SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (this “
Agreement
”) is made
as of the [•] day of September, 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), (ii) the
Warrants (as defined below) to purchase an aggregate of [•] Common Shares
(subject to adjustment) at an exercise price of $2.33 per share (subject to
adjustment) and (iii) the Adjustment Warrants (as defined below) to purchase a
number of Common Shares to be determined at such time as such Adjustment
Warrants become exercisable as set forth therein at an exercise price of $0.01
per share (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:
“
Adjustment Warrants
” means, as to each Investor, a
warrant to purchase Common Shares in the form attached hereto as
Exhibit
A
.
“
Adjustment Warrant Shares
” means the Common Shares
issuable upon the exercise of the Adjustment Warrants.
“
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, the Warrants and the Adjustment Warrants on the Closing Date
pursuant to
Section 3.1
of this Agreement.
“
Closing Date
” means the fourth (4
th
) 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.
“
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 two U.S. dollars and thirty-three
cents ($2.33).
-2-
“
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.
“
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, the
Adjustment Warrants, the Warrant Shares and the Adjustment 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, the
Warrants and the Adjustment 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,
the Warrants and the Adjustment 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, the Warrants representing the right to purchase
Warrant Shares and the Adjustment Warrants representing the right to purchase
Adjustment 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, the Warrants and the Adjustment Warrants shall
take place on the Closing Date at the offices of O’Melveny & Myers LLP, Two
Embarcadero Center, 28
th
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-
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;
(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 $2.33, set forth next to such Investor’s name on
Schedule I
attached hereto; and
(iii) an Adjustment Warrant registered in the name
of such Investor to purchase a number of Common Shares to be determined at such
time as such Adjustment Warrants become exercisable as set forth therein at an
exercise price of $0.01 per share.
(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, the Warrants and the Adjustment 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:
4.3
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.
4.4
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.
4.5
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.
-4-
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 June 30, 2015 and prior to giving effect to the
Transaction, there were (i) 37,289,839 Common Shares issued and outstanding,
(ii) 3,182,569 Common Shares issuable upon exercise of outstanding warrants,
(iii) 3,030,357 Common Shares issuable upon exercise of outstanding options and
(iv) 169,880 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 Adjustment Warrants have been duly and validly authorized. Upon the due
exercise of the Adjustment Warrants and full payment for the exercise price
thereof, the Adjustment 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 and the Adjustment
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, the Warrants and the Adjustment Warrants and, upon
exercise of the Warrants and/or exercise of the Adjustment Warrants, the Warrant
Shares and/or the Adjustment Warrant Shares, respectively, the Investors will
have good and marketable title to such Securities and the Warrant Shares and/or
the Adjustment Warrant Shares will be immediately freely tradable on Nasdaq
(subject to applicable securities laws, and the restrictions set forth in the
Warrants and Adjustment 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.
-5-
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, (iii) the issuance of the Adjustment Warrant Shares
upon due exercise of the Adjustment Warrants, and (iv) 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.
-6-
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, the Warrants and the Adjustment Warrants
hereunder shall be used by the Company for working capital and general corporate
purposes.
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 August 13, 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);
-7-
(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.
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.
-8-
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.
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.
-9-
(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.
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.
-10-
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.
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.
-11-
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.
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.
-12-
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.
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.
-13-
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
.
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, the
Warrants and the Adjustment 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):
-14-
(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, the Warrant Shares and the Adjustment 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.
(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.
-15-
6.2
Conditions to Obligations of the
Company
. The Company’s obligation to sell and issue the Shares, the Warrants
and the Adjustment 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;
(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
.
-16-
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 and the Adjustment Warrants, such number of Common
Shares as shall from time to time equal the Warrant Shares and the Adjustment
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, the Warrant Shares and the Adjustment
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, the Warrant Shares and the Adjustment 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.
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.
-17-
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.
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.
-18-
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:
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Sphere 3D Corp.
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9112 Spectrum Center Boulevard
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San Diego, California 92123
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Attention:
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Kurt Kalbfleisch, Chief Financial Officer
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Fax:
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(858) 495-4267
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With a copy to:
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O’Melveny & Myers LLP
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2756 Sand Hill Road
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Menlo Park, California 94025
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Attention:
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Warren T. Lazarow, Esq.
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Paul L. Sieben, Esq.
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Fax:
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(650) 473-2601
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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.
-19-
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).
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, the Adjustment Warrants, the Warrant Shares or the Adjustment 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.
-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]
-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.
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The Company:
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SPHERE 3D CORP.
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By:
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Name:
Eric L. Kelly
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Title: Chief Executive
Officer
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[Signature Page to Sphere 3D Subscription Agreement]
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The Investors:
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By:
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Name:
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Title:
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Address for Notice:
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Fax:
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Investor Aggregate Purchase Price:
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US$
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[Signature Page to Sphere 3D Subscription Agreement]
Schedule I
Purchase and Sale of Shares and Warrants
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Name
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Number of Shares
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Number of Warrant
Shares
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Aggregate
Purchase Price
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US$
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Schedule II
Material Contracts
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•
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Surplus Escrow Agreement dated December 20,
2012.
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•
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Value Escrow Agreement dated December 20, 2012.
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•
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Voting Agreements each dated July 15, 2013
between Eric L. Kelly and various shareholders of the Company.
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•
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Board Nomination Right Agreement dated July 15,
2013 between Eric L. Kelly and the Company.
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•
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Warrant Indenture Agreement dated November 12,
2013 between Equity Financial Trust Company and the Company.
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•
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Asset Purchase Agreement dated February 11,
2014 by and among V3 Systems, V3 Systems Holdings, Inc. and Sphere 3D.
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•
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Warrant Indenture dated June 5, 2014 between
the Company and Equity Financial Trust Company.
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•
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Convertible Debenture dated December 1, 2014
between the Company and FBC Holdings S.A.R.L. for $19.5 million.
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•
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Escrow Agreement dated December 1, 2014 between
the Company and Continental Stock Transfer and Trust Company.
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•
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Revolving Credit Agreement dated December 30,
2014 between the Company, Overland Storage, Inc. and FBC Holdings
S.A.R.L., as amended.
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•
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Amended and Restated Loan and Security
Agreement dated December 31, 2014 between Overland, Tandberg Data GmbH,
Sphere 3D, and Silicon Valley Bank, as amended.
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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.
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.
(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.
(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.
4.
Language
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]
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The Investor:
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[___________________________]
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[Annex IV-1 on next page]
Annex IV-1
Canadian Investor Certificate
(annex to
Schedule
IV
(Special Conditions for Canadian Investors))
|
TO:
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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:
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(i)
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is purchasing the Securities as principal;
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(ii)
|
is resident in or is subject to the laws of the Province
or Territory of (check one):
|
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[ ] Alberta
|
[ ] Northwest Territories
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[ ] Prince Edward Island
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[ ] British Columbia
|
[ ] Nova Scotia
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[ ] Quebec
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[ ] Manitoba
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[ ] Nunavut
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[ ] Saskatchewan
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[ ] 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 alimited market dealer under one or both of the
Securities
Act
(Ontario) or the
Securities Act
(Newfoundland and Labrador),
|
|
|
[ ]
|
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,
|
|
|
[ ]
|
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:
|
|
(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;
|
"
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,
|
|
|
(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;
|
“
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.
|
Certified at
________________________
this,
____________________________.
.
|
|
|
|
By:
|
|
|
Witness
|
|
Name:
|
|
|
|
Title:
|
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):
|
|
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
.
|
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, [
name of
holder
], [
address of holder
] (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$2.33 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 Company 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.
- 2 -
|
|
(a)
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duly completing and executing a subscription
substantially in the form attached as Schedule "A" (the "
Subscription
Form
"), in the manner therein indicated; and
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(b)
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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
”).
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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.
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8.
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(a)
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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:
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- 3 -
"
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
"
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)
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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.
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- 4 -
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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)
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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.
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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)
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no adjustment in the Exercise Price (unless pursuant to
section 19) 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;
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- 5 -
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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)
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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)
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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)
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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)
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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.
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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 and section 19, 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.
- 6 -
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)
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duly completing and executing the transfer form attached
as Schedule "B" ("Transfer Form"); and
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(b)
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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,
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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.
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18.
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(a)
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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).
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(b)
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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.
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19. If at any time on or after the date
hereof until December 31, 2015 (the “
Adjustment Period
”), the Corporation
completes an equity financing involving the issuance and sale of Common Shares
and related additional warrants, which have an exercise price above $0.01, to
purchase Common Shares (such warrants having an exercise price above $0.01, the
“
Additional Warrants
”) to one or more investors (an “
Additional
Raise
”) at a price per Common Share (the “
Additional Per Share
Price
”) that is lower than the per share purchase price paid by Holder, as
an Investor, under the Purchase Agreement (the “
Per Share Price
”), which
equals $2.33, then, subject to Sections 20 and 21 of this Warrant:
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(a)
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The Exercise Price shall be adjusted to equal the
exercise price of such Additional Warrants (if lower) as of the date of
the consummation of the Additional Raise;
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(b)
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If the Additional Coverage Ratio (as such term is defined
herein) is greater than or equal to the quotient obtained by dividing the
number of Common Shares issuable upon exercise of this Warrant (the “
Warrant Shares
”)
immediately prior to the adjustment provided for in this Section 19 by the
number of Common Shares issued to the Holder pursuant to the Purchase Agreement
(such quotient, the “
Coverage Ratio
”), the Warrant Shares shall be
increased to the product obtained by multiplying the Warrant Shares immediately
prior to the adjustment provided for in this Section 19 by the quotient obtained
by dividing:
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(x)
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the number of Common Shares issuable upon exercise of the
Additional Warrants divided by the number of Common Shares issued in such
Additional Raise to the holders of the Additional Warrants (the
“
Additional Coverage Ratio
”) by:
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(y)
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the number of Warrant Shares immediately prior to the
adjustment provided for in this Section 19 divided by the number of Common
Shares issued to the Holder pursuant to the Purchase Agreement (aggregated
with common shares issuable to the Holder pursuant to AdjustmentWarrants
(as defined in the Purchase Agreement)); and
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(c)
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If the Additional Coverage Ratio is less than the
Coverage Ratio, the number of Warrant Shares shall be increased to the
amount equaling the Coverage Ratio multiplied by the quotient obtained by
dividing the aggregate purchase price paid by Holder, as an Investor,
under the Purchase Agreement, which equals $[•], by the Additional Per
Share Price;
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provided, however
, that if the Corporation completes
multiple Additional Raises during the Adjustment Period, the number of Warrant
Shares used in this Section 19 shall reflect all previous operations of this
Section 19.
20. Notwithstanding any other provisions in
this Warrant Certificate or the Purchase Agreement to the contrary, the number
of Common Shares issuable upon the exercise of this Warrant, pursuant to the
Purchase Agreement and upon the exercise of the Adjustment Warrants shall in no
event equal an amount that may constitute, when aggregated with any issuances
pursuant to any Additional Raises and, in the event Nasdaq determines to
aggregate (“
Aggregate
”) any other issuances by the Corporation including,
without limitation, such issuances and the issuances by the Corporation
disclosed on its Current Reports on Form 6-K dated June 2, 2015 and August 14,
2015, pursuant to Nasdaq rules: (x) an amount greater than 19.999% of Common
Shares or voting power of the Corporation outstanding immediately prior to (I)
entry into the Purchase Agreement or, (II) in the event Nasdaq determines to
Aggregate, May 19, 2015, (y) an amount that would constitute a change of control
under Nasdaq rules, or (z) an amount that would otherwise trigger a shareholder
approval requirement under Nasdaq rules, except with the prior approval of the
Corporation’s shareholders.
21. Notwithstanding any other provisions in
this Warrant Certificate or the Purchase Agreement to the contrary, the
Corporation shall in no event be required to issue any additional Common Shares
to the Investor pursuant to an exercise of any Warrants following any adjustment
in the number of Warrant Shares represented hereby pursuant to Section 19 unless
the Investor confirms the representations and warranties set forth in
Section
5
of the Purchase Agreement as of the date of the issuance of additional
Common Shares as a result of such adjustment, and the issuance is in compliance
with applicable securities laws.
22. Any certificate representing Common
Shares issued upon the exercise of this Warrant may bear the following legend:
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"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.)
23. 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.
24. The Corporation shall notify the Holder
forthwith of any change of the Corporation’s address. 25. 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.
26. 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.
27. 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.
28. 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.
29. 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.
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30. 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.
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.
SPHERE 3D CORP.
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Per:
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Kurt Kalbfleisch, Chief
Financial Officer
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Schedule "A"
SUBSCRIPTION FORM
TO BE COMPLETED IF WARRANTS ARE TO BE EXERCISED:
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TO:
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SPHERE 3D CORPORATION
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9112 Spectrum Center Boulevard, San Diego,
California, 92123
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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).
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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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)
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WITNESS:
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HOLDER'S NAME
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)
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AUTHORIZED SIGNATURE
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)
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TITLE (IF APPLICABLE)
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Signature guaranteed
1
:
______________________________________________________________________________________________
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.
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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NOTICE:
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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".
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DATED this _____day of _______________, 20___.
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Signature Guaranteed
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(Signature of transferring Warrantholder)
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Name (please print)
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Address
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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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(Signature of Transferee)
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Date
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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.
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)
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Number of Warrants: 0
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Adjustment Warrant Certificate No. [•]
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This is to certify that, for value received, [
name of
holder
], [
address of holder
] (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 March 31, 2016 (the "
Expiry Date
"), the number of fully
paid and non-assessable common shares in the capital of the Corporation (a
"
Common Share
") set forth below within Section 19 of this Adjustment
Warrant Certificate for each Warrant (individually, a "
Warrant
")
represented hereby at a price of US$0.01 per Common Share (the "
Exercise
Price
"), upon and subject to the terms and conditions set forth herein. This
Warrant is one of the Adjustment 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:
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(a)
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duly completing and executing a subscription
substantially in the form attached as Schedule "A" (the "
Subscription
Form
"), in the manner therein indicated;
and
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- 2 -
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(b)
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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
”).
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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.
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8.
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(a)
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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:
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"
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
- 3 -
"
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)
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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)
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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.
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(d)
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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)
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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.
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9. The following rules and procedures shall be applicable to
the adjustments made pursuant to section 8:
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(a)
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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)
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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;
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(c)
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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)
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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)
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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)
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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)
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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)
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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)
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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.
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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.
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 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.
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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)
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duly completing and executing the transfer form attached
as Schedule "B" ("Transfer Form"); and
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(b)
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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.
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- 7 -
17. [Reserved].
18.
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(a)
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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 22 hereunder) of the amount of the Warrant that it must exercise
and the amount due hereunder (a “
Forced Exercise Notice
”). If,
pursuant to Section 19, this Warrant is not exercisable for any Common
Shares at the Forced Conversion Date, the Forced Conversion Date shall be
the Expiry Time and at such time this Warrant shall shall wholly cease and
such Warrants shall be wholly void and of no valid or binding effect after
such time. 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 28 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).
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(b)
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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.
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19. The number of Common Shares issuable upon
the exercise of this Warrant shall initially be zero (0). If, however, at any
time on or after the date hereof until December 31, 2015, the Corporation
completes an equity financing involving the issuance and sale of Common Shares
to one or more investors (an “
Additional Raise
”) at a price per Common
Share that is lower than the per share purchase price paid by Holder, as an
Investor, under the Purchase Agreement, which equals $2.33, then, subject to
Sections 20 and 21 of this Warrant, the number of Common Shares issuable upon
the exercise of this Warrant shall be increased to the amount equaling the
difference between:
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(a)
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The aggregate purchase price paid by Holder, as an
Investor, under the Purchase Agreement, which equals $[•], divided by the
per share purchase price at which Common Shares were issued in the
Additional Raise; and
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- 9 -
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(b)
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The aggregate number of Common Shares purchased by
Holder, as an Investor, under the Purchase Agreement, which equals
[•].
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20. Notwithstanding any other provisions
in this Warrant Certificate or the Purchase Agreement to the contrary, the
number of Common Shares issuable upon the exercise of this Warrant, pursuant to
the Purchase Agreement and upon the exercise of the additional warrant to
purchase common shares issued to the Investor pursuant to the Purchase Agreement
shall in no event equal an amount that may constitute, when aggregated with any
issuances pursuant to any Additional Raises and, in the event Nasdaq determines
to aggregate (“
Aggregate
”) any other issuances by the Corporation
including, without limitation, such issuances and the issuances by the
Corporation disclosed on its Current Reports on Form 6-K dated June 2, 2015 and
August 14, 2015, pursuant to Nasdaq rules: (x) an amount greater than 19.999% of
Common Shares or voting power of the Corporation outstanding immediately prior
to (I) entry into the Purchase Agreement or, (II) in the event Nasdaq determines
to Aggregate, May 19, 2015, (y) an amount that would constitute a change of
control under Nasdaq rules, or (z) an amount that would otherwise trigger a
shareholder approval requirement under Nasdaq rules, except with the prior
approval of the Corporation’s shareholders.
21. Notwithstanding any other provisions in
this Warrant Certificate or the Purchase Agreement to the contrary, the
Corporation shall in no event be required to issue any Common Shares to the
Investor pursuant to an exercise of any Warrants represented hereby unless the
Investor confirms the representations and warranties set forth in
Section
5
of the Purchase Agreement as of the date of the issuance of such Common
Shares pursuant to an exercise of any Warrants represented hereby, and the
issuance is in compliance with applicable securities laws.
22. 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.)
23. 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.
24. The Corporation shall notify the Holder
forthwith of any change of the Corporation’s address.
25. 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.
- 10 -
26. 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.
27. 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.
28. 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.
29. 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.
30. 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.
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.
SPHERE 3D CORP.
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Per:
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Kurt Kalbfleisch, Chief
Financial Officer
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Schedule "A"
SUBSCRIPTION FORM
TO BE COMPLETED IF WARRANTS ARE TO BE EXERCISED:
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TO:
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SPHERE 3D CORPORATION
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9112 Spectrum Center Boulevard, San Diego,
California, 92123
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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).
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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$0.01 per Common Share or as
adjusted) US$ _______________
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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)
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)
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WITNESS:
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)
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HOLDER'S NAME
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)
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)
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)
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AUTHORIZED SIGNATURE
|
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)
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)
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)
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TITLE (IF APPLICABLE)
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Signature guaranteed
1
:
________________________________________________________________________________________________________
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.
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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NOTICE:
|
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".
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DATED this _____ day of __________, 20___ .
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Signature Guaranteed
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(Signature of transferring Warrantholder)
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Name
(please print)
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Address
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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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(Signature of Transferee)
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Date
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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.
