SECOND SUPPLEMENT TO PROXY STATEMENT
FOR THE
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 31, 2018
May 24, 2018
This is a supplement (the Supplement) to the definitive proxy
statement and management information circular (the Definitive Proxy Statement)
of Sphere 3D Corp. (Sphere 3D or the Company) filed with the Securities and
Exchange Commission (the SEC) on April 26, 2018 and with the applicable
Canadian securities regulatory authorities on April 27, 2018 and mailed to the
Companys shareholders (the Shareholders) in connection with the solicitation
of proxies for use at the special meeting of shareholders scheduled to be held
on May 31, 2018 (the Special Meeting), as supplemented by a first supplement
filed with the SEC and the applicable Canadian securities regulatory authorities
on May 18, 2018. At the Special Meeting, Shareholders will be asked to, among
other things, consider and, if advisable, pass a special resolution approving
the sale by Sphere 3D of all of the shares of its subsidiary Overland Storage,
Inc. (the Share Purchase) to Silicon Valley Technology Partners LLC, an entity
established and controlled by Eric Kelly, the Chief Executive Officer of Sphere
3D (the Purchaser). The board of directors of the Company previously
established April 10, 2018 as the record date for the determination of
Shareholders entitled to vote at the Special Meeting.
If Shareholders have not already submitted a proxy for use at
the Special Meeting, they are urged to do so promptly. No action in connection
with this Supplement is required by any Shareholder who has previously delivered
a proxy and who does not wish to revoke or change that proxy. Information about
voting or revoking a proxy appears on page 15, in the section entitled
Questions and Answers starting on page 11, and in the section entitled The
Special Meeting starting on page 18 of the Definitive Proxy Statement.
Important information concerning the Share Purchase is set
forth in the Definitive Proxy Statement. The Definitive Proxy Statement is
amended and supplemented by, and should be read in conjunction with, the
information set forth in this supplement to the Definitive Proxy Statement,
which information shall be considered part of the Definitive Proxy Statement.
Capitalized terms used in this supplement to the Definitive Proxy Statement but
not otherwise defined herein have the meanings ascribed to those terms in the
Definitive Proxy Statement.
We have not authorized any person to give any information or to
make any representation in connection with any matters to be considered at the
Special Meeting other than those contained in this Supplement and the Definitive
Proxy Statement. If any such information or representation is given or made to
you, you should not rely on it as having been authorized or as being accurate.
This Supplement and the Definitive Proxy Statement do not
constitute an offer to buy, or a solicitation of an offer to sell, any
securities, or the solicitation of a proxy, by any person in any jurisdiction in
which such an offer or solicitation is not authorized or in which the person
making such an offer or solicitation is not qualified to do so or to any person
to whom it is unlawful to make such an offer or solicitation.
NO CANADIAN OR UNITED STATES SECURITIES REGULATORY AUTHORITY
HAS PASSED UPON THE ACCURACY OR ADEQUACY OF THIS SUPPELEMENT OR THE DEFINITIVE
PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS AN OFFENCE.
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SUPPLEMENTAL DISCLOSURE
The Company makes the following amended and supplemental
disclosures:
The section of the Definitive Proxy Statement entitled
Related Party Transaction Matters is amended and supplemented as
follows:
The disclosure under "Related Party Transaction Matters
Application of MI 61-101" starting on page 45 of the Definitive Proxy Statement
is supplemented by adding the following paragraphs after the second paragraph of
such section.
Cyrus and MFV are related parties of Sphere 3D, and as
described in this Proxy Statement, the net proceeds from the Share Purchase are
intended to be used, among other things, to repay outstanding indebtedness owed
by Sphere 3D to FBC Holdings, which is an investment fund managed by Cyrus, and
to MFV. In addition, in connection with the Share Purchase, existing security
holders and debtors of Sphere 3D (including potentially Cyrus (through FBC
Holdings or otherwise) and/or MFV) may agree to arrangements pursuant to which
outstanding indebtedness owed by Sphere 3D to them would be restructured and
assumed by the Purchaser or its affiliates and/or pursuant to which they would,
directly or indirectly, receive securities from, or become a debtor of, the
Purchaser or its affiliates in consideration for financing the Purchaser
(including for the payment of the Purchase Price) or for the restructuring or
settlement of indebtedness owed by Sphere 3D to them. The foregoing could, among
other things, result in the receipt, directly or indirectly, of a collateral
benefit (as defined in MI 61-101) by Cyrus and/or MFV as a consequence of the
Share Purchase. Consequently, each of Cyrus and MFV may be considered to be an
interested party (as defined in MI 61-101), or a related party of an
interested party, for the Share Purchase.
In connection with such arrangements, Sphere 3D may agree to
reduce the Purchase Price in proportion of the amount of indebtedness that would
cease to be owed by Sphere 3D. Since the full amount of the Purchase Price is
expected to be used by the Company to repay outstanding debt obligations, this
would not substantively alter the current terms of the Share Purchase.
Moreover, since, as described in the Proxy Statement, it is
possible that the net proceeds that Sphere 3D would receive from the Share
Purchase will not be sufficient to pay all of its debts and liabilities that
would become due and the expenses relating to the Share Purchase, or that there
will not be enough cash or working capital in the Company to fund its continuing
operations, the Company may need to raise additional capital through debt or
equity financings before, at or around the time of the Closing (including from
related parties) or otherwise agree to restructure or recapitalize such debts
and liabilities.
The disclosure under "Related Party Transaction Matters
Minority Approval" starting on page 46 of the Definitive Proxy Statement is
amended and supplemented by replacing the second paragraph of such section by
the following:
To the knowledge of the directors and executive officers of
Sphere 3D, after reasonable inquiry, the following Shareholders who,
collectively, beneficially owned or exercised control or direction over an
aggregate of 2,829,105 Common Shares as of the Record Date, representing in the
aggregate approximately 29.79% of the Common Shares that may be voted at the
Special Meeting, will be have to be excluded from the vote of the Minority
Shareholders:
|
Common Shares as of Record Date
|
Shareholder
|
(#)
|
(%)
|
Eric Kelly
|
51,984
|
0.55%
|
Kurt L. Kalbfleisch
|
25,479
|
0.27%
|
Jenny Yeh
|
2,133
|
0.02%
|
Cyrus (including its related parties and
joint actors)
|
754,940
|
7.95%
|
MFV
|
1,994,569
|
21.00%
|
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See The Share PurchaseParties to the Share Purchase.
Additional Information and Where to Find It
In connection with the Share Purchase, the Company has filed
with the SEC and mailed or otherwise provided to its Shareholders the Definitive
Proxy Statement regarding the Share Purchase. Investors are urged to read the
Definitive Proxy Statement and this Supplement and other relevant materials
because they will contain important information. Investors may obtain free
copies of the Definitive Proxy Statement as well as other filings containing
information about the Company, without charge, at the SECs Internet site
(http://www.sec.gov). Copies of these documents may also be obtained for free
from the Companys website at www.sphere3d.com.
The Definitive Proxy Statement, the Supplement and other
materials relating to the Special Meeting and additional information relating to
the Company may also be found on SEDAR at www.sedar.com. Financial information
regarding the Company is provided in the Companys comparative financial
statements and managements discussion and analysis for its most recently
completed financial year. Shareholders may contact the Company at 240 Matheson
Blvd. East, Mississauga, ON L4Z 1X1 to request copies of the Companys financial
statements and managements discussion and analysis.
Any material change report (except confidential material change
reports) filed by the Company with applicable securities commissions or similar
authorities in Canada under the Companys issuer profile on SEDAR until the date
of the Special Meeting will also be incorporated by reference in the Definitive
Proxy Statement.
Participants in Solicitation
The Company, the Purchaser and their respective executives,
officers and directors may be deemed to be participants in the solicitation of
proxies from the Shareholders of the Company in connection with the proposed
transaction. Information about the Companys executive officers and directors is
set forth in its Annual Report on Form 10-K, which was filed with the SEC on
March 21, 2018, and the proxy statement for its 2017 annual meeting of
shareholders, which was filed with the SEC on November 13, 2017. Investors may
obtain more detailed information regarding the direct and indirect interests of
the Company, the Purchaser and their respective executives, officers and
directors in the transaction by reading the Definitive Proxy Statement, as
amended and supplemented.
Approval by the Directors
The Board of Directors has approved the content and delivery of
this Supplement as of the date hereof.
|
By order of the Board of Directors,
|
|
|
|
/s/ Kurt L. Kalbfleisch
|
|
KURT L. KALBFLEISCH
|
|
Secretary
|
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Forward Looking Statements
This Supplement contains forward-looking statements, which
include, among others, the Companys expectations, beliefs, plans, objectives,
prospects, financial condition, assumptions or future events or performance,
that may involve risks, uncertainties, and assumptions with respect to the Share
Purchase, expected financial performance of the Company as well as the Companys
strategic and operational plans. The Company intends such forward-looking
statements to be covered by the safe harbor provisions for forward-looking
statements contained in Section 21E of the Securities Exchange Act of 1934 and
the Private Securities Reform Act of 1995, and in applicable Canadian securities
laws. In some cases, forward-looking statements can be identified by the
following words: may, will, could, would, should, expect, intend,
plan, anticipate, believe, estimate, predict, project, potential,
continue, ongoing, outlook, guidance and similar expressions, although
not all forward-looking statements contain these words. Actual events, results
and the timing of events could differ materially from those anticipated or
described in this written communication due to a number of risks and
uncertainties. The forward-looking information and statements are or may be
based on a series of projections and estimates and involve risks and
uncertainties. The potential risks and uncertainties include, without
limitation, the possibility that the Company may be unable to obtain required shareholder approval or that
other conditions to closing the transaction may not be satisfied, such that the
transaction will not close or that the closing may be delayed; the proceeds may
be insufficient for the Company to pay off its outstanding obligations; our
inability to obtain additional debt or equity financing or to refinance our
debt; any increase in our cash needs; the occurrence of any event, change or
other circumstance that could give rise to the termination of the definitive
transaction agreement; the reaction of customers to the transaction; those
related to disruption of managements attention from the Companys ongoing
business operations due to the proposed transaction; the effect of the
announcement of the transaction on the ability of the Company to retain and hire
key personnel and maintain relationships with its customers, suppliers and
others with whom it does business; general economic conditions; unexpected
costs, liabilities or delays; risks that the transaction disrupts current plans
and operations of the parties to the transaction; the ability to recognize the
benefits of the transaction; the amount of the costs, fees, expenses and charges
related to the transaction and the actual terms of any financings that will be
obtained for the transaction; the outcome of any legal proceedings related to
the transaction; the occurrence of any event, change or other circumstances that
could give rise to the termination of the transaction agreement; the Companys
ability to maintain listing with the NASDAQ Capital Market; and other risks
detailed from time to time in our periodic reports contained in our filings with
Canadian securities regulators (www.sedar.com) and in periodic reports filed
with the SEC (www.sec.gov), including our Annual Report on Form 10-K filed on
March 21, 2018 and definitive proxy statement filed on April 26, 2018. All
forward-looking statements speak only as of the date of this written
communication or, in the case of any document incorporated by reference, the
date of that document. The Company undertakes no obligation to update any
forward-looking statement, whether written or oral, that may be made from time
to time, whether as a result of new information, future developments or
otherwise, except as required by law.
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