UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR
15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of December, 2015
Commission File Number: 001-36532
Sphere 3D Corp.
240 Matheson Blvd. East
Mississauga, Ontario, Canada, L4Z
1X1
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will
file annual reports under cover Form 20-F or Form 40-F. [ ]
Form 20-F [ x ] Form 40-F
Indicate by check mark if the registrant is submitting the Form
6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ]
Indicate by check mark if the registrant is submitting the Form
6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]
Indicate by check mark whether by furnishing the information
contained in this Form, the registrant is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the Securities
Exchange Act of 1934. Yes [ ] No [ x ]
If "Yes" is marked, indicate below the file number assigned to
the registrant in connection with Rule 12g3-2(b):
The information contained in this Form 6-K is incorporated by
reference into, or as additional exhibits to, as applicable, the registrant's
outstanding registration statements.
Registered Direct Placements
Sphere 3D Corp. (the “Company”) has entered into
subscription and purchase agreements (the “Subscription Agreements”) with
certain investors party thereto (the “Investors”) pursuant to which the
Company agreed to issue to the Investors, in the aggregate, 2,880,000 of the
Company’s common shares, no par value per share (the “Common Shares”),
warrants (the “Canadian Warrants”) exercisable to purchase up to
1,380,000 Common Shares, and warrants (the “Fund Warrants” and together
with the Canadian Warrants, the “Warrants”) exercisable to purchase up to
1,500,000 Common Shares, for an aggregate offering price of approximately
U.S.$5.76 million (the “Offering”). Pursuant to the Subscription
Agreements, the purchase price for one common share (a “Purchased Common
Share”) and a Warrant to purchase one common share (the “Warrant
Shares”) is U.S.$2.00 (the “Purchase Price”). Each Warrant has an
initial exercise price of U.S.$2.50 per Warrant Share. The Warrants are
immediately exercisable and have a five year term. The Subscription Agreements
were signed on November 30, 2015. The issuance and sale of the Purchased Common
Shares and Warrants is expected to close on or about December 4, 2015.
If the Company, at any time while the Fund Warrants are
outstanding, effects a variable rate transaction (as defined in the Subscription
Agreement pursuant to which the Fund Warrants were issued) and the issue price,
conversion price or exercise price per share applicable thereto is less than the
exercise price then in effect for the Fund Warrants, then the exercise price of
the Fund Warrants shall be reduced to equal such price. For a period of one year
from the date of the Subscription Agreement, the Company may not enter into a
variable rate transaction without the purchaser’s consent. In addition, if as of
the 180 day anniversary of the date of the Subscription Agreements, the quotient
of (x) the sum of the volume weighted average price of the Common Shares for
each trading day during the five (5) consecutive trading days ending and
including the trading day immediately preceding the such date, divided by (y)
five (5) is less than the exercise price then in effect, the exercise price of
the Fund Warrants shall be adjusted to the such price.
The foregoing descriptions of the Subscription Agreements and
the Warrants do not purport to be complete and are qualified in their entirety
by reference to each of the Subscription Agreement, the Canadian Warrants, and
the Fund Warrants, the forms of which are attached hereto as Exhibits 99.1, 99.2, 99.3
and 99.4, respectively, and incorporated herein by reference.
All Purchased Common Shares and Warrants were offered and sold
by the Company in connection with a Registration Statement on Form S-3 (File No.
333-206357) filed by the Company with the Securities and Exchange Commission on
August 27, 2015, the prospectus dated August 27, 2015 included therein, and the
prospectus supplement thereto dated December 1, 2015.
First Amendment to 8% Senior Secured Convertible Debenture
The Company has entered into an amendment to its 8% Senior Secured Convertible Debenture with FBC Holdings S.A.R.L. (“FBC”). Pursuant to this amendment and on the condition that the Company provides to FBC subscription agreements evidencing the raise by the Company of at least $2,750,000 (the “Raise”) in immediately available funds through the issuance of common shares and/or warrants (i) FBC will make a loan to the Company of an additional $5,000,000 pursuant to the terms of the Company’s revolving credit agreement with FBC upon the Company’s request, (ii) the Company will then reduce the conversion price for the entire principal of the debenture to $3.00 per common share, (iii) if the maturity date of the Company’s Silicon Valley Bank credit facility is extended beyond its current maturity date (which would automatically cause the extension of the loans made pursuant to the Company’s revolving credit agreement with FBC), the Company will issue warrants to FBC to purchase up to 500,000 common shares at a price per share equal to 110% of the closing price of the common shares on The NASDAQ Global Market immediately prior to the date of any such extension and (iv) any failure to complete the Raise prior to December 15, 2015 will constitute a default under the debenture.
Amendment to August Purchase Agreement
On September 22, 2015, as initially reported in our Report on
Form 6-K filed with the Commission on October 7, 2015, we entered into an
amendment (the “Amendment”) amending that certain purchase agreement, by and
between the Company and an investor, dated as of August 10, 2015 (the “Purchase
Agreement”), pursuant to which the Company amended certain price protection
provisions in the Purchase Agreement. Such price protection provisions will be
triggered as a result of the closing of the transactions contemplated by the
Subscription Agreements, and as a result, we will be required to issue an
additional 141,631 common shares under the Purchase Agreement and the Warrants
issued under the Purchase Agreement will become exercisable for an additional
141,631 common shares. The foregoing description of the Purchase Agreement does
not purport to be complete and is qualified in its entirety by reference to the
Second Amendment, the form of which is attached hereto as Exhibit 99.6 and
incorporated herein by reference.
SUBMITTED HEREWITH
Exhibits
This Form 6-K contains forward-looking statements that involve
risks, uncertainties, and assumptions that are difficult to predict. Actual
results and the timing of events could differ materially from those anticipated
in such forward-looking statements as a result of risks and uncertainties
including, without limitation, unforeseen changes in the Company’s ability to
close the direct sales and receive the anticipated proceeds; and other risks
detailed from time to time in the Company’s periodic reports contained in the
Company’s Annual Information Form and other filings with Canadian securities
regulators (www.sedar.com) and periodic reports filed with the United States
Securities and Exchange Commission (the “SEC”) (www.sec.gov), and risks
detailed in the Form F-4/A relating to the Company’s merger with Overland
Storage filed with the SEC. The Company undertakes no obligation to update any
forward-looking statement, whether written or oral, that may be made from time
to time, whether as a result of new information, future developments or
otherwise, except as required by law.
SIGNATURE
Pursuant to the requirements of
the Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
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SPHERE 3D CORP. |
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| Date: December 1, 2015 |
/s/
Kurt Kalbfleisch |
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Name: Kurt Kalbfleisch |
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Title: Chief Financial Officer
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SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this “Agreement”) is made
as of the day of , 2015 by and among Sphere 3D Corp., an Ontario corporation
(the “Company”), and the Investors set forth on the signature pages
affixed hereto (each an “Investor” and collectively the
“Investors”).
WHEREAS, subject to the terms and conditions set forth in
this Agreement (including the schedules thereto) and pursuant to an effective
registration statement filed pursuant to the 1933 Act (as defined below), the
Investors wish to purchase from the Company, and the Company wishes to sell and
issue to the Investors, upon the terms and conditions stated in this Agreement,
(i) up to an aggregate of Common Shares (as defined below) and (ii) the Warrants
(as defined below) to purchase an aggregate of Common Shares (subject to
adjustment) at an exercise price of $ per share (subject to adjustment)
(together, the “Transaction”).
WHEREAS, the Company and any Canadian Investor are
executing and delivering this Agreement in reliance upon the Canadian prospectus
exemption provided by Section 2.3 of National Instrument 45-106 – Prospectus
Exemptions (“NI 45-106”) or Section 73.3 of the Securities Act (Ontario), as
applicable, in accordance with Schedule IV hereto.
NOW, THEREFORE, in consideration of the mutual promises made
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
1. Definitions. In addition to
those terms defined above and elsewhere in this Agreement, for the purposes of
this Agreement, the following terms shall have the meanings set forth below:
“Affiliate” means, with respect to any Person, any other
Person which directly or indirectly through one or more intermediaries Controls,
is controlled by, or is under common control with, such Person.
“Business Day” means a day, other than a Saturday or
Sunday, on which banks in New York City are open for the general transaction of
business.
“Canadian Investor” means an Investor that is resident
in or otherwise subject to the securities laws of a jurisdiction of Canada.
“Canadian Securities Laws” means the securities laws,
regulations and rules, and the blanket rulings, policies and written
interpretations of and multilateral or national instruments adopted by the
securities regulators in each of the provinces and territories of Canada.
“Closing” means the closing of the purchase and sale of
the Shares and the Warrants on the Closing Date pursuant to Section 3.1
of this Agreement.
“Closing Date” means the fourth (4th) Trading
Day after the date hereof.
“Common Shares” means the common shares in the capital
of the Company (no par value).
“Company’s Knowledge” means the actual knowledge of the
executive officers (as defined in Rule 405 under the 1933 Act) of the Company,
after due inquiry.
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“Control” (including the terms “controlling”,
“controlled by” or “under common control with”) means the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
“Intellectual Property” means all of the following: (i)
patents, patent applications, patent disclosures and inventions (whether or not
patentable and whether or not reduced to practice); (ii) trademarks, service
marks, trade dress, trade names, corporate names, logos, slogans and Internet
domain names, together with all goodwill associated with each of the foregoing;
(iii) copyrights and copyrightable works; (iv) registrations, applications and
renewals for any of the foregoing; and (v) proprietary computer software
(including but not limited to data, data bases and documentation).
“Material Adverse Effect” means a material adverse
effect on (i) the assets, liabilities, results of operations, condition
(financial or otherwise), business or prospects of the Company and its
Subsidiaries taken as a whole, or (ii) the ability of the Company to perform its
obligations under the Transaction Documents.
“Material Contract” means any contract, instrument or
other agreement to which the Company or any Subsidiary is a party or by which it
is bound which has been listed on Schedule II.
“Nasdaq” means The Nasdaq Global Market.
“OSC” means the Ontario Securities Commission.
“Person” means an individual, corporation, partnership,
limited liability company, trust, business trust, association, joint stock
company, joint venture, sole proprietorship, unincorporated organization,
governmental authority or any other form of entity not specifically listed
herein.
“Prospectus” means the final prospectus filed for the
Registration Statement, including (i) the documents incorporated by reference in
the Registration Statement, including the documents incorporated by reference in
such final prospectus, and (ii) in the case of a Canadian Investor, any
additional documentation attached to the final prospectus and communicated to
such Canadian Investor for the purposes of effecting sales into Canada.
“Prospectus Supplement” means each supplement to the
Prospectus complying with Rule 424(b) of the 1933 Act that is filed with the SEC
and delivered by the Company to each Investor prior to the execution and
delivery of this Agreement, including (i) the documents incorporated by
reference therein; and (ii) in the case of a Canadian Investor, any additional
documentation attached to the supplement and communicated to such Canadian
Investor for the purposes of effecting sales into Canada.
“Purchase Price” means ($ ).
“Registration Statement” means the effective
registration statement on Form F-3 (Commission File No. 333-206357) filed by the
Company with the SEC pursuant to the 1933 Act for the registration of the
Securities, as such Registration Statement may be amended and supplemented from
time to time (including pursuant to Rule 462(b) of the 1933 Act), including (i)
all documents filed as part thereof or incorporated by reference therein, and
including all information deemed to be a part thereof at the time of
effectiveness pursuant to Rule 430B of the 1933 Act; and (ii) in the case of a
Canadian Investor, any additional documentation attached to the registration
statement and communicated to such Canadian Investor for the purposes of
effecting sales into Canada.
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“SEC” means the U.S. Securities and Exchange Commission.
“SEC Filings” has the meaning set forth in Section
4.6.
“Securities” means the Shares, the Warrants and the
Warrant Shares.
“Shares” means the Common Shares to be purchased by the
Investors hereunder.
“Subsidiary” of any Person means another Person, an
amount of the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are no such voting interests,
50% or more of the equity interests of which) is owned directly or indirectly by
such first Person.
“Trading Day” means a day on which the Common Shares are
traded on Nasdaq.
“Transaction Documents” means this Agreement and the
Warrants.
“Warrants” means, as to each Investor, a warrant to
purchase Common Shares in the form attached hereto as Exhibit B.
“Warrant Shares” means the Common Shares issuable upon
the exercise of the Warrants.
“1933 Act” means the Securities Act of 1933, as amended,
or any successor statute, and the rules and regulations promulgated thereunder.
“1934 Act” means the Securities Exchange Act of 1934, as
amended, or any successor statute, and the rules and regulations promulgated
thereunder.
2. Purchase and Sale of the Shares
and the Warrants. Subject to the terms and conditions of this Agreement, on
the Closing Date, each of the Investors shall severally, and not jointly,
purchase, and the Company shall sell and issue to the Investors, the Shares and
the Warrants representing the right to purchase Warrant Shares in the respective
amounts set forth on Schedule I attached hereto.
3. Closing.
3.1 Closing. The Closing of the
purchase and sale of the Shares and the Warrants shall take place on the Closing
Date at the offices of O’Melveny & Myers LLP, Two Embarcadero Center,
28th Floor, San Francisco, CA 94111, or at such other location and on
such other date as the Company and the Investors shall mutually agree.
3.2 Closing Deliverables.
(a) At the Closing, the Company shall
deliver or cause to be delivered to each Investor the following:
(i) evidence that the number of Shares
set forth next to such Investor’s name on Schedule I attached hereto have
been recorded in the name of such Investor as beneficial owner on the records of
the Company’s transfer agent, TMX Equity Transfer Services Inc., in Canada, for
Canadian Investors, or Continental Stock Transfer & Trust, in the United
States, for all other Investors; and
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(ii) a Warrant registered in the name
of such Investor to purchase up to a number of Warrants Shares, with an exercise
price equal to $ , set forth next to such Investor’s name on Schedule I
attached hereto.
(b) At the Closing, each Investor shall
deliver or cause to be delivered to the Company the aggregate amount to be paid
for the Shares and the Warrants purchased by such Investor hereunder, as set
forth next to such Investor’s name on Schedule I attached hereto, in
United States dollars and in immediately available funds by wire transfer to the
account specified in writing by the Company.
4. Representations and Warranties of
the Company. The Company hereby represents and warrants to each Investor
that:
4.1 Organization, Good Standing and
Qualification. Each of the Company and its Subsidiaries is a corporation
duly organized, validly existing and in good standing (where such concept
exists) under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to carry on its business as now
conducted and to own or lease its properties, in each case as described in the
SEC Filings. Each of the Company and its Subsidiaries is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the conduct of its business or its ownership or leasing of property
makes such qualification or leasing necessary unless the failure to so qualify
has not had and could not reasonably be expected to have a Material Adverse
Effect.
4.2 Authorization. The Company
has the corporate power and authority to enter into this Agreement and has taken
all requisite action on its part, its officers, directors and shareholders
necessary for (i) the authorization, execution and delivery of the Transaction
Documents, (ii) the authorization of the performance of all obligations of the
Company hereunder or thereunder, and (iii) the authorization, issuance (or
reservation for issuance) and delivery of the Securities. The Transaction
Documents constitute the legal, valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium and
similar laws of general applicability, relating to or affecting creditors’
rights generally and to general equitable principles.
4.3 Capitalization. The
authorized capital of the Company consists of an unlimited number of Common
Shares, as set forth in the SEC Filings and in the Articles of Amalgamation of
the Company, as amended and as in effect as of the date of this Agreement (the
“Articles of Amalgamation”). All of the issued and outstanding Common Shares
have been duly authorized and validly issued and are fully paid, nonassessable
and free of pre-emptive rights and were issued in full compliance with
applicable provincial, state and federal securities law and any rights of third
parties. Except as described in the SEC Filings or described in Schedule
III, all of the issued and outstanding shares of capital stock of each
Subsidiary have been duly authorized and validly issued and are fully paid,
nonassessable and free of pre-emptive rights, were issued in full compliance
with applicable provincial, state and federal securities law and any rights of
third parties and are owned by the Company, beneficially and of record, subject
to no lien, encumbrance or other adverse claim. Except as described in the SEC
Filings, no Person is entitled to pre-emptive or similar statutory or
contractual rights with respect to any securities of the Company. Except as
described in the SEC Filings or described in Schedule III, there are no
outstanding warrants, options, convertible securities or other rights,
agreements or arrangements of any character under which the Company or any of
its Subsidiaries is or may be obligated to issue any equity securities of any
kind. Except as described or listed in the SEC Filings there are no voting
agreements, buy-sell agreements, option or right of first purchase agreements or
other agreements of any kind among the Company and any of the securityholders of
the Company relating to the securities of the Company held by them. Except as
described in the SEC Filings, no Person has the right to require the Company to
register any securities of the Company under the 1933 Act,
whether on a demand basis or in connection with the registration of securities
of the Company for its own account or for the account of any other Person.
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Except as described in the SEC Filings, the issuance and sale
of the Securities hereunder will not obligate the Company to issue Common Shares
or other securities to any other Person (other than the Investors) and will not
result in the adjustment of the exercise, conversion, exchange or reset price of
any outstanding security.
Except as described in the SEC Filings, the Company does not
have outstanding shareholder purchase rights, a “poison pill” or any similar
arrangement in effect giving any Person the right to purchase any equity
interest in the Company upon the occurrence of certain events.
As of and prior to giving effect to the Transaction, there were
(i) Common Shares issued and outstanding, (ii) Common Shares issuable upon
exercise of outstanding warrants, (iii) Common Shares issuable upon exercise of
outstanding options and (iv) outstanding restricted stock units.
4.4 Valid Issuance. The Shares
have been duly and validly authorized and, when issued and paid for pursuant to
this Agreement, will be validly issued, fully paid and nonassessable, and shall
be free and clear of all encumbrances and restrictions, except for restrictions
on transfer set forth in the Transaction Documents or imposed by applicable
securities laws (including, in the case of the Canadian Investors, the
restrictions set forth in Schedule IV hereto). The Warrants have been duly and
validly authorized. Upon the due exercise of the Warrants and full payment for
the exercise price thereof, the Warrant Shares will be validly issued, fully
paid and non-assessable free and clear of all encumbrances and restrictions,
except for restrictions on transfer set forth in the Transaction Documents or
imposed by applicable securities laws. The Company has reserved a sufficient
number of Common Shares for issuance upon the exercise of the Warrants, free and
clear of all encumbrances and restrictions, except for restrictions on transfer
set forth in the Transaction Documents or imposed by applicable securities laws.
The Securities are being issued pursuant to the Registration Statement and the
issuance of the Securities will be registered by the Company pursuant to the
1933 Act. The Company has prepared and filed the Registration Statement with the
SEC in accordance with the provisions of the 1933 Act. The Registration
Statement is effective pursuant to the 1933 Act and available for the issuance
of the Securities thereunder and the Company has not received any written notice
that the SEC has issued or intends to issue a stop-order or other order with
respect to the Registration Statement or the Prospectus or that the SEC
otherwise has (i) suspended or withdrawn the effectiveness of the Registration
Statement or (ii) issued any order preventing or suspending the use of the
Prospectus, in either case, either temporarily or permanently or intends or has
threatened in writing to do so. The “Plan of Distribution” section of the
Registration Statement permits the issuance of the Securities hereunder. Upon
receipt of the Shares and the Warrants and, upon exercise of the Warrants, the
Warrant Shares, the Investors will have good and marketable title to such
Securities and the Warrant Shares will be immediately freely tradable on Nasdaq
(subject to applicable securities laws, and the restrictions set forth in the
Warrants). At the time the Registration Statement and any amendments thereto
became effective, at the date of this Agreement and at each deemed effective
date thereof pursuant to Rule 430B(f)(2) of the 1933 Act, the Registration
Statement and any amendments thereto complied and will comply in all material
respects with the requirements of the 1933 Act and did not and will not contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading; and the Prospectus and any amendments or supplements thereto, at the
time the Prospectus or any amendment or supplement thereto was issued and on the
Closing Date, complied and will comply in all material respects with the
requirements of the 1933 Act and did not and will not contain an untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements therein, in light of the circumstances under which they were
made, not misleading. The Company meets all of the requirements for the use of a
registration statement on Form F-3 (“Form F-3”) pursuant to the 1933 Act
for the offering and sale of the Securities contemplated by this Agreement, and
the SEC has not notified the Company of any objection to the use of the form of
the Registration Statement pursuant to Rule 401(g)(1) of the 1933 Act. The
Registration Statement, as of its effective date, meets the requirements set
forth in Rule 415(a)(1)(x) pursuant to the 1933 Act. At the earliest time after
the filing of the Registration Statement that the Company or another offering
participant made a bona fide offer (within the meaning of Rule 164(h)(2) of the
1933 Act) relating to any of the Securities, the Company was not and is not an
Ineligible Issuer (as defined in Rule 405 of the 1933 Act). The Company (i) has
not distributed any offering material in connection with the offering and sale
of any of the Securities and (ii) until no Investor holds any of the Securities,
shall not distribute any offering material in connection with the offering and
sale of any of the Securities to, or by, the Investors, in each case, other than
the Registration Statement, the Prospectus, the Prospectus Supplements or any
amendment or supplement thereto required pursuant to applicable law or the
Transaction Documents. In accordance with Rule 5110(b)(7)(C)(i) of the Financial
Industry Regulatory Authority, Inc.’s Manual, the offering of the Securities has
been registered with the SEC on Form F-3 pursuant to the 1933 Act pursuant to
the standards for Form F-3 in effect prior to October 21, 1992, and the
Securities are being offered pursuant to Rule 415 of the 1933 Act.
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4.5 Consents. The execution,
delivery and performance by the Company of the Transaction Documents and the
offer, issuance and sale of the Securities require no consent of, action by or
in respect of, or filing with, any Person, governmental body, agency, or
official other than filings that have been made pursuant to applicable
provincial and state securities laws and post-sale filings pursuant to
applicable provincial, state and federal securities laws which the Company
undertakes to file within the applicable time periods. Subject to the accuracy
of the representations and warranties of each Investor set forth in Section
5 hereof, and, in the case of each Canadian Investor, Schedule IV
hereto, the Company has taken all action necessary to exempt (i) the issuance
and sale of the Securities, (ii) the issuance of the Warrant Shares upon due
exercise of the Warrants, and (iii) the other transactions contemplated by the
Transaction Documents from the provisions of any shareholder rights plan or
other “poison pill” arrangement, any anti-takeover, business combination or
control share law or statute binding on the Company or to which the Company or
any of its assets and properties may be subject and any provision of the
Articles of Amalgamation or the Company’s Bylaw No. 1, as amended and as in
effect as of the date of this Agreement (the “Bylaws”), that is or could
reasonably be expected to become applicable to the Investors as a result of the
transactions contemplated hereby, including, without limitation, the issuance of
the Securities and the ownership, disposition or voting of the Securities by the
Investors or the exercise of any right granted to the Investors pursuant to this
Agreement or the other Transaction Documents.
4.6 Delivery of SEC Filings;
Business. The Company has made available to the Investors through the EDGAR
system, true and complete copies of the Company’s most recent Annual Report on
Form 40-F for the fiscal year ended December 31, 2014 (as amended prior to the
date hereof, the “40-F”), and all other reports filed or furnished by the
Company pursuant to Sections 13(a), 13(e), 14 and 15(d) of the 1934 Act since
July 7, 2014 (collectively, the “SEC Filings”). The SEC Filings are the
only filings required of the Company pursuant to the 1934 Act for such period.
The Company and its Subsidiaries are engaged in all material respects only in
the business described in the SEC Filings and the SEC Filings contain a complete
and accurate description in all material respects of the business of the Company
and its Subsidiaries, taken as a whole.
4.7 Use of Proceeds. The net proceeds
of the sale of the Shares and the Warrants hereunder shall be used by the
Company for working capital and general corporate purposes.
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4.8 No Material Adverse Change. Since December 31,
2014, except as described in the SEC Filings, there has not been:
(i) any change in the consolidated
assets, liabilities, financial condition or operating results of the Company
from that reflected in the financial statements included in the Company’s Form
6-K dated November 16, 2015, except for changes in the ordinary course of
business which have not had and could not reasonably be expected to have a
Material Adverse Effect, individually or in the aggregate;
(ii) any declaration or payment of any
dividend, or any authorization or payment of any distribution, on any of the
capital stock of the Company, or any redemption or repurchase of any securities
of the Company;
(iii) any material damage, destruction
or loss, whether or not covered by insurance to any assets or properties of the
Company or its Subsidiaries;
(iv) any waiver, not in the ordinary
course of business, by the Company or any Subsidiary of a material right or of a
material debt owed to it;
(v) any satisfaction or discharge of
any lien, claim or encumbrance or payment of any obligation by the Company or a
Subsidiary, except in the ordinary course of business and which is not material
to the assets, properties, financial condition, operating results or business of
the Company and its Subsidiaries taken as a whole (as such business is presently
conducted and as it is proposed to be conducted);
(vi) any change or amendment to the
Articles of Amalgamation (other than in connection with the transactions
contemplated hereby) or Bylaws, or material change to any material contract or
arrangement by which the Company or any Subsidiary is bound or to which any of
their respective assets or properties is subject;
(vii) any material labor difficulties
or labor union organizing activities with respect to employees of the Company or
any Subsidiary;
(viii) any material transaction entered
into by the Company or a Subsidiary other than in the ordinary course of
business;
(ix) the loss of the services of any
key employee, or material change in the composition or duties of the senior
management of the Company or any Subsidiary;
(x) the loss or, to the Company’s
Knowledge, threatened loss of any customer which has had or could reasonably be
expected to have a Material Adverse Effect; or
(xi) any other event or condition of
any character that has had or could reasonably be expected to have a Material
Adverse Effect.
4.9 SEC Filings. At the time of
filing thereof, the SEC Filings complied as to form in all material respects
with the requirements of the 1934 Act and did not contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements made therein, in the light
of the circumstances under which they were made, not misleading.
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4.10 No Conflict, Breach, Violation
or Default. The execution, delivery and performance of the Transaction
Documents by the Company and the issuance and sale of the Securities will not
(i) conflict with or result in a breach or violation of (a) any of the terms and
provisions of, or constitute a default under the Articles of Amalgamation or the
Bylaws (true and complete copies of which have been made available to the
Investors through the EDGAR system), or (b) any statute, rule, regulation or
order of any governmental agency or body or any court, domestic or foreign,
having jurisdiction over the Company, any Subsidiary or any of their respective
assets or properties, or (ii) conflict with, or constitute a default (or an
event that with notice or lapse of time or both would become a default) under,
result in the creation of any lien, encumbrance or other adverse claim upon any
of the properties or assets of the Company or any Subsidiary or give to others
any rights of termination, amendment, acceleration or cancellation (with or
without notice, lapse of time or both) of, any Material Contract, except in the
case of clauses (i)(b) and (ii) above, such as could not
reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate.
4.11 Tax Matters. The Company
and each Subsidiary has prepared and filed (or filed applicable extensions
therefore) all tax returns required to have been filed by the Company or such
Subsidiary with all appropriate governmental agencies and paid all taxes shown
thereon or otherwise owed by it, other than any such taxes which the Company or
any Subsidiary are contesting in good faith and for which adequate reserves have
been provided and reflected in the Company’s financial statements included in
the SEC Filings. The charges, accruals and reserves on the books of the Company
in respect of taxes for all fiscal periods are adequate in all material
respects, and there are no material unpaid assessments against the Company or
any Subsidiary nor, to the Company’s Knowledge, any basis for the assessment of
any additional taxes, penalties or interest for any fiscal period or audits by
any federal, state or local taxing authority except for any assessment which is
not material to the Company and its Subsidiaries, taken as a whole. All taxes
and other assessments and levies that the Company or any Subsidiary is required
to withhold or to collect for payment have been duly withheld and collected and
paid to the proper governmental entity or third party when due, other than any
such taxes which the Company or any Subsidiary are contesting in good faith and
for which adequate reserves have been provided and reflected in the Company’s
financial statements included in the SEC Filings. There are no tax liens or
claims pending or, to the Company’s Knowledge, threatened in writing against the
Company or any Subsidiary or any of their respective assets or property. Except
as described in the SEC Filings, there are no outstanding tax sharing agreements
or other such arrangements between the Company and any Subsidiary or other
corporation or entity.
4.12 Title to Properties. Except
as disclosed in the SEC Filings, the Company and each Subsidiary has good and
marketable title to all real properties and all other properties and assets
(excluding Intellectual Property assets which are the subject of Section
4.15 hereof) owned by it, in each case free from liens, encumbrances and
defects that would materially affect the value thereof or materially interfere
with the use made or currently planned to be made thereof by them; and except as
disclosed in the SEC Filings, the Company and each Subsidiary holds any leased
real or personal property under valid and enforceable leases with no exceptions
that would materially interfere with the use made or currently planned to be
made thereof by them.
4.13 Certificates, Authorities and
Permits. The Company and each Subsidiary possess adequate certificates,
authorities or permits issued by appropriate governmental agencies or bodies
necessary to conduct the business now operated by it, except to the extent
failure to possess such certificates, authorities or permits could not
reasonably be expected to have a Material Adverse Effect, individually or in the
aggregate, and neither the Company nor any Subsidiary has received any notice of
proceedings relating to the revocation or modification of any such certificate,
authority or permit that, if determined adversely to the Company or such
Subsidiary, could reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate.
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4.14 Labor Matters.
(a) Except as set forth in the SEC
Filings, the Company is not a party to or bound by any collective bargaining
agreements or other agreements with labor organizations. The Company has not
violated in any material respect any laws, regulations, orders or contract
terms, affecting the collective bargaining rights of employees, labor
organizations or any laws, regulations or orders affecting employment
discrimination, equal opportunity employment, or employees’ health, safety,
welfare, wages and hours.
(b) (i) There are no labor complaint,
grievance, disputes or arbitration existing, or to the Company’s Knowledge,
threatened, involving strikes, slow-downs, work stoppages, job actions,
disputes, lockouts or any other disruptions of or by the Company’s employees,
(ii) there are no unfair labor practices or petitions for election pending or,
to the Company’s Knowledge, threatened before the Ontario Labour Relations
Board, the National Labor Relations Board or any other federal, provincial,
state or local labor commission or tribunal relating to the Company’s employees,
(iii) no demand for recognition or certification heretofore made by any labor
organization or group of employees is pending with respect to the Company and
(iv) to the Company’s Knowledge, the Company enjoys good labor and employee
relations with its employees and labor organizations.
(c) The Company is, and at all times
has been, in compliance with all applicable laws respecting employment
(including laws relating to classification of employees and independent
contractors) and employment practices, terms and conditions of employment, wages
and hours, and immigration and naturalization, except where the failure to so
comply could not reasonably be expected to have a Material Adverse Effect,
individually or in the aggregate. There are no claims pending against the
Company before the Human Rights Code, the Equal Employment Opportunity
Commission or any other administrative body or in any court asserting any
violation of the Human Rights Code, Title VII of the Civil Rights Act of 1964,
the Age Discrimination Act of 1967, 42 U.S.C. §§ 1981 or 1983 or any other
federal, provincial, state or local Law, statute or ordinance barring
discrimination in employment.
(d) To the Company’s Knowledge, the
Company has no liability for the improper classification by the Company of its
employees as independent contractors or leased employees prior to the Closing.
4.15 Intellectual Property. The
Company and the Subsidiaries own, or have obtained valid and enforceable
licenses for, or other rights to use, the Intellectual Property necessary for
the conduct of the business of the Company and the Subsidiaries as currently
conducted and as described in the SEC Filings as being owned or licensed by
them, except where the failure to own, license or have such rights could not
reasonably be expected to result in a Material Adverse Effect, individually or
in the aggregate. Except as described in the SEC Filings, (i) to the Company’s
Knowledge, there are no third parties who have or will be able to establish
rights to any Intellectual Property, except for the ownership rights of the
owners of the Intellectual Property which is licensed to the Company as
described in the SEC Filings or where such rights could not reasonably be
expected to result in a Material Adverse Effect, individually or in the
aggregate, (ii) there is no pending or, to the Company’s Knowledge, threat of
any, action, suit, proceeding or claim by others challenging the Company’s or
any Subsidiary’s rights in or to, or the validity, enforceability, or scope of,
any Intellectual Property owned by or licensed to the Company or any Subsidiary
or claiming that the use of any Intellectual Property by the Company or any
Subsidiary in their respective businesses as currently conducted infringes,
violates or otherwise conflicts with the intellectual property rights of any
third party, and (iii) to the Company’s Knowledge, the use by the Company or any
Subsidiary of any Intellectual Property by the Company or any Subsidiary in
their respective businesses as currently conducted does not infringe,
violate or otherwise conflict with the intellectual property rights of any third
party.
S-A-9
4.16 Environmental Matters. To
the Company’s Knowledge, neither the Company nor any Subsidiary is in violation
of any statute, rule, regulation, decision or order of any governmental agency
or body or any court, domestic or foreign, relating to the use, disposal or
release of hazardous or toxic substances or relating to the protection or
restoration of the environment or human exposure to hazardous or toxic
substances (collectively, “Environmental Laws”), owns or operates any
real property contaminated with any substance that is subject to any
Environmental Laws, is liable for any off-site disposal or contamination
pursuant to any Environmental Laws, or is subject to any claim relating to any
Environmental Laws, which violation, contamination, liability or claim has had
or could reasonably be expected to have a Material Adverse Effect, individually
or in the aggregate; and there is no pending or, to the Company’s Knowledge,
threatened investigation that might lead to such a claim.
4.17 Litigation. There are no
pending actions, suits or proceedings against or affecting the Company, its
Subsidiaries or any of its or their properties; and to the Company’s Knowledge,
no such actions, suits or proceedings are threatened, except (i) as described in
the SEC Filings or (ii) any such proceeding, which if resolved adversely to the
Company or any Subsidiary, could not reasonably be expected to have a Material
Adverse Effect, individually or in the aggregate. Neither the Company nor any
Subsidiary, nor any director or officer thereof, is or since January 1, 2014 has
been the subject of any action involving a claim of violation of or liability
under federal, provincial, or state securities laws or a claim of breach of
fiduciary duty. There has not been, and to the Company’s Knowledge, there is not
pending or contemplated, any investigation by the OSC (or any other Canadian
securities regulatory authority) or SEC involving the Company or any current or
former director or officer of the Company. The SEC has not issued any stop order
or other order suspending the effectiveness of any registration statement filed
by the Company or any Subsidiary under the 1933 Act or the 1934 Act.
4.18 Financial Statements. The
financial statements included in each SEC Filing comply in all material respects
with applicable accounting requirements and the rules and regulations of the SEC
with respect thereto as in effect at the time of filing (or to the extent
corrected by a subsequent restatement) and present fairly, in all material
respects, the consolidated financial position of the Company as of the dates
shown and its consolidated results of operations and cash flows for the periods
shown, and such financial statements have been prepared in conformity with
United States generally accepted accounting principles applied on a consistent
basis (“GAAP”) (except as may be disclosed therein or in the notes
thereto). Except as set forth in the SEC Filings filed prior to the date hereof,
neither the Company nor any of its Subsidiaries has incurred any liabilities,
contingent or otherwise, except those incurred in the ordinary course of
business, consistent (as to amount and nature) with past practices since the
date of such financial statements, none of which, individually or in the
aggregate, have had or could reasonably be expected to have a Material Adverse
Effect.
4.19 Insurance Coverage. The
Company and each Subsidiary maintain in full force and effect insurance coverage
that is customary for comparably situated companies for the business being
conducted and properties owned or leased by the Company and each Subsidiary.
4.20 Compliance with Nasdaq
Continued Listing Requirements. Except as disclosed in the SEC Filings, (i)
the Company is in compliance with applicable Nasdaq continued listing
requirements, (ii) there are no proceedings pending or, to the Company’s
Knowledge, threatened against the Company relating to the continued listing of
the Common Shares on Nasdaq, and (iii) the Company has not received any
currently pending notice of the delisting of the Common Shares from Nasdaq.
S-A-10
4.21 Brokers and Finders. No
Person, including, without limitation, any Investor or any current holder of
Common Shares, will have, as a result of the transactions contemplated by the
Transaction Documents, any valid right, interest or claim against or upon the
Company, any Subsidiary or an Investor for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of the Company.
4.22 No Integrated Offering.
Assuming the accuracy of the Investors’ representations and warranties set forth
in Section 5 hereof, neither the Company nor any of its Affiliates, nor
any Person acting on its or their behalf has, directly or indirectly, made any
offers or sales of any Company security or solicited any offers to buy any
security, which are or will be integrated with this offering of the Securities
hereunder in a manner that would adversely affect reliance by the Company on
Section 4(a)(2) for the exemption from registration for the transactions
contemplated hereby or would require registration of the Securities under the
1933 Act.
4.23 Private Placement. Assuming
the accuracy of the Canadian Investors’ representations and warranties set forth
in Schedule IV hereto, the offer and sale of the Securities to the Canadian
Investors as contemplated hereby is exempt from the prospectus requirement under
applicable Canadian Securities Laws.
4.24 Questionable
Payments. Neither the Company nor any of its Subsidiaries nor,
to the Company’s Knowledge, any of their respective current or former
shareholders, directors, officers, employees, agents or other Persons acting on
behalf of the Company or any Subsidiary, has, on behalf of the Company or any
Subsidiary or in connection with their respective businesses, (i) used any
corporate funds for unlawful contributions, gifts, entertainment or other
unlawful expenses relating to political activity, (ii) made any direct or
indirect unlawful payments to any governmental officials or employees from
corporate funds, (iii) established or maintained any unlawful or unrecorded fund
of corporate monies or other assets, (iv) made any false or fictitious entries
on the books and records of the Company or any Subsidiary, or (v) made any
unlawful bribe, rebate, payoff, influence payment, kickback or other unlawful
payment of any nature.
4.25 Transactions with
Affiliates. Except as disclosed in the SEC Filings and except as would not
be required to be disclosed in the SEC Filings, none of the officers or
directors of the Company and, to the Company’s Knowledge, none of the employees
of the Company is presently a party to any transaction with the Company or any
Subsidiary (other than as holders of stock options and/or warrants, and for
services as employees, officers and directors), including any contract,
agreement or other arrangement providing for the furnishing of services to or
by, providing for rental of real or personal property to or from, or otherwise
requiring payments to or from any officer, director or such employee or, to the
Company’s Knowledge, any entity in which any officer, director, or any such
employee has a substantial interest or is an officer, director, trustee or
partner.
4.26 Internal Controls. The
Company is in material compliance with the provisions of the Sarbanes-Oxley Act
of 2002 currently applicable to the Company. The Company and the Subsidiaries
maintain a system of internal accounting controls sufficient to provide
reasonable assurance that (i) transactions are executed in accordance with
management’s general or specific authorizations, (ii) transactions are recorded
as necessary to permit preparation of financial statements in conformity with
GAAP and to maintain asset accountability, (iii) access to assets is permitted
only in accordance with management’s general or specific authorization, and (iv)
the recorded accountability for assets is compared with the existing assets at
reasonable intervals and appropriate action is taken with respect to any
differences. The Company has established disclosure controls and procedures (as
defined in 1934 Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed
such disclosure controls and procedures to ensure that material information
relating to the Company, including the Subsidiaries, is made known to the certifying officers by others within those entities,
particularly during the period in which the Company’s most recently filed
periodic report under the 1934 Act, as the case may be, is being prepared. The
Company’s certifying officers have evaluated the effectiveness of the Company’s
disclosure controls and procedures as of the end of the period covered by the
most recently filed periodic report under the 1934 Act (such date, the
“Evaluation Date”). The Company presented in its most recently filed
periodic report under the 1934 Act the conclusions of the certifying officers
about the effectiveness of the disclosure controls and procedures based on their
evaluations as of the Evaluation Date. Since the Evaluation Date, there have
been no significant changes in the Company’s internal controls (as such term is
defined in Item 308 of Regulation S-K) or, to the Company’s Knowledge, in other
factors that could significantly affect the Company’s internal controls. The
Company maintains and will continue to maintain a standard system of accounting
established and administered in accordance with GAAP and the applicable
requirements of the 1934 Act.
S-A-11
4.27 Investment Company. The
Company is not required to be registered as, and is not an Affiliate of, and
immediately following the Closing will not be required to register as, an
“investment company” within the meaning of the Investment Company Act of 1940,
as amended.
Each of the Investors acknowledges and agrees that the Company
has not made any representations or warranties with respect to the transactions
contemplated hereby other than those specifically set forth in this Section
4. Each of the Investors further acknowledges and agrees that neither the
Company nor any other Person has made any representation or warranty, expressed
or implied, as to the accuracy or completeness of any information received by
any such Investor which constitutes or may be deemed to constitute a projection,
estimate or other forecast and certain business plan information, except that
such information was prepared in good faith and based upon assumptions that the
Company believes to have been reasonable at the time such information, if any,
was provided to the applicable Investor.
5. Representations and Warranties of
the Investors. Each of the Investors hereby severally, and not jointly,
represents and warrants to the Company that:
5.1 Organization and Existence.
Such Investor is a corporation, limited partnership or limited liability
company, it is duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation or organization and has all
requisite corporate, partnership or limited liability company power and
authority to enter into and to consummate the transactions contemplated by the
Transaction Documents and otherwise to carry out its obligations hereunder and
thereunder.
5.2 Authorization. The
execution, delivery and performance by such Investor of the Transaction
Documents to which such Investor is a party have been duly authorized and each
will constitute the legal, valid and binding obligation of such Investor,
enforceable against such Investor in accordance with their respective terms,
subject to bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium and similar laws of general applicability, relating to or affecting
creditors’ rights generally.
5.3 Consents. All consents,
approvals, orders and authorizations required on the part of such Investor in
connection with the execution, delivery or performance of each Transaction
Document and the consummation of the transactions contemplated hereby and
thereby have been obtained and are effective as of the date hereof.
5.4 Purchase Entirely for Own
Account. The Securities to be received by such Investor hereunder will be
acquired for such Investor’s own account, not as nominee, trustee,
representative or agent, and not with a view to the resale or distribution of
any part thereof in violation of the 1933 Act, and such Investor has no present intention of
selling, granting any participation in, or otherwise distributing the same and
has no arrangement or understanding with any other Persons regarding the
distribution of such Securities in violation of the 1933 Act or any applicable
federal, provincial or state securities law without prejudice, however, to such
Investor’s right at all times to sell or otherwise dispose of all or any part of
such Securities in compliance with applicable federal, provincial and state
securities laws. Such Investor is acquiring the Securities hereunder in
the ordinary course of its business. Nothing contained herein shall be deemed a
representation or warranty by such Investor to hold the Securities for any
period of time. Such Investor is not a broker-dealer registered with the SEC
under the 1934 Act or an entity engaged in a business that would require it to
be so registered.
S-A-12
5.5 Investment Experience. Such
Investor acknowledges that it can bear the economic risk and complete loss of
its investment in the Securities and has such knowledge and experience in
financial or business matters that it is capable of evaluating the merits and
risks of the investment contemplated hereby.
5.6 Disclosure of Information.
Such Investor has had an opportunity to receive all information related to the
Company requested by it and to ask questions of and receive answers from the
Company regarding the Company, its business and the terms and conditions of the
offering of the Securities. Such Investor acknowledges receipt of copies of the
SEC Filings. Neither such inquiries nor any other due diligence investigation
conducted by such Investor shall modify, limit or otherwise affect such
Investor’s right to rely on the Company’s representations and warranties
contained in this Agreement.
5.7 Accredited Investor. (i) In
the case of a non-Canadian Investor, such Investor is an accredited investor as
defined in Rule 501(a) of Regulation D, as amended, under the 1933 Act, or (ii)
in the case of a Canadian investor, has completed, executed and delivered to the
Company the form attached hereto as Schedule IV. Such Investor was not organized
for the specific purpose of acquiring the Securities and is not required to be
registered as a broker-dealer under Section 15 of the Exchange Act. Each
Canadian Investor shall complete, execute and deliver to the Company the form
attached hereto as Schedule IV.
5.8 Legends. It is understood
that certificates evidencing the Securities may bear a legend in accordance with
Canadian Securities Laws in substantially the form set out in Schedule IV hereto
and, in the event that no physical certificates bearing such legend are issued,
written notice of the legend restriction under applicable Canadian Securities
Laws is hereby provided.
5.9 Brokers and Finders. No
Person will have, as a result of the transactions contemplated by the
Transaction Documents, any valid right, interest or claim against or upon the
Company, any Subsidiary or an Investor for any commission, fee or other
compensation pursuant to any agreement, arrangement or understanding entered
into by or on behalf of such Investor.
5.10 Prohibited Transactions.
Since the such time as such Investor was first contacted by the Company or any
other Person acting on behalf of the Company regarding the transactions
contemplated hereby through the public announcement of the Transaction, neither
such Investor nor any Affiliate of such Investor which (a) had knowledge of the
transactions contemplated hereby, (b) has or shares discretion relating to such
Investor’s investments or trading or information concerning such Investor’s
investments, including in respect of the Securities, or (c) is subject to such
Investor’s review or input concerning such Affiliate’s investments or trading
(collectively, “Trading Affiliates”) has, directly or indirectly,
effected or agreed to effect, or will directly or indirectly effect, any short
sale, whether or not against the box, established any “put equivalent position”
(as defined in Rule 16a-1(h) under the 1934 Act) with respect to the Common
Shares, granted any other right (including, without limitation, any put or call option) with respect to the Common Shares or with respect
to any security that includes, relates to or derived any significant part of its
value from the Common Shares or otherwise sought to hedge its position in the
Securities (each, a “Prohibited Transaction”). Such Investor acknowledges that
the representations, warranties and covenants contained in this Section
5.10 are being made for the benefit of the Investors as well as the Company
and that each of the other Investors shall have an independent right to assert
any claims against such Investor arising out of any breach or violation of the
provisions of this Section 5.10.
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5.11 Beneficial Ownership.
Immediately following such Investor’s purchase of the Securities hereunder, such
Investor, together with its Affiliates, will not beneficially own or be deemed
the beneficial owner of more than 9.9999% of all such Common Shares and other
voting securities of the Company. For the purposes of this Section 5.11,
beneficial ownership shall be determined in accordance with Section 13(d) of the
1934 Act.
The Company acknowledges and agrees that each Investor has not
made any representations or warranties with respect to the transactions
contemplated by the Transaction Documents other than those specifically set
forth in this Section 5 and, in the case of each Canadian investor,
Schedule IV hereto.
6. Conditions to Closing.
6.1 Conditions to the Investors’
Obligations. The obligation of each Investor to purchase the Shares and the
Warrants at the Closing is subject to the fulfillment to such Investor’s
satisfaction, on or prior to the Closing Date, of the following conditions, any
of which may be waived by such Investor (as to itself only):
(a) The representations and warranties
made by the Company in Section 4 hereof qualified as to materiality shall
be true and correct at all times prior to and on the Closing Date as so
qualified, except to the extent any such representation or warranty expressly
speaks as of an earlier date, in which case such representation or warranty
shall be true and correct as of such earlier date as so qualified, and, the
representations and warranties made by the Company in Section 4 hereof
not qualified as to materiality shall be true and correct in all material
respects at all times prior to and on the Closing Date, except to the extent any
such representation or warranty expressly speaks as of an earlier date, in which
case such representation or warranty shall be true and correct in all material
respects as of such earlier date. The Company shall have performed in all
material respects all obligations and covenants herein required to be performed
by it on or prior to the Closing Date.
(b) The Company shall have obtained any
and all consents, permits, approvals, registrations and waivers necessary or
appropriate for consummation of the purchase and sale of the Securities and the
consummation of the other transactions contemplated by the Transaction
Documents, all of which shall be in full force and effect.
(c) The Company shall have filed with
Nasdaq a Notification Form: Listing of Additional Shares for the listing of the
Shares and the Warrant Shares on Nasdaq, a copy of which shall have been
provided to the Investors.
(d) No judgment, writ, order,
injunction, award or decree of or by any court, or judge, justice or magistrate,
including any bankruptcy court or judge, or any order of or by any governmental
authority, shall have been issued, and no action or proceeding shall have been
instituted by any governmental authority, enjoining or preventing the
consummation of the transactions contemplated hereby or in the other Transaction
Documents.
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(e) The Company shall have delivered a
certificate, executed on behalf of the Company by its Chief Executive Officer or
its Chief Financial Officer, dated as of the Closing Date, certifying to the
fulfillment of the conditions specified in subsections (a), (b),
(d) and (h) of this Section 6.1.
(f) The Company shall have delivered a
certificate, executed on behalf of the Company by its Secretary, dated as of the
Closing Date, certifying the resolutions adopted by the Board of Directors of
the Company or any duly authorized committee thereof approving the transactions
contemplated by this Agreement and the other Transaction Documents and the
issuance of the Securities, certifying the current versions of the Articles of
Amalgamation and Bylaws and certifying as to the signatures and authority of
persons signing the Transaction Documents and related documents on behalf of the
Company.
(g) The Investors shall have received
an opinion from O’Melveny & Myers LLP, U.S. special counsel to the Company,
and an opinion from Stikeman Elliott LLP, Canadian special counsel to the
Company, each dated as of the Closing Date, in form and substance reasonably
acceptable to the Investors and addressing such legal matters as the Investors
may reasonably request.
(h) No stop order or suspension of
trading shall have been imposed by Nasdaq, the SEC or any other governmental or
regulatory body with respect to public trading in the Common Shares.
6.2 Conditions to Obligations of the
Company. The Company’s obligation to sell and issue the Shares and the
Warrants at Closing is subject to the fulfillment to the satisfaction of the
Company on or prior to the Closing Date of the following conditions, any of
which may be waived by the Company:
(a) The representations and warranties
made by the Investors in Section 5 hereof and, in the case of Canadian
Investors, Schedule IV hereto, other than the representations and
warranties contained in Sections 5.4, 5.5, 5.6, 5.7,
and 5.8 (the “Investment Representations”), shall be true and
correct in all material respects when made, and shall be true and correct in all
material respects on the Closing Date with the same force and effect as if they
had been made on and as of said date. The Investment Representations shall be
true and correct in all respects when made, and shall be true and correct in all
respects on the Closing Date with the same force and effect as if they had been
made on and as of said date. The Investors shall have performed in all material
respects all obligations and covenants herein required to be performed by them
on or prior to the Closing Date; and
(b) The Investors shall have delivered
the Purchase Price to the Company.
6.3 Termination of Obligations to
Effect Closing; Effects.
(a) The obligations of the Company, on
the one hand, and the Investors, on the other hand, to effect the Closing shall
terminate as follows:
(i) Upon the mutual written consent of
the Company and the Investors;
(ii) By the Company if any of the
conditions set forth in Section 6.2 shall have become incapable of
fulfillment, and shall not have been waived by the Company;
S-A-15
(iii) By an Investor (with respect to
itself only) if any of the conditions set forth in Section 6.1 shall have become
incapable of fulfillment, and shall not have been waived by the Investor; or
(iv) By either the Company or any
Investor (with respect to itself only) if the Closing has not occurred on or
prior to ;
provided, however, that, except in the case of
clause (i) above, the party seeking to terminate its obligation to effect
the Closing shall not then be in breach of any of its representations,
warranties, covenants or agreements contained in this Agreement or the other
Transaction Documents if such breach has resulted in the circumstances giving
rise to such party’s seeking to terminate its obligation to effect the Closing.
(b) In the event of termination by the
Company or any Investor of its obligations to effect the Closing pursuant to
this Section 6.3, written notice thereof shall forthwith be given to the
other Investors by the Company and the other Investors shall have the right to
terminate their obligations to effect the Closing upon written notice to the
Company and the other Investors. Nothing in this Section 6.3 shall be
deemed to release any party from any liability for any breach by such party of
the terms and provisions of this Agreement or the other Transaction Documents or
to impair the right of any party to compel specific performance by any other
party of its obligations under this Agreement or the other Transaction
Documents.
7. Covenants and Agreements.
7.1 Reservation of Common
Shares. The Company shall at all times reserve and keep available out of its
authorized but unissued Common Shares, solely for the purpose of providing for
the exercise of the Warrants, such number of Common Shares as shall from time to
time equal the Warrant Shares issuable from time to time.
7.2 No Conflicting Agreements.
Prior to the Closing, the Company will not take any action, enter into any
agreement or make any commitment that would conflict or interfere in any
material respect with the Company’s obligations to the Investors under the
Transaction Documents.
7.3 Compliance with Laws. The
Company will comply in all material respects with all laws, rules, regulations,
orders and decrees of all governmental authorities applicable to this Agreement
and the transactions contemplated hereby.
7.4 Listing of Shares and Related
Matters. Promptly following the date hereof, the Company shall take all
necessary action to cause the Shares and the Warrant Shares to be listed on
Nasdaq no later than the Closing Date. Further, if the Company applies to have
its Common Shares or other securities traded on any other principal stock
exchange or market, it shall include in such application the Shares and the
Warrant Shares and will take such other action as is necessary to cause such
Common Shares to be so listed. The Company will use commercially reasonable
efforts to continue the listing and trading of its Common Shares on Nasdaq and,
in accordance, therewith, will use commercially reasonable efforts to comply in
all respects with the Company’s reporting, filing and other obligations under
the bylaws or rules of such market or exchange, as applicable.
7.5 Subsequent Equity Sales. The
Company shall not, and shall use its commercially reasonable efforts to ensure
that no Affiliate of the Company shall, sell, offer for sale or solicit offers
to buy or otherwise negotiate in respect of any security (as defined in Section
2 of the 1933 Act) that will be integrated with the offer or sale of the
Securities in a manner that would require the registration under the 1933 Act of the sale of the Securities to the Investors, or
that will be integrated with the offer or sale of the Securities for purposes of
the rules and regulations of any trading market such that it would require
shareholder approval prior to the closing of such other transaction unless
shareholder approval is obtained before the closing of such subsequent
transaction.
S-A-16
7.6 Equal Treatment of
Investors. No consideration shall be offered or paid to any Person to amend
or consent to a waiver or modification of any provision of any of the
Transaction Documents unless the same consideration is also offered to all of
the parties to the Transaction Documents. For clarification purposes, this
provision constitutes a separate right granted to each Investor by the Company
and negotiated separately by each Investor, and is intended for the Company to
treat the Investors as a class and shall not in any way be construed as the
Investors acting in concert or as a group with respect to the purchase,
disposition or voting of Securities or otherwise.
8. Survival and Indemnification.
8.1 Survival. The
representations, warranties, covenants and agreements contained in this
Agreement shall survive the Closing of the transactions contemplated by this
Agreement until the expiration of the applicable statute of limitations.
8.2 Indemnification. The
Company agrees to indemnify and hold harmless each Investor and its Affiliates
and their respective directors, officers, trustees, members, managers, employees
and agents, and their respective successors and assigns, from and against any
and all losses, claims, damages, liabilities and expenses (including, without
limitation, reasonable attorney fees and disbursements (subject to Section
8.3 below) and other expenses incurred in connection with investigating,
preparing or defending any action, claim or proceeding, pending or threatened
and the costs of enforcement thereof) (collectively, “Losses”) to which
such Person may become subject as a result of any breach of any representation,
warranty, covenant or agreement made by or to be performed on the part of the
Company under the Transaction Documents, and will reimburse any such Person for
all such amounts as they are incurred by such Person.
8.3 Conduct of Indemnification
Proceedings. Any person entitled to indemnification hereunder
shall (i) give prompt notice to the indemnifying party of any claim with respect
to which it seeks indemnification and (ii) permit such indemnifying party to
assume the defense of such claim with counsel reasonably satisfactory to the
indemnified party; provided that any person entitled to indemnification
hereunder shall have the right to employ separate counsel and to participate in
the defense of such claim, but the fees and expenses of such counsel shall be at
the expense of such person unless (a) the indemnifying party has agreed to pay
such fees or expenses, (b) the indemnifying party shall have failed to assume
the defense of such claim and employ counsel reasonably satisfactory to such
person or (c) in the reasonable judgment of any such person, based upon written
advice of its counsel, a conflict of interest exists between such person and the
indemnifying party with respect to such claims (in which case, if the person
notifies the indemnifying party in writing that such person elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such claim on behalf of
such person); and provided, further, that the failure of any
indemnified party to give notice as provided herein shall not relieve the
indemnifying party of its obligations hereunder, except to the extent that such
failure to give notice shall materially adversely affect the indemnifying party
in the defense of any such claim or litigation. It is understood that the
indemnifying party shall not, in connection with any proceeding in the same
jurisdiction, be liable for fees or expenses of more than one separate firm of
attorneys at any time for all such indemnified parties. No indemnifying party
will, except with the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement that does not include as an unconditional
term thereof the giving by the claimant or plaintiff to such indemnified party
of a release from all liability in respect of such claim or litigation. The Company will not be liable to any indemnified
party under this Agreement (x) for any settlement by such indemnified party
effected without the Company’s prior written consent, which shall not be
unreasonably withheld, conditioned or delayed, or (y) for any Losses incurred by
such indemnified party which a court of competent jurisdiction determines in a
final judgment which is not subject to further appeal are solely attributable to
(A) a breach of any of the representations, warranties, covenants or agreements
made by such indemnified party under this Agreement or in any other Transaction
Document or (B) the fraud, gross negligence or willful misconduct of such
indemnified party.
S-A-17
9. Miscellaneous.
9.1 Successors and Assigns. This
Agreement may not be assigned by a party hereto without the prior written
consent of the Company or the Investors, as applicable, provided, however, that
an Investor may assign its rights and delegate its duties hereunder in whole or
in part to an Affiliate or to a third party acquiring some or all of its
Securities in a transaction complying with applicable securities laws without
the prior written consent of the Company or the other Investors. The provisions
of this Agreement shall inure to the benefit of and be binding upon the
respective permitted successors and assigns of the parties. Without limiting the
generality of the foregoing, in the event that the Company is a party to a
merger, amalgamation, consolidation, share exchange or similar business
combination transaction in which the Common Shares is converted into the equity
securities of another Person, from and after the effective time of such
transaction, such Person shall, by virtue of such transaction, be deemed to have
assumed the obligations of the Company hereunder, the term “Company” shall be
deemed to refer to such Person and the term “Common Shares” shall be deemed to
refer to the securities received by the Investors in connection with such
transaction. Nothing in this Agreement, express or implied, is intended to
confer upon any party other than the parties hereto or their respective
successors and assigns any rights, remedies, obligations, or liabilities under
or by reason of this Agreement, except as expressly provided in this Agreement.
9.2 Counterparts; Faxes. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
instrument. This Agreement may also be executed via facsimile, which shall be
deemed an original.
9.3 Titles and Subtitles. The
titles and subtitles used in this Agreement are used for convenience only and
are not to be considered in construing or interpreting this Agreement.
9.4 Notices. Unless otherwise
provided, any notice required or permitted under this Agreement shall be given
in writing and shall be deemed effectively given as hereinafter described (i) if
given by personal delivery, then such notice shall be deemed given upon such
delivery, (ii) if given by electronic mail, telex or telecopier, then such
notice shall be deemed given upon receipt of confirmation of complete
transmittal, (iii) if given by mail, then such notice shall be deemed given upon
the earlier of (a) receipt of such notice by the recipient or (b) three days
after such notice is deposited in first class mail, postage prepaid, and (iv) if
given by an internationally recognized overnight air courier, then such notice
shall be deemed given one Business Day after delivery to such carrier. All
notices shall be addressed to the party to be notified at the address as
follows, or at such other address as such party may designate by ten days’
advance written notice to the other party:
If to the Company:
| |
Sphere 3D Corp. |
| |
9112 Spectrum
Center Boulevard |
| |
San Diego, California 92123 |
| |
Attention: |
Kurt Kalbfleisch, Chief Financial Officer
|
| |
Fax: |
(858) 495-4267 |
S-A-18
With a copy to:
| |
O’Melveny & Myers LLP |
| |
2756 Sand Hill Road |
| |
Menlo Park, California 94025 |
| |
Attention: |
Warren T. Lazarow, Esq. |
| |
|
Paul L. Sieben, Esq. |
| |
Fax: |
(650) 473-2601 |
If to the Investors:
__________________
__________________
__________________
__________________
9.5 Expenses. The parties hereto
shall pay their own costs and expenses in connection herewith, regardless of
whether the transactions contemplated hereby are consummated. In the event that
legal proceedings are commenced by any party to this Agreement against another
party to this Agreement in connection with this Agreement or the other
Transaction Documents, the party or parties which do not prevail in such
proceedings shall severally, but not jointly, pay their pro rata share of the
reasonable attorneys’ fees and other reasonable out-of-pocket costs and expenses
incurred by the prevailing party in such proceedings.
9.6 Amendments and Waivers. Any
term of this Agreement may be amended and the observance of any term of this
Agreement may be waived (either generally or in a particular instance and either
retroactively or prospectively), only with the written consent of the Company
and the Investors. Any amendment or waiver effected in accordance with this
paragraph shall be binding upon each holder of any Securities purchased under
this Agreement at the time outstanding, each future holder of all such
Securities, and the Company.
9.7 Securities Laws Disclosure;
Publicity. The Company and each Investor shall consult with each other in
issuing any press releases with respect to the transactions contemplated hereby,
and, except as may be required by law, neither the Company nor any Investor
shall issue any such press release or otherwise make any such public statement
without the prior consent of the Company, with respect to any press release of
any Investor, or without the prior consent of each Investor, with respect to any
press release of the Company, which consent shall not unreasonably be withheld
or delayed, except if such disclosure is required by law, in which case the
disclosing party shall promptly provide the other party with prior notice of
such public statement or communication. Notwithstanding the foregoing, the
Company shall not publicly disclose the name of any Investor, or include the
name of any Investor in any filing with the SEC or any regulatory agency or
Nasdaq, without the prior written consent of such Investor, except (i) in any
press release disclosing the material terms of the transactions contemplated
hereby, (ii) the filing of this Agreement (including the signature pages
hereto), any Prospectus Supplement, any filings required to be made with the OSC
and the Form 6-K with the SEC, and (iii) to the extent such disclosure is
required by law or any Nasdaq regulations, in which case (subject, in the case
of Canadian Investors, to agreements and notices already made and acknowledged
in Schedule IV hereto) the Company shall provide the Investors with prior notice of
such disclosure permitted under this subclause (iii).
S-A-19
9.8 Severability. Any provision
of this Agreement that is prohibited or unenforceable in any jurisdiction shall,
as to such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof but shall
be interpreted as if it were written so as to be enforceable to the maximum
extent permitted by applicable law, and any such prohibition or unenforceability
in any jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction. To the extent permitted by applicable law, the
parties hereby waive any provision of law which renders any provision hereof
prohibited or unenforceable in any respect.
9.9 Entire Agreement. This
Agreement, including the Exhibits and the Schedules, and the other Transaction
Documents constitute the entire agreement among the parties hereof with respect
to the subject matter hereof and thereof and supersede all prior agreements and
understandings, both oral and written, between the parties with respect to the
subject matter hereof and thereof.
9.10 Further Assurances. The
parties shall execute and deliver all such further instruments and documents and
take all such other actions as may reasonably be required to carry out the
transactions contemplated hereby and to evidence the fulfillment of the
agreements herein contained.
9.11 Governing Law; Consent to
Jurisdiction; Waiver of Jury Trial. This Agreement shall be governed by, and
construed in accordance with, the internal laws of the State of New York
applicable to agreements made and to be performed entirely within the State of
New York (except to the extent the provisions of the Business Corporations Act
(Ontario) would be mandatorily applicable to the issuance of the Shares, the
Warrants or the Warrant Shares). Each of the parties hereto irrevocably submits
to the exclusive jurisdiction of the courts of the State of New York located in
New York County and the United States District Court for the Southern District
of New York for the purpose of any suit, action, proceeding or judgment relating
to or arising out of this Agreement and the transactions contemplated hereby.
Service of process in connection with any such suit, action or proceeding may be
served on each party hereto anywhere in the world by the same methods as are
specified for the giving of notices under this Agreement. Each of the parties
hereto irrevocably consents to the jurisdiction of any such court in any such
suit, action or proceeding and to the laying of venue in such court. Each party
hereto irrevocably waives any objection to the laying of venue of any such suit,
action or proceeding brought in such courts and irrevocably waives any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum. TO THE EXTENT ALLOWABLE UNDER APPLICABLE
LAW, EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN
ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS
BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.
S-A-20
9.12 Independent Nature of
Investors’ Obligations and Rights. The obligations of each Investor under
any Transaction Document are several and not joint with the obligations of any
other Investor, and no Investor shall be responsible in any way for the
performance of the obligations of any other Investor under any Transaction
Document. The decision of each Investor to purchase Securities pursuant to the
Transaction Documents has been made by such Investor independently of any other
Investor. Nothing contained herein or in any Transaction Document, and no action
taken by any Investor pursuant thereto, shall be deemed to constitute the
Investors as a partnership, an association, a joint venture or any other kind of
entity, or create a presumption that the Investors are in any way acting in
concert or as a group with respect to such obligations or the transactions
contemplated by the Transaction Documents. Each Investor acknowledges that no
other Investor has acted as agent for such Investor in connection with making
its investment hereunder and that no Investor will be acting as agent of such
Investor in connection with monitoring its investment in the
Securities or enforcing its rights under the Transaction Documents. Each
Investor shall be entitled to independently protect and enforce its rights,
including, without limitation, the rights arising out of this Agreement or out
of the other Transaction Documents, and it shall not be necessary for any other
Investor to be joined as an additional party in any proceeding for such purpose.
Each Investor has been represented by its own separate legal counsel in their
review and negotiation of the Transaction Documents. The Company acknowledges
that each of the Investors has been provided with the same Transaction Documents
for the purpose of closing a transaction with multiple Investors and not because
it was required or requested to do so by any Investor.
[Signature page follows]
S-A-21
IN WITNESS WHEREOF, the parties have executed this Agreement or
caused their duly authorized officers to execute this Agreement as of the date
first above written.
| The Company: |
SPHERE 3D CORP. |
| |
|
| |
|
| |
|
| |
By:_________________________ |
| |
Name: |
| |
Title: |
[Signature Page to Sphere 3D Subscription Agreement]
S-A-22
| The Investors: |
_________________________ |
| |
|
| |
By:______________________ |
| |
Name: |
| |
Title: |
| |
|
| |
|
| Address for Notice: |
|
| |
_________________________ |
| |
_________________________ |
| |
_________________________ |
| |
Fax:______________________ |
| Investor Aggregate Purchase Price: |
US$______________________ |
[Signature Page to Sphere 3D Subscription Agreement]
S-A-23
Schedule I
Purchase and Sale of Shares and Warrants
| Name |
Number of Shares |
Number of Warrant
Shares |
Aggregate
Purchase
Price |
| |
|
|
US$ |
S-A-24
Schedule II
Material Contracts
| • |
Surplus Escrow Agreement dated December 20,
2012. |
| |
|
| • |
Value Escrow Agreement dated December 20, 2012.
|
| |
|
| • |
Voting Agreements each dated July 15, 2013
between Eric L. Kelly and various shareholders of the Company. |
| |
|
| • |
Board Nomination Right Agreement dated July 15,
2013 between Eric L. Kelly and the Company. |
| |
|
| • |
Warrant Indenture Agreement dated November 12,
2013 between Equity Financial Trust Company and the Company. |
| |
|
| • |
Asset Purchase Agreement dated February 11,
2014 by and among V3 Systems, V3 Systems Holdings, Inc. and Sphere 3D.
|
| |
|
| • |
Warrant Indenture dated June 5, 2014 between
the Company and Equity Financial Trust Company. |
| |
|
| • |
Convertible Debenture dated December 1, 2014
between the Company and FBC Holdings S.A.R.L. for $19.5 million. |
| |
|
| • |
Escrow Agreement dated December 1, 2014 between
the Company and Continental Stock Transfer and Trust Company. |
| |
|
| • |
Revolving Credit Agreement dated December 30,
2014 between the Company, Overland Storage, Inc. and FBC Holdings
S.A.R.L., as amended. |
| |
|
| • |
Amended and Restated Loan and Security
Agreement dated December 31, 2014 between Overland, Tandberg Data GmbH,
Sphere 3D, and Silicon Valley Bank, as amended. |
S-A-25
Schedule III
SVB Credit Facility
Pursuant to that certain Amended and Restated Loan and Security
Agreement, dated December 31, 2014, by and among Overland Storage, Inc.,
Tandberg Data GmbH, the Company, and Silicon Valley Bank, the stock of V3
Systems Holdings, Inc., Sphere 3D Inc., Frostcat Technologies Inc., Overland
Storage, Inc., Tandberg Data Corporation, Zetta Systems, Inc. and Tandberg Data
GmbH have been pledged as collateral.
FBC Facilities
Pursuant to the Revolving Credit Agreement dated as of December
31, 2014 among Sphere 3D Corp., Overland Storage, Inc. and Sphere 3D Corp., (i)
the stock of V3 Systems Holdings, Inc., Sphere 3D Inc., Frostcat Technologies
Inc., Overland Storage, Inc., Tandberg Data Corporation, and Zetta Systems, Inc.
and (ii) 65% of the stock of Overland Storage (Europe) Limited, Overland Storage
Sarl, Overland Storage GmbH, Overland Technologies Luxembourg Sarl have been
pledged as collateral.
Pursuant to the 8% Senior Secured Convertible Debenture due
March 31, 2018 by Sphere 3D Corp. in favor of Sphere 3D Corp., (i) the stock of
V3 Systems Holdings, Inc., Sphere 3D Inc., Frostcat Technologies Inc., Overland
Storage, Inc., Tandberg Data Corporation, and Zetta Systems, Inc. and (ii) 65%
of the stock of Overland Storage (Europe) Limited, Overland Storage Sarl,
Overland Storage GmbH, Overland Technologies Luxembourg Sarl have been pledged
as collateral.
Preferred Equity Certificates
Preferred Equity Certificates, dated June 30, 2014, issued by
Tandberg Data Holdings S.à r.l. to Overland Technologies Luxembourg S.à r.l., as
holder, having a par value of $17,000,000.
Preferred Equity Certificates, dated June 30, 2014, issued by
Overland Technologies Luxembourg S.à r.l. to Overland Storage, Inc., as holder,
having a par value of $17,000,000.
S-A-26
Schedule IV
Special Conditions for Canadian Investors
(Alberta, British Columbia, Ontario, Québec)
This Schedule IV, including Annex IV-1 annexed
hereto, are to be completed and executed by any Investor who is a Canadian
Investor, being an Investor resident in or otherwise subject to the securities
laws of a jurisdiction of Canada. The Company and the Canadian Investors are
executing and delivering this Agreement in reliance upon the Canadian prospectus
exemption provided by Section 2.3 of NI 45-106 or Section 73.3 of the Securities
Act (Ontario), as applicable.
This Schedule IV, including Annex IV-1 annexed
hereto, forms part of the Subscription Agreement to which it is attached (the
“Agreement”) and the Investor is otherwise subject to the terms and
conditions specified in such Agreement. Terms not otherwise defined herein
have the meanings attributed to them in the Agreement.
| 1. |
Acknowledgments of the
Investor |
The Investor acknowledges that:
(a) AN INVESTMENT IN THE SECURITIES IS
NOT WITHOUT RISK AND THE INVESTOR MAY LOSE ITS ENTIRE INVESTMENT;
(b) The Company may complete additional
financings in the future in order to develop the business of the Company and
fund its ongoing development, and such future financings may have a dilutive
effect on current securityholders of the Company, including the Investor;
(c) The offer, sale and issuance
of the Securities is exempt from the prospectus requirements of Canadian
Securities Laws and, as a result: (i) the Investor may not receive information
that would otherwise be required under Canadian Securities Laws or be contained
in a prospectus prepared in accordance with Canadian Securities Laws, (ii) the
Investor is restricted from using most of the protections, rights and remedies
available under Canadian Securities Laws, including statutory rights of
rescission or damages , and (iii) the Company is relieved from certain
obligations that would otherwise apply under Canadian Securities Laws;
(d) No prospectus has been filed with
any Regulator in connection with the Transaction and no Regulator has made any
finding or determination as to the merit for investment in, or made any
recommendation or endorsement with respect to, the Securities. As used in this
Schedule, “Regulator” means (i) any governmental or public entity
department, court, commission, board, bureau, agency or instrumentality, (ii)
any quasi-governmental, self-regulatory or private body exercising any
regulatory authority and (iii) any stock exchange;
(e) The Company is required to file a
report of trade with all applicable Regulators containing personal information
about Investors of the Securities. This report of trade will include the full
name, residential address and telephone number of each Investor, the number and
type of Securities purchased, the total purchase price paid for such Securities,
the date of the Closing and the prospectus exemption relied upon under Canadian
Securities Laws to complete such purchase. In Ontario, this information is
collected indirectly by the OSC under the authority granted to it under, and for
the purposes of the administration and enforcement of, the securities
legislation in Ontario. Any Investor may contact the Administrative Support
Clerk at the OSC at Suite 1903, Box 55, 20 Queen Street West, Toronto, Ontario, M5H 3S8 or by telephone at (416) 593-3684 for
more information regarding the indirect collection of such information by the
OSC. The Company may also be required pursuant to Canadian Securities Laws to
file this Agreement on SEDAR. By completing this Agreement, the Investor
authorizes the indirect collection of the information described in this Section
1(e) by all applicable Regulators and consents to the disclosure of such
information to the public through (i) the filing of a report of trade with all
applicable Regulators and (ii) the filing of this Agreement on SEDAR.
S-A-27
(f) The Securities are being offered on
a “private placement” basis and will be subject to resale restrictions under
Canadian Securities Laws, and the Company may make a notation on its records or
give instructions to any transfer agent of the Shares in order to implement such
resale restrictions;
(g) The physical certificates
representing the Securities (and any replacement certificate issued prior to the
expiration of the applicable hold periods), if any, will bear a legend in
accordance with Canadian Securities Laws in substantially the following form
and, in the event that no physical certificates are issued, the below
constitutes written notice of the legend restriction under applicable Canadian
Securities Laws: “UNLESS PERMITTED UNDER APPLICABLE SECURITIES LEGISLATION, THE
HOLDER OF THIS SECURITY MUST NOT TRADE
THIS SECURITY TO OR FOR THE BENEFIT OF A CANADIAN PURCHASER UNTIL THE DATE THAT
IS FOUR MONTHS AND A DAY AFTER [INSERT DISTRIBUTION DATE].”
| 2. |
Representations and Warranties of the
Investor |
The Investor represents and warrants as follows to the Company
at the date of this Agreement and at the Closing Date and acknowledges and
confirms that the Company is relying on such representations and warranties in
connection with the offer, sale and issuance of the Securities to the Investor:
(a) THE INVESTOR HAS KNOWLEDGE IN
FINANCIAL AND BUSINESS AFFAIRS, IS CAPABLE OF EVALUATING THE MERITS AND RISKS OF
AN INVESTMENT IN THE SECURITIES, AND IS ABLE TO BEAR THE ECONOMIC RISK OF SUCH
INVESTMENT EVEN IF THE ENTIRE INVESTMENT IS LOST;
(b) The Investor has not been provided
with a prospectus, an offering memorandum (other than the Canadian Offering
Memorandum incorporating the Prospectus and the Prospectus Supplement (in each
case, in final form) and remitted to the Investor) or any other document in
connection with its subscription for Securities and the decision to subscribe
for Securities and execute this Agreement has not been based upon any verbal or
written representation made by or on behalf of the Company or any employee or
agent of the Company;
(c) The distribution of the Securities
has not been made through, or as a result of, and is not being accompanied by,
(i) a general solicitation, (ii) any advertisement including articles, notices
or other communications published in any newspaper, magazine or similar media or
broadcast over radio or television , or (iii) any seminar or meeting whose
attendees have been invited by general solicitation or general advertising;
(d) The Investor is eligible to
purchase the Securities pursuant to an exemption from the prospectus
requirements of Canadian Securities Laws. The Investor has completed and
delivered to the Company the Canadian Investor Certificate annexed to this
Schedule IV as Annex IV-1, evidencing the Investor's status and
criteria for reliance on the relevant prospectus exemption under Canadian
Securities Laws and: (i) confirms that it complies with the criteria for
reliance on the prospectus exemption and the truth and accuracy of all statements made in such certificate
as of the date of this Agreement and as of the Closing Date; (ii) understands
that the Company is required to verify that the Investor satisfies the relevant
criteria to qualify for the prospectus exemption; and (iii) may be required to
provide additional information or documentation to evidence compliance with the
prospectus exemption.
S-A-28
(e) The Investor is resident in the
province of Alberta, British Columbia, Ontario or Québec, and, where required,
is purchasing the Securities as principal;
(f) The Investor has been independently
advised as to and is aware of the resale restrictions under Canadian Securities
Laws with respect to the Securities;
(g) The Investor has obtained such
legal and tax advice as it considers appropriate in connection with the offer,
sale and issuance of the Securities and the execution, delivery and performance
by it of this Agreement and the transactions contemplated by the Transaction
Documents. The Investor is not relying on the Company, its affiliates or its
counsel in this regard;
(h) None of the funds that the Investor
is using to purchase the Securities are to the knowledge of the Investor,
proceeds obtained or derived, directly or indirectly, as a result of illegal
activities;
(i) No Person has made any oral or
written representations to the Investor: (i) that any Person will resell or
repurchase; (ii) that any Person will refund the purchase price of the
Securities; or (iii) as to the future value or price of any of the
Securities;
(j) The funds representing the
aggregate Purchase Price advanced by the Investor are not proceeds of crime as
defined in the Proceeds of Crime (Money Laundering) and Terrorist Financing
Act (Canada) (the “PCMLTFA”). To the Investor's knowledge none of the
subscription funds to be provided by the Investor (i) have been or will be
derived from or related to any activity that is deemed criminal under the laws
of Canada or any other applicable jurisdiction, or (ii) are being tendered on
behalf of a person or entity (A) with whom the Company would be prohibited from
dealing with under applicable money laundering, terrorist financing, economic
sanctions, criminal or other similar laws or regulations or (B) who has not been
identified to the Investor. The Investor acknowledges that the Company may in
the future be required by law to disclose the Investor's name and other
information relating to this Agreement and the Investor's subscription
hereunder, on a confidential basis pursuant to the PCMLTFA or other laws or
regulations and shall promptly notify the Company if the Investor discovers that
any of the foregoing representations ceases to be true, and to provide the
Company with appropriate information in connection therewith.
| 3. |
Covenants of the Investor |
(a) The Investor will comply with
Canadian Securities Laws concerning the subscription, purchase, holding and
resale of the Securities and will consult with its legal advisers with respect
to complying with resale restrictions under Canadian Securities Laws with
respect to the Securities. Resale restrictions may apply to resales of the
Securities outside of Canada.
(b) The Investor will execute, deliver,
file and otherwise assist the Company in filing any reports, undertakings and
other documents required under Canadian Securities Laws in connection with the
offer, sale and issuance of the Securities.
S-A-29
The Investor confirms its express wish that this Agreement
(including all Schedules and Annexes), the Transaction Documents and all related
documents be drafted in English. L’acquéreur confirme sa volonté expresse que
la présente convention (y compris toutes les annexes et tous les appendices),
les « Transaction Documents » décrits à la présente convention, ainsi que tous
les documents et contrats s'y rapportant directement ou indirectement soient
rédigés en anglais.
[Signature page follows]
S-A-30
| The Investor: |
[___________________________]
|
| |
By:_________________________ |
| |
Name: |
| |
Title: |
[Annex IV-1 on next page]
S-A-31
Annex IV-1
Canadian Investor Certificate
(annex to Schedule
IV (Special Conditions for Canadian Investors))
| TO: |
SPHERE 3D CORP. (THE “ISSUER”)
|
| |
|
| I. |
REPRESENTATIONS AND WARRANTIES
|
Reference is made to the Subscription Agreement between, the
Issuer and the undersigned (referred to herein as the “Investor”) dated
as of the date hereof (the “Agreement”). Upon execution of this Canadian
Investor Certificate by the Investor, this Canadian Investor Certificate shall
be incorporated into and form a part of the Agreement with respect to such
Investor. Terms not otherwise defined herein have the meanings attributed to
them in the Agreement (including Schedule IV thereto) and in National Instrument
45-106 – Prospectus Exemptions (“NI 45-106”). All monetary
references in this Annex IV-1 are in Canadian dollars.
In connection with the purchase of the Securities by the
Investor, the Investor hereby represents, warrants and certifies to the Issuer
that the Investor:
| |
(i) |
is purchasing the Securities as principal; |
| |
|
|
| |
(ii) |
is resident in or is subject to the laws of the Province
or Territory of (check one): |
| |
[ ] Alberta |
[ ] Northwest Territories |
[ ] Prince Edward Island |
| |
[ ] British Columbia |
[ ] Nova Scotia |
[ ] Quebec |
| |
[ ] Manitoba |
[ ] Nunavut |
[ ] Saskatchewan |
| |
[ ] Newfoundland and Labrador |
[ ] Ontario |
[ ] Yukon |
| |
[ ] New Brunswick |
|
|
| |
(iii) |
has not been provided with any offering memorandum in
connection with the purchase of the Securities; and |
| |
|
|
| |
(iv) |
is an “accredited investor” (as defined in NI 45-106
and/or Section 73.3 of the Securities Act (Ontario), as
applicable), and falls within the category(ies) of accredited investor
(check all applicable exemptions): |
| |
[ ] |
1. |
a financial institution, |
|
[ ] |
2. |
the Business Development Bank of Canada incorporated
under the Business Development Bank of Canada Act (Canada),
|
|
[ ] |
3. |
a subsidiary of any person referred to in paragraphs (1)
or (2), if the person owns all of the voting securities of the subsidiary,
except the voting securities required by law to be owned by directors of
that subsidiary, |
|
[ ] |
4. |
a person registered under the securities legislation of a
jurisdiction of Canada as an adviser or dealer, |
|
[ ] |
5. |
an individual registered under the securities legislation
of a jurisdiction of Canada as a representative of a person referred to in
paragraph (4), |
|
[ ] |
6. |
an individual formerly registered under the securities
legislation of a jurisdiction of Canada, other than an individual formerly
registered solely as a representative of a limited market dealer under one or both of the
Securities Act (Ontario) or the Securities Act (Newfoundland
and Labrador), |
S-A-32
|
[ ] |
7. |
the Government of Canada or a jurisdiction of Canada, or
any crown corporation, agency or wholly owned entity of the Government of
Canada or a jurisdiction of Canada, |
|
[ ] |
8. |
a municipality, public board or commission in Canada and
a metropolitan community, school board, the Comité de gestion de la taxe
scolaire de l'île de Montréal or an intermunicipal management board in
Québec, |
|
[ ] |
9. |
any national, federal, state, provincial, territorial or
municipal government of or in any foreign jurisdiction, or any agency of
that government, |
|
[ ] |
10. |
a pension fund that is regulated by the Office of the
Superintendent of Financial Institutions (Canada), a pension commission or
similar regulatory authority of a jurisdiction of Canada, |
|
[ ] |
11. |
an individual who, either alone or with a spouse,
beneficially owns financial assets having an aggregate realizable value
that, before taxes but net of any related liabilities, exceeds $1,000,000,
|
|
|
|
[ ] - Please mark to indicate that you have
returned an executed copy of Form 45-106F9 (attached to this
Certificate) |
|
[ ] |
12. |
an individual who beneficially owns financial assets
having an aggregate realizable value that, before taxes but net of any
related liabilities, exceeds $5,000,000, |
|
[ ] |
13. |
an individual whose net income before taxes exceeded
$200,000 in each of the 2 most recent calendar years or whose net income
before taxes combined with that of a spouse exceeded $300,000 in each of
the 2 most recent calendar years and who, in either case, reasonably
expects to exceed that net income level in the current calendar year,
|
|
|
|
[ ] - Please mark to indicate that you have
returned an executed copy of the Risk Acknowledgement Form 45-106F9
(attached to this Certificate) |
|
[ ] |
14. |
an individual who, either alone or with a spouse, has net
assets of at least $5,000,000, |
|
|
|
[ ] - Please mark to indicate that you have
returned an executed copy of the Risk Acknowledgement Form 45-106F9
(attached to this Certificate) |
|
[ ] |
15. |
a person, other than an individual or investment fund,
that has net assets of at least $5,000,000 as shown on its most recently
prepared financial statements and that has not been created or used solely
to purchase or hold securities as an accredited investor as defined in
this paragraph (15), |
| |
[ ] |
16. |
an investment fund that distributes or has distributed
its securities only to |
| |
|
|
(i) a person that is or was an
accredited investor at the time of the distribution, |
| |
|
|
(ii) a person that acquires or
acquired securities in the circumstances referred |
| |
|
|
to
in sections 2.10 (Minimum amount investment) of NI 45-106, or 2.19
|
| |
|
|
(Additional investment in investment funds) of NI 45-106, or
|
| |
|
|
(iii) a person described in
paragraph (i) or (ii) that acquires or acquired |
| |
|
|
securities
under section 2.18 (Investment fund reinvestment) of NI 45-106, |
|
[ ] |
17. |
an investment fund that distributes or has distributed
securities under a prospectus in a jurisdiction of Canada for which the
regulator or, in Québec, the securities regulatory authority, has issued a
receipt, |
|
[ ] |
18. |
a trust company or trust corporation registered or
authorized to carry on business under the Trust and Loan Companies Act
(Canada) or under comparable legislation in a jurisdiction of Canada
or a foreign jurisdiction, acting on behalf of a fully managed account
managed by the trust company or trust corporation, as the case may be,
|
S-A-33
| |
[ ] |
19. |
a person acting on behalf of a fully managed account
managed by that person, if that person is registered or authorized to
carry on business as an adviser or the equivalent under the securities
legislation of a jurisdiction of Canada or a foreign jurisdiction,
|
| |
[ ] |
20. |
a registered charity under the Income Tax Act
(Canada) that, in regard to the trade, has obtained advice from an
eligibility adviser or an adviser registered under the securities
legislation of the jurisdiction of the registered charity to give advice
on the securities being traded, |
| |
[ ] |
21. |
an entity organized in a foreign jurisdiction that is
analogous to any of the entities referred to in paragraphs (1) to (4) or
paragraph (10) in form and function, |
| |
[ ] |
22. |
a person in respect of which all of the owners of
interests, direct, indirect or beneficial, except the voting securities
required by law to be owned by directors, are persons that are accredited
investors, |
| |
[ ] |
23. |
an investment fund that is advised by a person registered
as an adviser or a person that is exempt from registration as an adviser,
|
| |
[ ] |
24. |
a person that is recognized or designated by the
securities regulatory authority or, except in Ontario and Québec, the
regulator as an accredited investor, |
| |
[ ] |
25. |
a trust established by an accredited investor for the
benefit of the accredited investor’s family members of which a majority of
the trustees are accredited investors and all of the beneficiaries are the
accredited investor’s spouse, a former spouse of the accredited investor
or a parent, grandparent, brother, sister, child or grandchild of that
accredited investor, of that accredited investor’s spouse or of that
accredited investor’s former spouse. |
AS USED IN THIS ANNEX IV-1, THE FOLLOWING TERMS HAVE THE
FOLLOWING MEANINGS:
"control person" means
in Ontario, Alberta, Newfoundland and Labrador, Nova Scotia and
Saskatchewan:
| |
(a) |
a person or company who holds a sufficient number of the
voting rights attached to all outstanding voting securities of an issuer
to affect materially the control of the issuer, and, if a person or
company holds more than 20 per cent of the voting rights attached to all
outstanding voting securities of an issuer, the person or company is
deemed, in the absence of evidence to the contrary, to hold a sufficient
number of the voting rights to affect materially the control of the
issuer, or |
| |
|
|
| |
(b) |
each person or company in a combination of persons or
companies, acting in concert by virtue of an agreement, arrangement,
commitment or understanding, which holds in total a sufficient number of
the voting rights attached to all outstanding voting securities of an
issuer to affect materially the control of the issuer, and, if a
combination of persons or companies holds more than 20 per cent of the
voting rights attached to all outstanding voting securities of an issuer,
the combination of persons or companies is deemed, in the absence of
evidence to the contrary, to hold a sufficient number of the voting rights
to affect materially the control of the issuer; |
in British Columbia and New Brunswick:
S-A-34
| |
(a) |
a person who holds a sufficient number of the voting
rights attached to all outstanding voting securities of an issuer to
affect materially the control of the issuer, or |
| |
|
|
| |
(b) |
each person in a combination of persons, acting in
concert by virtue of an agreement, arrangement, commitment or
understanding, which holds in total a sufficient number of the voting
rights attached to all outstanding voting securities of an issuer to
affect materially the control of the issuer, |
and, if a person or combination of
persons holds more than 20% of the voting rights attached to all outstanding
voting securities of an issuer, the person or combination of persons is deemed,
in the absence of evidence to the contrary, to hold a sufficient number of the
voting rights to affect materially the control of the issuer;] in Prince Edward
Island, Northwest Territories, Nunavut and the Yukon:
| |
(a) |
a person who holds a sufficient number of the voting
rights attached to all outstanding voting securities of an issuer to
affect materially the control of the issuer, and if a person holds more
than 20% of the voting rights attached to all outstanding voting
securities of an issuer, the person is deemed, in the absence of evidence
to the contrary, to hold a sufficient number of the voting rights to
affect materially the control of the issuer, or |
| |
|
|
| |
(b) |
each person in a combination of persons acting in concert
by virtue of an agreement, arrangement, commitment or understanding, who
holds in total a sufficient number of the voting rights attached to all
outstanding voting securities of an issuer to affect materially the
control of the issuer, and if a combination of persons holds more than 20%
of the voting rights attached to all outstanding voting securities of an
issuer, the combination of persons is deemed, in the absence of evidence
to the contrary, to hold a sufficient number of the voting rights to
affect materially the control of the issuer; |
in Quebec:
| |
(a) |
a person that, alone or with other persons acting in
concert by virtue of an agreement, holds a sufficient number of the voting
rights attached to all outstanding voting securities of an issuer to
affect materially the control of the issuer. If the person, alone or with
other persons acting in concert by virtue of an agreement, holds more than
20% of those voting rights, the person is presumed to hold a sufficient
number of the voting rights to affect materially the control of the
issuer; and |
in Manitoba
| |
(a) |
a person or company who holds a sufficient number of the
voting rights attached to all outstanding voting securities of an issuer
to affect materially the control of the issuer, |
| |
|
|
| |
(b) |
each person or company, or combination of persons or
companies acting in concert by virtue of an agreement, arrangement,
commitment or understanding, that holds in total a sufficient number of
the voting rights attached to all outstanding voting securities of an
issuer to affect materially the control of the issuer, or |
| |
|
|
| |
(c) |
a person or company, or combination of persons or
companies, that holds more than 20% of the voting rights attached to all
outstanding voting securities of an issuer, unless there is evidence that
the holding does not affect materially the control of the
issuer; |
S-A-35
"director" means
| |
(a) |
a member of the board of directors of a company or an
individual who performs similar functions for a company, and |
| |
|
|
| |
(b) |
with respect to a person that is not a company, an
individual who performs functions similar to those of a director of a
company; |
"eligibility adviser" means
| |
(a) |
a person that is registered as an investment dealer and
authorized to give advice with respect to the type of security being
distributed, and |
| |
|
|
|
| |
(b) |
in Saskatchewan or Manitoba, also means a lawyer who is a
practicing member in good standing with a law society of a jurisdiction of
Canada or a public accountant who is a member in good standing of an
institute or association of chartered accountants, certified general
accountants or certified management accountants in a jurisdiction of
Canada provided that the lawyer or public accountant must not |
| |
|
|
|
| |
|
(i) |
have a professional, business or personal relationship
with the issuer, or any of its directors, executive officers, founders, or
control persons (as such term is defined in applicable securities
legislation), and |
| |
|
|
|
| |
|
(ii) |
have acted for or been retained personally or otherwise
as an employee, executive officer, director, associate or partner of a
person that has acted for or been retained by the issuer or any of its
directors, executive officers, founders or control persons (as such term
is defined in applicable securities legislation) within the previous 12
months; |
"executive officer" means, for an issuer, an individual
who is
| |
(a) |
a chair, vice-chair or president, |
| |
|
|
| |
(b) |
a vice-president in charge of a principal business unit,
division or function including sales, finance or production, or |
| |
|
|
| |
(c) |
performing a policy-making function in respect of the
issuer; |
"financial assets" means
| |
(a) |
cash, |
| |
|
|
| |
(b) |
securities, or |
| |
|
|
| |
(c) |
a contract of insurance, a deposit or an evidence of a
deposit that is not a security for the purposes of securities
legislation; |
"financial institution" means,
| |
(a) |
other than in Ontario, |
S-A-36
| |
(i) |
an association governed by the Cooperative Credit
Associations Act (Canada) or a central cooperative credit society for
which an order has been made under section 473(1) of that Act, |
| |
|
|
| |
(ii) |
a bank, loan corporation, trust company, trust
corporation, insurance company, treasury branch, credit union, caisse
populaire, financial services cooperative, or league that, in each case,
is authorized by an enactment of Canada or a jurisdiction of Canada to
carry on business in Canada or a jurisdiction of Canada; or |
| |
|
|
| |
(iii) |
a Schedule III bank, |
| |
(i) |
a bank listed in Schedule I, II or III to the Bank Act
(Canada); |
| |
|
|
| |
(ii) |
an association to which the Cooperative Credit
Association Act (Canada) applies or a central cooperative credit
society for which an order has been made under subsection 473(1) of that
Act; or |
| |
|
|
| |
(iii) |
a loan corporation, trust company, trust corporation,
insurance company, treasury branch, credit union, caisse populaire,
financial services cooperative or credit union league or federation that
is authorized by a statute of Canada or Ontario to carry on business in
Canada or Ontario, as the case may be. |
"founder" means, in respect of an issuer, a person who,
| |
(a) |
acting alone, in conjunction, or in concert with one or
more persons, directly or indirectly, takes the initiative in founding,
organizing or substantially reorganizing the business of the issuer,
and |
| |
|
|
| |
(b) |
at the time of the distribution or trade is actively
involved in the business of the issuer; |
"fully managed account" means an account of a client for
which a person makes the investment decisions if that person has full discretion
to trade in securities for the account without requiring the client's express
consent to a transaction;
"investment fund" has the same meaning as in National
Instrument 81-106 Investment Fund Continuous Disclosure;
"person" includes
| |
(a) |
an individual, |
| |
|
|
| |
(b) |
a corporation, |
| |
|
|
| |
(c) |
a partnership, trust, fund and an association, syndicate,
organization or other organized group of persons, whether incorporated or
not, and |
| |
|
|
| |
(d) |
an individual or other person in that person's capacity
as a trustee, executor, administrator or personal or other legal
representative; |
S-A-37
“offering memorandum” means a document, together with
any amendments to that document, purporting to describe the business and affairs
of an issuer that has been prepared primarily for delivery to and review by a
prospective purchaser so as to assist the prospective purchaser to make an
investment decision in respect of securities being sold in a distribution to
which section 53 of the Securities Act (Ontario) would apply but for the
availability of one or more exemptions contained in Ontario securities laws, but
does not include a document setting out current information about an issuer for
the benefit of a prospective purchaser familiar with the issuer through prior
investment or business contacts, "related liabilities" means
| |
(a) |
liabilities incurred or assumed for the purpose of
financing the acquisition or ownership of financial assets, or |
| |
|
|
| |
(b) |
liabilities that are secured by financial
assets; |
"Schedule III bank" means an authorized foreign bank
named in Schedule III of the Bank Act (Canada);
"spouse" means, an individual who,
| |
(a) |
is married to another individual and is not living
separate and apart within the meaning of the Divorce Act (Canada), from
the other individual, |
| |
|
|
| |
(b) |
is living with another individual in a marriage-like
relationship, including a marriage-like relationship between individuals
of the same gender, or |
| |
|
|
| |
(c) |
in Alberta, is an individual referred to in paragraph (a)
or (b), or is an adult interdependent partner within the meaning of the
Adult Interdependent Relationships Act
(Alberta); |
"subsidiary" means an issuer that is controlled
directly or indirectly by another issuer and includes a subsidiary of that
subsidiary.
Interpretation
In this Annex IV-1, a person (first person) is considered to
control another person (second person) if
| |
(a) |
the first person, directly or indirectly, beneficially
owns or exercises control or direction over securities of the second
person carrying votes which, if exercised, would entitle the first person
to elect a majority of the directors of the second person, unless that
first person holds the voting securities only to secure an
obligation, |
| |
|
|
| |
(b) |
the second person is a partnership, other than a limited
partnership, and the first person holds more than 50% of the interests of
the partnership, or |
| |
|
|
| |
(c) |
the second person is a limited partnership and the
general partner of the limited partnership is the first
person. |
S-A-38
Certified at ________________________this,
____________________________.
S-A-39
Form 45-106F9
Form for Individual Accredited
Investors
WARNING!
This investment is risky. Don’t
invest unless you can afford to lose all the money you pay for this
investment. |
| SECTION 1 TO BE COMPLETED BY THE ISSUER OR
SELLING SECURITYHOLDER |
| 1. About your investment |
|
| |
|
| Type of securities: Common Shares, Warrants |
Issuer: |
|
| Purchased from: Sphere 3D Corp. |
|
| SECTIONS 2 TO 4 TO BE COMPLETED BY THE
INVESTOR |
|
|
| 2. Risk acknowledgement |
|
| This
investment is risky. Initial that you understand that: |
Your |
| |
initials |
| Risk of
loss – You could lose your entire investment of:
____________________ |
|
| |
|
| Liquidity risk – You may not be able to sell
your investment quickly – or at all. |
|
| Lack of information – You may receive little
or no information about your investment. |
|
| Lack of advice – You will not receive advice
from the salesperson about whether this investment is suitable for you
unless the salesperson is registered. The salesperson is the person who
meets with, or provides information to, you about making this investment.
To check whether the salesperson is registered, go to
www.aretheyregistered.ca. |
|
| 3. Accredited investor status |
|
| You must meet at least one of the following
criteria to be able to make this investment. Initial the statement that
applies to you. (You may initial more than one statement). The person
identified in section 6 is responsible for ensuring that you meet the
definition of accredited investor. That person, or the salesperson
identified in section 5, can help you if you have questions about whether
you meet these criteria. |
Your
initials |
| • |
Your net income before taxes was more than C$200,000 in each of
the 2 most recent calendar years, and you expect it to be more than
C$200,000 in the current calendar year. (You can find your net income
before taxes on your personal income tax return.) |
|
|
|
Your
initials |
| • |
Your net income before taxes combined
with your spouse’s was more than C$300,000 in each of the 2 most recent
calendar years, and you expect your combined net income before taxes to be
more than C$300,000 in the current calendar year. |
|
|
|
|
|
| • |
Either alone or with your spouse, you
own more than C$1 million in cash and securities, after subtracting any
debt related to the cash and securities. |
|
|
|
|
|
| • |
Either alone or with your spouse, you
have net assets worth more than C$5 million. (Your net assets are your
total assets (including real estate) minus your total debt.) |
|
|
|
|
|
| 4. Your name and your signature |
|
| By signing this form, you confirm that you have read
this form and you understand the risks of making this investment as
identified in this form. |
| First and last name (please print):
|
S-A-40
| Signature: |
Date: |
| SECTION 5 TO BE COMPLETED BY THE SALESPERSON |
|
| 5. Salesperson information |
|
| |
|
| |
|
| |
|
| First and last name of salesperson (please print): |
|
| Telephone: |
Email: |
| Name of firm (if registered): |
|
| SECTION 6 TO BE COMPLETED BY THE ISSUER OR SELLING
SECURITY |
|
| 6. For more information about this investment, contact:
|
|
Sphere 3D Corp.
Investor
Contact:
MKR Group
Inc.
Todd Kehrli or
Jim Byers
+1
323/468-2300 |
|
| |
|
| For more
information about prospectus exemptions, contact your local securities
regulator. |
| You can find
contact information at
www.securities-administrators.ca.
|
S-A-41
UNLESS PERMITTED UNDER APPLICABLE SECURITIES LEGISLATION,
THE HOLDER OF THIS SECURITY MUST NOT TRADE THIS SECURITY TO OR FOR THE BENEFIT
OF A CANADIAN PURCHASER UNTIL THE DATE THAT IS FOUR MONTHS AND A DAY AFTER
[INSERT DISTRIBUTION DATE].
Void after 5:00 p.m. (New York City time) on the Expiry Date.
WARRANT
For the purchase of Common Shares of
SPHERE 3D CORP.
(Organized
under the laws of the Province of Ontario, Canada)
| Number of Warrants: |
Warrant Certificate No. |
This is to certify that, for value received, , (the
"Holder"), shall have the right to purchase from Sphere 3D Corp. (the
"Corporation"), at any time and from time to time up to 5:00 p.m. (New
York City time) (the "Expiry Time") on 1, 2020 (the "Expiry
Date"), as amended herein, one fully paid and non-assessable common share in
the capital of the Corporation (a "Common Share") for each Warrant
(individually, a "Warrant") represented hereby at a price of US$ per
Common Share (the "Exercise Price"), upon and subject to the terms and
conditions set forth herein. This Warrant is one of the Warrants to purchase
Common Shares issued pursuant to that certain Subscription Agreement, dated as
of , by and among the Corporation and the investors (the "Investors")
referred to therein (the "Purchase Agreement").
1. For the purposes of this Warrant
Certificate, the term "Common Shares" means common shares without par
value in the capital of the Corporation as constituted as of the date hereof,
provided that in the event of a subdivision, redivision, reduction, combination
or consolidation thereof or any other adjustment under section 8 hereof, or
successive such subdivisions, redivisions, reductions, combinations,
consolidations or other adjustments, then subject to the adjustments, if any,
having been made in accordance with the provisions of this Warrant Certificate,
"Common Shares" shall thereafter mean the shares, other securities or
other property resulting from such subdivision, redivision, reduction,
combination or consolidation or other adjustment.
2. All Warrant Certificates shall be
signed by an officer of the Corporation holding office at the time of signing,
or any successor or replacement of such person and notwithstanding any change in
any of the persons holding said offices between the time of actual signing and
the delivery of the Warrant Certificate, the Warrant Certificate so signed shall
be valid and binding upon the Corporation.
3. All rights under any of the Warrants
in respect of which the right of subscription and purchase therein provided for
shall not theretofore have been exercised shall wholly cease and such Warrants
shall be wholly void and of no valid or binding effect after the Expiry Time.
4. The right to purchase Common Shares
of the Corporation pursuant to the Warrants may only be exercised by the Holder
at or before the Expiry Time by:
______________________________
1 5 year
anniversary of date of issuing the warrant.
S-B-1
| |
(a) |
duly completing and executing a subscription
substantially in the form attached as Schedule "A" (the "Subscription
Form"), in the manner therein indicated; and |
| |
|
|
| |
(b) |
surrendering this Warrant Certificate and the duly
completed and executed Subscription Form to the Corporation prior to the
Expiry Time at 9112 Spectrum Center Boulevard, San Diego, California,
92123, together with payment of the purchase price for the Common Shares
subscribed for in the form of certified cheque, money order or bank draft
payable to the Corporation in an amount equal to the then applicable
Exercise Price multiplied by the number of Common Shares subscribed for
(“Aggregate Exercise Price”). |
5. Upon delivery and payment as
set forth in section 4, the Corporation shall cause to be issued to the Holder
the number of Common Shares subscribed for by the Holder and the Holder shall
become a shareholder of the Corporation in respect of such Common Shares with
effect from the date of such delivery and payment and shall be entitled to
delivery of a certificate or certificates evidencing such shares, or to a
non-transferable written acknowledgement of the right to obtain a certificate.
The Corporation shall cause such certificate or certificates to be mailed to the
Holder at the address or addresses specified in the Subscription Form within
five (5) Business Days (as defined below) of such delivery and payment as set
forth in section 4 or, if so instructed by the Holder, held for pick-up by the
Holder at the principal office of the Corporation; provided, however, if the
transfer agent for the Common Shares is participating in DTC Fast Automated
Securities Transfer Program (the “DTC Program”) and the Common Shares to
be delivered to the Holder pursuant to this Section 5 are eligible to
participate in the DTC Program, the Corporation will cause the transfer agent to
credit such aggregate number of Common Shares to which the Holder is entitled
pursuant to this Section 5 to the Holder’s or its designee’s balance account
with DTC through its Deposit / Withdrawal At Custodian system. Notwithstanding
any adjustment provided for in section 8 hereof, the Corporation shall not be
required upon the exercise of any Warrants to issue fractional Common Shares in
satisfaction of its obligations hereunder and the Holder understands and agrees
that it will not be entitled to any cash payment or other form of compensation
in respect of a fractional Common Share that might otherwise have been issued.
As used in this Warrant Certificate, “Business Day” means a day, other
than a Saturday or Sunday, on which banks in New York City and Toronto (Ontario)
are open for the general transaction of business.
6. The holding of a Warrant shall not
constitute the Holder a shareholder of the Corporation nor entitle him to any
right or interest in respect thereof except as herein expressly provided.
7. The Corporation covenants and agrees
that until the Expiry Time, while any of the Warrants shall be outstanding, it
shall reserve and there shall remain unissued out of its authorized capital a
sufficient number of Common Shares to satisfy the right of purchase herein
provided, as such right of purchase may be adjusted pursuant to sections 8 and 9
hereof. The Corporation further covenants and agrees that while any of the
Warrants shall be outstanding, the Corporation shall (a) comply with the
securities legislation applicable to it; and (b) use its commercially reasonable
efforts to do or cause to be done all things necessary to preserve and maintain
its corporate existence. All Common Shares which shall be issued upon the
exercise of the right to purchase herein provided for, upon payment therefor of
the amount at which such Common Shares may at the time be purchased pursuant to
the provisions hereof, shall be issued as fully paid and non-assessable shares
and the holders thereof shall not be liable to the Corporation or its creditors
in respect thereof.
| 8. |
(a) |
For the purpose of this section 8, unless there
is something in the subject matter or context inconsistent therewith, the
words and terms defined below shall have the respective meanings specified
therefor: |
S-B-2
| |
|
"Current Market Price" of the Common Shares at any
date means the price per share equal to the Weighted Average Price (as
defined below) of the Common Shares have traded on the Nasdaq Global
Market or, if the Common Shares are not then listed on the Nasdaq Global
Market, on such other stock exchange on which the shares trade as may be
selected by the directors of the Corporation for such purpose
(collectively, “Nasdaq”); and |
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"director" means a director of the Corporation for
the time being and, unless otherwise specified herein, a reference to
action "by the directors" means action by the directors of the Corporation
as a board or, whenever empowered, action by the executive committee of
such board; and |
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(b) |
If and whenever at any time after the date hereof and
prior to the Expiry Time the Corporation shall (i) subdivide or redivide
its then outstanding Common Shares into a greater number of Common Shares,
(ii) reduce, combine or consolidate its then outstanding Common Shares
into a lesser number of Common Shares or (iii) issue Common Shares (or
securities exchangeable for or convertible into Common Shares) to the
holders of all or substantially all of its then outstanding Common Shares
by way of a stock dividend or other distribution (any of such events
herein called a "Common Share Reorganization"), then the Exercise
Price shall be adjusted effective immediately after the effective date of
any such event in (i) or (ii) above or the record date at which the
holders of Common Shares are determined for the purpose of any such
dividend or distribution in (iii) above, as the case may be, by
multiplying the Exercise Price in effect on such effective date or record
date, as the case may be, by a fraction, the numerator of which shall be
the number of Common Shares outstanding on such effective date or record
date, as the case may be, before giving effect to such Common Share
Reorganization and the denominator of which shall be the number of Common
Shares outstanding immediately after giving effect to such Common Share
Reorganization including, in the case where securities exchangeable for or
convertible into Common Shares are distributed, the number of Common
Shares that would be outstanding if such securities were exchanged for or
converted into Common Shares. |
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(c) |
If and whenever at any time after the date hereof and
prior to the Expiry Time there is a capital reorganization of the
Corporation or a reclassification or other change in the Common Shares
(other than a Common Share Reorganization) or a consolidation or merger or
amalgamation of the Corporation with or into any other corporation or
other entity (other than a consolidation, merger or amalgamation which
does not result in any reclassification of the outstanding Common Shares
or a change of the Common Shares into other securities), or a transfer of
all or substantially all of the Corporation's undertaking and assets to
another corporation or other entity in which the holders of Common Shares
are entitled to receive shares, other securities or other property) (any
of such events, excluding, however, a transaction effected solely to
change the domicile of the Corporation, being called a "Capital
Reorganization"), after the effective date of the Capital
Reorganization the Holder shall be entitled to receive, and shall accept,
for the same aggregate consideration, upon exercise of the Warrants, in
lieu of the number of Common Shares to which the Holder was theretofore
entitled upon the exercise of the Warrants, the kind and aggregate number
of Common Shares and other securities or property resulting from the
Capital Reorganization which the Holder would have been entitled to
receive as a result of the Capital Reorganization if, on the effective
date thereof, the Holder has been the registered holder of the number of
Common Shares to which the Holder was theretofore entitled to purchase or
receive upon the exercise of the Warrants. If necessary, as a result of any Capital
Reorganization, appropriate adjustments shall be made in the application
of the provisions of this Warrant Certificate with respect to the rights
and interest thereafter of the Holder such that the provisions of this
Warrant Certificate shall thereafter correspondingly be made applicable as
nearly as may reasonably be possible in relation to any shares or other
securities or property thereafter deliverable upon the exercise of this
Warrant Certificate. |
S-B-3
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(d) |
If and whenever at any time after the date hereof and
prior to the Expiry Time, any of the events set out in sections 8 (b) or
(c) shall occur and the occurrence of such event results in an adjustment
of the Exercise Price pursuant to the provisions of this section 8, then
the number of Common Shares purchasable pursuant to this Warrant shall be
adjusted contemporaneously with the adjustment of the Exercise Price by
multiplying the number of Common Shares then otherwise purchasable on the
exercise thereof by a fraction, the numerator of which shall be the
Exercise Price in effect immediately prior to the adjustment and the
denominator of which shall be the Exercise Price resulting from such
adjustment. |
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(e) |
If the Corporation takes any action affecting its Common
Shares to which the foregoing provisions of this section 8, in the opinion
of the board of directors of the Corporation, acting in good faith, are
not strictly applicable, or if strictly applicable would not fairly adjust
the rights of the Holder against dilution in accordance with the intent
and purposes hereof, or would otherwise materially affect the rights of
the Holder hereunder, then the Corporation shall, subject to the approval
of Nasdaq (or such other stock exchange or quotation system on which the
Common Shares are then listed and posted (or quoted) for trading, as
applicable), execute and deliver to the Holder an amendment hereto
providing for an adjustment in the application of such provisions so as to
adjust such rights as aforesaid in such manner as the board of directors
of the Corporation may determine to be equitable in the circumstances,
acting in good faith. The failure of the taking of action by the board of
directors of the Corporation to so provide for any adjustment on or prior
to the effective date of any action or occurrence giving rise to such
state of facts will be conclusive evidence that the board of directors has
determined that it is equitable to make no adjustment in the
circumstances. |
9. The following rules and procedures
shall be applicable to the adjustments made pursuant to section 8:
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(a) |
any Common Shares owned or held by or for the account of
the Corporation shall be deemed not be to outstanding except that, for the
purposes of section 8, any Common Shares owned by a pension plan or profit
sharing plan for employees of the Corporation or any of its subsidiaries
shall not be considered to be owned or held by or for the account of the
Corporation; |
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(b) |
no adjustment in the Exercise Price or the number of
Common Shares purchasable pursuant to this Warrant shall be required
unless a change of at least 1% of the prevailing Exercise Price or the
number of Common Shares purchasable pursuant to this Warrant would result,
provided, however, that any adjustment which, except for the provisions of
this section 9(b), would otherwise have been required to be made, shall be
carried forward and taken into account in any subsequent
adjustment; |
S-B-4
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(c) |
the adjustments provided for in section 8 are cumulative
and shall apply to successive subdivisions, consolidations, dividends,
distributions and other events resulting in any adjustment under the
provisions of such section; |
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(d) |
if the Corporation sets a record date to take any action
and thereafter and before the taking of such action abandons its plan to
take such action, then no adjustment to the Exercise Price will be
required by reason of the setting of such record date; |
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(e) |
as a condition precedent to the taking of any action
which would require any adjustment to the Warrants evidenced hereby,
including the Exercise Price, the Corporation must take any corporate
action which may be necessary in order that the Corporation shall have
unissued and reserved in its authorized capital and may validly and
legally issue as fully paid and non-assessable all of the shares or other
securities which the Holder is entitled to receive on the full exercise
thereof in accordance with the provisions hereof; |
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(f) |
forthwith, but no later than fourteen (14) days, after
any adjustment to the Exercise Price or the number of Common Shares
purchasable pursuant to the Warrants, the Corporation shall provide to the
Holder a certificate of an officer of the Corporation certifying as to the
amount of such adjustment and, in reasonable detail, describing the event
requiring and the manner of computing or determining such
adjustment; |
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(g) |
any question that at any time or from time to time arises
with respect to the amount of any adjustment to the Exercise Price or
other adjustment pursuant to section 8 shall be conclusively determined by
a firm of independent chartered accountants (who may be the Corporation's
auditors) and shall be binding upon the Corporation and the
Holder; |
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(h) |
any adjustment to the Exercise Price or the number of
Common Shares purchasable pursuant to the Warrants under the terms of this
Warrant Certificate shall be subject to the prior approval of Nasdaq (or
such other stock exchange or quotation system on which the Common Shares
are then listed and posted (or quoted) for trading, as applicable);
and |
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(i) |
in case the Corporation, after the date of issue of this
Warrant Certificate, takes any action affecting the Common Shares, other
than an action described in Section 8, which in the opinion of the
directors of the Corporation would materially affect the rights of the
Holder, the Exercise Price will be adjusted in such manner, if any, and at
such time, by action by the directors of the Corporation but subject in
all cases to any necessary regulatory approval, including approval of
Nasdaq (or such other stock exchange or quotation system on which the
Common Shares are then listed and posted (or quoted) for trading, as
applicable). Failure of the taking of action by the directors of the
Corporation so as to provide for an adjustment on or prior to the
effective date of any action by the Corporation affecting the Common
Shares will be conclusive evidence that the board of directors of the
Corporation has determined that it is equitable to make no adjustment in
the circumstances. |
10. At least 21 days prior to the
effective date or record date, as the case may be, of any event referred to in
section 8 herein, the Corporation shall notify the Holder of the particulars of
such event and the estimated amount of any adjustment required as a result
thereof.
11. On the happening of each and every
such event set out in section 8, the applicable provisions of this Warrant
Certificate, including the Exercise Price, shall, ipso facto, be deemed
to be amended accordingly and the Corporation shall take all necessary action
so as to comply with such provisions as so amended.
S-B-5
12. The Corporation shall not be
required to deliver certificates for Common Shares while the share transfer
books of the Corporation are properly closed, having regard to the provisions of
sections 8 and 9 hereof, prior to any meeting of shareholders or for the payment
of dividends or for any other purpose and in the event of the surrender of any
Warrant in accordance with the provisions hereof and the making of any
subscription and payment for the Common Shares called for thereby during any
such period, delivery of certificates for Common Shares may be postponed for not
more than five (5) Business Days after the date of the re-opening of said share
transfer books; provided, however, that any such postponement of delivery of
certificates shall be without prejudice to the right of the Holder so
surrendering the same and making payment during such period to receive after the
share transfer books shall have been re-opened such certificates for the Common
Shares called for, as the same may be adjusted pursuant to sections 8 and 9
hereof as a result of the completion of the event in respect of which the
transfer books were closed.
13. Subject as hereinafter provided,
all or any of the rights conferred upon the Holder by the terms hereof may be
enforced by the Holder by appropriate legal proceedings. No recourse under or
upon any obligation, covenant or agreement contained herein shall be had against
any shareholder, director or officer of the Corporation either directly or
through the Corporation, it being expressly agreed and declared that the
obligations under the Warrants are solely corporate obligations and that no
personal liability whatever shall attach to or be incurred by the shareholders,
directors or officers of the Corporation or any of them in respect thereof, any
and all rights and claims against every such shareholder, officer or director
being hereby expressly waived as a condition of and as a consideration for the
issue of the Warrants.
14. The Holder may subscribe for and
purchase any lesser number of Common Shares than the number of Common Shares
expressed in any Warrant Certificate. In the case of any subscription for a
lesser number of Common Shares than expressed in any Warrant Certificate, the
Holder hereof shall be entitled to receive, at no cost to the Holder, a new
Warrant Certificate in respect of the balance of Warrants not then exercised.
Such new Warrant Certificate shall be mailed to the Holder by the Corporation
or, at its direction, the transfer agent of the Corporation, contemporaneously
with the mailing of the certificate or certificates representing the Common
Shares issued pursuant to section 5.
15. If any Warrant Certificate becomes
stolen, lost, mutilated or destroyed, the Corporation shall, on such terms as it
may in its discretion impose, acting reasonably, issue and sign a new Warrant
Certificate of like denomination, tenor and date as the Warrant Certificate so
stolen, lost, mutilated or destroyed for delivery to the Holder. The applicant
for the issue of a new Warrant Certificate pursuant to this section shall bear
the cost of the issue thereof and in the case of mutilation shall as a condition
precedent to the issue thereof, deliver to the Corporation the mutilated Warrant
Certificate, and in case of loss, destruction or theft shall, as a condition
precedent to the issue thereof, furnish to the Corporation such evidence of
ownership and of the loss, destruction or theft of the Warrant Certificate so
lost, destroyed or stolen as shall be satisfactory to the Corporation in its
discretion and the applicant shall also be required to furnish an indemnity and
surety bond in amount and form satisfactory to the Corporation in its discretion
and shall pay the reasonable charges of the Corporation in connection therewith.
16. The Holder may transfer the
Warrants represented hereby by:
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(a) |
duly completing and executing the transfer form attached
as Schedule "B" ("Transfer Form"); and |
S-B-6
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(b) |
surrendering this Warrant Certificate and the completed
Transfer Form, together with such other documents as the Corporation may
reasonably request, to the Corporation at the address set forth on the
Transfer Form or such other office as may be specified by the Corporation,
in a written notice to the Holder, from time to
time, |
provided that all such transfers shall
be effected in accordance with all applicable securities laws, and provided
that, after such transfer, the term "Holder" shall mean and include any
transferee or assignee of the current or any future Holder. If only part of the
Warrants evidenced hereby is transferred, the Corporation will deliver to the
Holder and the transferee replacement Warrant Certificates substantially in the
form of this Warrant Certificate.
17. [Reserved].
| 18. |
(a) |
If at any time (the “Forced Conversion Date”) (i)
the arithmetic average of the Weighted Average Price of the Common Shares
for the ten (10) consecutive prior Trading Days (as defined below) is
equal to or greater than four hundred percent (400%) of US$[insert
current market price immediately prior to first signing of initial
Subscription Agreement] (as such price may be adjusted in a manner
to correspond with the adjustment of the Exercise Price pursuant to this
Warrant) and (ii) the registration statement covering all of the Common
Shares for which this Warrant is exercisable remains effective, then the
Corporation, at its sole discretion, may, no later than fifteen (15) days
following the Forced Conversion Date, force the exercise of the Warrant,
in whole or in part by notifying the Holder (in the manner set out in
Section 24 hereunder) of the amount of the Warrant that it must exercise
and the amount due hereunder (a “Forced Exercise Notice”). Within
ten (10) Business Days of the delivery of the Forced Exercise Notice, the
Holder shall deliver the amount due as set out in the Forced Exercise
Notice, provided that if condition (ii) in this 18(a) is no longer met,
the forced exercise under this Section 18(a) is no longer valid and such
payment need not be made. Failure to provide such funds by the eleventh
(11th) Business Day after delivery of the Forced Exercise Notice shall
result in an immediate two percent (2%) increase in the applicable
Aggregate Exercise Price, and if such funds remain unpaid, there shall be
an additional two percent (2%) increase each month thereafter. If the
Corporation has not received payments due under this Section 18(a) after
the tenth (10th) Business Day after the delivery of the Forced Exercise
Notice and any of the conditions (i) or (ii) in this Section 18(a) ceases
to be true, the forced exercise under this Section 18(a) shall remain in
full force. Upon payment under this Section 18, the Corporation shall
provide the Holder with the the Common Shares for which this Warrant is
exercisable pursuant to Section 18(b). As used in this Warrant,
“Weighted Average Price" means, for the Common Shares as of any
date, the dollar volume-weighted average price for the Common Shares on
Nasdaq during the period beginning at 9:30:01 a.m., New York time (or such
other time as Nasdaq publicly announces is the official open of trading),
and ending at 4:00:00 p.m., New York time (or such other time as Nasdaq
publicly announces is the official close of trading), as reported by
Bloomberg through its “Volume at Price” function or, if the foregoing does
not apply, the dollar volume-weighted average price of such security in
the over-the-counter market on the electronic bulletin board for such
security during the period beginning at 9:30:01 a.m., New York time (or
such other time as such market publicly announces is the official open of
trading), and ending at 4:00:00 p.m., New York time (or such other time as
such market publicly announces is the official close of trading), as
reported by Bloomberg, or, if no dollar volume-weighted average price is
reported for such security by Bloomberg for such hours, the average of the
highest closing bid price and the lowest closing ask price of any of the
market makers for such security as reported in the OTC Link or "pink sheets" by
OTC Markets Group Inc. (formerly Pink OTC Markets Inc.). If the Weighted
Average Price cannot be calculated for a security on a particular date on
any of the foregoing bases, the Weighted Average Price of the Common
Shares on such date shall be the fair market value as mutually determined
by the Corporation and the Holder. If the Corporation and the Holder are
unable to agree upon the fair market value of such security, then such
dispute shall be resolved pursuant to Section 30 with the term “Weighted
Average Price’ As used in this Warrant, “Trading Day” means any day
on which the Common Shares are traded on Nasdaq, or, if Nasdaq is not the
principal trading market for the Common Shares, then on the principal
securities exchange or securities market on which the Common Shares are
then traded; provided that “Trading Day” shall not include any day on
which the Common Shares are scheduled to trade on such exchange or market
for less than 4.5 hours or any day that the Common Shares are suspended
from trading during the final hour of trading on such exchange or market
(or if such exchange or market does not designate in advance the closing
time of trading on such exchange or market, then during the hour ending at
4:00:00 p.m., New York time). |
S-B-7
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(b) |
Upon payment as set forth in Section 18(a), the
Corporation shall cause to be issued to the Holder the number of Common
Shares subscribed for by the Holder and the Holder shall become a
shareholder of the Corporation in respect of such Common Shares with
effect from the date of such payment and shall be entitled to delivery of
a certificate or certificates evidencing such shares. The Corporation
shall cause such certificate or certificates to be mailed to the Holder at
the address or addresses provided by the Holder within five (5) Business
Days (as defined below) of such payment as set forth in Section 18(a) or,
if so instructed by the Holder, held for pick-up by the Holder at the
principal office of the Corporation; provided, however, if the transfer
agent for the Common Shares is participating in DTC Fast Automated
Securities Transfer Program (the “DTC Program”) and the Common
Shares to be delivered to the Holder pursuant to this Section 18 are
eligible to participate in the DTC Program, the Corporation will cause the
transfer agent to credit such aggregate number of Common Shares to which
the Holder is entitled pursuant to this Section 18 to the Holder’s or its
designee’s balance account with DTC through its Deposit / Withdrawal At
Custodian system. Notwithstanding any adjustment provided for in section 8
hereof, the Corporation shall not be required upon the exercise of any
Warrants to issue fractional Common Shares in satisfaction of its
obligations hereunder and the Holder understands and agrees that it will
not be entitled to any cash payment or other form of compensation in
respect of a fractional Common Share that might otherwise have been
issued. As used in this Warrant Certificate. |
19. Any certificate representing Common
Shares issued upon the exercise of this Warrant may bear the following legend:
|
"UNLESS PERMITTED UNDER APPLICABLE SECURITIES
LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THIS SECURITY TO
OR FOR THE BENEFIT OF A CANADIAN PURCHASER UNTIL THE DATE THAT IS FOUR
MONTHS AND A DAY AFTER [INSERT WARRANT DISTRIBUTION DATE]. (In the
event that no physical certificates are issued, the above constitutes
written notice of the legend restriction under applicable Canadian
securities laws.) |
20. The Corporation will maintain a
register of holders of Warrants at its principal office. The Corporation may
deem and treat the registered holder of any Warrant Certificate as the absolute
owner of the Warrants represented thereby for all purposes, and the Corporation
shall not be affected by any notice or knowledge to the contrary except where
the Corporation is required to take notice by statute or by order of a court of competent jurisdiction. A Holder shall be
entitled to the rights evidenced by such Warrant free from all equities or
rights of set-off or counterclaim between the Corporation and the original or
any intermediate holder thereof and all persons may act accordingly and the
receipt by any such Holder of the Common Shares purchasable pursuant to such
Warrant shall be a good discharge to the Corporation for the same and the
Corporation shall not be bound to inquire into the title of any such Holder
except where the Corporation is required to take notice by statute or by order
of a court of competent jurisdiction.
S-B-8
21. The Corporation shall notify the
Holder forthwith of any change of the Corporation’s address.
22. All notices to be sent hereunder
shall be deemed to be validly given to the registered holders of the Warrants if
delivered personally or if sent by registered letter through the post addressed
to such holders at their post office addresses appearing in the register of
Warrant holders caused to be maintained by the Corporation, and such notice
shall be deemed to have been given, if delivered personally when so delivered,
and if sent by post on the fifth Business Day next following the post thereof.
23. If for any reason, other than the
failure or default of the Holder, the Corporation is unable to issue and deliver
the Common Shares or other securities as contemplated herein to the Holder upon
the proper exercise by the Holder of the right to purchase any of the Common
Shares purchasable upon exercise of the Warrants represented hereby, the
Corporation may pay, at its option and in complete satisfaction of its
obligations and the rights of the Holder hereunder, to the Holder, in cash, an
amount equal to the difference between the Exercise Price and the Current Market
Price of such Common Shares on the date of exercise by the Holder, and upon such
payment the Corporation shall have no liability or other obligation to the
Holder relating to or in respect of the Warrants or this Warrant Certificate.
24. This Warrant Certificate shall be
governed by the internal laws of the State of New York, without giving effect to
any choice of law or conflict of law provision or rule (whether of the State of
New York or any other jurisdictions) that would cause the application of the
laws of any jurisdictions other than the State of New York.
25. If one or more of the provisions
contained herein shall, for any reason, be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Warrant Certificate, but this
Warrant Certificate shall be construed as if such invalid, illegal or
unenforceable provision or provisions had never been contained herein.
26. This Warrant Certificate shall
inure to the benefit of and shall be binding upon the Holder and the Corporation
and their respective successors and assigns.
27. In the case of a dispute as to the
determination of the Exercise Price or the arithmetic calculation of the Common
Shares for which this Warrant is exercisable, the Corporation shall submit the
disputed determinations or arithmetic calculations via facsimile or electronic
mail to the Holder. If the Holder and the Corporation are unable to agree upon
such determination or calculation of the Exercise Price or of the Common Shares
for which this Warrant is exercisable within three (3) Business Days of such
disputed determination or arithmetic calculation being submitted to the Holder,
then the Corporation shall submit via facsimile or electronic mail (a) the
disputed determination of the Exercise Price to an independent, reputable
investment bank selected by the Corporation and approved by the Holder or (b)
the disputed arithmetic calculation of the Common Shares for which this Warrant
is exercisable to the Corporation's independent, outside accountant. The
Corporation shall cause the investment bank or the accountant, as the case may
be, to perform the determinations or calculations and notify the Corporation and
the Holder of the results. Such investment bank's or accountant's determination
or calculation, as the case may be, shall be binding upon all parties absent
demonstrable error.
S-B-9
IN WITNESS WHEREOF the Corporation has caused this
Warrant Certificate to be signed by its duly authorized officer.
DATED as of the day of , 2015.
S-B-10
Schedule "A"
SUBSCRIPTION FORM
TO BE COMPLETED IF WARRANTS ARE TO BE EXERCISED:
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TO: |
SPHERE 3D CORP. |
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|
9112 Spectrum Center Boulevard, San Diego,
California, 92123 |
The undersigned hereby subscribes for __________ Common Shares
of Sphere 3D Corp. according to the terms and conditions set forth in the
annexed Warrant Certificate (or such number of other securities or property to
which such Warrant Certificate entitles the undersigned to acquire under the
terms and conditions set forth in such Warrant Certificate).
| Registered Name: |
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| Address for Delivery of Common Shares: |
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Attention: |
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| Exercise Price Tendered (US$
per Common Share or as adjusted)
US$ |
|
Capitalized terms not defined herein shall have the meanings
assigned to them in the Warrant Certificate to which this subscription form is
attached.
Dated at __________, this _____ day of __________,
20_____ .
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| WITNESS: |
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HOLDER'S NAME |
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AUTHORIZED SIGNATURE |
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TITLE (IF APPLICABLE)
|
Signature guaranteed1:
___________________________________________________________________
1.
If the Common Shares are to be registered in a name other than the name of
the registered Warrant Holder, the signature of the Warrant Holder must be
medallion guaranteed by a bank, trust Corporation or a member of a stock
exchange in the United States.
S-B-11
Schedule "B"
WARRANT TRANSFER FORM
FOR VALUE RECEIVED, subject to receipt of prior written
approval of SPHERE 3D CORP. (the "Corporation"), the undersigned (the
"Transferor") hereby sells, assigns and transfers unto (name)
_______________________(the "Transferee") of (residential address)
__________________________________________________________________________Warrants
of the Corporation registered in the name of the undersigned represented by the
within certificate, and irrevocably appoints the Corporation as the attorney of
the undersigned to transfer the said securities on the register of transfers for
the said Warrants, with full power of substitution.
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The signature of this assignment must correspond with the
name as written upon the face of the certificate, in every particular,
without alteration or enlargement or any change whatever, and must be
guaranteed by a bank, trust Corporation or a member of a recognized stock
exchange. The guarantor must affix a stamp bearing the actual words
"Signature Guaranteed". |
DATED this _____ day of __________, 20_____ .
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(Signature of transferring Warrantholder)
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S-B-12
TRANSFEREE ACKNOWLEDGMENT
In connection with this transfer the undersigned transferee is
delivering a written opinion of U.S. Counsel acceptable to the Corporation to
the effect that this transfer of Warrants has been registered under the 1933 Act
or is exempt from registration thereunder.
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Name of Transferee (please print)
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The Warrants and the common shares issuable upon exercise of
the Warrants shall only be transferable in accordance with applicable laws. The
Warrants may only be exercised in the manner required by the certificate
representing the Warrants and the Warrant Exercise Form attached thereto. Any
common shares acquired pursuant to this Warrant shall be subject to applicable
hold periods and any certificate representing such common shares will bear
restrictive legends.
S-B-13
SECURITIES PURCHASE AGREEMENT
This Securities Purchase Agreement (this “Agreement”) is
dated as of , between Sphere 3D Corp., an Ontario corporation (the
“Company”), and each purchaser identified on the signature pages hereto
(each, including its successors and assigns, a “Purchaser” and
collectively the “Purchasers”).
WHEREAS, subject to the terms and conditions set forth in this
Agreement and pursuant to an effective registration statement under the
Securities Act of 1933, as amended (the “Securities Act”), the Company
desires to issue and sell to each Purchaser, and each Purchaser, severally and
not jointly, desires to purchase from the Company, securities of the Company as
more fully described in this Agreement.
NOW, THEREFORE, IN CONSIDERATION of the mutual covenants
contained in this Agreement, and for other good and valuable consideration the
receipt and adequacy of which are hereby acknowledged, the Company and each
Purchaser agree as follows:
ARTICLE I.
DEFINITIONS
1.1 Definitions. In addition to
the terms defined elsewhere in this Agreement, for all purposes of this
Agreement, the following terms have the meanings set forth in this Section 1.1:
“Acquiring Person” shall have the meaning ascribed to
such term in Section 4.5.
“Action” shall have the meaning ascribed to such term in
Section 3.1(j) .
“Affiliate” means any Person that, directly or
indirectly through one or more intermediaries, controls or is controlled by or
is under common control with a Person as such terms are used in and construed
under Rule 405 under the Securities Act.
“Base Prospectus” means the form of prospectus included
in the Registration Statement in the form in which it has most recently been
filed with the Commission on or prior to the date of this Agreement relating to
the Securities.
“Board of Directors” means the board of directors of the
Company.
“Business Day” means any day except any Saturday, any
Sunday, any day which is a federal legal holiday in the United States or any day
on which banking institutions in the State of New York are authorized or
required by law or other governmental action to close.
“Canadian Company Counsel” means Stikeman Elliot LLP,
with offices located at 1155 Rene-Levesque Blvd. West, 40th Floor,
Montreal, QC H3B 3V2.
“Closing” means the closing of the purchase and sale of
the Securities pursuant to Section 2.1.
S-C-1
“Closing Date” means the Trading Day on which all of the
Transaction Documents have been executed and delivered by the applicable parties
thereto, and all conditions precedent to (i) the Purchasers’ obligations to pay
the Subscription Amount and (ii) the Company’s obligations to deliver the
Securities, in each case, have been satisfied or waived, but in no event later
than the third Trading Day following the date hereof.
“Commission” means the United States Securities and
Exchange Commission.
“Common Shares” means the Common Shares of the Company,
no par value per share, and any other class of securities into which such
securities may hereafter be reclassified or changed.
“Common Share Equivalents” means any securities of the
Company or the Subsidiaries which would entitle the holder thereof to acquire at
any time Common Shares, including, without limitation, any debt, preferred
stock, right, option, warrant or other instrument that is at any time
convertible into or exercisable or exchangeable for, or otherwise entitles the
holder thereof to receive, Common Shares.
“Evaluation Date” shall have the meaning ascribed to
such term in Section 3.1(s) .
“Exchange Act” means the Securities Exchange Act of
1934, as amended, and the rules and regulations promulgated thereunder.
“Exempt Issuance” means the issuance of (a) Common
Shares or options to employees, officers or directors of the Company pursuant to
any stock or option plan duly adopted for such purpose, by a majority of the
non-employee members of the Board of Directors or a majority of the members of a
committee of non-employee directors established for such purpose for services
rendered to the Company, (b) securities upon the exercise or exchange of or
conversion of any Securities issued hereunder and/or other securities
exercisable or exchangeable for or convertible into Common Shares issued and
outstanding on the date of this Agreement, (c) securities issued pursuant to
acquisitions or strategic transactions approved by a majority of the
disinterested directors of the Company, provided that any such issuance shall
only be to a Person (or to the equityholders of a Person) which is, itself or
through its subsidiaries, an operating company or an owner of an asset in a
business synergistic with the business of the Company and shall provide to the
Company additional benefits in addition to the investment of funds, but shall
not include a transaction in which the Company is issuing securities primarily
for the purpose of raising capital or to an entity whose primary business is
investing in securities, (d) the issuance of securities by the Company to third
parties in connection the settlement of any litigation known to the Company as
of the date of this Agreement or in connection with strategic transactions, (e)
the issuance of Common Shares and/or warrants pursuant to the terms of the
Purchase Agreement by and between the Company and an investor, dated as of
August 10, 2015, as amended (the “August Purchase Agreement”), or
issuances of Common Shares and/or Common Share Equivalents as permitted or
required pursuant to the terms of our 8% Senior Secured Convertible Debenture,
due March 31, 2018, by and between the Company and FBC Holdings S.À R.L., as amended through the date hereof, or
Revolving Credit Agreement, dated as of December 30, 2014, by and among the
Company, Overland Storage, Inc., and FBC Holdings S.À R.L., as amended through
the date hereof, and (f) the issuance of employee stock options and the grant of
restricted share awards or restricted share units pursuant to equity incentive
plans described in the Registration Statement (excluding exhibits thereto) and
the Prospectus or the issuance of shares upon the vesting of restricted share
units or the issuance of shares or any other securities issued under the
Company’s employee benefit or incentive plans.
S-C-2
“FCPA” means the Foreign Corrupt Practices Act of 1977,
as amended.
“GAAP” shall have the meaning ascribed to such term in
Section 3.1(h) .
“Indebtedness” shall have the meaning ascribed to such
term in Section 3.1(aa) .
“Intellectual Property Rights” shall have the meaning
ascribed to such term in Section 3.1(b)(xiv) .
“Liens” means a lien, charge, pledge, security interest,
encumbrance, right of first refusal, preemptive right or other restriction.
“Material Adverse Effect” shall have the meaning
assigned to such term in Section 3.1(b)(i) .
“Material Permits” shall have the meaning ascribed to
such term in Section 3.1(n) .
“Person” means an individual or corporation,
partnership, trust, incorporated or unincorporated association, joint venture,
limited liability company, joint stock company, government (or an agency or
subdivision thereof) or other entity of any kind.
“Preliminary Prospectus” means any preliminary
prospectus (including any preliminary prospectus supplement) relating to the
Securities filed with the Commission pursuant to Rule 424(b) under the Act.
“Proceeding” means an action, claim, suit, investigation
or proceeding (including, without limitation, an informal investigation or
partial proceeding, such as a deposition), whether commenced or threatened.
“Prospectus” means a final prospectus supplement filed
with the Commission pursuant to Rule 424 under the Securities Act not later than
the Commission’s close of business on the second business day following the
execution and delivery of this Agreement, or, if applicable, such earlier time
as may be required by Rule 430A(a)(3) under the Securities Act and any
Preliminary Prospectus (including the Base Prospectus as so supplemented).
“Purchaser Party” shall have the meaning ascribed to
such term in Section 4.9.
S-C-3
“Registration Statement” means the effective
registration statement on Form F-3 with Commission file No. 333-206357 which
registers the sale of the Warrants and the Warrant Shares to the Purchasers.
“Required Approvals” shall have the meaning ascribed to
such term in Section 3.1(e) .
“Rule 144” means Rule 144 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended or interpreted from
time to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same purpose and effect as such Rule.
“Rule 424” means Rule 424 promulgated by the Commission
pursuant to the Securities Act, as such Rule may be amended or interpreted from
time to time, or any similar rule or regulation hereafter adopted by the
Commission having substantially the same purpose and effect as such Rule.
“Rules and Regulations” means the rules and regulations
of the Commission promulgated under the Securities Act.
“SEC Reports” shall have the meaning ascribed to
such term in Section 3.1(b)(xi) .
“Securities” means the Registered Shares, the Warrants
and the Warrant Shares.
“Securities Act” means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder
“Short Sales” means all “short sales” as defined in Rule
200 of Regulation SHO under the Exchange Act (but shall not be deemed to include
the location and/or reservation of borrowable Common Shares).
“Subscription Amount” means, as to each Purchaser, the
aggregate amount to be paid for the Common Shares and Warrants purchased
hereunder as specified below such Purchaser’s name on the signature page of this
Agreement and next to the heading “Subscription Amount,” in United States
dollars and in immediately available funds, which such amount shall be equal to
U.S.$2.00 per Common Share and a Warrant to purchase one Common Share purchased
hereunder.
“Subsidiary” means any subsidiary of the Company as set
forth on Schedule 3.1(a), and shall, where applicable, also
include any direct or indirect subsidiary of the Company formed or acquired
after the date hereof.
“Time of Sale Disclosure Package” means the Base
Prospectus and the Prospectus most recently filed with the Commission or
otherwise supplied to the Purchasers before the time of this Agreement,
including any Preliminary Prospectus deemed to be a part thereof.
S-C-4
“Trading Day” means a day on which the principal Trading
Market is open for trading.
“Trading Market” means any of the following markets or
exchanges on which the Common Shares is listed or quoted for trading on the date
in question: the NYSE MKT, the Nasdaq Capital Market, the Nasdaq Global Market,
the Nasdaq Global Select Market, or the New York Stock Exchange (or any
successors to any of the foregoing).
“Transaction Documents” means this Agreement and the
Warrants and any other documents or agreements executed in connection with the
transactions contemplated hereunder.
“Transfer Agent” means TMX Equity Transfer Services
Inc., the current transfer agent of the Company, with a mailing address of 200
University Ave Suite 300, Toronto, ON M5H 4H1, Canada, and a contact email of
Steven.Nguyen@tmx.com, and any successor transfer agent of the Company.
“Underlying Securities” means the (i) the Registered
Shares, (ii) the Warrant Shares and (iiii) any share capital of the Company
issued or issuable with respect to the Registered Shares, the Warrant Shares, or
the Warrants, respectively, including, without limitation, (1) as a result of
any share split, share dividend, recapitalization, exchange or similar event or
otherwise and (2) share capital of the Company into which the Common Shares are
converted or exchanged and shares of capital stock of a successor entity into
which the Common Shares are converted or exchanged, in each case, without regard
to any limitations on exercise of the Warrants.
“U.S. Company Counsel” means O’Melveny & Myers LLP,
with an office at 2765 Sand Hill Road, Menlo Park, CA 94025.
“VWAP” means, for any date, the price determined by the
first of the following clauses that applies: (a) if the Common Shares is then
listed or quoted on a Trading Market, the daily volume weighted average price of
the Common Shares for such date (or the nearest preceding date) on the Trading
Market on which the Common Shares is then listed or quoted as reported by
Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to
4:02 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a Trading Market,
the volume weighted average price of the Common Shares for such date (or the
nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common
Shares is not then listed or quoted for trading on OTCQB or OTCQX and if prices
for the Common Shares are then reported in the “Pink Sheets” published by OTC
Markets, Inc. (or a similar organization or agency succeeding to its functions
of reporting prices), the most recent bid price per share of the Common Shares
so reported, or (d) in all other cases, the fair market value of a share of
Common Shares as determined by an independent appraiser selected in good faith
by the Purchasers of a majority in interest of the Securities then outstanding
and reasonably acceptable to the Company, the reasonable fees and expenses of
which shall be paid by the Company.
S-C-5
“Warrants” means the warrants having a term of from the
Closing Date in the form of Exhibit A-1 hereto.
“Warrant Shares” means the Common Shares issuable upon
exercise of the Warrants.
ARTICLE II.
PURCHASE AND SALE
2.1 Closing. On the Closing
Date, upon the terms and subject to the conditions set forth herein,
substantially concurrent with the execution and delivery of this Agreement by
the parties hereto, the Company agrees to sell, and the Purchasers, severally
and not jointly, agree to purchase, (i) up to an aggregate of Common Shares (the
“Registered Shares”) and (ii) Warrants to purchase an aggregate of Common
Shares. Each Purchaser shall deliver to the Escrow Agent, via wire transfer or a
certified check, immediately available funds equal to such Purchaser’s
Subscription Amount as set forth on the signature page hereto executed by such
Purchaser and the Company shall deliver to each Purchaser its respective
Warrants as determined pursuant to Section 2.2(a), and the Company and each
Purchaser shall deliver the other items set forth in Section 2.2 deliverable at
the Closing. Upon satisfaction of the covenants and conditions set forth in
Sections 2.2 and 2.3, the Closing shall occur at the offices of O’Melveny &
Myers LLP, Two Embarcadero Center, 28th Floor, San Francisco, CA
94111 or such other location as the parties shall mutually agree.
2.2 Deliveries.
(a) On or prior to the Closing Date,
the Company shall deliver or cause to be delivered to each Purchaser the
following:
(i) this Agreement duly executedby the
Company;
(ii) legal opinions of Canadian Company
Counsel and U.S. Company Counsel, in form and substance reasonably acceptable to
the Purchasers;
(iii) a Warrant, duly executed by the Company,
registered in the name of such Purchaser to purchase up to a number of Common
Shares equal to 100% of such Purchaser’s Subscription Amount divided by $2.00,
with an exercise price equal to $2.50, subject to adjustment therein;
(iv) duly executed transfer agent
instructions, in form and substance reasonably acceptable to the Purchasers,
which instructions shall have been delivered to and acknowledged in writing by
the Company’s transfer agent;
(v) a certificate duly executed by an
executive officer of the Company certifying to the accuracy in all material
respects (or, to the extent representations or warranties are qualified by
materiality or Material Adverse Effect, in all respects) when made and on the
Closing Date of the representations and warranties of the Company contained
herein (unless as of a specific date therein in which case they shall be
accurate as of such date) and that the Company shall have performed, satisfied and complied in all respects with the
covenants, agreements and conditions required to be performed, satisfied or
complied with by the Company at or prior to the Closing Date;
S-C-6
(vi) a letter from the Company’s transfer
agent certifying the number of shares of Common Stock outstanding on the Closing
Date immediately prior to the Closing; and
(vii) a certificate, in the form acceptable to such
Purchaser, duly executed by the Secretary of the Company and dated as of the
Closing Date, as to (i) the resolutions with respect to the offering
contemplated hreby as adopted by the Company’s board of directors in a form
reasonably acceptable to such Purchaser, (ii) the organizational documents of
the Company and (iii) specimen signatures of all signatories of the Company,
each as in effect at the Closing;
(viii) a letter on the letterhead of the Company, duly
executed by the Chief Executive Officer of the Company, setting forth the wire
amounts of each Purchaser and the wire transfer instructions of the Company
(ix) the Prospectus (which may be delivered
in accordance with Rule 172 under the Securities Act).
(b) On or prior to the Closing Date,
each Purchaser shall deliver or cause to be delivered to the Company the
following:
(i) this Agreement duly executed by
such Purchaser; and
(ii) such Purchaser’s Subscription Amount by
wire transfer to an account specified in writing by the Company (less any
amounts withheld by the lead Purchaser in accordance with Section 5.2 below).
2.3 Closing Conditions.
(a) The obligations of the Company
hereunder in connection with the Closing are subject to the following conditions
being met:
(i) the accuracy in all material
respects (or, to the extent representations or warranties are qualified by
materiality or Material Adverse Effect, in all respects) on the Closing Date of
the representations and warranties of the Purchasers contained herein (unless as
of a specific date therein in which case they shall be accurate as of such
date);
(ii) all obligations, covenants and
agreements of each Purchaser required to be performed at or prior to the Closing
Date shall have been performed; and
(iii) the delivery by each Purchaser of the items
set forth in Section 2.2(b) of this Agreement.
S-C-7
(b) The respective obligations of the
Purchasers hereunder in connection with the Closing are subject to the following
conditions being met:
(i) the accuracy in all material
respects (or, to the extent representations or warranties are qualified by
materiality or Material Adverse Effect, in all respects) when made and on the
Closing Date of the representations and warranties of the Company contained
herein (unless as of a specific date therein in which case they shall be
accurate as of such date);
(ii) all obligations, covenants and
agreements of the Company required to be performed at or prior to the Closing
Date shall have been performed;
(iii) the delivery by the Company of the items set
forth in Section 2.2(a) of this Agreement;
(iv) The Registration Statement shall be
effective and available for the issuance and sale of the Securities hereunder
and the Company shall have delivered to such Purchaser the Base Prospectus and
each prospectus supplement thereto as required thereunder;
(v) The Company shall have obtained all
governmental, regulatory or third party consents and approvals, if any,
necessary for the sale of the Securities, including without limitation, those
required by the principal Trading Market of the Common Shares of the Company as
of the date hereof (the “Principal Market”), if any;
(vi) The Common Shares (A) shall be
designated for quotation or listed (as applicable) on the Principal Market and
(B) shall not have been suspended, as of the Closing Date, by the Commission or
the Principal Market from trading on the Principal Market nor shall suspension
by the Commission or the Principal Market have been threatened, as of the
Closing Date, either (I) in writing by the Commission or the Principal Market or
(II) by falling below the minimum maintenance requirements of the Principal
Market.
(vii) No statute, rule, regulation, executive
order, decree, ruling or injunction shall have been enacted, entered,
promulgated or endorsed by any with any federal, state, provincial, local or
foreign governmental or regulatory commission, board, body, authority or agency,
or of or with any self-regulatory organization or other non-governmental
regulatory authority of competent jurisdiction that prohibits the consummation
of any of the transactions contemplated by the Transaction Documents;
(viii) there shall have been no Material Adverse Effect
with respect to the Company since the date hereof;
(ix) from the date hereof to the Closing
Date, trading in the Common Shares shall not have been suspended by the
Commission or the Company’s principal Trading Market, and, at any time prior to
the Closing Date, trading in securities generally as reported by Bloomberg L.P. shall not
have been suspended or limited, or minimum prices shall not have been
established on securities whose trades are reported by such service, or on any
Trading Market, nor shall a banking moratorium have been declared either by the
United States or New York State authorities nor shall there have occurred any
material outbreak or escalation of hostilities or other national or
international calamity of such magnitude in its effect on, or any material
adverse change in, any financial market which, in each case, in the reasonable
judgment of such Purchaser, makes it impracticable or inadvisable to purchase
the Securities at the Closing.; and
(x) the Company shall have issued and sold on the Closing Date, pursuant to this Agreement and the Concurrent Issuance (as defined in Section 4.14(c) of this Agreement) Registered Shares and other Common Shares having an aggregate purchase price of at least $5.75 million (and not more than $6.0 million) and related warrants to purchasers (including the Purchaser).
S-C-8
ARTICLE III.
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties
of the Company.
(a) The Company represents and warrants
to, and agrees with, each of the Purchasers, as of the date hereof and as of the
Closing Date, except as otherwise indicated, as follows:
(i) The Registration Statement has
become effective under the Securities Act; and no stop order suspending the
effectiveness of the Registration Statement or preventing or suspending the use
of any Preliminary Prospectus or the Prospectus is in effect, and no proceedings
for such purpose are pending before or threatened by the Commission, or any
securities regulatory authorities in Canada.
(ii) The Base Prospectus and any Preliminary
Prospectus filed as part of the Registration Statement as originally filed or as
part of any amendment thereto, or filed pursuant to Rule 424 under the
Securities Act, complied when so filed as to form in all material respects with
the Securities Act and the rules and regulations thereunder (including, without
limitation, Rule 430B(a) or 430A(b)). The Registration Statement contains all
exhibits and schedules required to be filed by the Securities Act or the Rules
and Regulations.
(iii) (A) Each document, if any, filed or to be
filed pursuant to the Exchange Act and incorporated by reference in the Time of
Sale Disclosure Package or the Prospectus complied or will comply when so filed
as to form in all material respects with the Exchange Act and the applicable
rules and regulations of the Commission thereunder; (B) the Registration
Statement, as of its effective date and as of the date hereof, does not contain
and, as amended or supplemented, if applicable, will not, at the time of such
amendment or supplement, contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make the
statements therein not misleading; (C) the Registration Statement complies and,
as amended or supplemented, if applicable, will comply in all material respects
as to form with the Securities Act; (D) the offering and sale of the Securities
as contemplated hereby complies with the requirements of Rule 415 under the
Securities Act (including without limitation Rule 415(a)(5)); (E) the Time of Sale Disclosure Package does
not, and at the Time of Sale and at the Closing Date, the Time of Sale
Disclosure Package, as then amended or supplemented by the Company, if
applicable, will not, contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; and (F) the
Prospectus, as of the date it is filed with the Commission pursuant to Rule 424
and at the Closing Date, will comply in all material respects as to form with
the Securities Act (including without limitation Section 10(a) of the Securities
Act) and will not contain any untrue statement of a material fact or omit to
state a material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading; provided, however,
that the representations and warranties set forth in this Section 3.1(a)(iii) do
not apply to statements or omissions in the Registration Statement, the Time of
Sale Disclosure Package, any Preliminary Prospectus, any road show or the
Prospectus or any amendments or supplements thereto based upon information
relating to any Purchaser furnished to the Company in writing by such Purchaser
expressly for use therein.
S-C-9
(iv) Prior to the execution of this
Agreement, the Company has not, directly or indirectly, offered or sold any
Securities by means of any “prospectus” (within the meaning of the Securities
Act) or used any “prospectus” (within the meaning of the Securities Act) in
connection with the offer or sale of the Securities, in each case other than the
Time of Sale Disclosure Package.
(v) The Company was, at the time the
Registration Statement was initially filed and when it became effective, and is,
eligible to use Form F-3 to register the offering of the Securities contemplated
hereby and all the conditions to the use of Form F-3 in connection with the
offering and sale of the Securities as contemplated hereby have been satisfied.
The Company was not an “ineligible issuer” (as defined in Rule 405 under the
Securities Act) as of the eligibility determination date for purposes of Rule
164 under the Securities Act with respect to the offering of the Securities
contemplated by the Registration Statement. The applicable conditions for use of
Form F-3, set forth in the General Instructions thereto, have been satisfied and
the Company meets the requirement for use of Form F-3.
(vi) The Common Shares are (and upon the
Closing Date, the Securities and the Common Shares underlying the Warrants will
be) registered pursuant to Section 12(b) of the Exchange Act and listed and
admitted for trading on the NASDAQ Global Market (“NASDAQ”). The Company
has not received any notice from NASDAQ regarding the delisting of such shares
from NASDAQ (except for such notices as have been fully resolved), nor has the
Company received any written notification that NASDAQ is contemplating
terminating such listing. A Listing of Additional Shares notification for the
Securities has been duly submitted to NASDAQ. To the Company’s knowledge, there
are no affiliations or associations between (A) any member of the Financial
Industry Regulatory Authority (“FINRA”) that is a participating
member in the offering of the Securities and (B) the Company or any of the
Company’s officers, directors or 5% or greater security holders or any
beneficial owner of the Company’s unregistered equity securities that were
acquired at any time on or after the 180th day immediately preceding the date
the Registration Statement was initially filed with the Commission, except as
disclosed in the Registration Statement (excluding the exhibits thereto), the
Time of Sale Disclosure Package and the Prospectus.
S-C-10
(vii) The Company is not, and after giving
effect to the offering and sale of the Securities and the application of the
proceeds thereof as described in the Prospectus will not be, required to
register as an “investment company” as such term is defined in the Investment
Company Act of 1940, as amended.
(viii) The financial statements included or
incorporated by reference in the Registration Statement, the Time of Sale
Disclosure Package and the Prospectus, together with the related notes and
schedules, present fairly, in all material respects, the financial position of
the Company as of the dates indicated and the consolidated results of
operations, cash flows and changes in shareholders’ equity of the Company for
the periods specified and have been prepared as to form in compliance with the
requirements of the Securities Act and Exchange Act and in conformity with U.S.
generally accepted accounting principles applied on a consistent basis during
the periods presented; all pro forma financial statements or financial data
included or incorporated by reference in the Registration Statement, the Time of
Sale Disclosure Package and the Prospectus, if any, comply as to form with the
requirements of the Securities Act and the Exchange Act, and the assumptions
used in the preparation of such pro forma financial statements and data are
reasonable, the pro forma adjustments used therein are appropriate to give
effect to the transactions or circumstances described therein and the pro forma
adjustments have been properly applied to the historical amounts in the
compilation of those statements and data; the other financial data contained or
incorporated by reference in the Registration Statement, the Time of Sale
Disclosure Package and the Prospectus are accurately and fairly presented in all
material respects and prepared on a basis consistent with the financial
statements and books and records of the Company; there are no financial
statements (historical or pro forma) that are required to be included or
incorporated by reference in the Registration Statement, the Time of Sale
Disclosure Package or the Prospectus that are not included or incorporated by
reference as required; the Company does not have any material liabilities or
obligations, direct or contingent (including any off-balance sheet obligations),
not described in the Time of Sale Disclosure Package and the Prospectus or in
documents incorporated therein by reference that are required to be described
are not so described, other than trade payables and accrued expenses incurred in
the ordinary course of business consistent with past practice; and all
disclosures contained or incorporated by reference in the Time of Sale
Disclosure Package and the Prospectus regarding “non-GAAP financial measures”
(as such term is defined by the rules and regulations of the Commission) comply
with Regulation G under the Exchange Act and Item 10 of Regulation S-K under the
Securities Act, to the extent applicable. To the knowledge of the Company, each
of Moss Adams LLP and Collins Barrow Toronto LLP, which has expressed its
opinion with respect to the consolidated financial statements and schedules of
the Company, is (i) an independent registered public accounting firm as required
by the Securities Act and the rules and regulations thereunder and (ii)
independent with respect to the Company as required by the Business Corporations
Act (Ontario).
S-C-11
(ix) All statistical or market-related data
included or incorporated by reference in the Time of Sale Disclosure Package and
the Prospectus are based on or derived from sources that the Company reasonably
believes to be reliable and accurate, and the Company has obtained the written
consent to the use of such data from such sources to the extent required and
except to the extent that failure to obtain such consent would not reasonably be
expected to have a Material Adverse Effect. Each “forward-looking statement”
(within the meaning of Section 27A of the Securities Act or Section 21E of the
Exchange Act) contained or incorporated by reference in the Registration
Statement, the Time of Sale Disclosure Package and the Prospectus has been made
or reaffirmed with a reasonable basis and in good faith.
(b) The Company represents and warrants
to, and agrees with, each of the Purchasers, except as set forth in the Time of
Sale Disclosure Package, as follows:
(i) The Company has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of the Province of Ontario, Canada, has the corporate power and authority
to own its property and to conduct its business as described in the Time of Sale
Disclosure Package and the Prospectus and is duly qualified to transact business
and is in good standing in each jurisdiction in which the conduct of its
business or its ownership or leasing of property requires such qualification,
except to the extent that the failure to be so qualified or be in good standing
would not (A) have a material adverse effect on the assets, business, prospects,
condition (financial or otherwise), results of operation or prospects of
Company, (B) prevent or materially interfere with consummation of the
transactions contemplated hereby, or (C) result in the delisting of Common
Shares from NASDAQ (the occurrence of any such effect, prevention, interference
or result described in the foregoing clauses (A), (B) or (C) being herein
referred to as a “Material Adverse Effect”).
(ii) This Agreement has been duly authorized,
executed and delivered by the Company.
(iii) The authorized and outstanding capitalization
of the Company is as set forth in the Time of Sale Disclosure Package and will
be as set forth in the Prospectus, subject, in each case, to the issuance of
Common Shares upon exercise of stock options, warrants or convertible securities
disclosed as outstanding in the Time of Sale Disclosure Package and the
Prospectus, as the case may be, and the grant of options, restricted shares and
restricted share units and the issuance of Common Shares upon the exercise of
share options and the vesting of restricted share units under existing equity
incentive plans described in the Time of Sale Disclosure Package and the
Prospectus, in each case as of the date specified therein. The authorized share
capital of the Company conforms and will conform as to legal matters to the
description thereof contained in the Time of Sale Disclosure Package and the
Prospectus.
S-C-12
(iv) The Common Shares outstanding prior to
the issuance of the Securities to be sold by the Company have been duly
authorized, are validly issued, fully paid and nonassessable, have been issued
in material compliance with applicable securities laws and were not issued in
violation of any preemptive or similar rights. All prior offers and sales of
securities by the Company were made in compliance in all material respects with
the Securities Act and all other applicable laws and regulations.
(v) The Securities to be sold by the
Company have been duly authorized and, when issued and delivered in accordance
with the terms of this Agreement, will be validly issued, fully paid and
nonassessable, and the issuance of such Securities will not be subject to any
preemptive or similar rights. All corporate action required to be taken for the
authorization, issuance and sale of the Securities have been duly and validly
taken. The Securities conform in all material respects to all statements with
respect thereto contained in the Registration Statement, the Time of Sale
Disclosure Package and the Prospectus. The Common Shares issuable upon exercise
of the Warrants have been duly authorized and reserved for issuance by all
necessary corporate action on the part of the Company and when paid for and
issued in accordance with the Warrants and this Agreement, such Common Shares
will be validly issued, fully paid and non-assessable; the holders thereof are
not and will not be subject to personal liability by reason of being such
holders; and such Common Shares are not and will not be subject to the
preemptive rights of any holders of any security of the Company or similar
contractual rights granted by the Company.
(vi) This Agreement and the Warrants have
been duly and validly authorized by the Company, and, when executed and
delivered, will constitute, the valid and binding agreements of the Company,
enforceable against the Company in accordance with their respective terms,
except: (i) as such enforceability may be limited by bankruptcy, insolvency,
reorganization or similar laws affecting creditors’ rights generally; (ii) as
enforceability of any indemnification or contribution provision may be limited
under the federal and state securities laws; and (iii) that the remedy of
specific performance and injunctive and other forms of equitable relief may be
subject to the equitable defenses and to the discretion of the court before
which any proceeding therefor may be brought.
S-C-13
(vii) Neither the execution and delivery by the
Company of, nor the performance by the Company of its obligations under, this
Agreement or the Warrants will conflict with, contravene, result in a material
breach or violation of, or imposition of any lien, charge or encumbrance upon
any material assets of the Company pursuant to, or constitute a material default
under (A) any applicable statute, law, rule, regulation, judgment, order or
decree of any governmental body, regulatory or administrative agency or court
having jurisdiction over the Company or any subsidiary; (B) the constating
documents of the Company; or (C) any contract, agreement, obligation, covenant
or instrument required to be filed by the Company with the Commission pursuant
to Item 601(b)(10) of Regulation S-K.
(viii) No approval, authorization, consent or order of or
filing with any federal, state, provincial, local or foreign governmental or
regulatory commission, board, body, authority or agency, or of or with any
self-regulatory organization or other non-governmental regulatory authority
(including, without limitation, NASDAQ), or approval of the Company’s
shareholders, is required in connection with the issuance and sale of the
Securities or the consummation of the transactions contemplated by this
Agreement and the Warrants, other than (A) registration of the Securities under
the Securities Act, which has been effected (or, with respect to any Rule 462
Registration Statement, will be effected in accordance Rule 462(b) under the
Securities Act), (B) any necessary qualification under the securities or blue
sky laws of the various jurisdictions in which the Securities are being offered
to the Purchasers, (C) under the FINRA Conduct Rules, (D) the submission to
NASDAQ of a “Listing of Additional Shares” notification, together with all
supporting documentation, or (E) any continuous disclosure filing required under
applicable securities laws.
(ix) There are no actions, suits, claims,
investigations or proceedings pending or, to the Company’s knowledge, threatened
to which the Company or any of its directors or officers is or would be a party
or of which any of its properties is or would be subject at law or in equity,
before or by any federal, state, provincial, local or foreign governmental or
regulatory commission, board, body, authority or agency, or before or by any
self-regulatory organization or other non-governmental regulatory authority
(including, without limitation, NASDAQ) other than (A) any such action, suit,
claim, investigation or proceeding which, if resolved adversely to the Company,
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect, or (B) any such action, suit, claim, investigation or
proceeding that is, or is required to be, described in the Time of Sale
Disclosure Package or the Prospectus and is not so described in the Time of Sale
Disclosure Package and the Prospectus.
(x) The Company (A) is in compliance
with any and all applicable foreign, federal, state, provincial and local laws
and regulations relating to the protection of human health and safety, the
environment or hazardous or toxic substances or wastes, pollutants or
contaminants (“Environmental Laws”), (B) has received all permits, licenses or other approvals required of
it under applicable Environmental Laws to conduct its business and (C) is in
compliance with all terms and conditions of any such permit, license or
approval, except where such noncompliance with Environmental Laws, failure to
receive required permits, licenses or other approvals or failure to comply with
the terms and conditions of such permits, licenses or approvals would not
reasonably be expected to have a Material Adverse Effect. The Company is not
liable for any costs or liabilities associated with Environmental Laws
(including, without limitation, any capital or operating expenditures required
for clean-up, closure of properties or compliance with Environmental Laws or any
permit, license or approval, any related constraints on operating activities and
any potential liabilities to third parties) which would reasonably be expected
to have a Material Adverse Effect.
S-C-14
(xi) Except as disclosed in the Company’s
reports, schedules, forms, statements and other documents required to be filed
by the Company under the Securities Act and the Exchange Act, including pursuant
to Section 13(a) or 15(d) thereof, for the two years preceding the date hereof
(or such shorter period as the Company was required by law or regulation to file
such material) (the foregoing materials, including the exhibits thereto and
documents incorporated by reference therein, together with the Prospectus and
the Prospectus Supplement, being collectively referred to herein as the “SEC
Reports”), there are no contracts, agreements or understandings between the
Company and any person granting such person the right to require the Company to
file a registration statement under the Securities Act with respect to any
securities of the Company or require the Company to include such securities of
the Company with the Securities registered pursuant to the Registration
Statement that have not been satisfied or effectively waived with respect to the
issuance of the Securities.
(xii) Subsequent to the respective dates as of
which information is given in each of the Registration Statement, the Time of
Sale Disclosure Package and the Prospectus, (A) there has not occurred any
Material Adverse Effect; and (B) the Company has not purchased any of its
outstanding share capital (except in connection with the payment of the exercise
price of, or withholding taxes for, awards under the Company’s equity incentive
plans), nor declared, paid or otherwise made any dividend or distribution of any
kind on its share capital other than ordinary and customary dividends and (D)
there has not been any material change in the share capital, short-term debt or
long-term debt of the Company, except in each case as described in any of the
Registration Statement, the Time of Sale Disclosure Package and the Prospectus,
respectively.
(xiii) The Company has good and marketable title in fee
simple to all real property and good and marketable title to all personal
property owned by it that is material to the business of the Company, in each
case free and clear of all liens, encumbrances and defects, except such as would
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect; and any real property held under lease by the Company is held by
it under a valid, subsisting and enforceable lease with such exceptions as are
not material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company, in each case except as would not
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
S-C-15
(xiv) The Company owns or possesses all inventions,
patent applications, patents, trademarks (both registered and unregistered),
trade names, service names, copyrights, trade secrets and other proprietary
information described in the Registration Statement (and all associated
registrations and applications for registration, and all associated rights,
including moral rights) the Time of Sale Disclosure Package and the Prospectus
as being owned or licensed by it or which is necessary for the conduct of, or
material to, its businesses as currently conducted (collectively, the
“Intellectual Property”), and (A) there are no third parties who have or,
to the Company’s knowledge, will be able to establish ownership rights to any
Intellectual Property, except for, and to the extent of, the ownership rights of
the owners of the Intellectual Property which the Registration Statement, the
Time of Sale Disclosure Package and the Prospectus disclose is licensed to the
Company; (B) to the knowledge of the Company, there is no infringement by third
parties of any Intellectual Property, which infringement is required to be
disclosed in the Registration Statement, the Time of Sale Disclosure Package or
the Prospectus and is not so disclosed; (C) there is no pending or, to the
Company’s knowledge, threatened action, suit, proceeding or claim by others
challenging the Company’s rights in or to any Intellectual Property, and the
Company is unaware of any facts which could form a reasonable basis for any such
action, suit, proceeding or claim, except as disclosed in the Registration
Statement, the Time of Sale Disclosure Package and the Prospectus; (D) there is
no pending or, to the Company’s knowledge, threatened action, suit, proceeding
or claim by others challenging the validity, enforceability or scope of any
Intellectual Property, except as disclosed in the Registration Statement, the
Time of Sale Disclosure Package and the Prospectus; (E) there is no pending or,
to the Company’s knowledge, threatened action, suit, proceeding or claim by
others that the Company infringes or otherwise violates any patent, trademark,
trade name, service name, copyright, trade secret or other proprietary rights of
others; and (F) the Company has complied with the terms of each agreement
pursuant to which Intellectual Property has been licensed to the Company, and
all such agreements are in full force and effect, except as such failure to
comply or be in full force and effect would not reasonably be expected to result
in a Material Adverse Effect.
(xv) Except as would not individually or in
the aggregate reasonably be expected to have a Material Adverse Effect upon the
condition of the Company, and to the best of the Company’s knowledge, each of
the current and former employees of the Company, including for greater certainty
each of the officers of the Company, has entered into a proprietary rights
agreement with the Company, being the Company, (i) assigning to the Company any
Intellectual Property rights in any developments, works, inventions or
improvements produced or designed by such person, during the term of and in the course of
employment with the Company, and waiving any moral rights in the same, as the
case may be; and (ii) which contains customary confidentiality, noncompetition
and non-disclosure covenants.
S-C-16
(xvi) No labor dispute with the employees of the
Company exists, except as described in the Registration Statement, the Time of
Sale Disclosure Package and the Prospectus, or, to the knowledge of the Company,
is imminent; and the Company is not aware of any existing labor disturbance by
the employees of any of its principal suppliers, manufacturers or contractors
that would reasonably be expected to have a Material Adverse Effect. The Company
is not in violation of any provision of the Employee Retirement Income Security
Act of 1974, as amended, or the rules and regulations promulgated thereunder,
except for such violations as would not reasonably be expected to have a
Material Adverse Effect.
(xvii) The Company is insured by insurers of recognized
financial responsibility against such losses and risks and in such amounts as
are prudent and customary in the businesses in which it is engaged; since
January 1, 2014, the Company has not been refused any insurance coverage sought
or applied for; and the Company has no reason to believe that it will not be
able to renew its existing insurance coverage as and when such coverage expires
or to obtain similar coverage from similar insurers as may be necessary to
continue its business at a cost that would not reasonably be expected to have a
Material Adverse Effect.
(xviii) The Company possesses all certificates, authorizations
and permits issued by the appropriate federal, state, provincial or foreign
regulatory authorities necessary to conduct its businesses, and the Company has
not received any notice of proceedings relating to the revocation or
modification of any such certificate, authorization or permit which, singly or
in the aggregate, if the subject of an unfavorable decision, ruling or finding,
would have a Material Adverse Effect.
(xix) The Company maintains “internal control over
financial reporting” (as defined in Rules 13a-15 and 15d-15 under the Exchange
Act) in compliance with the requirements of the Exchange Act. The Company’s
internal control over financial reporting has been designed by the Company’s
principal executive officer and principal financial officer, or under their
supervision, to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles and is
effective in performing the functions for which it was established. Except as
described in the Registration Statement, the Time of Sale Disclosure Package and
the Prospectus, since the end of the Company’s most recent audited fiscal year,
there has been (A) no significant deficiency or material weakness in the design
or operation of the Company’s internal control over financial reporting (whether
or not remediated) which is reasonably likely to adversely affect the Company’s
ability to record, process, summarize and report financial information, and (B) no
change in the Company’s internal control over financial reporting that has
materially affected, or is reasonably likely to materially affect, the Company’s
internal control over financial reporting.
S-C-17
(xx) The Company maintains “disclosure
controls and procedures” (as such term is defined in Rules 13a-15 and 15d-15
under the Exchange Act); such disclosure controls and procedures are designed to
ensure that material information relating to the Company is made known to the
Company’s Chief Executive Officer and Chief Financial Officer by others within
the Company, and such disclosure controls and procedures are effective in
performing the functions for which they were established; the principal
executive officers (or their equivalents) and principal financial officers (or
their equivalents) of the Company have made all certifications required by the
Sarbanes-Oxley Act of 2002 and any related rules and regulations promulgated by
the Commission (the “Sarbanes-Oxley Act”), and the statements made in
each such certification are accurate; the Company and its directors and officers
are each in compliance with the applicable provisions of the Sarbanes-Oxley Act.
(xxi) The Company has not sent or received any
communication regarding termination of, or intent not to renew, any of the
contracts or agreements referred to or described in the Time of Sale Disclosure
Package or the Prospectus, or referred to or described in, or filed as an
exhibit to, the Registration Statement, and no such termination or non-renewal
has been threatened by the Company or, to the Company’s knowledge, any other
party to any such contract or agreement, except as would not reasonably be
expected to have a Material Adverse Effect.
(xxii) All material tax returns required to be filed by
the Company have been timely filed, and all material taxes, including any
interest, additions to tax or penalties applicable thereto due or claimed to be
due from the Company have been paid, other than those being contested in good
faith and for which adequate reserves have been provided.
(xxiii) Neither the Company nor, to the knowledge of the
Company, any director, officer, agent, employee or affiliate of the Company has
taken any action, directly or indirectly, that would result in a violation by
such persons of the Foreign Corrupt Practices Act of 1977, as amended, and the
rules and regulations thereunder, the Corruption of Foreign Officials Act
(Canada) or similar legislation; and the Company has instituted and
maintains policies and procedures designed to ensure continued compliance
therewith, including without limitation a system of internal accounting controls
sufficient to provide reasonable assurances that (A) transactions are executed
in accordance with management’s general or specific authorization, (B)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets, (C) access to assets is permitted only in accordance with management’s
general or specific authorization, and (D) the recorded accountability for
assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
S-C-18
(xxiv) The Company has not sold, issued or distributed
any Common Shares during the six-month period preceding the date hereof,
including any sales pursuant to Rule 144A under, or Regulation D or S of, the
Securities Act, other than (A) shares issued pursuant to employee benefit plans,
qualified share option plans or other employee compensation plans or pursuant to
outstanding options, rights, warrants or restricted share units or other
convertible securities and (B) as described or incorporated by reference in the
Registration Statement, the Time of Sale Disclosure Package and the Prospectus
or the Company’s filings with the SEC.
(xxv) Neither the Company nor any of its directors,
officers, affiliates or to the Company’s knowledge, controlling persons has
taken, directly or indirectly, any action designed, or which has constituted or
might reasonably be expected to cause or result in the stabilization or
manipulation of the price of any security of the Company to facilitate the sale
of the Securities.
(xxvi) The Company (a) is organized under the laws of
Ontario and has its principal business operations in the United States; (b) has
a class of securities registered pursuant to Section 12(b) of the Exchange Act;
(c) (i) has been subject to the reporting requirements of Section 12 of the
Exchange Act and has filed all the material required to be filed pursuant to
Section 13, 14 or 15(d) of the Exchange Act for a period of at least 12 calendar
months immediately prior to the filing of its most recent Annual Report on Form
40-F, and (ii) has filed in a timely manner all reports required to be filed
during the 12 calendar months and any portion of a month immediately preceding
the filing of its most recent Annual Report on Form 40-F; and (d) has not, since
the end of the last fiscal year for which audited financial statements of the
Company were included in a report filed pursuant to Section 13(a) or 15(d) of
the Exchange Act: (i) failed to pay any dividend or sinking fund installment on
preferred share, or (ii) defaulted: (A) on any installment or installments on
indebtedness for borrowed money, or (B) on any rental on one or more long term
leases, which defaults in the aggregate are material to the financial position
of the Company.
(xxvii) The Company is a reporting issuer under the securities
laws of each of the provinces of British Columbia, Alberta and Ontario and is in
compliance in all material respects with all applicable securities laws in each
of the provinces of British Columbia, Alberta and Ontario (including the rules,
regulations, instruments, blanket orders, blanket rulings and written
interpretations under such laws together with applicable published policies,
policy statements and notices of the applicable securities commission or
securities regulatory authority in each such jurisdiction), and is not on the
list of defaulting reporting issuers maintained by the Canadian securities
regulatory authorities in each such province that maintains such a list; and the
Company has not filed any confidential material change reports which remain
confidential at the date hereof. Without limiting the foregoing, the Company is
in compliance in all material respects with its obligations to make timely
disclosure of all material changes to its business, and certification
requirements contained in National Instrument 52-109 – Certification of
Disclosure in Issuers’ Annual and Interim Filings of the Canadian Securities
Administrators with respect to the Company’s annual of and interim filings.
S-C-19
(xxviii) As of the date hereof, the Company is not considering
effecting a reverse stock split or other combination of its outstanding common
shares.
(c) Any certificate signed by any
officer of the Company and delivered to the Purchasers in connection with the
offering of the Securities shall be deemed a representation and warranty by the
Company to the Purchasers as to the matters covered thereby.
3.2 Representations and
Warranties of the Purchasers. Each Purchaser, for itself and for no other
Purchaser, hereby represents and warrants as of the date hereof and as of the
Closing Date to the Company as follows (unless as of a specific date therein):
(a) Organization; Authority.
Such Purchaser is either an individual or an entity duly incorporated or formed,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation or formation with full right, corporate, partnership, limited
liability company or similar power and authority to enter into and to consummate
the transactions contemplated by this Agreement and otherwise to carry out its
obligations hereunder and thereunder. The execution and delivery of this
Agreement and performance by such Purchaser of the transactions contemplated by
this Agreement have been duly authorized by all necessary corporate,
partnership, limited liability company or similar action, as applicable, on the
part of such Purchaser. Each Transaction Document to which it is a party has
been duly executed by such Purchaser, and when delivered by such Purchaser in
accordance with the terms hereof, will constitute the valid and legally binding
obligation of such Purchaser, enforceable against it in accordance with its
terms, except: (i) as limited by general equitable principles and applicable
bankruptcy, insolvency, reorganization, moratorium and other laws of general
application affecting enforcement of creditors’ rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief or other equitable remedies and (iii) insofar as indemnification and
contribution provisions may be limited by applicable law.
(b) Understandings or
Arrangements. Such Purchaser is acquiring the Securities as principal for
its own account and has no direct or indirect arrangement or understandings with
any other persons to distribute or regarding the distribution of such Securities
(this representation and warranty not limiting such Purchaser’s right to sell
the Securities pursuant to the Registration Statement or otherwise in compliance
with applicable federal and state securities laws). Such Purchaser is acquiring
the Securities hereunder in the ordinary course of its business. Such Purchasers
acknowledge that the Securities may be subject to resale restrictions under applicable Canadian
securities laws and agrees to comply with such restrictions.
S-C-20
(c) Purchaser Status. At the
time such Purchaser was offered the Securities, it was, and as of the date
hereof it is, and on each date on which it exercises any Warrants, it will be
either: (i) an “accredited investor” as defined in Rule 501(a)(1), (a)(2),
(a)(3), (a)(7) or (a)(8) under the Securities Act or (ii) a “qualified
institutional buyer” as defined in Rule 144A(a) under the Securities Act.
(d) Experience of Such
Purchaser. Such Purchaser, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in the Securities, and has so evaluated the merits
and risks of such investment. Such Purchaser is able to bear the economic risk
of an investment in the Securities and, at the present time, is able to afford a
complete loss of such investment.
(e) Access to Information. Such
Purchaser acknowledges that it has had the opportunity to review the Transaction
Documents (including all exhibits and schedules thereto) and the SEC Reports
and, has been afforded, (i) the opportunity to ask such questions as it has
deemed necessary of, and to receive answers from, representatives of the Company
concerning the terms and conditions of the offering of the Securities and the
merits and risks of investing in the Securities; (ii) access to information
about the Company and its financial condition, results of operations, business,
properties, management and prospects sufficient to enable it to evaluate its
investment; and (iii) the opportunity to obtain such additional information that
the Company possesses or can acquire without unreasonable effort or expense that
is necessary to make an informed investment decision with respect to the
investment.
(f) Certain Transactions and
Confidentiality. Other than consummating the transactions contemplated
hereunder, such Purchaser has not, nor has any Person acting on behalf of or
pursuant to any understanding with such Purchaser, directly or indirectly
executed any purchases or sales, including Short Sales, of the securities of the
Company during the period commencing as of the time that such Purchaser first
received a term sheet (written or oral) from the Company or any other Person
representing the Company setting forth the material terms of the transactions
contemplated hereunder and ending immediately prior to the execution hereof.
Notwithstanding the foregoing, in the case of a Purchaser that is a
multi-managed investment vehicle whereby separate portfolio managers manage
separate portions of such Purchaser’s assets and the portfolio managers have no
direct knowledge of the investment decisions made by the portfolio managers
managing other portions of such Purchaser’s assets, the representation set forth
above shall only apply with respect to the portion of assets managed by the
portfolio manager that made the investment decision to purchase the Securities
covered by this Agreement. Other than to other Persons party to this Agreement
or to such Purchaser’s representatives, including, without limitation, its
officers, directors, partners, legal and other advisors, employees, agents and
Affiliates, such Purchaser has maintained the confidentiality of all disclosures
made to it in connection with this transaction (including the existence and
terms of this transaction). Notwithstanding the foregoing, for avoidance of
doubt, nothing contained herein shall constitute a representation or warranty, or preclude any actions, with
respect to the identification of the availability of, or securing of, available
shares to borrow in order to effect Short Sales or similar transactions in the
future.
S-C-21
The Company acknowledges and agrees that the representations
contained in this Section 3.2 shall not modify, amend or affect such Purchaser’s
right to rely on the Company’s representations and warranties contained in this
Agreement or any representations and warranties contained in any other
Transaction Document or any other document or instrument executed and/or
delivered in connection with this Agreement or the consummation of the
transaction contemplated hereby.
ARTICLE IV.
OTHER AGREEMENTS OF THE PARTIES
4.1 Warrant Shares. If all or
any portion of a Warrant is exercised at a time when there is an effective
registration statement to cover the issuance or resale of the Warrant Shares or
if the Warrant is exercised via cashless exercise, the Warrant Shares issued
pursuant to any such exercise shall be issued free of all legends. If at any
time following the date hereof the Registration Statement (or any subsequent
registration statement registering the sale or resale of the Warrant Shares) is
not effective or is not otherwise available for the sale or resale of the
Warrant Shares, the Company shall immediately notify the holders of the Warrants
in writing that such registration statement is not then effective and thereafter
shall promptly notify such holders when the registration statement is effective
again and available for the sale or resale of the Warrant Shares (it being
understood and agreed that the foregoing shall not limit the ability of the
Company to issue, or any Purchaser to sell, any of the Warrant Shares in
compliance with applicable federal and state securities laws). The Company shall
use best efforts to keep a registration statement (including the Registration
Statement) registering the issuance or resale of the Warrant Shares effective
during the term of the Warrants.
4.2 Furnishing of Information.
Until the earliest of the time that (i) no Purchaser owns Securities or (ii) the
Warrants have expired, the Company covenants to timely file (or obtain
extensions in respect thereof and file within the applicable grace period) all
reports required to be filed by the Company after the date hereof pursuant to
the Exchange Act even if the Company is not then subject to the reporting
requirements of the Exchange Act.
4.3 Integration. The Company
shall not sell, offer for sale or solicit offers to buy or otherwise negotiate
in respect of any security (as defined in Section 2 of the Securities Act) that
would be integrated with the offer or sale of the Securities for purposes of the
rules and regulations of any Trading Market such that it would require
shareholder approval prior to the closing of such other transaction unless
shareholder approval is obtained before the closing of such subsequent
transaction.
4.4 Securities Laws Disclosure;
Publicity. The Company shall file a Current Report on Form 6-K, including
the Transaction Documents as exhibits thereto, with the Commission within the
time required by the Exchange Act. The Company and each Purchaser shall consult
with each other in issuing any press releases with respect to the transactions
contemplated hereby, and, except as may be required by law, neither the Company
nor any Purchaser shall issue any such press release nor otherwise make any such public
statement without the prior consent of the Company, with respect to any press
release of any Purchaser, or without the prior consent of each Purchaser, with
respect to any press release of the Company, which consent shall not
unreasonably be withheld or delayed, except if such disclosure is required by
law, in which case the disclosing party shall promptly provide the other party
with prior notice of such public statement or communication. Notwithstanding the
foregoing, the Company shall not publicly disclose the name of any Purchaser, or
include the name of any Purchaser in any filing with the Commission or any
regulatory agency or Trading Market, without the prior written consent of such
Purchaser, except to the extent such disclosure is required by law or Trading
Market regulations, in which case the Company shall provide the Purchasers with
prior notice of such disclosure permitted under this clause.
S-C-22
4.5 Exercise Procedures. The
form of Notice of Exercise included in the Warrants sets forth the totality of
the procedures required of the Purchasers in order to exercise the Warrants.
Without limiting the preceding sentences, no ink-original Notice of Exercise
shall be required, nor shall any medallion guarantee (or other type of guarantee
or notarization) of any Notice of Exercise form be required in order to exercise
the Warrants. No additional legal opinion, other information or instructions
shall be required of the Purchasers to exercise their Warrants. The Company
shall honor exercises of the Warrants and shall deliver Warrant Shares in
accordance with the terms, conditions and time periods set forth in the
Transaction Documents.
4.6 Shareholder Rights Plan. No
claim will be made or enforced by the Company or, with the consent of the
Company, any other Person, that any Purchaser is an “Acquiring Person”
under any control share acquisition, business combination, poison pill
(including any distribution under a rights agreement) or similar anti-takeover
plan or arrangement in effect or hereafter adopted by the Company, or that any
Purchaser could be deemed to trigger the provisions of any such plan or
arrangement, by virtue of receiving Securities under the Transaction Documents
or under any other agreement between the Company and the Purchasers.
4.7 Non-Public Information.
Except with respect to the material terms and conditions of the transactions
contemplated by the Transaction Documents, which shall be disclosed pursuant to
Section 4.4, the Company covenants and agrees that neither it, nor any other
Person acting on its behalf will provide any Purchaser or its agents or counsel
with any information that constitutes, or the Company reasonably believes
constitutes, material non-public information, unless prior thereto such
Purchaser shall have consented to the receipt of such information and agreed
with the Company to keep such information confidential. The Company understands
and confirms that each Purchaser shall be relying on the foregoing covenant in
effecting transactions in securities of the Company. To the extent that the
Company delivers any material, non-public information to a Purchaser without
such Purchaser’s consent, the Company hereby covenants and agrees that such
Purchaser shall not have any duty of confidentiality to the Company, any of its
Subsidiaries, or any of their respective officers, directors, agents, employees
or Affiliates, or a duty to the Company, any of its Subsidiaries or any of their
respective officers, directors, agents, employees or Affiliates not to trade on
the basis of, such material, non-public information, provided that the Purchaser
shall remain subject to applicable law. To the extent that any notice provided
pursuant to any Transaction Document constitutes, or contains, material,
non-public information regarding the Company or any Subsidiaries, the Company
shall simultaneously file such notice with the Commission pursuant to
a Current Report on Form 6-K. The Company understands and confirms that each
Purchaser shall be relying on the foregoing covenant in effecting transactions
in securities of the Company.
S-C-23
4.8 Use of Proceeds. Except as
set forth on Schedule 4.8 attached hereto, the Company shall use the net
proceeds from the sale of the Securities hereunder for working capital purposes
and shall not use such proceeds: (a) for the satisfaction of any portion of the
Company’s debt (other than payment of trade payables or payments on any
revolving credit line in the ordinary course of the Company’s business and prior
practices), (b) for the redemption of any Common Shares or Common Shares
Equivalents, or (c) in violation of FCPA or OFAC regulations.
4.9 Indemnification of
Purchasers. Subject to the provisions of this Section 4.9, the Company will
indemnify and hold each Purchaser and its directors, officers, shareholders,
members, partners, employees and agents (and any other Persons with a
functionally equivalent role of a Person holding such titles notwithstanding a
lack of such title or any other title), each Person who controls such Purchaser
(within the meaning of Section 15 of the Securities Act and Section 20 of the
Exchange Act), and the directors, officers, shareholders, agents, members,
partners or employees (and any other Persons with a functionally equivalent role
of a Person holding such titles notwithstanding a lack of such title or any
other title) of such controlling persons (each, a “Purchaser Party”)
harmless from any and all losses, liabilities, obligations, claims,
contingencies, damages, costs and expenses, including all judgments, amounts
paid in settlements, court costs and reasonable attorneys’ fees and costs of
investigation that any such Purchaser Party may suffer or incur as a result of
or relating to (a) any breach of any of the representations, warranties,
covenants or agreements made by the Company in this Agreement or in the other
Transaction Documents or (b) any action instituted against the Purchaser Parties
in any capacity, or any of them or their respective Affiliates, by any
stockholder of the Company who is not an Affiliate of such Purchaser Party, with
respect to any of the transactions contemplated by the Transaction Documents
(unless such action is based upon a breach of such Purchaser Party’s
representations, warranties or covenants under the Transaction Documents or any
agreements or understandings such Purchaser Party may have with any such
stockholder or any violations by such Purchaser Party of state or federal
securities laws or any conduct by such Purchaser Party which constitutes fraud,
gross negligence, willful misconduct or malfeasance). If any action shall be
brought against any Purchaser Party in respect of which indemnity may be sought
pursuant to this Agreement, such Purchaser Party shall promptly notify the
Company in writing, and the Company shall have the right to assume the defense
thereof with counsel of its own choosing reasonably acceptable to the Purchaser
Party. Any Purchaser Party shall have the right to employ separate counsel in
any such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Purchaser Party except
to the extent that (i) the employment thereof has been specifically authorized
by the Company in writing, (ii) the Company has failed after a reasonable period
of time to assume such defense and to employ counsel or (iii) in such action
there is, in the reasonable opinion of counsel, a material conflict on any
material issue between the position of the Company and the position of such
Purchaser Party, in which case the Company shall be responsible for the
reasonable fees and expenses of no more than one such separate counsel. The
Company will not be liable to any Purchaser Party under this Agreement (y) for
any settlement by a Purchaser Party effected without the Company’s prior written
consent, which shall not be unreasonably withheld or delayed; or (z) to the extent, but only to the extent that a
loss, claim, damage or liability is attributable to any Purchaser Party’s breach
of any of the representations, warranties, covenants or agreements made by such
Purchaser Party in this Agreement or in the other Transaction Documents. The
indemnification required by this Section 4.9 shall be made by periodic payments
of the amount thereof during the course of the investigation or defense, as and
when bills are received or are incurred. The indemnity agreements contained
herein shall be in addition to any cause of action or similar right of any
Purchaser Party against the Company or others and any liabilities the Company
may be subject to pursuant to law.
S-C-24
4.10 Reservation of Common Shares. As
of the date hereof, the Company has reserved and the Company shall continue to
reserve and keep available at all times, free of preemptive rights, a sufficient
number of Common Shares for the purpose of enabling the Company to issue Warrant
Shares pursuant to any exercise of the Warrants.
4.11 Listing of Common Shares. The
Company hereby agrees to use best efforts to maintain the listing or quotation
of the Common Shares on the Trading Market on which it is currently listed, and
concurrently with the Closing, the Company shall apply to list or quote all of
the Warrant Shares on each such Trading Market and promptly secure the listing
of all of the Warrant Shares on such Trading Market. The Company further agrees,
if the Company applies to have the Common Shares traded on any other Trading
Market, it will then include in such application all of the Shares and Warrant
Shares, and will take such other action as is necessary to cause all of the
Shares and Warrant Shares to be listed or quoted on such other Trading Market as
promptly as possible. The Company will then take all action reasonably necessary
to continue the listing and trading of its Common Shares on a Trading Market and
will comply in all respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of the Trading Market. The Company agrees
to maintain the eligibility of the Common Shares for electronic transfer through
the Depository Trust Company or another established clearing corporation,
including, without limitation, by timely payment of fees to the Depository Trust
Company or such other established clearing corporation in connection with such
electronic transfer.
4.12 Certain Transactions and
Confidentiality. Each Purchaser, severally and not jointly with the other
Purchasers, covenants that neither it nor any Affiliate acting on its behalf or
pursuant to any understanding with it will execute any purchases or sales,
including Short Sales of any of the Company’s securities during the period
commencing with the execution of this Agreement and ending at such time that the
transactions contemplated by this Agreement are first publicly announced
pursuant to the initial press release as described in Section 4.4. Each
Purchaser, severally and not jointly with the other Purchasers, covenants that
until such time as the transactions contemplated by this Agreement are publicly
disclosed by the Company pursuant to the initial press release as described in
Section 4.4, such Purchaser will maintain the confidentiality of the existence
and terms of this transaction. Notwithstanding the foregoing and notwithstanding
anything contained in this Agreement to the contrary, the Company expressly
acknowledges and agrees that (i) no Purchaser makes any representation, warranty
or covenant hereby that it will not engage in effecting transactions in any
securities of the Company after the time that the transactions contemplated by
this Agreement are first publicly announced pursuant to the initial press
release as described in Section 4.4, (ii) no Purchaser shall be restricted or
prohibited from effecting any transactions in any securities of the Company in
accordance with applicable securities laws from and after the time that the
transactions contemplated by this Agreement are first publicly announced
pursuant to the initial press release as described in Section 4.4 and (iii) no
Purchaser shall have any duty of confidentiality or duty not to trade in the
securities of the Company to the Company or its Subsidiaries after the issuance
of the initial press release as described in Section 4.4. Notwithstanding the
foregoing, in the case of a Purchaser that is a multi-managed investment vehicle
whereby separate portfolio managers manage separate portions of such Purchaser’s
assets and the portfolio managers have no direct knowledge of the investment
decisions made by the portfolio managers managing other portions of such
Purchaser’s assets, the covenant set forth above shall only apply with respect
to the portion of assets managed by the portfolio manager that made the
investment decision to purchase the Securities covered by this Agreement.
S-C-25
4.13 Variable Securities. So long as
any Warrants remain outstanding until the one year anniversary of the date
hereof, the Company and each Subsidiary shall be prohibited from effecting or
entering into an agreement after the date hereof to effect any Subsequent
Placement involving a Variable Rate Transaction. “Variable Rate
Transaction” means a transaction in which the Company or any Subsidiary (i)
issues or sells any Convertible Securities either (A) at a conversion, exercise
or exchange rate or other price that is based upon and/or varies with the
trading prices of or quotations for the Common Shares at any time after the
initial issuance of such Common Share Equivalents, or (B) with a conversion,
exercise or exchange price that is subject to being reset at some future date
after the initial issuance of such Common Share Equivalents or upon the
occurrence of specified or contingent events directly or indirectly related to
the business of the Company or the market for the Common Shares, other than
pursuant to a customary anti-dilution provision or (ii) enters into any
agreement (including, without limitation, an equity line of credit or an
“at-the-market” offering) whereby the Company or any Subsidiary may sell
securities at a future determined price (other than standard and customary
“preemptive” or “participation” rights). Each Purchaser shall be entitled to
obtain injunctive relief against the Company and its Subsidiaries to preclude
any such issuance, which remedy shall be in addition to any right to collect
damages.
4.14 Additional Issuance of
Securities. So long as any Purchaser beneficially owns any Securities, the
Company will not, without the prior written consent of the Required Holders
issue any other securities that would cause a breach or default under the
Warrants. The Company agrees that for the period commencing on the date hereof
and ending on the date immediately following the 90th calendar day
after the Closing Date (the “Restricted Period”), neither the Company nor
any of its Subsidiaries shall directly or indirectly:
(a) file a registration statement under the
Securities Act relating to securities that are not the Underlying Securities
(other than a registration statement on Form S-8 or such supplements or
amendments to registration statements that are outstanding and have been
declared effective by the Commission as of the date hereof (solely to the extent
necessary to keep such registration statements effective and available and not
with respect to any Subsequent Placement)); provided that the Company may file
any registration statement or prospectus with the Commission relating to
securities issuable pursuant to the terms of the August Purchase Agreement or
adjustable warrants issued by the Company pursuant to those certain Subscription
Agreements by and between the Company and certain investors, dated as of
September 22, 2015 and October 6, 2015;
S-C-26
(b) amend or modify (whether by an
amendment, waiver, exchange of securities, or otherwise) any of the Company’s
warrants to purchase Common Shares that are outstanding as of the date hereof;
or
(c) issue, offer, sell, grant any option or right to purchase, or otherwise dispose of (or announce any issuance, offer, sale, grant of any option or right to purchase or other disposition of) any equity security or any equity-linked or related security (including, without limitation, any “equity security” (as that term is defined under Rule 405 promulgated under the Securities Act)), any Common Share Equivalents, any debt, any preferred stock or any purchase rights, except for any Common Shares issued in connection with the current offering by the Company, which is understood to comprise the issuance to various subscribers or purchasers of up to 3,000,000 Common Shares (inclusive of the 1,500,000 Common Shares issued to the Purchaser herein) and 3,000,000 Warrants to purchase Common Shares (inclusive of the 1,500,000 Warrants issued to the Purchaser herein), on the same pricing terms, and on terms conditions no less favorable to the Company than those set forth in this Agreement (the “Concurrent Issuance” and any such issuance, offer, sale, grant, disposition or announcement prohibited under this Section 4.14(c) (whether occurring during the Restricted Period or at any time thereafter) is referred to as a “Subsequent Placement”).
Notwithstanding the foregoing, this Section 4.14 shall not
apply in respect of the Exempt Issuances.
ARTICLE V.
MISCELLANEOUS
5.1 Termination. This Agreement
may be terminated by any Purchaser, as to such Purchaser’s obligations hereunder
only and without any effect whatsoever on the obligations between the Company
and the other Purchasers, by written notice to the other parties, if the Closing
has not been consummated on or before _________ ___, 2015; provided,
however, that no such termination will affect the right of any party to
sue for any breach by any other party (or parties).
5.2 Fees and Expenses. The
Company shall reimburse the lead Purchaser a non-accountable fee of $15,000 for
all costs and expenses incurred by it or its affiliates in connection with the
structuring, documentation, negotiation and closing of the transactions
contemplated by the Transaction Documents (including, without limitation, as
applicable, all reasonable legal fees of outside counsel and disbursements of
Kelley Drye & Warren, LLP, counsel to the lead Purchaser, any other
reasonable fees and expenses in connection with the structuring, documentation,
negotiation and closing of the transactions contemplated by the Transaction
Documents and due diligence and regulatory filings in connection therewith) (the
“Transaction Expenses”) and shall be withheld by the lead
Purchaser from its wire of the Subscription Amount payable to the Company at the
Closing; provided, that the Company shall promptly reimburse Kelley Drye &
Warren, LLP on demand for all Transaction Expenses not so reimbursed through
such withholding at the Closing up to an amount that, when aggregated with such
withholding at the Closing, shall not exceed $15,000. In addition to the
Transaction Expenses, the Company shall be responsible for the payment of any
placement agent’s fees, financial advisory fees, transfer agent fees (including,
without limitation, any fees required for same-day processing of any instruction
letter delivered by the Company and any exercise notice delivered by a
Purchaser), fees of the depository trust company or broker’s commissions (other
than for Persons engaged by any Purchaser) relating to or arising out of the
transactions contemplated hereby, and any stamp taxes and other taxes and duties
levied in connection with the delivery of any Securities to the Purchasers. The
Company shall pay, and hold each Purchaser harmless against, any liability, loss
or expense (including, without limitation, reasonable attorneys’ fees and
out-of-pocket expenses) arising in connection with any claim relating to any
such payment. Except as otherwise set forth in the Transaction Documents, each
party to this Agreement shall bear its own expenses in connection with the sale
of the Securities to the Purchasers.
S-C-27
5.3 Entire Agreement. The
Transaction Documents, together with the exhibits and schedules thereto, and any
Prospectus, contain the entire understanding of the parties with respect to the
subject matter hereof and thereof and supersede all prior agreements and
understandings, oral or written, with respect to such matters, which the parties
acknowledge have been merged into such documents, exhibits and schedules.
5.4 Notices. Any and all notices
or other communications or deliveries required or permitted to be provided
hereunder shall be in writing and shall be deemed given and effective on the
earliest of: (a) the date of transmission, if such notice or communication is
delivered via facsimile or email attachment at the facsimile number or email
address as set forth on the signature pages attached hereto at or prior to 5:30
p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the
date of transmission, if such notice or communication is delivered via facsimile
or email attachment at the facsimile number or email address as set forth on the
signature pages attached hereto on a day that is not a Trading Day or later than
5:30 p.m. (New York City time) on any Trading Day, (c) the second
(2nd) Trading Day following the date of mailing, if sent by U.S.
nationally recognized overnight courier service or (d) upon actual receipt by
the party to whom such notice is required to be given. The address for such
notices and communications shall be as set forth on the signature pages attached
hereto. To the extent that any notice provided pursuant to any Transaction
Document constitutes, or contains, material, non-public information regarding
the Company or any Subsidiaries, the Company shall simultaneously file such
notice with the Commission pursuant to a Current Report on Form 6-K.
5.5 Amendments; Waivers. This
Agreement, the other Transaction Documents and the schedules and exhibits
attached hereto and thereto and the instruments referenced herein and therein
supersede all other prior oral or written agreements between the Purchasers, the
Company, its Subsidiaries, their affiliates and Persons acting on their behalf,
including, without limitation, any transactions by any Purchaser with respect to
Common Shares or the Securities, and the other matters contained herein and
therein, and this Agreement, the other Transaction Documents, the schedules and
exhibits attached hereto and thereto and the instruments referenced herein and
therein contain the entire understanding of the parties solely with respect to
the matters covered herein and therein; provided, however, nothing contained in
this Agreement or any other Transaction Document shall (or shall be deemed to)
(i) have any effect on any agreements any Purchaser has entered into with, or
any instruments any Purchaser has received from, the Company or any of its
Subsidiaries prior to the date hereof with respect to any prior investment made
by such Purchaser in the Company or (ii) waive, alter, modify or amend in any
respect any obligations of the Company or any of its Subsidiaries, or any rights
of or benefits to any Purchaser or any other Person, in any agreement entered
into prior to the date hereof between or among the Company and/or any of its
Subsidiaries and any Purchaser, or any instruments any Purchaser received from
the Company and/or any of its Subsidiaries prior to the date hereof, and all such agreements and instruments shall
continue in full force and effect. Except as specifically set forth herein or
therein, neither the Company nor any Purchaser makes any representation,
warranty, covenant or undertaking with respect to such matters. For
clarification purposes, the Recitals are part of this Agreement. No provision of
this Agreement may be amended other than by an instrument in writing signed by
the Company and the Required Holders (as defined below), and any amendment to
any provision of this Agreement made in conformity with the provisions of this
Section 5.5 shall be binding on all Purchasers and holders of Securities, as
applicable, provided that no such amendment shall be effective to the extent
that it (A) applies to less than all of the holders of the Securities then
outstanding or (B) imposes any obligation or liability on any Purchaser without
such Purchaser’s prior written consent (which may be granted or withheld in such
Purchaser’s sole discretion). No waiver shall be effective unless it is in
writing and signed by an authorized representative of the waiving party,
provided that the Required Holders may waive any provision of this Agreement,
and any waiver of any provision of this Agreement made in conformity with the
provisions of this Section 5.5 shall be binding on all Purchasers and holders of
Securities, as applicable, provided that no such waiver shall be effective to
the extent that it (1) applies to less than all of the holders of the Securities
then outstanding (unless a party gives a waiver as to itself only) or (2)
imposes any obligation or liability on any Purchaser without such Purchaser’s
prior written consent (which may be granted or withheld in such Purchaser’s sole
discretion). No consideration (other than reimbursement of legal fees) shall be
offered or paid to any Person to amend or consent to a waiver or modification of
any provision of any of the Transaction Documents unless the same consideration
also is offered to all of the parties to the Transaction Documents, all holders
of the Registered Shares, or all holders of the Warrants (as the case may be).
From the date hereof and while any Warrants are outstanding, the Company shall
not be permitted to receive any consideration from a Purchaser or a holder of
Warrants that is not otherwise contemplated by the Transaction Documents in
order to, directly or indirectly, induce the Company or any Subsidiary (i) to
treat such Purchaser or holder of Warrants in a manner that is more favorable
than to other similarly situated Purchasers or holders of Warrants, as
applicable, or (ii) to treat any Purchaser(s) or holder(s) of Warrants in a
manner that is less favorable than the Purchaser or holder of Warrants that is
paying such consideration; provided, however, that the determination of whether
a Purchaser has been treated more or less favorably than another Purchaser shall
disregard any securities of the Company purchased or sold by any Purchaser. The
Company has not, directly or indirectly, made any agreements with any Purchasers
relating to the terms or conditions of the transactions contemplated by the
Transaction Documents except as set forth in the Transaction Documents. Without
limiting the foregoing, the Company confirms that, except as set forth in this
Agreement, no Purchaser has made any commitment or promise or has any other
obligation to provide any financing to the Company, any Subsidiary or otherwise.
“Required Holders” means (I) prior to the Closing Date, Purchasers
entitled to purchase, in the aggregate, at least a majority of the number of
Registered Shares to be sold hereunder at the Closing and (II) on or after the
Closing Date, holders of, in the aggregate, at least a majority of the
Underlying Securities as of such time (excluding any Underlying Securities held
by the Company or any of its Subsidiaries or any of their affiliates as of such
time and excluding any Underlying Securities sold in open market transactions)
issued or issuable hereunder or pursuant to the Warrants.
S-C-28
5.6 Headings. The headings
herein are for convenience only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any of the provisions hereof.
S-C-29
5.7 Successors and Assigns. This
Agreement shall be binding upon and inure to the benefit of the parties and
their successors and permitted assigns. The Company may not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of each Purchaser (other than by merger). Any Purchaser may assign any
or all of its rights under this Agreement to any Person to whom such Purchaser
assigns or transfers any Securities, provided that such transferee agrees in
writing to be bound, with respect to the transferred Securities, by the
provisions of the Transaction Documents that apply to the “Purchasers.”
5.8 No Third-Party
Beneficiaries. This Agreement is intended for the benefit of the parties
hereto and their respective successors and permitted assigns and is not for the
benefit of, nor may any provision hereof be enforced by, any other Person,
except as otherwise set forth in Section 4.8.
5.9 Governing Law. All questions
concerning the construction, validity, enforcement and interpretation of the
Transaction Documents shall be governed by and construed and enforced in
accordance with the internal laws of the State of New York, without regard to
the principles of conflicts of law thereof. Each party agrees that all legal
Proceedings concerning the interpretations, enforcement and defense of the
transactions contemplated by this Agreement and any other Transaction Documents
(whether brought against a party hereto or its respective affiliates, directors,
officers, shareholders, partners, members, employees or agents) shall be
commenced exclusively in the state and federal courts sitting in the City of New
York. Each party hereby irrevocably submits to the exclusive jurisdiction of the
state and federal courts sitting in the City of New York, Borough of Manhattan
for the adjudication of any dispute hereunder or in connection herewith or with
any transaction contemplated hereby or discussed herein (including with respect
to the enforcement of any of the Transaction Documents), and hereby irrevocably
waives, and agrees not to assert in any Action or Proceeding, any claim that it
is not personally subject to the jurisdiction of any such court, that such
Action or Proceeding is improper or is an inconvenient venue for such
Proceeding. Each party hereby irrevocably waives personal service of process and
consents to process being served in any such Action or Proceeding by mailing a
copy thereof via registered or certified mail or overnight delivery (with
evidence of delivery) to such party at the address in effect for notices to it
under this Agreement and agrees that such service shall constitute good and
sufficient service of process and notice thereof. Nothing contained herein shall
be deemed to limit in any way any right to serve process in any other manner
permitted by law. If any party shall commence an Action or Proceeding to enforce
any provisions of the Transaction Documents, then, in addition to the
obligations of the Company under Section 4.8, the prevailing party in such
Action or Proceeding shall be reimbursed by the non-prevailing party for its
reasonable attorneys’ fees and other costs and expenses incurred with the
investigation, preparation and prosecution of such Action or Proceeding.
5.10 Survival. The representations and
warranties contained herein shall survive the Closing and the delivery of the
Securities.
5.11 Execution. This Agreement may be
executed in two or more counterparts, all of which when taken together shall be
considered one and the same agreement and shall become effective when
counterparts have been signed by each party and delivered to each other party,
it being understood that the parties need not sign the same counterpart. In the
event that any signature is delivered by facsimile transmission or by e-mail
delivery of a “.pdf” format data file, such signature shall create a valid and
binding obligation of the party executing (or on whose behalf such signature is
executed) with the same force and effect as if such facsimile or “.pdf”
signature page were an original thereof.
S-C-30
5.12 Severability. If any term,
provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction to be invalid, illegal, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions set forth herein
shall remain in full force and effect and shall in no way be affected, impaired
or invalidated, and the parties hereto shall use their commercially reasonable
efforts to find and employ an alternative means to achieve the same or
substantially the same result as that contemplated by such term, provision,
covenant or restriction. It is hereby stipulated and declared to be the
intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may be
hereafter declared invalid, illegal, void or unenforceable.
5.13 Rescission and Withdrawal Right.
Notwithstanding anything to the contrary contained in (and without limiting any
similar provisions of) any of the other Transaction Documents, whenever any
Purchaser exercises a right, election, demand or option under a Transaction
Document and the Company does not timely perform its related obligations within
the periods therein provided, then such Purchaser may rescind or withdraw, in
its sole discretion from time to time upon written notice to the Company, any
relevant notice, demand or election in whole or in part without prejudice to its
future actions and rights; provided, however, that in the case of
a rescission of an exercise of a Warrant, the applicable Purchaser shall be
required to return any Common Shares subject to any such rescinded exercise
notice concurrently with the return to such Purchaser of the aggregate exercise
price paid to the Company for such shares and the restoration of such
Purchaser’s right to acquire such shares pursuant to such Purchaser’s Warrant
(including, issuance of a replacement warrant certificate evidencing such
restored right).
5.14 Replacement of Securities. If any
certificate or instrument evidencing any Securities is mutilated, lost, stolen
or destroyed, the Company shall issue or cause to be issued in exchange and
substitution for and upon cancellation thereof (in the case of mutilation), or
in lieu of and substitution therefor, a new certificate or instrument, but only
upon receipt of evidence reasonably satisfactory to the Company of such loss,
theft or destruction. The applicant for a new certificate or instrument under
such circumstances shall also pay any reasonable third-party costs (including
customary indemnity) associated with the issuance of such replacement
Securities.
5.15 Remedies. In addition to being
entitled to exercise all rights provided herein or granted by law, including
recovery of damages, each of the Purchasers and the Company will be entitled to
specific performance under the Transaction Documents. The parties agree that
monetary damages may not be adequate compensation for any loss incurred by
reason of any breach of obligations contained in the Transaction Documents and
hereby agree to waive and not to assert in any Action for specific performance
of any such obligation the defense that a remedy at law would be adequate.
5.16 Payment Set Aside. To the extent
that the Company makes a payment or payments to any Purchaser pursuant to any
Transaction Document or a Purchaser enforces or exercises its rights thereunder, and such payment or payments
or the proceeds of such enforcement or exercise or any part thereof are
subsequently invalidated, declared to be fraudulent or preferential, set aside,
recovered from, disgorged by or are required to be refunded, repaid or otherwise
restored to the Company, a trustee, receiver or any other Person under any law
(including, without limitation, any bankruptcy law, state or federal law, common
law or equitable cause of action), then to the extent of any such restoration
the obligation or part thereof originally intended to be satisfied shall be
revived and continued in full force and effect as if such payment had not been
made or such enforcement or setoff had not occurred.
S-C-31
5.17 Independent Nature of Purchasers’
Obligations and Rights. The obligations of each Purchaser under any
Transaction Document are several and not joint with the obligations of any other
Purchaser, and no Purchaser shall be responsible in any way for the performance
or non-performance of the obligations of any other Purchaser under any
Transaction Document. Nothing contained herein or in any other Transaction
Document, and no action taken by any Purchaser pursuant hereto or thereto, shall
be deemed to constitute the Purchasers as a partnership, an association, a joint
venture or any other kind of entity, or create a presumption that the Purchasers
are in any way acting in concert or as a group with respect to such obligations
or the transactions contemplated by the Transaction Documents. Each Purchaser
shall be entitled to independently protect and enforce its rights including,
without limitation, the rights arising out of this Agreement or out of the other
Transaction Documents, and it shall not be necessary for any other Purchaser to
be joined as an additional party in any Proceeding for such purpose. Each
Purchaser has been represented by its own separate legal counsel in its review
and negotiation of the Transaction Documents. The Company has elected to provide
all Purchasers with the same terms and Transaction Documents for the convenience
of the Company and not because it was required or requested to do so by any of
the Purchasers. It is expressly understood and agreed that each provision
contained in this Agreement and in each other Transaction Document is between
the Company and a Purchaser, solely, and not between the Company and the
Purchasers collectively and not between and among the Purchasers.
5.18 Liquidated Damages. The Company’s
obligations to pay any partial liquidated damages or other amounts owing under
the Transaction Documents is a continuing obligation of the Company and shall
not terminate until all unpaid partial liquidated damages and other amounts have
been paid notwithstanding the fact that the instrument or security pursuant to
which such partial liquidated damages or other amounts are due and payable shall
have been canceled.
5.19 Saturdays, Sundays, Holidays,
etc. If the last or appointed day for the taking of any action or the
expiration of any right required or granted herein shall not be a Business Day,
then such action may be taken or such right may be exercised on the next
succeeding Business Day.
5.20 Construction. The parties agree
that each of them and/or their respective counsel have reviewed and had an
opportunity to revise the Transaction Documents and, therefore, the normal rule
of construction to the effect that any ambiguities are to be resolved against
the drafting party shall not be employed in the interpretation of the
Transaction Documents or any amendments thereto. In addition, each and every
reference to share prices and Common Shares in any Transaction Document shall be
subject to adjustment for reverse and forward stock splits, stock dividends, stock combinations and other similar
transactions of the Common Shares that occur after the date of this Agreement.
S-C-32
5.21 WAIVER OF JURY TRIAL.
IN ANY ACTION, SUIT, OR PROCEEDING IN ANY
JURISDICTION BROUGHT BY ANY PARTY AGAINST ANY OTHER PARTY,
THE PARTIES EACH KNOWINGLY AND INTENTIONALLY, TO THE GREATEST EXTENT
PERMITTED BY APPLICABLE LAW, HEREBY ABSOLUTELY, UNCONDITIONALLY,
IRREVOCABLY AND EXPRESSLY WAIVES FOREVER TRIAL BY
JURY.
(Signature Pages Follow)
S-C-33
IN WITNESS WHEREOF, the parties hereto have caused this
Securities Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
| SPHERE 3D CORP. |
Address for Notice:
|
| |
|
|
| By: |
|
Fax: |
| |
Name: |
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Title: |
|
With a copy to (which shall not constitute notice):
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SIGNATURE PAGE
FOR PURCHASER FOLLOWS]
S-C-34
[PURCHASER SIGNATURE PAGES TO ANY SECURITIES PURCHASE AGREEMENT]
IN WITNESS WHEREOF, the undersigned have caused this Securities
Purchase Agreement to be duly executed by their respective authorized
signatories as of the date first indicated above.
Name of Purchaser:
________________________________________________________
Signature of Authorized Signatory of Purchaser:
_________________________________
Name of Authorized Signatory:
_______________________________________________
Title of Authorized Signatory:
________________________________________________
Email Address of Authorized
Signatory:_________________________________________
Facsimile Number of Authorized Signatory:
__________________________________________
Address for Notice to Purchaser:
Address for Delivery of Securities to Purchaser (if not same as
address for notice):
Subscription Amount: U.S.$
Warrants: _________________
EIN Number: _______________________
[ ] Notwithstanding anything contained in this
Agreement to the contrary, by checking this box (i) the obligations of the
above-signed to purchase the securities set forth in this Agreement to be
purchased from the Company by the above-signed, and the obligations of the
Company to sell such securities to the above-signed, shall be unconditional and
all conditions to Closing shall be disregarded, (ii) the Closing shall occur on
the third (3rd) Trading Day following the date of this Agreement and
(iii) any condition to Closing contemplated by this Agreement (but prior to
being disregarded by clause (i) above) that required delivery by the Company or
the above-signed of any agreement, instrument, certificate or the like or
purchase price (as applicable) shall no longer be a condition and shall instead
be an unconditional obligation of the Company or the above-signed (as
applicable) to deliver such agreement, instrument, certificate or the like or
purchase price (as applicable) to such other party on the Closing Date.
[SIGNATURE PAGES CONTINUE]
S-C-35
UNLESS PERMITTED UNDER APPLICABLE CANADIAN SECURITIES
LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THIS SECURITY TO OR FOR
THE BENEFIT OF A CANADIAN PURCHASER UNTIL THE DATE THAT IS FOUR MONTHS AND A DAY
AFTER .
EXHIBIT A-1
COMMON SHARE PURCHASE WARRANT
SPHERE 3D CORP.
| Warrant Shares: |
Issuance Date: |
THIS COMMON SHARE PURCHASE
WARRANT (the “Warrant”) certifies that, for value received, _____________
or its assigns (the “Holder”) is entitled, upon the terms and subject to the
limitations on exercise and the conditions hereinafter set forth, at any time on
or after (the “Issuance Date”) and on or prior to the close of business
on the five year anniversary of the Issuance Date (the “Termination
Date”) but not thereafter, to subscribe for and purchase from Sphere 3D
Corp., an Ontario corporation (the “Company”), up to (as subject to
adjustment hereunder, the “Warrant Shares”) common shares, no par value,
of the Company (“Common Shares”). The purchase price of one Common Share
under this Warrant shall be equal to the Exercise Price, as defined in Section
2(b).
Section
1. Definitions. Capitalized terms
used and not otherwise defined herein shall have the meanings set forth in that
certain Securities Purchase Agreement (the “Purchase Agreement”),
dated , among the Company and the purchasers signatory thereto.
Section
2. Exercise.
a) Exercise of Warrant.
Exercise of the purchase rights represented by this Warrant may be made, in
whole or in part, at any time or times on or after the Issuance Date and on or
before the Termination Date by delivery to the Company (or such other office or
agency of the Company as it may designate by notice in writing to the registered
Holder at the address of the Holder appearing on the books of the Company) of a
duly executed facsimile copy (or e-mail attachment) of the Notice of Exercise in
the form annexed hereto. Within three (3) Trading Days following the date of
exercise as aforesaid, the Holder shall deliver the aggregate Exercise Price for
the shares specified in the applicable Notice of Exercise by wire transfer or
cashier’s check drawn on a United States bank unless the cashless exercise
procedure specified in Section 2(c) below is specified in the applicable Notice
of Exercise. No ink-original Notice of Exercise shall be required, nor shall any
medallion guarantee (or other type of guarantee or notarization) of any Notice
of Exercise form be required. Notwithstanding anything herein to the contrary,
the Holder shall not be required to physically surrender this Warrant to the
Company until the Holder has purchased all of the Warrant Shares available
hereunder and the Warrant has been exercised in full, in which case, the Holder
shall surrender this Warrant to the Company for cancellation within three (3)
Trading Days of the date the final Notice of Exercise is delivered to the Company. Partial
exercises of this Warrant resulting in purchases of a portion of the total
number of Warrant Shares available hereunder shall have the effect of lowering
the outstanding number of Warrant Shares purchasable hereunder in an amount
equal to the applicable number of Warrant Shares purchased. The Holder and the
Company shall maintain records showing the number of Warrant Shares purchased
and the date of such purchases. The Company shall deliver any objection to any
Notice of Exercise within one (1) Business Day of receipt of such notice. The
Holder and any assignee, by acceptance of this Warrant, acknowledge and agree
that, by reason of the provisions of this paragraph, following the purchase of a
portion of the Warrant Shares hereunder, the number of Warrant Shares available
for purchase hereunder at any given time may be less than the amount stated on
the face hereof.
S-D-1
b) Exercise
Price. The exercise price per share of the Common Shares under this Warrant
shall be $ , subject to adjustment hereunder (the “Exercise
Price”).
c) Cashless
Exercise. If at the time of exercise hereof there is no effective
registration statement registering, or the prospectus contained therein is not
available for the issuance of the Warrant Shares to the Holder, then this
Warrant may only be exercised, in whole or in part, at such time by means of a
“cashless exercise” in which the Holder shall, be entitled to receive a number
of Warrant Shares equal to the quotient obtained by dividing [(A-B) (X)] by (A),
where:
| |
(A) |
= |
the ten day VWAP immediately preceding
the time of delivery of the Notice of Exercise giving rise to the
applicable “cashless exercise”, as set forth in the applicable Notice of
Exercise (to clarify, the last “VWAP” will be the last VWAP as calculated
over an entire Trading Day such that, in the event that this Warrant is
exercised at a time that the Trading Market is open, the prior Trading
Day’s VWAP shall be used in this calculation); |
| |
|
|
|
| |
(B) |
= |
the Exercise Price of this Warrant, as
adjusted hereunder; and |
| |
|
|
|
| |
(X) |
= |
the number of Warrant Shares that would
be issuable upon exercise of this Warrant in accordance with the terms of
this Warrant if such exercise were by means of a cash exercise rather than
a cashless exercise. |
If Warrant Shares are issued in
such a cashless exercise, the parties acknowledge and agree that in accordance
with Section 3(a)(9) of the Securities Act, the Warrant Shares shall take on the
registered characteristics of the Warrants being exercised. The Company agrees
not to take any position contrary to this Section 2(c).
“VWAP” means, for any
date, the price determined by the first of the following clauses that applies:
(a) if the Common Shares are then listed or quoted on a Trading Market, the
daily volume weighted average price of the Common Shares for such date (or the
nearest preceding date) on the Trading Market on which the Common Shares are
then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from
9:30 a.m. (New York City time) to 4:02 p.m. (New York City time)), (b) if OTCQB
or OTCQX is not a Trading Market, the volume weighted average price of the
Common Shares for such date (or the nearest preceding date) on OTCQB or OTCQX as
applicable, (c) if the Common Shares are not then listed or quoted for trading
on OTCQB or OTCQX and if prices for the Common Shares are then reported in the
“Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or
agency succeeding to its functions of reporting prices), the most recent bid
price per share of the Common Shares so reported, or (d) in all other cases, the
fair market value of a share of Common Shares as determined by an independent
appraiser selected in good faith by the Purchasers of a majority in interest of
the Securities then outstanding and reasonably acceptable to the Company, the
fees and expenses of which shall be paid by the Company.
S-D-2
d) Mechanics
of Exercise.
i. Delivery of Warrant
Shares Upon Exercise. The Company shall cause the Warrant Shares purchased
hereunder to be transmitted by the Transfer Agent to the Holder by crediting the
account of the Holder’s or its designee’s balance account with The Depository
Trust Company through its Deposit or Withdrawal at Custodian system
(“DWAC”) if the Company is then a participant in such system and either
(A) there is an effective registration statement permitting the issuance of the
Warrant Shares to or resale of the Warrant Shares by Holder or (B) this Warrant
is being exercised via cashless exercise and otherwise by physical delivery of a
certificate, registered in the Company’s share register in the name of the
Holder or its designee, for the number of Warrant Shares to which the Holder is
entitled pursuant to such exercise to the address specified by the Holder in the
Notice of Exercise by the date that is three (3) Trading Days after the delivery
to the Company of the Notice of Exercise (such date, the “Warrant Share
Delivery Date”). Upon delivery of the Notice of Exercise the Holder shall
be deemed for all corporate purposes to have become the holder of record of the
Warrant Shares with respect to which this Warrant has been exercised,
irrespective of the date of delivery of the Warrant Shares; provided payment of
the aggregate Exercise Price (other than in the case of a Cashless Exercise) is
received within three Trading Days of delivery of the Notice of Exercise. The
Company agrees to take commercially reasonable efforts to maintain a transfer
agent that is a participant in the FAST program so long as this Warrant remains
outstanding and exercisable.
ii.
Delivery of New Warrants Upon Exercise. If this Warrant shall have been
exercised in part, the Company shall, at the request of a Holder and upon
surrender of this Warrant certificate, at the time of delivery of the Warrant
Shares, deliver to the Holder a new Warrant evidencing the rights of the Holder
to purchase the unpurchased Warrant Shares called for by this Warrant, which new
Warrant shall in all other respects be identical with this Warrant.
S-D-3
iii.
Rescission Rights. If the Company fails to cause the Transfer Agent to
transmit to the Holder the Warrant Shares pursuant to Section 2(d)(i) by the
Warrant Share Delivery Date, then the Holder will have the right to rescind such
exercise.
iv. Compensation
for Buy-In on Failure to Timely Deliver Warrant Shares Upon Exercise.
In addition to any other rights available to the Holder, if the Company fails to
cause the Transfer Agent to transmit to the Holder the Warrant Shares in
accordance with the provisions of Section 2(d)(i) above pursuant to an exercise
on or before the Warrant Share Delivery Date, and if after such date the Holder
is required by its broker to purchase (in an open market transaction or
otherwise) or the Holder’s brokerage firm otherwise purchases, Common Shares to
deliver in satisfaction of a sale by the Holder of the Warrant Shares which the
Holder anticipated receiving upon such exercise (a “Buy-In”), then the
Company shall (A) pay in cash to the Holder the amount, if any, by which (x) the
Holder’s total purchase price (including brokerage commissions, if any) for the
Common Shares so purchased exceeds (y) the amount obtained by multiplying (1)
the number of Warrant Shares that the Company was required to deliver to the
Holder in connection with the exercise at issue times (2) the price at which the
sell order giving rise to such purchase obligation was executed, and (B) at the
option of the Holder, either reinstate the portion of the Warrant and equivalent
number of Warrant Shares for which such exercise was not honored (in which case
such exercise shall be deemed rescinded) or deliver to the Holder the number of
Common Shares that would have been issued had the Company timely complied with
its exercise and delivery obligations hereunder. For example, if the Holder
purchases Common Shares having a total purchase price of $11,000 to cover a
Buy-In with respect to an attempted exercise of Common Shares with an aggregate
sale price giving rise to such purchase obligation of $10,000, under clause (A)
of the immediately preceding sentence the Company shall be required to pay the
Holder $1,000. The Holder shall provide the Company written notice indicating
the amounts payable to the Holder in respect of the Buy-In and, upon request of
the Company, evidence of the amount of such loss. Nothing herein shall limit a
Holder’s right to pursue any other remedies available to it hereunder, at law or
in equity including, without limitation, a decree of specific performance and/or
injunctive relief with respect to the Company’s failure to timely deliver Common
Shares upon exercise of the Warrant as required pursuant to the terms hereof.
v. No
Fractional Shares or Scrip. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise of this Warrant. As to any
fraction of a share which the Holder would otherwise be entitled to purchase
upon such exercise, the Company shall, at its election, either pay a cash
adjustment in respect of such final fraction in an amount equal to such fraction multiplied by the
Exercise Price or round down to the next whole share.
S-D-4
vi. Charges,
Taxes and Expenses. Issuance of Warrant Shares shall be made without charge
to the Holder for any issue or transfer tax or other incidental expense in
respect of the issuance of such Warrant Shares, all of which taxes and expenses
shall be paid by the Company, and such Warrant Shares shall be issued in the
name of the Holder or in such name or names as may be directed by the Holder;
provided, however, that in the event Warrant Shares are to be
issued in a name other than the name of the Holder, this Warrant when
surrendered for exercise shall be accompanied by the Assignment Form attached
hereto duly executed by the Holder and the Company may require, as a condition
thereto, the payment of a sum sufficient to reimburse it for any transfer tax
incidental thereto. The Company shall pay all Transfer Agent fees required for
same-day processing of any Notice of Exercise and all fees to the Depository
Trust Company (or another established clearing corporation performing similar
functions) required for same-day electronic delivery of the Warrant Shares.
vii. Closing
of Books. The Company will not close its stockholder books or records in any
manner which prevents the timely exercise of this Warrant, pursuant to the terms
hereof.
viii. Legend.
Any certificate representing Warrant Shares issued upon the exercise of this
Warrant may bear the following legends:
"UNLESS PERMITTED UNDER APPLICABLE
CANADIAN SECURITIES LEGISLATION, THE HOLDER OF THIS SECURITY MUST NOT TRADE THIS
SECURITY TO OR FOR THE BENEFIT OF A CANADIAN PURCHASER UNTIL THE DATE THAT IS
FOUR MONTHS AND A DAY AFTER [INSERT WARRANT DISTRIBUTION DATE]. (In the event
that no physical certificates are issued, the above constitutes written notice
of the legend restriction under applicable Canadian securities laws.)
S-D-5
e) Holder’s
Exercise Limitations. The Company shall not effect any exercise of this
Warrant, and a Holder shall not have the right to exercise any portion of this
Warrant, pursuant to Section 2 or otherwise, to the extent that after giving
effect to such issuance after exercise as set forth on the applicable Notice of
Exercise, the Holder (together with the Holder’s Affiliates, and any other
Persons acting as a group together with the Holder or any of the Holder’s
Affiliates (such Persons, “Attribution Parties”)), would beneficially own in
excess of the Beneficial Ownership Limitation (as defined below). For purposes
of the foregoing sentence, the number of Common Shares beneficially owned by the
Holder and its Affiliates and Attribution Parties shall include the number of
Common Shares issuable upon exercise of this Warrant with respect to which such determination is being made, but shall exclude the number
of Common Shares which would be issuable upon (i) exercise of the remaining,
nonexercised portion of this Warrant beneficially owned by the Holder or any of
its Affiliates or Attribution Parties and (ii) exercise or conversion of the
unexercised or nonconverted portion of any other securities of the Company
(including, without limitation, any other Common Share Equivalents) subject to a
limitation on conversion or exercise analogous to the limitation contained
herein beneficially owned by the Holder or any of its Affiliates or Attribution
Parties. Except as set forth in the preceding sentence, for purposes of this
Section 2(e), beneficial ownership shall be calculated in accordance with
Section 13(d) of the Exchange Act and the rules and regulations promulgated
thereunder, it being acknowledged by the Holder that the Company is not
representing to the Holder that such calculation is in compliance with Section
13(d) of the Exchange Act and the Holder is solely responsible for any schedules
required to be filed in accordance therewith. To the extent that the limitation
contained in this Section 2(e) applies, the determination of whether this
Warrant is exercisable (in relation to other securities owned by the Holder
together with any Affiliates and Attribution Parties) and of which portion of
this Warrant is exercisable shall be in the sole discretion of the Holder and
the submission of a Notice of Exercise shall be deemed to be the Holder’s
determination of whether this Warrant is exercisable (in relation to other
securities owned by the Holder together with any Affiliates and Attribution
Parties) and of which portion of this Warrant is exercisable, in each case
subject to the Beneficial Ownership Limitation, and the Company shall have no
obligation to verify or confirm the accuracy of such determination. In addition,
a determination as to any group status as contemplated above shall be determined
in accordance with Section 13(d) of the Exchange Act and the rules and
regulations promulgated thereunder. For purposes of this Section 2(e), in
determining the number of outstanding Common Shares, a Holder may rely on the
number of outstanding Common Shares as reflected in (A) the Company’s most
recent periodic or annual report filed with the Commission, as the case may be,
(B) a more recent public announcement by the Company or (C) a more recent
written notice by the Company or the Transfer Agent setting forth the number of
Common Shares outstanding. Upon the written or oral request of a Holder, the
Company shall within two Trading Days confirm orally and in writing to the
Holder the number of Common Shares then outstanding. In any case, the number of
outstanding Common Shares shall be determined after giving effect to the
conversion or exercise of securities of the Company, including this Warrant, by
the Holder or its Affiliates or Attribution Parties since the date as of which
such number of outstanding Common Shares was reported. The “Beneficial Ownership Limitation” shall be 4.99% of the number of Common Shares
outstanding immediately after giving effect to the issuance of Common Shares
issuable upon exercise of this Warrant. The Holder, upon notice to the Company,
may increase or decrease the Beneficial Ownership Limitation provisions of this
Section 2(e), provided that the Beneficial Ownership Limitation in no event
exceeds 9.99% of the number of Common Shares outstanding immediately after
giving effect to the issuance of Common Shares upon exercise of this Warrant held by the Holder and the provisions of this Section 2(e)
shall continue to apply. Any increase in the Beneficial Ownership Limitation
will not be effective until the 61st day after such notice is
delivered to the Company. The provisions of this paragraph shall be construed
and implemented in a manner otherwise than in strict conformity with the terms
of this Section 2(e) to correct this paragraph (or any portion hereof) which may
be defective or inconsistent with the intended Beneficial Ownership Limitation
herein contained or to make changes or supplements necessary or desirable to
properly give effect to such limitation. The limitations contained in this
paragraph shall apply to a successor holder of this Warrant.
S-D-6
Section 3. Certain
Adjustments.
a) Stock
Dividends and Splits. If the Company, at any time while this Warrant is
outstanding: (i) pays a stock dividend or otherwise makes a distribution or
distributions on its Common Shares or any other equity or equity equivalent
securities payable in Common Shares (which, for avoidance of doubt, shall not
include any Common Shares issued by the Company upon exercise of this Warrant),
(ii) subdivides outstanding Common Shares into a larger number of shares, (iii)
combines (including by way of reverse stock split) outstanding Common Shares
into a smaller number of shares or (iv) issues by reclassification of Common
Shares any shares of capital stock of the Company, then in each case the
Exercise Price shall be multiplied by a fraction of which the numerator shall be
the number of Common Shares (excluding treasury shares, if any) outstanding
immediately before such event and of which the denominator shall be the number
of Common Shares outstanding immediately after such event, and the number of
shares issuable upon exercise of this Warrant shall be proportionately adjusted
such that the aggregate Exercise Price of this Warrant shall remain unchanged.
Any adjustment made pursuant to this Section 3(a) shall become effective
immediately after the record date for the determination of stockholders entitled
to receive such dividend or distribution and shall become effective immediately
after the effective date in the case of a subdivision, combination or
re-classification.
b) Adjustment
for Variable Rate Transactions. If the Company or any Subsidiary thereof, as
applicable, at any time while this Warrant is outstanding, shall effect a
Variable Rate Transaction (as defined in the Purchase Agreement) and the issue
price, conversion price or exercise price per share applicable thereto (as
applicable, and after any adjustment or reset triggered by the later trading
price or quotation for the Common Shares after the initial issuance thereof or
upon the occurrence of the specified or contingent events described therein, the
“VRT Price”) is less than the Exercise Price then in effect, then upon
the determination of such VRT Price, the Exercise Price shall be reduced and
only reduced to equal the VRT Price. Notwithstanding the foregoing, no
adjustments shall be made, paid or issued under this Section 3(b) in respect of
an Exempt Issuance (as defined in the Purchase Agreement). The Company shall
notify the Holder, in writing, no later than the Trading Day following the date
of determination of the VRT Price, indicating therein the VRT Price (such
notice, the “VRT Notice”). For purposes of clarification, whether or not
the Company provides a VRT Notice pursuant to this Section 3(b), upon the
determination of the VRT Price, the Holder is entitled to receive a number of Warrant Shares based upon the VRT Price regardless of
whether the Holder accurately refers to the VRT Price in the Notice of Exercise.
S-D-7
c) Adjustment.
If as of [ , 2016]1 (the “Adjustment Date”), the quotient of
(x) the sum of the VWAP of the Common Shares for each Trading Day during the
five (5) consecutive Trading Day period ending and including the Trading Day
immediately preceding the Adjustment Date, divided by (y) five (5) (the
“Adjustment Price”) is less than the Exercise Price then in effect, on
the Adjustment Date the Exercise Price shall be adjusted to the Adjustment Price
(in each case, subject to adjustment for any share split, share dividend, share
combination, recapitalization or other adjustment during such measuring period).
d) Subsequent
Rights Offerings. In addition to any adjustments pursuant to Section 3(a)
above, if at any time the Company grants, issues or sells any Common Share
Equivalents or rights to purchase stock, warrants, securities or other property
pro rata to the record holders of any class of Common Shares (the “Purchase
Rights”), then the Holder will be entitled to acquire, upon the terms applicable
to such Purchase Rights, the aggregate Purchase Rights which the Holder could
have acquired if the Holder had held the number of Common Shares acquirable upon
complete exercise of this Warrant (without regard to any limitations on exercise
hereof, including without limitation, the Beneficial Ownership Limitation)
immediately before the date on which a record is taken for the grant, issuance
or sale of such Purchase Rights, or, if no such record is taken, the date as of
which the record holders of Common Shares are to be determined for the grant,
issue or sale of such Purchase Rights (provided, however, to the extent that the
Holder’s right to participate in any such Purchase Right would result in the
Holder exceeding the Beneficial Ownership Limitation, then the Holder shall not
be entitled to participate in such Purchase Right to such extent (or beneficial
ownership of such Common Shares as a result of such Purchase Right to such
extent) and such Purchase Right to such extent shall be held in abeyance for the
Holder until such time, if ever, as its right thereto would not result in the
Holder exceeding the Beneficial Ownership Limitation).
e) Pro
Rata Distributions. During such time as this Warrant is outstanding, if the
Company shall declare or make any dividend or other distribution of its assets
(or rights to acquire its assets) to holders of Common Shares, by way of return
of capital or otherwise (including, without limitation, any distribution of
cash, stock or other securities, property or options by way of a dividend, spin
off, reclassification, corporate rearrangement, scheme of arrangement or other
similar transaction) (a "Distribution"), at any time after the issuance
of this Warrant, then, in each such case, the Holder shall be entitled to
participate in such Distribution to the same extent that the Holder would have
participated therein if the Holder had held the number of Common Shares
acquirable upon complete exercise of this Warrant (without regard to any
limitations on exercise hereof, including without limitation, the Beneficial
Ownership Limitation) immediately before the date of which a record is taken for
such Distribution, or, if no such record is taken, the date as of which the
record holders of Common Shares are to be determined for the participation in
such Distribution (provided, however, to the extent that the
Holder's right to participate in any such Distribution would result in
the Holder exceeding the Beneficial Ownership Limitation, then the Holder shall
not be entitled to participate in such Distribution to such extent (or in the
beneficial ownership of any Common Shares as a result of such Distribution to
such extent) and the portion of such Distribution shall be held in abeyance for
the benefit of the Holder until such time, if ever, as its right thereto would
not result in the Holder exceeding the Beneficial Ownership Limitation). To the
extent that this Warrant has not been partially or completely exercised at the
time of such Distribution, such portion of the Distribution shall be held in
abeyance for the benefit of the Holder until the Holder has exercised this
Warrant.
______________________________
1
Insert 180 day anniversary of the date of execution of the Purchase Agreement
S-D-8
f) Fundamental
Transaction. If, at any time while this Warrant is outstanding, (i) the
Company, directly or indirectly, in one or more related transactions effects any
merger or consolidation of the Company with or into another Person, (ii) the
Company, directly or indirectly, effects any sale, lease, license, assignment,
transfer, conveyance or other disposition of all or substantially all of its
assets in one or a series of related transactions, (iii) any, direct or
indirect, purchase offer, tender offer or exchange offer (whether by the Company
or another Person) is completed pursuant to which holders of Common Shares are
permitted to sell, tender or exchange their shares for other securities, cash or
property and has been accepted by the holders of 50% or more of the outstanding
Common Shares, (iv) the Company, directly or indirectly, in one or more related
transactions effects any reclassification, reorganization or recapitalization of
the Common Shares or any compulsory share exchange pursuant to which the Common
Shares are effectively converted into or exchanged for other securities, cash or
property, or (v) the Company, directly or indirectly, in one or more related
transactions consummates a stock or share purchase agreement or other business
combination (including, without limitation, a reorganization, recapitalization,
spin-off or scheme of arrangement) with another Person or group of Persons
whereby such other Person or group acquires more than 50% of the outstanding
Common Shares (not including any Common Shares held by the other Person or other
Persons making or party to, or associated or affiliated with the other Persons
making or party to, such stock or share purchase agreement or other business
combination) (each a “Fundamental Transaction”), then, upon any
subsequent exercise of this Warrant, the Holder shall have the right to receive,
for each Warrant Share that would have been issuable upon such exercise
immediately prior to the occurrence of such Fundamental Transaction, at the
option of the Holder (without regard to any limitation in Section 2(e) on the
exercise of this Warrant), the number of Common Shares of the successor or
acquiring corporation or of the Company, if it is the surviving corporation, and
any additional consideration (the “Alternate Consideration”) receivable
as a result of such Fundamental Transaction by a holder of the number of Common
Shares for which this Warrant is exercisable immediately prior to such
Fundamental Transaction (without regard to any limitation in Section 2(e) on the
exercise of this Warrant). For purposes of any such exercise, the determination
of the Exercise Price shall be appropriately adjusted to apply to such Alternate
Consideration based on the amount of Alternate Consideration issuable in respect
of one Common Share in such Fundamental Transaction, and the Company shall
apportion the Exercise Price among the Alternate Consideration in a reasonable
manner reflecting the relative value of any different components of the
Alternate Consideration. If holders of Common Shares are given any choice as to
the securities, cash or property to be received in a Fundamental Transaction, then the Holder shall
be given the same choice as to the Alternate Consideration it receives upon any
exercise of this Warrant following such Fundamental Transaction. The Company
shall cause any successor entity in a Fundamental Transaction in which the
Company is not the survivor (the “Successor Entity”) to assume in
writing all of the obligations of the Company under this Warrant and the other
Transaction Documents in accordance with the provisions of this Section 3(e)
pursuant to written agreements in form and substance reasonably satisfactory to
the Holder and approved by the Holder (without unreasonable delay) prior to such
Fundamental Transaction and shall, at the option of the Holder, deliver to the
Holder in exchange for this Warrant a security of the Successor Entity evidenced
by a written instrument substantially similar in form and substance to this
Warrant which is exercisable for a corresponding number of shares of capital
stock of such Successor Entity (or its parent entity) equivalent to the Common
Shares acquirable and receivable upon exercise of this Warrant (without regard
to any limitations on the exercise of this Warrant) prior to such Fundamental
Transaction, and with an exercise price which applies the exercise price
hereunder to such shares of capital stock (but taking into account the relative
value of the Common Shares pursuant to such Fundamental Transaction and the
value of such shares of capital stock, such number of shares of capital stock
and such exercise price being for the purpose of protecting the economic value
of this Warrant immediately prior to the consummation of such Fundamental
Transaction), and which is reasonably satisfactory in form and substance to the
Holder. Upon the occurrence of any such Fundamental Transaction, the Successor
Entity shall succeed to, and be substituted for (so that from and after the date
of such Fundamental Transaction, the provisions of this Warrant and the other
Transaction Documents referring to the “Company” shall refer instead to the
Successor Entity), and may exercise every right and power of the Company and
shall assume all of the obligations of the Company under this Warrant and the
other Transaction Documents with the same effect as if such Successor Entity had
been named as the Company herein.
S-D-9
g) Calculations.
All calculations under this Section 3 shall be made to the nearest cent or the
nearest 1/100th of a share, as the case may be. For purposes of this Section 3,
the number of Common Shares deemed to be issued and outstanding as of a given
date shall be the sum of the number of Common Shares (excluding treasury shares,
if any) issued and outstanding.
h) Notice
to Holder.
i. Adjustment
to Exercise Price. Whenever the Exercise Price is adjusted pursuant to any
provision of this Section 3, the Company shall promptly deliver to the Holder by
facsimile or email a notice setting forth the Exercise Price after such
adjustment and any resulting adjustment to the number of Warrant Shares and
setting forth a brief statement of the facts requiring such adjustment.
ii. Notice
to Allow Exercise by Holder. If (A) the Company shall declare a dividend (or
any other distribution in whatever form) on the Common Shares, (B) the Company
shall declare a special nonrecurring cash dividend on or a redemption of the Common Shares, (C) the
Company shall authorize the granting to all holders of the Common Shares rights
or warrants to subscribe for or purchase any shares of capital stock of any
class or of any rights, (D) the approval of any stockholders of the Company
shall be required in connection with any reclassification of the Common Shares,
any consolidation or merger to which the Company is a party, any sale or
transfer of all or substantially all of the assets of the Company, or any
compulsory share exchange whereby the Common Shares are converted into other
securities, cash or property, or (E) the Company shall authorize the voluntary
or involuntary dissolution, liquidation or winding up of the affairs of the
Company, then, in each case, the Company shall cause to be delivered by
facsimile or email to the Holder at its last facsimile number or email address
as it shall appear upon the Warrant Register of the Company, at least five (5)
calendar days prior to the applicable record or effective date hereinafter
specified, a notice stating (x) the date on which a record is to be taken for
the purpose of such dividend, distribution, redemption, rights or warrants, or
if a record is not to be taken, the date as of which the holders of the Common
Shares of record to be entitled to such dividend, distributions, redemption,
rights or warrants are to be determined or (y) the date on which such
reclassification, consolidation, merger, sale, transfer or share exchange is
expected to become effective or close, and the date as of which it is expected
that holders of the Common Shares of record shall be entitled to exchange their
shares of the Common Shares for securities, cash or other property deliverable
upon such reclassification, consolidation, merger, sale, transfer or share
exchange; provided that the failure to deliver such notice or any defect therein
or in the delivery thereof shall not affect the validity of the corporate action
required to be specified in such notice. To the extent that any notice provided
in this Warrant constitutes, or contains, material, non-public information
regarding the Company or any of the Subsidiaries, the Company shall
simultaneously file such notice with the Commission pursuant to a Current Report
on Form 6-K. The Holder shall remain entitled to exercise this Warrant during
the period commencing on the date of such notice until one (1) Business Day
prior to the effective date of the event triggering such notice except as may
otherwise be expressly set forth herein.
S-D-10
Section
4. Transfer of Warrant.
a) Transferability.
This Warrant and all rights hereunder (including, without limitation, any
registration rights) are, subject to applicable Canadian securities laws
including the legend restriction on the first page hereto, transferable, in
whole or in part, upon surrender of this Warrant at the principal office of the
Company or its designated agent, together with a written assignment of this
Warrant substantially in the form attached hereto duly executed by the Holder or
its agent or attorney and funds sufficient to pay any transfer taxes payable
upon the making of such transfer. Upon such surrender and, if required, such
payment, the Company shall execute and deliver a new Warrant or Warrants in the name of the assignee or assignees, as
applicable, and in the denomination or denominations specified in such
instrument of assignment, and shall issue to the assignor a new Warrant
evidencing the portion of this Warrant not so assigned, and this Warrant shall
promptly be cancelled. Notwithstanding anything herein to the contrary, the
Holder shall not be required to physically surrender this Warrant to the Company
unless the Holder has assigned this Warrant in full, in which case, the Holder
shall surrender this Warrant to the Company within three (3) Trading Days of the
date the Holder delivers an assignment form to the Company assigning this
Warrant full. The Warrant, if properly assigned in accordance herewith, may be
exercised by a new holder for the purchase of Warrant Shares without having a
new Warrant issued.
S-D-11
b) New
Warrants. This Warrant may be divided or combined with other Warrants upon
presentation hereof at the aforesaid office of the Company, together with a
written notice specifying the names and denominations in which new Warrants are
to be issued, signed by the Holder or its agent or attorney. Subject to
compliance with Section 4(a), as to any transfer which may be involved in such
division or combination, the Company shall execute and deliver a new Warrant or
Warrants in exchange for the Warrant or Warrants to be divided or combined in
accordance with such notice. All Warrants issued on transfers or exchanges shall
be dated the initial issuance date of this Warrant and shall be identical with
this Warrant except as to the number of Warrant Shares issuable pursuant
thereto.
c) Warrant
Register. The Company shall register this Warrant, upon records to be
maintained by the Company for that purpose (the “Warrant Register”), in
the name of the record Holder hereof from time to time. The Company may deem and
treat the registered Holder of this Warrant as the absolute owner hereof for the
purpose of any exercise hereof or any distribution to the Holder, and for all
other purposes, absent actual notice to the contrary.
Section
5. Miscellaneous.
a) No
Rights as Stockholder Until Exercise. This Warrant does not entitle the
Holder to any voting rights, dividends or other rights as a stockholder of the
Company prior to the exercise hereof as set forth in Section 2(d)(i), except as
expressly set forth in Section 3.
b) Loss,
Theft, Destruction or Mutilation of Warrant. The Company covenants that upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant or any stock certificate
relating to the Warrant Shares, and in case of loss, theft or destruction, of
indemnity or security reasonably satisfactory to it (which, in the case of the
Warrant, shall not include the posting of any bond), and upon surrender and
cancellation of such Warrant or stock certificate, if mutilated, the Company
will make and deliver a new Warrant or stock certificate of like tenor and dated
as of such cancellation, in lieu of such Warrant or stock certificate.
S-D-12
c) Saturdays,
Sundays, Holidays, etc. If the last or appointed day for the taking of any
action or the expiration of any right required or granted herein shall not be a
Business Day, then, such action may be taken or such right may be exercised on
the next succeeding Business Day.
d) Authorized
Shares.
The
Company covenants that, during the period the Warrant is outstanding, it will
reserve a sufficient number of shares to provide for the issuance of the Warrant
Shares upon the exercise of any purchase rights under this Warrant. The Company
further covenants that its issuance of this Warrant shall constitute full
authority to its officers who are charged with the duty of executing stock
certificates to execute and issue the necessary Warrant Shares upon the exercise
of the purchase rights under this Warrant. The Company will take all such
reasonable action as may be necessary to assure that such Warrant Shares may be
issued as provided herein without violation of any applicable law or regulation,
or of any requirements of the Trading Market upon which the Common Shares may be
listed. The Company covenants that all Warrant Shares which may be issued upon
the exercise of the purchase rights represented by this Warrant will, upon
exercise of the purchase rights represented by this Warrant and payment for such
Warrant Shares in accordance herewith, be duly authorized, validly issued, fully
paid and nonassessable and free from all taxes, liens and charges created by the
Company in respect of the issue thereof (other than taxes in respect of any
transfer occurring contemporaneously with such issue).
Except
and to the extent as waived or consented to by the Holder, the Company shall not
by any action, including, without limitation, amending its certificate of
incorporation or through any reorganization, transfer of assets, consolidation,
merger, dissolution, issue or sale of securities or any other voluntary action,
avoid or seek to avoid the observance or performance of any of the terms of this
Warrant, but will at all times in good faith assist in the carrying out of all
such terms and in the taking of all such actions as may be necessary or
appropriate to protect the rights of Holder as set forth in this Warrant against
impairment. Without limiting the generality of the foregoing, the Company will
(i) not increase the par value of any Warrant Shares above the amount payable
therefor upon such exercise immediately prior to such increase in par value,
(ii) take all such action as may be necessary or appropriate in order that the
Company may validly and legally issue fully paid and nonassessable Warrant
Shares upon the exercise of this Warrant and (iii) use commercially reasonable
efforts to obtain all such authorizations, exemptions or consents from any
public regulatory body having jurisdiction thereof, as may be, necessary to
enable the Company to perform its obligations under this Warrant.
Before
taking any action which would result in an adjustment in the number of Warrant
Shares for which this Warrant is exercisable or in the Exercise Price, the
Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public
regulatory body or bodies having jurisdiction thereof.
S-D-13
e) Jurisdiction.
All questions concerning the construction, validity, enforcement and
interpretation of this Warrant shall be determined in accordance with the
provisions of the Purchase Agreement.
f) Restrictions.
The Holder acknowledges that the Warrant Shares acquired upon the exercise of
this Warrant, if not registered, and the Holder does not utilize cashless
exercise, will have restrictions upon resale imposed by state and federal
securities laws.
g) Nonwaiver
and Expenses. No course of dealing or any delay or failure to exercise any
right hereunder on the part of Holder shall operate as a waiver of such right or
otherwise prejudice the Holder’s rights, powers or remedies. Without limiting
any other provision of this Warrant or the Purchase Agreement, if the Company
willfully and knowingly fails to comply with any provision of this Warrant,
which results in any material damages to the Holder, the Company shall pay to
the Holder such amounts as shall be sufficient to cover any costs and expenses
including, but not limited to, reasonable attorneys’ fees, including those of
appellate proceedings, incurred by the Holder in collecting any amounts due
pursuant hereto or in otherwise enforcing any of its rights, powers or remedies
hereunder.
h) Notices.
Any notice, request or other document required or permitted to be given or
delivered to the Holder by the Company shall be delivered in accordance with the
notice provisions of the Purchase Agreement.
i) Limitation
of Liability. No provision hereof, in the absence of any affirmative action
by the Holder to exercise this Warrant to purchase Warrant Shares, and no
enumeration herein of the rights or privileges of the Holder, shall give rise to
any liability of the Holder for the purchase price of any Common Shares or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
j) Remedies.
The Holder, in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Warrant. The Company agrees that monetary damages would not be
adequate compensation for any loss incurred by reason of a breach by it of the
provisions of this Warrant and hereby agrees to waive and not to assert the
defense in any action for specific performance that a remedy at law would be
adequate.
k) Successors
and Assigns. Subject to applicable securities laws, this Warrant and the
rights and obligations evidenced hereby shall inure to the benefit of and be
binding upon the successors and permitted assigns of the Company and the
successors and permitted assigns of Holder. The provisions of this Warrant are
intended to be for the benefit of any Holder from time to time of this Warrant
and shall be enforceable by the Holder or holder of Warrant Shares.
S-D-14
l) Amendment.
This Warrant may be modified or amended or the provisions hereof waived with the
written consent of the Company and the Holder. The Holder shall be entitled, at
its option, to the benefit of any amendment of (i) any other similar warrant
issued under the Purchase Agreement or (ii) any other similar warrant.
m) Severability.
Wherever possible, each provision of this Warrant shall be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Warrant shall be prohibited by or invalid under applicable law, such
provision shall be ineffective to the extent of such prohibition or invalidity,
without invalidating the remainder of such provisions or the remaining
provisions of this Warrant.
n) Headings.
The headings used in this Warrant are for the convenience of reference only and
shall not, for any purpose, be deemed a part of this Warrant.
********************
(Signature Page Follows)
S-D-15
IN WITNESS WHEREOF, the Company
has caused this Warrant to be executed by its officer thereunto duly authorized
as of the date first above indicated.
| SPHERE 3D CORP. |
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| By: |
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Name: |
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Title: |
S-D-16
NOTICE OF EXERCISE
TO: SPHERE 3D CORP.
(1)
The undersigned hereby elects to purchase ________Warrant Shares of the Company
pursuant to the terms of the attached Warrant (only if exercised in full), and
tenders herewith payment of the exercise price in full, together with all
applicable transfer taxes, if any.
(2)
Payment shall take the form of (check applicable box):
[ ] in lawful money of the United
States; or
[ ] [if permitted the cancellation of
such number of Warrant Shares as is necessary, in accordance with the formula
set forth in subsection 2(c), to exercise this Warrant with respect to the
maximum number of Warrant Shares purchasable pursuant to the cashless exercise
procedure set forth in subsection 2(c).
(3)
Please issue said Warrant Shares in the name of the undersigned or in such other
name as is specified below:
_______________________________
The Warrant Shares shall be delivered to the following DWAC
Account Number:
_______________________________
_______________________________
_______________________________
| [SIGNATURE OF HOLDER] |
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| Name of Investing Entity: |
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| Signature of Authorized Signatory of
Investing Entity: |
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| Name of Authorized Signatory: |
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| Title of Authorized Signatory: |
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| Date: |
|
S-D-17
EXHIBIT B
ASSIGNMENT FORM
(To assign the foregoing
Warrant, execute this form and supply required information. Do not use this form
to purchase shares.)
FOR VALUE RECEIVED, the
foregoing Warrant and all rights evidenced thereby are hereby assigned to
| Name: |
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(Please Print) |
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| Address: |
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(Please
Print) |
| Dated: |
, |
| Holder’s Signature: |
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| Holder’s Address: |
|
S-D-18
FIRST AMENDMENT TO
8% SENIOR SECURED CONVERTIBLE
DEBENTURE
This FIRST AMENDMENT TO 8%
SENIOR SECURED CONVERTIBLE DEBENTURE (this “Amendment”) is dated as
of November 30, 2015 and entered into by and among SPHERE 3D CORP., a
corporation incorporated under the laws of the Province of Ontario (the
“Corporation”), the Subsidiaries of the Corporation listed on the
signature pages hereto as Guarantors, and FBC HOLDINGS S.A.R.L., a company
incorporated under the laws of Luxembourg (the “Holder”), and is made
with reference to that certain 8% Senior Secured Convertible Debenture Due March
31, 2018 (as amended, modified or otherwise supplemented prior to the date
hereof, the “Debenture”), made by the Corporation for the benefit of the
Holder. Capitalized terms used herein without definition shall have the same
meanings herein as set forth in the Debenture.
RECITALS
WHEREAS, the Conversion
Price as to a portion of the principal of the Debenture is $7.50 per Common
Share and the Conversion Price as to a portion of the principal of the Debenture
is $8.50 per Common Share;
WHEREAS, the
Corporation has requested that the Holder provide its consent, pursuant to
Section 5.2(e) of the Revolving Credit Agreement, dated as of December 30, 2014,
by and between the Corporation, Overland Storage, Inc., a California
corporation, and the Holder (as amended as of July 10, 2015, the “RCA”)
to the Corporation’s drawdown of the Incremental Revolving Commitment (as
defined therein) (the “Consent”);
WHEREAS, as consideration
for the Consent, Holder and the Corporation have agreed to lower the Conversion
price of the entire amount of principal due under the Debenture to $3.00 per
Common Share and to provide that, if the Revolving Line Maturity Date (as
defined in the SVB Credit Agreement, is extended past February 27, 2016, then
the Corporation will issue to the Holder the warrant described below.
NOW, THEREFORE, in
consideration of the premises and the agreements, provisions and covenants
herein contained, the parties hereto agree as follows:
Section
1. LOAN; CONSENT
A. The
Corporation hereby requests the Holder to consent to, and to loan to the
Corporation, the full Incremental Revolving Commitment (as defined in the RCA).
Subject to the Corporation’s providing the Holder with executed subscription
agreements from investors in substantially the form provided by Corporation to
the Holder by electronic mail on November 20, 2015 for the raising by the
Corporation of at least $2,750,000 in immediately available funds through the
issuance of Common Shares and/or warrants (the “Equity Raise” and the
date such agreements are provided to the Holder being the “Effective
Date”), the Holder hereby consents to the loan of the Full Incremental
Revolving Commitment by Holder and will make such loan within one Business Day
of receipt of a written request from the Corporation The Corporation and the
Holder acknowledge and confirm that the Corporation shall be required to issue
the warrants detailed in section 2.1(c) of the RCA in connection with such loan
and as required by the RCA.
B. The
parties hereby confirm that, as a result of the funding of the full
Incremental Revolving Commitment, the Incremental Revolving Commitment shall not
be relevant to the determination of the amount of the Commitment Fee (as defined
in the RCA) pursuant to Section 2.1(f) of the RCA.
1
Section
2. AMENDMENTS TO THE
DEBENTURE
2.1 Amendments
to Article 1.1: Definitions
A. With
effect on and from the Effective Date, Article 1.1 of the Debenture is hereby
amended by:
(i) deleting the definition
“Conversion Price” therefrom in its entirety and substituting the
following therefor: “Conversion Price”: means $3.00 per Common Share,
subject to adjustment in certain circumstances as provided for in Section 3.5.
(ii) amending
the definition of “Exchange” by deleting “the TSX Venture Exchange or, if not
listed on the TSX Venture Exchange” in the first line of such definition and
deleting the word “either” on the second line of such definition:
(iii) deleting the
definition of “New Control Person Approval” therefrom in its entirety and
substituting the following therefor:
“New Control Person Approval” means that the Holder has
received any required shareholder approval in accordance with the requirement of
the Exchange with respect to the exercise of the conversion rights under Article
3.
B. With
effect on and from the Effective Date, Article 6.14 of the Debenture is hereby
amended by deleting “$5,000,000” in the last line of such article and replacing
it with “$10,000,000”.
C. With
effect on and from the Effective Date, Article 7.2 of the Debenture is hereby
amended by deleting such provision therefrom in its entirety and substituting
the following therefor:
“(a) Shareholder
Approvals. To the extent required by or necessary under Nasdaq Rule 5635
or any other law, rule or regulation, the Corporation shall call and hold a
meeting of its shareholders, as promptly as reasonably practicable after the
date hereof, but no later than 31 July 2016, to vote on proposals (collectively,
the “Shareholder Proposal”) to approve the issuance Common Shares to the
Holder in connection with the conversion of the Debentures into Common Stock and
any other matters related thereto. The Board of Directors shall recommend to the
Corporation’s shareholders that such shareholders approve the Stockholder
Proposal, and shall not modify or withdraw such resolution. In connection with
such meeting, the Corporation shall promptly prepare and file with a proxy
statement, shall use its reasonable best efforts to solicit proxies for such
shareholder approval and shall cause a definitive proxy statement related to
such shareholders’ meeting to be mailed to the Corporation’s shareholders as
promptly as practicable after clearance by any required regulatory authority.
The Corporation agrees that each proxy statement referred to in this paragraph
shall comply in all material respects with the requirements of the United States
Securities and Exchange Commission and all applicable laws and regulations. The
Corporation shall consult with the Holder prior to mailing any proxy statement,
or any amendment or supplement thereto, and provide the Holders with a
reasonable opportunity to comment thereon. In the event that the approval of the
Shareholder Proposal is not obtained at such shareholders’ meeting, the
Corporation shall include a proposal to approve (and, the Board of Directors
shall recommend approval of) such Shareholder Proposal at a meeting of its
shareholders (which may be an annual meeting) no less than once in each six
(6)-month period after such meeting until such approval is obtained or made, and
otherwise in accordance with the provisions hereof.
2
(b) Listing.
The Corporation shall take all action reasonably necessary to effect the listing
of the Common Shares issuable upon conversion of the Debenture on Nasdaq or such
other exchange or market as the Common Shares is at any time traded. The
Corporation will use its best efforts to continue the listing and trading of its
Common Shares on Nasdaq and, in accordance, therewith, will use its best efforts
to comply in all respects with the Corporation’s reporting, filing and other
obligations under law and the bylaws or rules of such market or exchange, as
applicable.
(c) Reservation
of Shares. The Corporation shall at all times reserve and keep available
out of its authorized but unissued Common Shares, solely for the purpose of
providing for the conversion of the Debenture, such number of Common Shares as
shall from time to time equal the number of shares sufficient to permit the
conversion of the Debenture and accrued interest in full. The Corporation
covenants that all Common Shares issuable upon conversion of the Debenture
shall, upon such issue, be duly and validly issued and fully paid and
non-assessable. The Corporation will use its best efforts to obtain any
authorization, consent, approval or other action by, and shall make any filing
with any court or administrative body that may be required or advisable under,
applicable laws and regulations in connection with the issuance of Common Shares
of Common Stock to the Holder upon conversion of the Debenture.”
(d)
Issuance of Warrants. If the Revolving Line Maturity Date (under and as
defined in the SVB Credit Agreement) is extended past February 27, 2016, the
Corporation shall issue the Holder a warrant to purchase 500,000 Common Shares
of the Corporation at a price per share equal to 110% of the closing price of
the Common Shares on the Business Day immediately prior to the date of such
extension, otherwise in substantially the form attached to the RCA as Exhibit B
thereto.
D. With
effect on and from the Effective Date, Section 8.1 of the Debenture is hereby
amended by adding the following clause (k) to the end of such section:
“(k) the Equity Raise (as defined in the amendment agreement
between the Holder and the Corporation dated on or around November 30, 2015) has
not been completed on or before December 15, 2015.”
Section
3. REPRESENTATIONS AND
WARRANTIES
In order to induce the Holder to
enter into this Amendment and to amend the Debenture in the manner provided
herein, the Corporation represents and warrants to the Holder that the following
statements are true, correct and complete:
A. Conditions
to Incremental Revolving Commitment.
(i) The
representations and warranties contained in Article IV of the RCA or any other
Loan Document (as defined in the RCA) are correct in all material respects when
made and on and as of the date hereof as though made on and as of the date
hereof except to the extent any such representation or warranty expressly
relates to an earlier date (in which case, such representation and warranty was
true and correct in all material respects as of such earlier date).
3
(ii) No
event or condition has occurred and is continuing, or would result from the
Corporation’s borrowing of the Incremental Revolving Commitment, which
constitutes an Event of Default (as defined in the RCA) or Potential Event of
Default (as defined in the RCA).
(iii) Since
the date on which the most up to date audited financial statements of the
Corporation were furnished to the Holder , there has not occurred, or been
threatened, any Material Adverse Effect (as defined in the RCA).
B. Corporate
Power and Authority. Each of the Corporation and the Guarantors has all
requisite corporate power and authority to enter into this Amendment and to
carry out the transactions contemplated by, and perform its obligations under,
the Debenture as amended by this Amendment (the “Amended Agreement”).
C. Authorization
of Agreements. The execution and delivery of this Amendment and the
performance of the Amended Agreement have been duly authorized by all necessary
corporate action on the part of the Corporation.
D. No
Conflict. The execution and delivery by the Corporation of this
Amendment and the performance by the Corporation of the Amended Agreement do not
and will not (i) violate any provision of any law or any governmental rule or
regulation applicable to the Corporation, the organizational documents of the
Corporation or any order, judgment or decree of any court or other agency of
government binding on the Corporation, (ii) conflict with, result in a breach of
or constitute (with due notice or lapse of time or both) a default under any
material agreement of the Corporation, (iii) result in or require the creation
or imposition of any Lien upon any of the properties or assets of the
Corporation, or (iv) require any approval of stockholders or any approval or
consent of any Person under any material agreement of the Corporation, except
for such approvals or consents which have been obtained.
E. Governmental
Consents. The execution and delivery by the Corporation of this
Amendment and the performance by the Corporation of the Amended Agreement do not
and will not require any registration with, consent or approval of, or notice
to, or other action to, with or by, any federal, state or other governmental
authority or regulatory body.
F. Binding
Obligation. This Amendment has been duly executed and delivered by the
Corporation and this Amendment and the Amended Agreement are the legally valid
and binding obligations of the Corporation, enforceable against such Loan Party
in accordance with their respective terms, except as may be limited by
bankruptcy, insolvency, reorganization, moratorium or similar laws relating to
or limiting creditors’ rights generally or by equitable principles relating to
enforceability.
G. Incorporation
of Representations and Warranties From Debenture. The Corporation’s
representations and warranties contained in Article 6 of the Debenture are and
will be true, correct and complete in all material respects on and as of the
date hereof to the same extent as though made on and as of that date, except to
the extent such representations and warranties specifically relate to an earlier
date, in which case they were true, correct and complete in all material
respects on and as of such earlier date.
H. Absence
of Default. No event has occurred and is continuing or will result from
the consummation of the transactions contemplated by this Amendment that would
constitute an Event of Default.
4
Section
4. CONFIRMATION OF GUARANTEE
AND SECURITY
A. By
executing this Amendment each Guarantor confirms it received a copy of the
Amendment and consents to the provisions of the Debenture as amended by the
Amendment including any amendment to the obligations guaranteed made by the
Amendment. Each Guarantor confirms that the guarantee remains in full force and
effect and that the guaranteed obligations include all obligations and
liabilities of the primary obligor to the beneficiary under the Debenture as
amended by this Amendment.
B. The
Corporation confirms that the Debenture (a) ranks as a continuing security for
the payment and discharge of the liabilities owing to the Holder pursuant to the
Debenture including, without limitation, all present and future monies,
obligations and liabilities owed by the Corporation to the Holder, whether
actual or contingent and whether owed jointly or severally, as principal or
surety and/or in any other capacity, under or in connection with the Debenture
and in accordance with the provisions thereof; and (b) shall continue in full
force and effect in all respects and the Debenture and this agreement shall be
read and construed together.
Section
5. MISCELLANEOUS
A. Reference
to and Effect on the Debenture.
(i) On
and after the date hereof, each reference in the Debenture to “this Debenture”,
“hereunder”, “hereof”, “herein” or words of like import referring to the
Debenture shall mean and be a reference to the Debenture, as amended by this
Amendment.
(ii) Except
as specifically amended by this Amendment, the Debenture shall remain in full
force and effect and is hereby ratified and confirmed.
B. Headings.
Section and subsection headings in this Amendment are included herein for
convenience of reference only and shall not constitute a part of this Amendment
for any other purpose or be given any substantive effect.
C. Applicable
Law. THIS AMENDMENT AND THE RIGHTS AND OBLIGATIONS OF THE PARTIES HEREUNDER
SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH,
THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING WITHOUT LIMITATION SECTION
5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK), WITHOUT REGARD
TO CONFLICTS OF LAWS PRINCIPLES.
D. Counterparts;
Effectiveness. This Amendment may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed and delivered shall be deemed an original, but all such
counterparts together shall constitute but one and the same instrument;
signature pages may be detached from multiple separate counterparts and attached
to a single counterpart so that all signature pages are physically attached to
the same document. This Amendment shall become effective upon the execution of a
counterpart hereof by the Corporation and the Holder and receipt by the
Corporation and the Holder of written or telephonic notification of such
execution and authorization of delivery thereof.
[Remainder of page intentionally left blank]
5
IN WITNESS WHEREOF, the
parties hereto have caused this Amendment to be duly executed and delivered by
their respective officers thereunto duly authorized as of the date first written
above.
| SPHERE 3D CORP., as the Corporation |
| |
| By:
|
| Name: |
| Title: |
| |
| SPHERE 3D INC., as Guarantor |
| |
| By:
|
| Name: |
| Title: |
| |
| |
| V3 SYSTEMS HOLDINGS, INC, as |
| Guarantor |
| |
| By:
|
| Name: |
| Title: |
| |
| |
| OVERLAND STORRAGE, INC, as |
| Guarantor |
| |
| By:
|
| Name: |
| Title: |
| |
| TANDBERG DATA HOLDINGS SARL, |
| as Guarantor |
| |
| By:
|
| Name: |
| Title: |
| FBC HOLDINGS S.À R.L., as Holder |
| |
| |
| By:
|
| Name: Manacor (Luxembourg) S.A |
| Title: |
| |
| |
| By:
|
| Name: Cyrus Capital Partners, LP |
| Title: Manager B |
| AMENDMENT NO. 2 TO |
| PURCHASE AGREEMENT |
THIS AMENDMENT NO. 2 TO THE
PURCHASE AGREEMENT (this “Amendment”) dated September 22, 2015 is an
amendment to that certain Purchase Agreement (the “Purchase Agreement”)
dated August 10, 2015 by and between Sphere 3D Corp., an Ontario corporation
(the “Company”) and MacFarlane Family Ventures, LLC
(“MacFarlane”). Capitalized terms used herein and not defined shall have
the same respective meanings as provided in the Purchase Agreement.
R E C I T A L S
| |
A. |
The parties to the Purchase Agreement desire to make
certain changes with respect to Section 3.2(i) of the Purchase Agreement
to reflect a change in the terms of the Purchase
Agreement. |
A G R E E M E N T
The undersigned parties hereby agree that:
| |
1. |
Section 3.2(i) of the Purchase Agreement is hereby
deleted in its entirety and replaced with the following: |
| |
|
|
| |
|
“(i) Any sale for cash of Common
Shares and/or warrants to purchase Common Shares (“Additional
Warrants”) for equity capital raise purposes to one or more investors
(each an “Additional Investor”) on or after the date of this
Agreement until and including December 31, 2015 (each sale, an
“Additional Raise”) shall be subject to Sections 3.2(ii) through
(iv) of this Agreement.” |
| |
|
|
| |
2. |
Section 3.2(iii) of the Purchase Agreement is hereby
deleted in its entirety and replaced with the following: |
| |
|
|
|
|
“(iii) If, pursuant to an
Additional Raise, the Company issues and sells to any Additional Investor
Common Shares at a price per Common Share that is lower than the Purchase
Price or Additional Warrants with a per share exercise price lower than
the exercise price per share than the Warrants issued hereunder then: (a)
the per share exercise price of the Warrants will be adjusted to equal the
exercise price per share of such Additional Warrants (if lower) as of the
date of the consummation of the Additional Raise, (b) promptly following
the consummation of the Additional Raise, the Investor will receive a
number of additional Common Shares from the Company equal to the
difference between (x) the number of shares (the “Adjusted Share
Amount”) that Investor would have received had the Purchase Price been
equal to the per share purchase price at which Common Shares were issued
in the Additional Raise and (y) the aggregate number of Common Shares
purchased by the Investor as of the Closing Date, (c) the number of Common
Shares issuable upon exercise of each Warrant shall be increased to equal
the Adjusted Share Amount, (d) the Company will use its commercially
reasonable efforts to cause such additional Common Shares issued pursuant
to Section 3.2(iii)(b) above to be listed on Nasdaq (if the Common Shares
are listed thereon) and (e) the provisions of Section 7.8 of this
Agreement shall apply to the additional Common Shares issued pursuant to
this 3.2(iii)(b) and (c).” |
| |
|
|
| |
3. |
Additional Raise. For the avoidance of doubt, the
parties acknowledge and agree that the sale and issuance of Common Shares,
warrants and adjustment warrants to MacFarlane pursuant to
a |
| |
|
Subscription Agreement on or about September 22, 2015
(the “September Raise”) shall be an Additional Raise for purposes of the
Purchase Agreement, and that any issuance of Common Shares and any
adjustment to the number of Common Shares issuable upon the exercise of
the Warrants pursuant to the Purchase Agreement shall be based upon the
purchase price per share of the Common Shares sold and issued in the
September Raise and the exercise price per share of the warrants (and not
the exercise price per share of the adjustment warrants) sold and issued
in the September Raise. |
| |
|
|
| |
4. |
Governing Law. This Amendment shall be governed
by, and construed in accordance with, the internal laws of the State of
New York applicable to agreements made and to be performed entirely within
the State of New York (except to the extent the provisions of the Business
Corporations Act (Ontario) would be mandatorily applicable to the issuance
of the Shares, the Warrants, the Warrant Shares or the additional Common
Shares issued pursuant to Section 3.2). Each of the parties hereto
irrevocably submits to the exclusive jurisdiction of the courts of the
State of New York located in New York County and the United States
District Court for the Southern District of New York for the purpose of
any suit, action, proceeding or judgment relating to or arising out of
this Amendment and the transactions contemplated hereby. Service of
process in connection with any such suit, action or proceeding may be
served on each party hereto anywhere in the world by the same methods as
are specified for the giving of notices under this Amendment. Each of the
parties hereto irrevocably consents to the jurisdiction of any such court
in any such suit, action or proceeding and to the laying of venue in such
court. Each party hereto irrevocably waives any objection to the laying of
venue of any such suit, action or proceeding brought in such courts and
irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum. TO
THE EXTENT ALLOWABLE UNDER APPLICABLE LAW, EACH OF THE PARTIES HERETO
WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT
TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED
SPECIFICALLY AS TO THIS WAIVER. |
| |
|
|
| |
5. |
Counterparts. This Amendment may be executed in
two or more counterparts, each of which shall be deemed an original, but
all of which together shall be considered one and the same
agreement. |
| |
|
|
| |
6. |
Entire Agreement. The Purchase Agreement,
including the Exhibits and the Schedules, any amendments prior to the date
hereof, this Amendment, and the other Transaction Documents constitute the
entire agreement among the parties hereof with respect to the subject
matter hereof and thereof and supersede all prior agreements and
understandings, both oral and written, between the parties with respect to
the subject matter hereof and thereof. |
[Signatures Follow]
IN WITNESS WHEREOF, the parties have
executed this Amendment or caused their duly authorized officers to execute this
Amendment as of the date first above written.
| The Company: |
SPHERE 3D CORP. |
| |
|
|
| |
|
|
| |
|
|
| |
By: |
|
| |
Name: |
Eric L. Kelly |
| |
Title: |
Chief Executive Officer |
| |
|
|
| |
|
|
| |
|
|
| MacFarlane |
MACFARLANE FAMILY VENTURES, LLC
|
| |
|
|
| |
|
|
| |
By: |
|
| |
Name: |
|
| |
Title: |
|
[CORRECTION FROM SOURCE]
Sphere 3D Announces Registered Direct Equity Offering and
Credit Facility for a
total of approximately U.S. $10.76 million
The information on the credit facility as described in the
fourth paragraph has been updated.
SAN JOSE, CA – December 1, 2015 – Sphere 3D Corp.
(Nasdaq: ANY) has entered into subscription agreements for registered direct
equity offerings of 2,880,000 Common Shares of the Company and warrants to
purchase up to the same number of Common Shares for a gross purchase price of
approximately U.S.$5.76 million on November 30, 2015. In addition, FBC Holdings
S.A.R.L. has consented to the draw, at the Company’s option, of U.S. $5 million
under the Company’s existing revolving credit facility.
Pursuant to the subscription agreements, the purchase price for
one Common Share and a warrant to purchase one Common Share is U.S. $2.00. The
Warrants will have an exercise price of U.S. $2.50 per share, a five-year term,
and are exercisable in whole or in part, at any time prior to expiration. In
addition, 1.5 million of the warrants contain price protection provisions. The
transaction is anticipated to close on or before December 4, 2015, subject to
customary closing conditions. The Company intends to use the proceeds from the
offering for general corporate and working capital purposes. Ladenburg Thalmann
& Co. Inc., a subsidiary of Ladenburg Thalmann Financial Services Inc. (NYSE
MKT: LTS), acted as exclusive placement agent for the equity offerings.
FBC has agreed that the completion of the equity transactions
described herein would fulfill the conditions applicable under the revolving
credit facility for the additional U.S. $5 million draw.
In addition, the Company has agreed that, only if the Company
chooses to draw down any portion of the U.S. $5 million credit facility in the
future as described above, the conversion price of FBC’s existing convertible
debenture will be reduced to US $3.00 per share, and the Company will issue
warrants to purchase up to an additional 500,000 Common Shares to FBC only if
the maturity dates of the Company’s existing credit facilities are extended as
provided for under the FBC credit facility. These warrants would have a three
year term and have an exercise price of 110% of the closing price of our common
shares as of the date of such extension.
FBC is an affiliate of Cyrus Capital Partners, L.P., which
beneficially owns, directly or indirectly, securities of the Company carrying
more than 10% of the voting rights attached to the outstanding voting securities
of the Company prior to giving effect to the transactions described herein. As a
result, the convertible debenture amendment constitutes a “related party
transaction” within the meaning of Multilateral Instrument 61-101 –
Protection of Minority Security Holders in Special Transactions (“MI
61-101”). The Company intends to file a material change report on Form 51-102F3
in connection with the convertible debenture amendment. However, such material
change report will not be filed at least 21 days before the completion of the
convertible debenture amendment in order to allow the Company to secure the
financing opportunities described herein. The Company is relying on the
exemptions from the “formal valuation” and “minority approval” requirements
under MI 61-101 set forth in sections 5.5(a) and 5.7(1)(a) of MI 61-101,
respectively,
based on the fact that the subject matter of, or consideration for, the convertible debenture amendment insofar as it involves interested parties, as determined in accordance with MI 61-101, does not exceed 25% of the market capitalization of the
Company, as determined in accordance with MI 61-101.
The equity offering described above is being conducted pursuant to Sphere 3D’s effective “shelf” registration statement on Form F-3 (File No. 333- 206357) filed with the Securities and Exchange Commission (“SEC”) on
August 14, 2015, which became effective on August 28, 2015. The offering was made by means of a prospectus supplement and an accompanying prospectus that form a part of the registration statement. Electronic copies of a preliminary prospectus
supplement and the accompanying prospectus relating to the offering may be obtained free of charge, when available, by visiting EDGAR on the SEC website at www.sec.gov.
This press release shall not constitute an offer to sell or the solicitation of an offer to buy these securities, nor shall there be any sale of these securities in any state or other jurisdiction in which such an offer, solicitation or sale would
be unlawful prior to registration or qualification under the securities laws of any such state or other jurisdiction.
About Sphere 3D
Sphere 3D Corp. (NASDAQ: ANY) delivers containerization and virtualization technologies along with data management products that enable workload-optimized solutions. We achieve this through a combination of containerized applications, virtual
desktops, virtual storage and physical hyper-converged platforms. Sphere 3D’s value proposition is simple and direct—we allow organizations to deploy a combination of public, private or hybrid cloud strategies while backing them up with
state of the art storage solutions. Sphere 3D, along with its wholly-owned subsidiaries, Overland Storage and Tandberg Data, has a strong portfolio of brands including Glassware 2.0™, SnapCLOUD™, SnapScale®, SnapServer®, V3,
RDX®, and NEO®. For more information, visit www.sphere3d.com.
Safe Harbor Statement
This press release may contain forward-looking statements that involve risks, uncertainties, and assumptions that are difficult to predict. Actual results and the timing of events could differ materially from those anticipated in such
forward-looking statements as a result of risks and uncertainties including, without limitation, unforeseen changes in the course of Sphere 3D’s business or the business of its wholly-owned subsidiaries, including, without limitation, Overland
Storage and Tandberg Data; any failure of the ecosystem across enterprise cloud products to develop, any increase in Sphere 3D’s cash needs or our inability to obtain additional debt or equity financing; performance of our products; the level
of success of our collaborations and business partnerships; possible actions by customers, partners, suppliers, competitors or regulatory authorities; and other risks detailed from time to time in Sphere 3D’s periodic reports contained in our
Annual Information Form and other filings with Canadian securities regulators (www.sedar.com) and in prior periodic reports filed with the United States Securities and Exchange Commission (www.sec.gov). Sphere 3D undertakes no obligation to update
any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise, except as required by law.
CONTACT INFORMATION
Investor Relations Contact:
Mike Bishop
The Blueshirt Group
+1 415-217-4968
mike@blueshirtgroup.com
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