Item 1.01. Entry into a Material Definitive Agreement.
Share Purchase Agreement
On September 14, 2020, Sphere 3D Corp. (the "Company" or "Sphere") entered into a securities purchase agreement (the "SPA") with an investor relating to the issuance and sale to the investor of 3,000 shares (the "Shares") of the Company's to-be-established Series E Convertible Preferred Stock, no par value (the "Series E Preferred Stock") in a private placement transaction, for proceeds of $3 million. The sale of the Shares to the investor is expected to close on or about September 30, 2020, subject to regulatory and NASDAQ approvals. A copy of the SPA is attached hereto as Exhibit 10.1 and incorporated herein by reference. The Form of Certificate of Designation for the Series E Preferred Stock (the "Certificate of Designation") is attached hereto as Exhibit 10.2 and incorporated by reference herein.
Under the SPA, the Company has made certain customary representations, warranties and covenants.
Pursuant to the Certificate of Designation, each share of Series E Preferred Stock shall have a stated value of $1,000.00 and is convertible into the Company's common shares at a conversion price equal to the lower of (1) 80% of the average of the three (3) lowest VWAPs of the common stock during the ten (10) trading days immediately preceding, but not including, the conversion date and (2) $2.00; however, in no event shall the conversion price be lower than $1.00 per share. The Series E Preferred Stock is non-voting and pays dividends at a rate of 8% per annum.
The Shares have not been registered under the Securities Act of 1933, as amended (the "Securities Act"), and may not be offered or sold in the United States absent registration or an applicable exemption from the registration requirements under the Securities Act and state securities laws. This Current Report on Form 8-K shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Shares in any state in which such offer, solicitation or sale would be unlawful.
The Shares are being offered and sold to an accredited investor without registration under the Securities Act or any state securities laws. The Company is relying upon the exemption from the registration requirements of the Securities Act provided by Section 4(2) of the Securities Act and Rule 506 of Regulation D promulgated thereunder. This Current Report on Form 8-K shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of the Shares in any state in which such offer, solicitation or sale would be unlawful.
The foregoing summary of the terms of the SPA and the Certificate of Designation do not purport to be complete and are qualified in their entirety by reference to the full text of such documents, copies of which are filed hereto as Exhibit 10.1 and Exhibit 10.2, respectively, to this Current Report on Form 8-K and incorporated herein by reference.
Amendment No. 1 to Agreement and Plan of Merger
On July 14, 2020, Rainmaker Worldwide Inc., a Nevada corporation ("Rainmaker"), entered into an Agreement and Plan of Merger (the "Merger Agreement") with Sphere, an Ontario corporation and S3D Nevada Inc., a Nevada corporation and wholly owned subsidiary of Parent ("Merger Sub") ("collectively the "Parties"). The Merger Agreement provides for a business combination whereby Merger Sub will merge with and into Rainmaker (the "Merger"), and as a result Rainmaker will continue as the surviving operating corporation and a wholly owned subsidiary of Sphere.
On September 14, 2020, the Parties entered into Amendment No. 1 to Agreement and Plan of Merger (the "Amendment"). Under the Amendment, the ratio of Sphere stock to be received by Rainmaker shareholders has changed from 1/3rd of a share of Sphere per common or preferred share of Rainmaker to 1/15th of a share. Under the Amendment, the Company has also agreed to loan $1,850,000 to Rainmaker as described below under New Rainmaker Promissory Note.
The foregoing summary of the terms of the Amendment are subject to, and qualified in its entirety by reference to the full text of the Amendment, a copy of which is filed hereto as Exhibit 10.3 to this Current Report on Form 8-K.
New Rainmaker Promissory Note
On September 14, 2020, Sphere entered into a Senior Secured Convertible Promissory Note (the "New Note") with Rainmaker, pursuant to which Sphere loaned Rainmaker the principal amount of $3,105,896.72 comprised of: (a) a new advance of $1,850,000, (b) the principal and any interest owing under existing promissory notes issued by Rainmaker to two investors on April 2, 2020 in the aggregate amount of $1,105,896.72, which indebtedness was assigned to Sphere on May 4, 2020 (the "Assigned Notes"), and (c) a promissory note in the principal amount of $150,000 issued to Sphere on August 4, 2020 (the "Original Note"). The Assigned Notes and the Original Note are included in the principal amount of the New Note and therefore, the Assigned Notes and the Original Notes are deemed cancelled. The New Note shall be secured as a registered lien under the Uniform Commercial Code and the Personal Property Security Act (Ontario) against the assets of Rainmaker and shall bear interest at the rate of 10% per annum. The principal and interest shall accrue monthly and be due and payable in full on the three-year anniversary date of the funding advance of $1,850,000. The New Note will fund on or about the closing date of the SPA transaction described above.
Subject to certain limitations, the New Note is convertible at any time for common shares of Sphere. The conversion price shall be equal to 85% multiplied by the average of the five closing prices of Sphere common stock immediately preceding the trading day that the Company receives a notice of conversion; however, the conversion price shall not be less than $0.15 per share.
The foregoing summary of the terms of the New Note are subject to, and qualified in its entirety by reference to the full text of the New Note, a copy of which is filed hereto as Exhibit 4.1 to this Current Report on Form 8-K.