealers may allocate its Placement Agent Warrants and Exercise Warrants among the members of its selling group and its brokers in its sole discretion.  The Company also reserves the right to pay finders fees for identifying investors in appropriate circumstances.  See “Plan of Distribution.”

An investment in our common stock involves a significant degree of risk. You should not invest in our common stock unless you can afford to lose your entire investment. You should consider carefully the following risk factors and other information in this annual report before deciding to invest in our common stock. If any of the following risks and uncertainties develops into actual events, our business, financial condition or results of operations could be materially adversely affected and you could lose your entire investment in our company.

WE HAVE A HISTORY OF LOSSES AND AN ACCUMULATED DEFICIT. WE ANTICIPATE CONTINUING LOSSES MAY RESULT IN SIGNIFICANT LIQUIDITY AND CASH FLOW PROBLEMS. THE REPORT ON OUR FINANCIAL STATEMENTS FOR FISCAL 2008 CONTAINS AN EXPLANATORY PARAGRAPH REGARDING OUR ABILITY TO CONTINUE AS A GOING CONCERN.

Our net losses for the fiscal years ended December 31, 2008 and 2007 were $15,132,558 and $26,084,897, respectively. We have never generated sufficient revenues to fund our ongoing operations. Our operating losses for fiscal 2008 and fiscal 2007 were $10,625,232 and $18,765,117, respectively, and these losses are primarily attributable to our sales, general and administrative expense. The report of our independent registered public accounting firm on our financial statements for the year ended December 31, 2008 contains an explanatory paragraph regarding our ability to continue as a going concern based upon our net losses, cash used in operations and working capital deficit.  Our ability to continue as a going concern is dependent upon our ability to raise additional capital as described below.  T he financial statements included in this annual report do not include any adjustments to reflect future adverse effects on the recoverability and classification of assets or amounts and classification of liabilities that may result if we are not able to continue as a going concern.

During 2008 approximately 77% of our net revenues were derived by sales through our relationship with DSG International.  While we are materially dependent upon the continued effort of that company to sell our products, we have no control direct control over the efforts of its sales force on our behalf.  A reduction in the revenues generated through our relationship with DSG International until such time as we broaden our distribution base to remove this dependence, assuming we are successful in those efforts, will materially adversely affect our results of operations in future periods.  The Company is currently in negotiations with DSG regarding revisions to our agreement with them, and management believes that unless suitable terms can be negotiated, our relationship will terminate.
60; While the Company is in negotiations with other companies, we can provide no assurances that any agreements can be negotiated which will offset the loss of revenues attributable to our agreement with DSG.

While our operating expenses have decreased approximately 40% for fiscal 2008 over fiscal 2007, we will need to significantly increase our revenues to fund these costs.  At December 31, 2008 we had approximately $19,000 of cash on hand and a working capital deficit of approximately $6.86 million. We have raised subsequent to December 31, 2008, approximately $50,000 from the sale of our common stock, and borrowed an aggregate of $803,000 under an 18-month note. The proceeds are being used for working capital purposes. However, our current working capital is not sufficient to pay our operating expenses, our obligations as they become due or certain tax liabilities nor is our working capital sufficient to fund any expansion of our company

While we are constantly evaluating our cash needs and existing burn rate in order to make appropriate adjustments in operating expenses, we need to raise additional debt or equity capital to provide funding for ongoing and future operations and to satisfy our obligations as they become due.  While we have historically been able to raise capital, the current capital markets are very challenging and there are no assurances that we will be successful in obtaining additional capital, or that such capital will be available on terms acceptable to us. Our continued existence is dependent upon, among other things, our ability to raise capital and to market and sell our products successfully. If we are unable to raise capital as needed, it is possible that we would be required to cease operations in which event you would lose your entire investment in our company.

WE CANNOT PREDICT OUR FUTURE REVENUES OR WHETHER OUR PRODUCTS WILL BE ACCEPTED. IF THE MARKETS FOR OUR PRODUCTS AND SERVICES DO NOT DEVELOP, OUR FUTURE RESULTS OF OPERATIONS WILL BE ADVERSELY AFFECTED.

Net revenues from the sales of our Spare Backup line of products have been limited and insufficient to fund our ongoing operations. We reported net revenues of $1,381,443 and $260,350, respectively, for the fiscal years ended December 31, 2008 and 2007. While our net revenues significantly increased for fiscal 2008 over fiscal 2007, our net revenues will need to significantly increase if we are to provide cash to fund our operating expenses. We cannot guarantee either that the demand for our Spare Backup line of software products will develop, that such demand will be sustainable or that we will ever effectively compete in our market segment. In addition, we cannot predict what impact, if any; the reduction in discretionary spending will have on future sales of our products.  If we are unable to generate an y significant net revenues from our products and services our business, operating results, and financial condition in future periods will be materially and adversely affected and we may not be able to continue our business as presently operated, if at all.

In addition to funding our operating expenses, we need capital to pay various debt obligations totaling approximately $3,291,000 which are either current past due or which are due in the current fiscal year. Currently, there are $170,000 principal amount of the 10% notes which have already become due in September 2008, $436,000 principal amount of the 10% notes which due dates have been extended between August 2009 and September 2009, the remaining $185,000 of the 10% notes and $2,500,000 of the 8% notes of short term debts becomes due between February 2009 to August 2009. The Company has not redeemed the required monthly redemption beginning in September 2008 in connection with the 10% Convertible Senior Unsecured promissory notes amounting to $195,000. Additionally, there are $560,000 principal amount of the 8% lon g-term notes which becomes due between February 2010 and July 2010. Under the terms of various of the short-term notes in the aggregate principal amount of $2,500,000, we have the right to force a conversion of those obligations into equity providing that we have registered the shares of common stock issuable upon such conversions prior to the maturity dates of the notes. We have not filed the requisite registration statement and unless we are successful in extending the maturity dates of these obligations it is not likely we will be able to avail our company of this opportunity before the notes become due. The existence of these obligations provide additional challenges to us in our efforts to raise capital to fund our operations.  If we are unable to restructure these notes and we are unable to raise the capital necessary to satisfy the obligations, it is possible we will be forced to cease operations.

 Historically, our operations have been financed primarily through the issuance of equity and debt. Because we have a history of losses and have never generated sufficient revenue to fund our ongoing operations, we are dependent on our continued ability to raise working capital through the issuance of equity or debt to fund our present operations. Because our operating expenses have continued to grow and we do not know if our net revenues will grow at a pace sufficient to fund our current operations, the continuation of our operations and any future growth will depend upon our ability to raise additional capital, possibly through the issuance of long-term or short-term indebtedness or the issuance of our equity securities in private or public transactions. While the actual amount of our future capital requiremen ts, however, depend on a number of factors, including our ability to grow our net revenues and manage our business, it is likely we will need to raise a significant amount of capital during fiscal 2009 if we are to continue our current operations and satisfy our obligations as they become due. In addition to the challenges facing the capital markets today which make raising equity capital much more difficult for a company such as our than in prior years, the existence of a number of short term notes which are either currently past due or which will become due in 2009, together with the pending litigation facing our company and the piggy-back registration rights we have granted a number of investors serve to also make it harder to raise the capital we need. There can be no assurance that acceptable financing can be obtained on suitable terms, if at all. If we are unable to raise additional working capital as needed, our ability to continue our current business will be adversely affected and may be forced to c urtail some or all of our operations.

At July 31, 2009, we had $1,301,000 of accrued but unpaid payroll taxes due the federal government and since that date through March 15, 2009 the amount has increased to $903,000.  We do not have the funds necessary to satisfy this obligation.  If we are unable to raise the funds necessary, it is possible that we will be subject to significant additional fines and penalties, Mr. Perle, our President, could be personally subject to a 100% penalty on the amount of unpaid taxes and the government could file liens against our company and our bank accounts until such time as the amounts have been paid.

The pricing model of our products and services may be lower than expected as a result of competitive pricing pressures, promotional programs and customers who negotiate price reductions in exchange for longer term purchase commitments or otherwise. Our pricing model depends on the duration of the agreement, the specific requirements of the order, purchase volumes, the sales and service support and other contractual agreements. We expect to experience pricing pressure and anticipate that the average selling prices and gross margins for our products may decrease over product life cycles. We may not be successful in developing and introducing on a timely basis new products with enhanced features and services that can be sold at higher gross margins.

We are currently a defendant in five separate lawsuits in which the plaintiffs are seeking approximately $900,000 together with attorney’s fees, costs and prejudgment interest.  We are also incurring additional legal fees in our efforts to defend these actions.  While we believe our defenses are meritorious in each of these cases, should we not prevail in one or more of the actions we could be forced to pay significant amounts which, given our current cash position and need for working capital, could materially adversely affect our ability to continue as a going concern.

As of March 25, 2009 the following securities which are convertible or exercisable into shares of our common stock were outstanding:

·	common stock purchase warrants to purchase a total of 46,466,879 shares of our common stock at prices ranging between $0.20 to $1.30 per share;

·	21,468,750 shares of our common stock issuable upon the possible conversion of the outstanding $4,344,000 principal amount 8% and 10% convertible promissory notes due between September 2008 and July 2010, and

·	21,456,930 shares of our common stock issuable upon exercise of outstanding options with exercise prices ranging from $0.001 to $1.75.

The exercise of these warrants and the conversion of the notes may materially adversely affect the market price of our common stock and will have a dilutive effect on our existing stockholders.

Our quarterly operating results have fluctuated in the past and we expect our net revenues and operating results may vary significantly from quarter to quarter due to a number of factors, many of which are beyond our control, including:

·	the announcement or introduction of new services and products by us and our competitors;

·	our ability to upgrade and develop our products in a timely and effective manner;

·	our ability to retain existing customers and attract new customers at a steady rate, and maintain customer satisfaction;

·	the amount and timing of operating costs and capital expenditures relating to expansion of our business and operations;

·	government regulation; and

·	general economic conditions and economic conditions specific to development and marketing of software products, the market acceptance of new products offered by us, our competitors and potential competitors.

Our limited operating history and unproven business model further contribute to the difficulty of making meaningful quarterly comparisons. Our current and future levels of expenditures are based primarily on our growth plans and estimates of expected future net revenues. Such expenditures are primarily fixed in the short term and our sales cycle can be lengthy. Accordingly, we may not be able to adjust spending or generate new revenue sources timely to compensate for any shortfall in net revenues.  If our operating results fall below the expectations of investors, our stock price will likely decline significantly.

We have incurred net losses quarterly from inception through December 31, 2008, and at December 31, 2008 we had an accumulated deficit of approximately $89 million. We expect to continue to incur net losses for the foreseeable future absent a significant increase in our revenues, of which there are no assurances. Accordingly, our ability to operate our business and implement our business strategy may be hampered by negative cash flows in the future, and the value of our stock may decline as a result. Our capital requirements may vary materially from those currently planned if, for example, we incur unforeseen capital expenditures, unforeseen operating expenses or investments to maintain our competitive position. If this is the case, we may have to delay or abandon some or all of our development plans or otherwise for ego market opportunities. We will need to generate significant additional net revenues to be profitable in the future and we may not generate sufficient net revenues to be profitable on either a quarterly or annual basis in the future.

To address the risks and uncertainties facing our business strategy, we must, among other things:

·	Achieve broad customer adoption and acceptance of our products and services;

·	Successfully raise additional capital in the future;

·	Successfully integrate, leverage and expand our product distribution;

·	Successfully scale our current operations;

·	Implement and execute our business and marketing strategies;

·	Address intellectual property rights issues that affect our business;

·	Develop and maintain strategic relationships to enhance the and marketing of our existing and new products and services; and

·	Respond to competitive developments in the software industry.

 

 

We might not be successful in achieving any or all of these business objectives in a cost-effective manner, if at all, and the failure to achieve these could have a serious adverse impact on our business, results of operations and financial position.  Each of these objectives may require significant additional expenditures on our part. Even if we ultimately do achieve profitability, we may not be able to sustain or increase profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis.

Recent Federal legislation, including the Sarbanes-Oxley Act of 2002, has resulted in the adoption of various corporate governance measures designed to promote the integrity of the corporate management and the securities markets. Some of these measures have been adopted in response to legal requirements. Others have been adopted by companies in response to the requirements of national securities exchanges, such as the NYSE or The Nasdaq Stock Market, on which their securities are listed. Among the corporate governance measures that are required under the rules of national securities exchanges are those that address board of directors' independence, audit committee oversight, and the adoption of a code of ethics. Although we have adopted a Code of Ethics, we have not yet adopted any of these other corporate governance measures and, since our securities are not yet listed on a national securities exchange, we are not required to do so. We have not adopted corporate governance measures such as an audit or other independent committees of our board of directors as we presently have only two independent directors. If we expand our board membership in future periods to include additional independent directors, we may seek to establish an audit and other committees of our board of directors. It is possible that if we were to adopt some or all of these corporate governance measures, stockholders would benefit from somewhat greater assurances that internal corporate decisions were being made by disinterested directors and that policies had been implemented to define responsible conduct. For example, in the absence of audit, nominating and compensation committees comprised of at least a majority of independent directors, decisions concerning matters such as compensation packages to our senior officers and recommendations for direc tor nominees may be made by a majority of directors who have an interest in the outcome of the matters being decided. Prospective investors should bear in mind our current lack of corporate governance measures in formulating their investment decisions.

Our intellectual property is critical to our business, and we seek to protect our intellectual property through copyrights, trademarks, patents, trade secrets, confidentiality provisions in our customer, supplier, potential investors, and strategic relationship agreements, nondisclosure agreements with third parties, and invention assignment agreements with our employees and contractors. We cannot assure you that measures we take to protect our intellectual property will be successful or that third parties will not develop alternative solutions that do not infringe upon our intellectual property.

 

In addition, we could be subject to intellectual property infringement claims by others. Claims against us, and any resultant litigation, should it occur in regard to any of our services and applications, could subject us to significant liability for damages including treble damages for willful infringement. In addition, even if we prevail, litigation could be time-consuming and expensive to defend and could result in the diversion of our time and attention. Any claims from third parties may also result in limitations on our ability to use the intellectual property subject to these claims. Further, we plan to offer our services and applications to customers worldwide including customers in foreign countries that may offer less protection for our intellectual property than the United States. Our failure to protect aga inst misappropriation of our intellectual property, or claims that we are infringing the intellectual property of third parties could have a negative effect on our business, revenues, financial condition and results of operations.

We face intense and increasing competition in the web-base backup solutions market. If we do not compete effectively or if we experience reduced market share from increased competition, our business will be harmed. In addition, the more successful we are in the emerging market for web-based storage solutions, the more competitors are likely to emerge. We believe that the principal competitive factors in our market include:

·	Service functionality, quality and performance;

·	Ease of use, reliability and security of services;

·	Establish a significant base of customers and distribution partners;

·	Ability to introduce new services to the market in a timely manner;

·	Customer service and support; and

·

Pricing.

Our primary competitors are various Internet-based backup providers broadcasters, such as Connected.com, Novastar, Livevault, firstbackup.com, Carbonate, EMC/Mozy and Norton 360 a product of Symantac. These companies provide services similar to ours and each have to various degrees a market presence. We also compete with providers of traditional backup technologies, such as EMC and VERITAS along with CommVault Systems.

Substantially all of our competitors may have more capital, longer operating histories, greater brand recognition, larger customer bases and significantly greater financial, technical and marketing resources than we do. These competitors may also engage in more extensive development of their technologies, adopt more aggressive pricing policies and establish more comprehensive marketing and advertising campaigns than we can. Our competitors may develop products and service offerings that we do not offer or that are more sophisticated or more cost effective than our own. For these and other reasons, our competitors' products and services may achieve greater acceptance in the marketplace than our own, limiting our ability to gain market share and customer loyalty and to generate sufficient net revenues to achieve a prof itable level of operations. Our failure to adequately address any of the above factors could harm our business and operating results.

Provisions of our certificate of incorporation and bylaws may be deemed to have anti-takeover effects, which include when and by whom special meetings of our stockholders may be called, and may delay, defer or prevent a takeover attempt. In addition, certain provisions of Delaware law also may be deemed to have certain anti-takeover effects which include that control of shares acquired in excess of certain specified thresholds will not possess any voting rights unless these voting rights are approved by a majority of a corporation's disinterested stockholders.

In addition, our certificate of incorporation authorizes the issuance of up to 5,000,000 shares of preferred stock with such rights and preferences as may be determined by our board of directors. Our board of directors may, without stockholder approval, issue preferred stock with dividends, liquidation, conversion or voting rights that could adversely affect the voting power or other rights of our common stockholders. In January 2008 we created a series of 50,000 shares of Series A Preferred Stock which carries super voting rights of 400 votes per share which were issued to our CEO as additional compensation. Prior to the issuance of the shares of Series A Preferred Stock to Mr. Perle he controlled the vote of approximately 10% of our outstanding voting securities.

As a result of the issuance of these securities, Mr. Perle now controls the vote of approximately 22.5% of our outstanding voting securities.  This action was approved by our Board of Directors of which Mr. Perle is a member in accordance with the provisions of our certificate of incorporation.

OUR COMMON STOCK IS CURRENTLY QUOTED ON THE OTCBB, BUT TRADING IN OUR STOCK IS LIMITED. BECAUSE OUR STOCK CURRENTLY TRADES BELOW $5.00 PER SHARE, AND IS QUOTED ON THE OTC BULLETIN BOARD, OUR STOCK IS CONSIDERED A "PENNY STOCK" WHICH CAN ADVERSELY EFFECT ITS LIQUIDITY.

The market for our common stock is extremely limited and there are no assurances an active market for our common stock will ever develop. Accordingly, purchasers of our common stock cannot be assured any liquidity in their investment. In addition, the trading price of our common stock is currently below $5.00 per share and we do not anticipate that it will be above $5.00 per share in the foreseeable future. Because the trading price of our common stock is less than $5.00 per share, our common stock is considered a "penny stock," and trading in our common stock is subject to the requirements of Rule 15g-9 under the Securities Exchange Act of 1934. Under this rule, broker/dealers who recommend low-priced securities to persons other than established customers and accredited investors must satisfy special sales practice requirements. SEC regulations also require additional disclosure in connection with any trades involving a "penny stock," including the delivery, prior to any penny stock transaction, of a disclosure schedule explaining the penny stock market and its associated risks. These requirements severely limit the liquidity of our securities in the secondary market because few broker or dealers are likely to undertake these compliance activities.

Use		Estimated Amount
Capital Equipment		$	65,000
Pay down Taxes and Debt		$	1,400,000
Additional Licensing		$	10,000
Legal/Accounting		$	25,000
Working Capital		$	1,200,000
Total		$	2,700,000

Our certificate of incorporation authorizes the issuance of up to 5,000,000 shares of preferred stock with such rights and preferences as may be determined by our board of directors. Our board of directors may, without stockholder approval, issue preferred stock with dividends, liquidation, conversion or voting rights that could adversely affect the voting power or other rights of our common stockholders. In January 2008 we created a series of 50,000 shares of Series A Preferred Stock which carries super voting rights of 400 votes per share which were issued to our CEO as additional compensation. Prior to the issuance of the shares of Series A Preferred Stock to Mr. Perle he controlled the vote of approximately 10% of our outstanding voting securities.

As a result of the issuance of these securities, Mr. Perle now controls the vote of approximately 22.5% of our outstanding voting securities. This action was approved by our Board of Directors of which Mr. Perle is a member in accordance with the provisions of our certificate of incorporation.

 

 

 

 

 

 

Date of Issuance: _______________ 2009

Warrant to Purchase An Aggregate of

_______________ shares of Common Stock

Warrant No. 2009-_________

FOR VALUE RECEIVED, Spare Backup, Inc., a Delaware corporation (the “Company”), promises to issue in the name of, and sell and deliver to ___________________ (the "Holder") a certificate or certificates for an aggregate of _____________________ (____________________) total shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”), upon payment by the Holder of $0.20 per share of the total underlying shares (the “Exercise Price”), with the Exercise Price being subject to adjustment in the circumstances set forth below.

1.

Exercise of Warrant

(A)           Exercise Period.  The Holder may exercise this Warrant, in whole or in part (but not as to fractional shares), at any time and from time to time commencing on the date hereof and ending at 5:00 p.m., Eastern Time, on the second (2nd) anniversary of the date hereof (the “Exercise Period”).

(B)           Exercise Procedure.

(i)           This Warrant will be deemed to have been exercised at such time as the Company has received all of the following items (the “Exercise Date”):

(a)           a completed Exercise Agreement, in the form attached hereto as Exhibit C, executed by the Holder (the “Purchaser”); and

(b)           a certified check or other immediately available funds payable to the Company in an amount equal to the sum of the product of the Exercise Price multiplied by the number of shares of Common Stock being purchased upon such exercise.

(ii)           Certificates for the shares of Common Stock purchased upon exercise of this Warrant will be delivered by the Company to the Purchaser within ten (10) business days after the Exercise Date.  Unless this Warrant has expired or all of the purchase rights represented hereby have been exercised, the Company will prepare a new Warrant representing the rights formerly represented by this Warrant that have not expired or been exercised.  The Company will, within such ten (10) day period, deliver such new Warrant to the Holder at the address set forth in this Warrant.

(iii)           The shares of Common Stock issuable upon the exercise of this Warrant will be deemed to have been transferred to the Purchaser on the Exercise Date, and the Purchaser will be deemed for all purposes to have become the record holder of such Common Stock on the Exercise Date.

(iv)           The issuance of certificates for shares of Common Stock upon the exercise of this Warrant will be made without charge to the Purchaser for any issuance tax in respect thereof or any other cost incurred by the Company in connection with such exercise and related transfer of the shares; provided, however, 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 certificate or instrument in a name other than that of the Holder of this Warrant, and that the Company shall not be required to issue or deliver any such certificate or instrument unless and until the person or persons requiring the issue 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.

(v)           Unless the Company shall have registered the shares of Common Stock underlying this Warrant, the shares of Common Stock issuable upon the exercise of this Warrant will be “restricted securities” as that term is defined in the Securities Act of 1933. The Company may insert the following or similar legend on the face of the certificates evidencing shares of Common Stock if required in compliance with state securities laws:

"These securities have not been registered under any state securities laws and may not be sold or otherwise transferred­ or disposed of except pursuant to an effective registration statement under any applicable state securities laws, or an opinion of counsel satisfactory to counsel to the Company that an exemption from registration under any applicable state securities laws is available."

 

(C)           Fractional Shares.  The Company shall not be required to issue fractions of shares of Common Stock on the exercise of this Warrant.  The Company shall not be obligated to issue any fractional share interests or fractional warrant interests upon the exercise of this Warrant, nor shall it be obligated to issue scrip or pay cash in lieu of fractional interests, provided, however, that if a holder exercises all the Warrants held of record by such holder, the Company shall at its option (i) eliminate the fractional interests by rounding any fraction up to the nearest whole number of shares or (ii) within 30 days after the Exercise Date, deliver to the Purchaser a check payable to the Purchaser, in lieu of such fractional share, in an amount equal to the value of such fractional share as determined by the closing price of the Company’s Common Stock as reported on the principal exchange on which the Company’s Common Stock is then traded, as of the close of business on the Exercise Date.

2.           Effect of Reorganization, Reclassification, Consolidation, Merger or Sale

(A)           Recapitalization or Reclassification of Common Stock.  In case the Company shall at any time prior to the satisfaction of the note underlying this Warrant, or the Exercise of this Warrant, or the expiration of the Exercise Period, whichever first occurs, effect a recapitalization or reclassification of such character that its Common Stock shall be changed into or become exchangeable for a larger or smaller number of shares, then, upon the effective date thereof, the number of shares of Common Stock that the Holder of this Warrant shall be entitled to purchase upon exercise hereof shall be increased or decreased, as the case may be, in direct proportion to the increase or dec rease in such number of shares of Common Stock by reason of such recapitalization or reclassification, and the Exercise Price of such recapitalized or reclassified Common Stock shall, in the case of an increase in the number of shares, be proportionately decreased and, in  the  case  of  a  decrease  in  the  number  of  shares,  be proportionately increased.

(B)           Consolidation, Merger or Sale.  In case the Company shall at any time prior to the satisfaction of the note underlying this Warrant, or the exercise of this Warrant, or the expiration of the Exercise Period, whichever first occurs, consolidate or merge with any other corporation (unless the Company shall be the surviving entity) or transfer all or substantially all of its assets to any other corporation preparatory to a dissolution, then the Company shall, as a condition precedent to such transaction, cause effective provision to be made so that the Holder of this Warrant, upon the exercise thereof after the effective date of such transaction, shall be entitled to receive th e kind and amount of shares, evidences of indebtedness, and/or other property receivable on such transaction by a holder of the number of shares of Common Stock as to which the Warrant was exercisable immediately prior to such transaction (without giving effect to any restriction upon such exercise); and, in any such case, appropriate provision shall be made with respect to the rights and interests of the Holder hereof to the effect that the provisions of this Warrant shall thereafter be applicable (as nearly as may be practicable) with respect to any shares, evidences of indebtedness, or other securities or assets thereafter deliverable upon exercise of this Warrant.

 

(C)           Notice of Adjustment.  Whenever the number of shares of Common Stock purchasable upon exercise of this Warrant shall be adjusted as provided herein, the Company shall file with its corporate records a certificate of its Chief Financial Officer setting forth the computation and the adjusted number of shares of Common Stock purchasable hereunder resulting from such adjustments, and a copy of such certificate shall be mailed to the Holder.  Any such certificate or letter shall be conclusive evidence as to the correctness of the adjustment or adjustments referred to therein and shall be available for inspection by the holders of the Warrants on any day during normal bu siness hours.

3.           Reservation of Common Stock.  The Company will at all time reserve and keep available such number of shares of Common Stock as will be sufficient to permit the exercise in full of this Warrant.  Upon exercise of this Warrant pursuant to its terms, the Holder will acquire fully paid and non-assessable ownership rights of the Common Stock, free and clear of any liens, claims or encumbrances except as otherwise provided herein.

4.           No Shareholder Rights or Obligations.  This Warrant will not entitle the Holder hereof to any voting rights or other rights as a shareholder of the Company.  Until the shares of Common Stock issuable upon the exercise of this Warrant are recorded as issued on the books and records of the Company’s transfer agent, the Holder shall not be entitled to any voting rights or other rights as a shareholder; provided, however, the Company uses its best efforts to ensure that, upon receipt of the Exercise Agreement and payment of the Exercise Price, the appropriate documentation necessary to effectuate the exercise of the Warrant and the issuance of the Common Stock is accomplished as expeditiously as possible.  No provision of this Warrant, in the absence of affirmative action by the Holder to purchase Common Stock, and no enumeration in this Warrant of the rights or privileges of the Holder, will give rise to any obligation of such Holder for the Exercise Price or as a stockholder of the Company.

 

6.           Transferability.  Subject to the terms hereof, this Warrant and all rights hereunder are transferable, in whole or in part, upon surrender of this Warrant with a properly executed Assignment in the form of Exhibit 2 hereto at the principal offices of the Company.  This Warrant and the underlying shares of Common Stock may not be offered, sold or transferred except in compliance with the Act, and any applicable state securities laws, and then only against receipt of an agreement of the person to whom such offer or sale or transfer is made to comply with the provisions of this Warrant with respect to any resale or other disposition of such securities; provided that no such agreement shall be required from any person purchasing this Warrant or the underlying shares of Common Stock pursuant to a registration statement effective under the Act.  The Holder of this Warrant agrees that, prior to the disposition of any security purchased on the exercise hereof other than pursuant to a registration statement then effective under the Act, or any similar statute then in effect, the Holder shall give written notice to the Company, expressing his intention as to such disposition.  Upon receiving such notice, the Company shall present a copy thereof to its securities counsel.  If, in the sole opinion of such counsel, which such opinion shall not be unreasonably withheld, the proposed disposition does not require registration of such security under the Act, or any similar statute then in effect, the Company shall, as promptly as practicable, notify the Holder of such opinion, whereupon the Holder shall be entitled to dispose of such security in accordance with the terms of the notice delivered by the Holder to the Company.

7.      Miscellaneous.

(A)           Notices.  Any notices, requests or consents hereunder shall be deemed given, and any instruments delivered, two days after they have been mailed by first class mail, postage prepaid, or upon receipt if delivered personally or by facsimile transmission, as follows:

If to the Company:                               Spare Backup, Inc.

72-757 Fred Waring Drive

Palm Desert, California 92260

Attn: Cery Perle, President/CEO

If to the Holder:                                    To the address and/or facsimile of

Holder as recorded in the records

of the Company.

except that any of the foregoing may from time to time by written notice to the other designate another address which shall thereupon become its effective address for the purposes of this paragraph.

(B)           Entire Agreement.  This Warrant, including the exhibits and documents referred to herein which are a part hereof, contain the entire understanding of the parties hereto with respect to the subject matter and may be amended only by a written instrument executed by the parties hereto or their successors or assigns.  Any paragraph headings contained in this Warrant are for reference purposes only and shall not affect in any way the meaning or interpretation of this Warrant.

(C)           Governing Law. This Warrant is governed by, interpreted under and construed in all respects in accordance with the substantive laws of the State of California, without regard to the conflicts of law provision thereof, and irrespective of the place of domicile or resident of the party.  In the event of a controversy arising out of the interpretation, construction, performance or breach of this Warrant, the parties hereby agree and consent to the jurisdiction and venue of the Courts of the State of California, or the United States District Court for the Southern District of California; and further agree and consent that personal service of process in any such action or precedi ng outside the State of California shall be tantamount to service in person in California.

 

 

IN WITNESS WHEREOF, this Warrant has been duly executed and the corporate seal affixed hereto, all as of the day and year first above written.

SPARE BACKUP, INC.

By: ____________________________________                                                               

      Cery Perle, CEO

 

 

To:

____________________

Dated: ____________________

The undersigned record Holder, pursuant to the provisions set forth in the within Warrant, hereby subscribed for and purchases   shares of Common Stock covered by such Warrant and hereby makes full cash payment of $  for such shares at the Exercise Price provided by such Warrant.

 

 

NOTICE: The signature of this Exercise Agreement must correspond with the name as written upon the face of the within Warrant, or upon the Assignment thereof, if applicable, in every particular, without alteration, enlargement or any change whatsoever.

 

Bank of America

73829 El Paseo

Palm Desert, CA  92260

(760) 341-4710

ABA Routing No. 026-009-593

For the account of:

Spare Backup Inc. “Capital Account”

Account #05854 71851

72757 Fred Waring Drive

Palm Desert, CA  92260

760 ###-###-####

 

_____________

We are offering for sale a maximum of 2,000,000 units (the “Units”) for $1.50 per Unit, to accredited investors only.  Each Unit consists of 9 (nine) shares of Spare Backup, Inc. common stock, par value $0.001 per share (“Common Stock”), and a Common Stock Purchase Warrant (the “Warrants”) to purchase 5(five) shares of Common Stock exercisable at $0.20 for a period of 2 years.

The minimum investment is 20,000 Units.  The Company reserves the right to accept subscriptions for lesser amounts.

The purchase price is payable in cash upon subscription.  All proceeds received by us from subscribers for the Units offered hereby will be deposited directly into an account maintained by us, and shall be immediately available for our use.

This offering shall continue until November 15, 2009 (the “Termination Date”).  However the company has the right to extend it by 30 days at their own discretion.

We will update this Confidential Private Placement Memorandum (“Memorandum”) from time to time to disclose material events affecting us.

In order to subscribe for the Units, a prospective investor must deliver the following items to our Placement Agent: (i) A fully executed copy of this Subscription Agreement with all open lines completed, dated and signed; (ii) a fully executed copy of the Purchasers Questionnaire attached hereto, with all open lines completed, dated and signed; and (iii) the Purchase Price by cash, wire transfer, certified check or money order payable to the order of Spare Backup, Inc.

1.             Subscription.

 

Subject to the terms and conditions hereinafter set forth in this Subscription Agreement, the undersigned hereby offers to purchase _________ units for a total purchase price of $______________ (number of Units multiplied by 1.50) (the “Purchase Price”).  The minimum subscription is 20,000 Units ($30,000).  In the sole discretion of the Company subscriptions for less than the minimum investment may be accepted.

2.             Conditions to Offer.

The offering is made subject to the following conditions:  (i) that the Company shall have the right to accept or reject this Offer, in whole or in part, for any reason whatsoever; and (ii) that the undersigned agrees to comply with the terms of this Subscription Agreement and to execute and deliver any and all further documents necessary to complete the transaction.

Acceptance of this Offer shall be deemed given by the countersigning of this Subscription Agreement on our behalf.

3.             Representations and Warranties of the Undersigned.

The undersigned, in order to induce us to accept this Offer, hereby warrants and represents as follows:

(A)           The undersigned has sufficient liquid assets to sustain a loss of the undersigned's entire investment.

(B)           The undersigned is either an Accredited Investor as that term is defined in Regulation D promulgated under the Securities Act, or a non-accredited investors who is a sophisticated investor and who either alone or with his/her purchaser representatives has such knowledge and experience in financial and business matters that he/she is capable of evaluating the merits and risks of the prospective investment.  In general, an "Accredited Investor" is deemed to be an institution with assets in excess of $5,000,000 or an individual with a net worth in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly with his/her spouse.

(C)           We have not made any other representations or warranties to the undersigned with respect to Spare Backup, Inc. or rendered any investment advice.

(D)           The undersigned has ___ or has not ___ (please check the appropriate box) authorized any person or institution to act as his Purchaser Representative (as that term is defined in Regulation D of the General Rules and Regulations under the Act) in connection with this transaction.  The undersigned has such knowledge and experience in financial, investment and business matters that the undersigned is capable of evaluating the merits and risks of the prospective investment in the Units.  The undersigned has consulted with such independent legal counsel or other advisers as the undersigned has deemed appropriate to assist the undersigned in evaluating the proposed investment in the Units.

 (E)           The undersigned represents that the undersigned (i) has adequate means of providing for the undersigned's current financial needs and possible personal contingencies and has no need for liquidity of investment in the Company; (ii) can afford (a) to hold unregistered securities for an indefinite period of time as required; and (b) sustain a complete loss of the entire amount of the subscription; and (iii) has not made an overall commitment to investments which are not readily marketable which is disproportionate so as to cause such overall commitment to become excessive.

 

(F)           The undersigned has been afforded the opportunity to ask questions of, and receive answers from the officers and/or directors of the Company acting on its behalf concerning the terms and conditions of this transaction and to obtain any additional information, to the extent that the Company possesses such information or can acquire it without unreasonable effort or expense, necessary to verify the accuracy of the information furnished; and has availed himself of such opportunity to the extent the undersigned considers appropriate in order to permit the undersigned to evaluate the merits and risks of an investment in the Company.  It is understood that all documents, records and books pertaining to this investment have been made available f or inspection, and that the books and records of the Company will be available upon reasonable notice for inspection by investors during reasonable business hours at its principal place of business.

(G)           The undersigned further acknowledges that this offering has not been passed upon or the merits thereof endorsed or approved by any state or federal authorities.

(H)           The Units being subscribed for are being acquired solely for the account of the undersigned for personal investment and not with a view to, or for resale in connection with, any distribution in any jurisdiction where such sale or distribution would be precluded.  By such representation, the undersigned means that no other person has a beneficial interest in the Units, and that no other person has furnished or will furnish directly or indirectly, any part of or guarantee the payment of any part of the consideration to be paid to the Company in connection therewith.  The undersigned does not intend to dispose of all or any part of the securities underlying the Units except in compliance with the provisions of the Act and applicabl e state securities laws, and understands that the securities underlying the Units are being offered pursuant to a specific exemption under the provisions of the Act, which exemption(s) depends, among other things, upon the compliance with the provisions of the Act.

 

(I)           The undersigned acknowledges that he has not been provided with any offering literature or other documentation on the Company other than this Memorandum and Subscription Agreement.

(J)           The undersigned hereby agrees that the Company may insert the following or similar legend on the face of the certificates evidencing the Common Stock issued as part of the Units and upon any certificates representing shares of Common Stock underlying the Common Stock Purchase Warrants, if required in compliance with the Securities Act or state securities laws:

"These securities have not been registered under the Securities Act of 1933, as amended ("Act"), or any state securities laws and may not be sold or otherwise transferred or disposed of except pursuant to an effective registration statement under the Act and any applicable state securities laws, or an opinion of counsel satisfactory to counsel to the issuer that an exemption from registration under the act and any applicable state securities laws is available."

The undersigned certifies that each of the foregoing representations and warranties set forth in subsections (A) through (J) inclusive of this Section 3 are true as of the date hereof and shall survive such date.

The undersigned certifies that each of the foregoing representations and warranties set forth in subsections (A) through (J) inclusive of this Section 3 are true as of the date hereof and shall survive such date.

4.             Indemnification.

The undersigned understands that the securities acquired as a result of the subscription right provided in Section 1 hereof are being offered without registration under the Act and applicable state securities laws and in reliance upon the exemption for transactions by the Company not involving any public offering; that the availability of such exemption is, in part, dependent upon the truthfulness and accuracy of the representations made by the undersigned herein; that the Company will rely on such representations in accepting any subscriptions for the Units and that the Company may take such steps as it considers reasonable to verify the accuracy and truthfulness of such representations in advance of accepting or rejecting the undersigned's subscription.  The undersigned agrees to indemnify and hold harmless the Company against any damage, loss, expense or cost, including reasonable attorneys' fees, sustained as a result of any misstatement or omission on the undersigned's part.

5.             FOR CALIFORNIA RESIDENTS ONLY:

EACH CALIFORNIA RESIDENT WHO SUBSCRIBES FOR THE PURCHASE OF SECURITIES HEREIN HAS THE RIGHT, PURSUANT TO SECTION 517.061(11) (A) (5) OF THE CALIFORNIA SECURITIES ACT, TO WITHDRAW HIS SUBSCRIPTION FOR THE PURCHASE AND RECEIVE A FULL REFUND OF ALL MONIES PAID WITHIN THREE BUSINESS DAYS AFTER THE EXECUTION OF THE SUBSCRIPTION AGREEMENT OR PAYMENT FOR THE PURCHASE HAS BEEN MADE, WHICHEVER IS LATER.  WITHDRAWAL WILL BE WITHOUT ANY FURTHER LIABILITY TO ANY PERSON.  TO ACCOMPLISH THIS WITHDRAWAL, A SUBSCRIBER NEED ONLY SEND A LETTER OR TELEGRAM TO THE COMPANY AT THE ADDRESS SET FORTH IN THIS MEMORANDUM INDICATING HIS INTENTION TO WITHDRAW.

 

SUCH LETTER OR TELEGRAM SHOULD BE SET AND POSTMARKED PRIOR TO THE END OF THE AFOREMENTIONED THIRD BUSINESS DAY.  IT IS ADVISABLE TO SEND SUCH LETTER BY CERTIFIED MAIL, RETURN RECEIPT REQUESTED, TO ENSURE THAT IT IS RECEIVED AND ALSO TO EVIDENCE THE TIME IT WAS MAILED.  IF THE REQUEST IS MADE ORALLY, IN PERSON OR BY TELEPHONE TO AN OFFICER OF THE COMPANY, A WRITTEN CONFIRMATION THAT THE REQUEST HAS BEEN RECEIVED SHOULD BE REQUESTED.

FOR RESIDENTS OF ALL STATES:

THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND ARE BEING OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF SAID ACT AND SUCH LAWS.  THE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM.  INVESTORS SHOULD BE AWARE THAT THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN INDEFINITE PERIOD OF TIME.

6.             No Waiver.

Notwithstanding any of the representations, warranties, acknowledgments or agreements made herein by the undersigned, the undersigned does not thereby or in any manner waive any rights granted to the undersigned under federal or state securities laws.

7.             Revocation.

The undersigned agrees that the undersigned shall not cancel, terminate or revoke this Subscription Agreement or any agreement of the undersigned made hereunder other than as set forth under Section 5 above, and that this Subscription Agreement shall survive the death or disability of the undersigned.

8.             Termination of Subscription Agreement.

If the Company elects to cancel this Subscription Agreement, provided that it returns to the undersigned, without interest and without deduction, all sums paid by the undersigned, this offer shall be null and void and of no further force and effect, and no party shall have any rights against any other party hereunder.

9.             Miscellaneous.

(A)           All notices or other communications given or made hereunder shall be in writing and shall be mailed by registered or certified mail, return receipt requested, postage prepaid, to the undersigned at the undersigned's address set forth below and to Spare Backup, Inc., 72757 Fred Waring Drive, Palm Desert, California 92260.

(B)           This Subscription Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof and may be amended only by a writing executed by all parties.

(C)           The provisions of this Subscription Agreement shall survive the execution thereof.

(D)           This Subscription Agreement shall be governed by and construed in accordance with the domestic laws of the State of California without giving effect to any choice or conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of California.  The parties further: (i) agree that any legal suit, action or proceeding arising out of or relating to this Subscription Agreement shall be instituted exclusively in any Federal or State court of competent jurisdiction within the County of Broward, State of California, (ii) waive any objection that they may have now or hereafter to the venue of any such suit, action or proceeding, and (iii) irrevocably consent to the in personam jurisdiction of any Federal or State court of competent jurisdiction within the County of Riverside, State of California in any such suit, action or proceeding.  The parties each further agree to accept and acknowledge service of any and all process which may be served in any such suit, action or proceeding in a Federal or State court of competent jurisdiction within the County of Riverside, State of California, and that service of process upon the parties mailed by certified mail to their respective addresses shall be deemed in every respect effective service of process upon the parties, in any action or proceeding.

10.           Certification.

The undersigned certifies that the undersigned has read this entire Subscription Agreement and that every statement on the undersigned's part made and set forth herein is true and complete.

 

 

IN WITNESS WHEREOF, the undersigned has executed this Subscription Agreement on the date his signature has been subscribed and sworn to below.

 

 

Accepted as of the _______ day of _________________ 2009

SPARE BACKUP, INC.

 

The information contained herein is being furnished to the Company in order that it may determine whether offers of subscriptions for the Units may be made to the undersigned.  I understand that (a) the Company will rely on the information contained herein for purposes of such determination, (b) the securities underlying the Units will not be registered under the Act in reliance upon the exemptions from registration afforded under the Act, (c) the securities underlying the Units will not be registered under the securities laws of any state in reliance upon similar exemptions, and (d) this questionnaire is not an offer to purchase the Units in any case where such offer would not be legally permitted.

Information contained in this questionnaire will be kept confidential by the Company and its agents, employees or representatives.  I understand, however, that the Company may have the need to present it to such parties as it deems advisable in order to establish the applicability under any federal or state securities laws of an exemption from registration.

In accordance with the foregoing, the following representations and information are hereby made and furnished:

Please answer all questions.  If the answer is "none" or "not applicable," please so state.

INFORMATION REQUIRED OF EACH PROSPECTIVE INVESTOR IF INDIVIDUAL (NOT A CORPORATION OR LEGAL ENTITY):

 

10.	Do you consider yourself to be an experienced and sophisticated investor or are you advised by a qualified investment advisor, all as required under the various securities laws and regulations:  Yes ___ No  ___

 

11.	Do you understand the full nature and risk of an investment in the Units, and can you afford the complete loss of your entire investment. Yes ___ No  ___

 

12.	Are you able to bear the economic risk of an investment in the Units for an indefinite period of time and do you understand that an investment in the Units is illiquid.  Yes ___ No __

 

13.

Do you further understand that you will be required to agree not to dispose of the securities underlying the Units except in compliance with Rule 144 under the Act or pursuant to the registration statement filed by the company any other conditions contained in the accompanying Subscription Agreement. Yes ___ No ___

 

14.	Have you participated in other private placements of securities?   Yes ___ No ___

 

15.	Have read the public releases of company and financial fillings?     Yes___  No___

 

 

(i)

The answers to the above questions are complete and correct and may be relied upon by the Company whether the offering in which I propose to participate is exempt from registration under the Act and the securities laws of certain states;

 

(ii)

I will notify the Company immediately of any material change in any statement made herein occurring prior to the closing of any purchase by me of an interest in the Company; and

 

(iii)

I have sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of the prospective investment; I am able to bear the economic risk of the investment and currently could afford a complete loss of such investment.

IN WITNESS WHEREOF, I have executed this Purchaser Question­naire this _____ day of __________________, 2009, and declare that it is truthful and correct to the best of my knowledge.

__________________________________________

IF CORPORATION OR LEGAL ENTITY:

 

 

5.	Does the corporation/entity understand the full nature and risk of an investment in the Units, and can you afford the complete loss of your entire investment. Yes ___ No  ___

 

6.	Is the corporation/entity able to bear the economic risk of an investment in the Units for an indefinite period of time and do you understand that an investment in the Units is illiquid.

Yes ___ No ___

 

7.	Do you further understand that the corporation/entity will be required to agree not to dispose of the securities underlying the Units except in compliance with Rule 144 under the Act or any other conditions contained in the accompanying Subscription Agreement. Yes ___ No ___

 

8.	Has the corporation/entity participated in other private placements of securities.

Yes ___ No ___

(i)

The answers to the above questions are complete and correct and may be relied upon by the Company whether the offering in which I propose to participate is exempt from registration under the Act and the securities laws of certain states;

(ii)

I will notify the Company immediately of any material change in any statement made herein occurring prior to the closing of any purchase by me of an interest in the Company; and

(iii)

The Corporation/Entity has sufficient knowledge and experience in financial and business matters to evaluate the merits and risks of the prospective investment; I am able to bear the economic risk of the investment and currently could afford a complete loss of such investment.