UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (date of earliest event reported): May 15, 2014 (May 15, 2014)
OVERLAND STORAGE, INC.
(Exact name of registrant as specified in its charter)
| California | 000-22071 | 95-3535285 | ||
| (State or other jurisdiction of incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
9112 Spectrum Center Boulevard, San Diego, California 92123
(Address of principal executive offices, including zip code)
(858) 571-5555
(Registrant’s telephone number, including area code)
Not Applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
| ¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
| x | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
| ¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| ¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
| Item 1.01 | Entry into a Material Definitive Agreement |
Merger Agreement
On May 15, 2014, Overland Storage, Inc., a California corporation (the “Company”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Sphere 3D Corporation, an Ontario corporation (“Sphere”), and S3D Acquisition Company, a California corporation and wholly owned subsidiary of Sphere (“Merger Sub”). The Merger Agreement provides for a business combination whereby Merger Sub will merge with and into the Company (the “Merger”), and as a result the Company will continue as the surviving operating corporation and a wholly owned subsidiary of Sphere.
Each of the Boards of Directors of Sphere and Merger Sub, and the Board of Directors of the Company (upon the unanimous recommendation of a special committee of independent directors of the Company (the “Special Committee”)) have approved the Merger Agreement.
Pursuant to the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each issued and outstanding share of common stock of the Company (“Common Stock”) will be canceled and extinguished and automatically converted into the right to receive a fraction of a fully paid and nonassessable Parent Common Share equal to the Exchange Ratio . The “Exchange Ratio” shall be equal to 0.510594 plus the quotient obtained by dividing (x) the number of shares of common stock of Sphere held by the Company immediately prior to the closing of the Merger by (y) 18,495,865.20 plus the quotient obtained by dividing (A) (i)105% of the principal amount of any indebtedness of the Company to Cyrus Capital Partners and its affiliates repaid by the Company on or after the date of the Merger Agreement and prior to the closing of the Merger divided by (ii) 8.675 by (B) 18,495,865.20. The Merger Agreement contains reciprocal operating covenants requiring operation of the Company and Sphere in the ordinary course of business, as well as customary negative covenants.
At the Effective Time, all outstanding warrants to purchase the Common Stock (the “Company Warrants”), options to purchase Common Stock (the “Company Options”) and all outstanding awards of restricted stock units with respect to Company Common Stock (“Company RSUs”), whether or not vested or exercisable at the Effective Time, shall be assumed by Sphere. All outstanding awards of stock appreciation rights with respect to the Common Stock will be cancelled at the Effective Time.
In connection with the Merger Agreement, Sphere agreed to loan the Company up to $5 million dollars (the “Financing”) pursuant to a note to be issued to Sphere by the Company (the “Note”). The Note will be subordinated to certain existing indebtedness of the Company and will be secured by inventory of the Company and shares of common stock of Sphere owned by the Company. The Financing shall be made in two installments, with the first borrowing to occur by no later than May 19, 2014 and the second borrowing to occur on or about June 3, 2014.
The Merger Agreement provides that, upon consummation of the Merger Sphere shall cause two nominees of the Company to be appointed to the board of directors of Parent, in addition to Eric Kelly who will remain as a Sphere director.
Conditions to Closing
The completion of the Merger is subject to the approval of shareholders of the Company. In addition, the Merger is subject to other customary closing conditions, including, among others, (i) the declaration by the Securities and Exchange Commission (“SEC”) of the effectiveness of the Registration Statement on Form F-4 to
be filed with the SEC, (ii) Sphere having received all state securities authorizations necessary for the issuance of shares of Sphere’s common stock, (iii) the shares of Sphere’s common stock issuable pursuant to the Merger Agreement shall have been approved for listing on the TSX Venture Exchange (the “TSXV”) and on the NASDAQ Capital Market, subject, in the case of the TSXV, to the making of certain prescribed filings as soon as possible following the closing of the Merger, and (iii) the shares of Sphere’s common stock issuable pursuant to the Merger Agreement shall have been approved for listing on the TSX Venture Exchange (the “TSXV”) and on the NASDAQ Capital Market, subject, in the case of the TSXV, to the making of certain prescribed filings as soon as possible following the closing of the Merger.
Representations and Warranties; Covenants
Each of the Company and Sphere has agreed to customary and generally reciprocal representations, warranties and covenants in the Merger Agreement. Among these covenants, both the Company and Sphere have agreed (i) to conduct their respective businesses in the ordinary course during the period between the execution of the Merger Agreement and the closing of the Merger. Further, the Company has agreed not to solicit alternative transactions or, except under limited circumstances to permit the Company’s Board of Directors to comply with its fiduciary duties, participate in any discussions or negotiations, or furnish to third parties any information, with respect thereto.
Termination
The Merger Agreement contains certain termination rights for both the Company and Sphere, including in the event that the Merger is not consummated by December 31, 2015 (subject to extension to January 31, 2015 in certain circumstances), or if the requisite stockholder approvals is not received. The Merger Agreement further provides that, upon termination of the Merger Agreement under specified circumstances, including termination of the Merger Agreement by the Company as a result of the Company entering into an agreement for an alternative transaction , the Company may be required to pay to Sphere a termination fee of $3.5 million.
The foregoing description of the Merger Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Merger Agreement, which will be filed as an Exhibit to hereto by amendment.
Voting Agreements
As a condition to its willingness to enter into the Merger Agreement, Sphere entered into voting agreements (the “Voting Agreements”), dated as of May 15, 2014, with various shareholders of the Company, pursuant to which the shareholders agreed, upon the terms and subject to the conditions set forth therein, (a) to vote their shares of the Company’s common stock for the Merger and against any competing transaction that may be proposed and (b) to not sell or otherwise transfer their shares, except in connection with Merger. The shareholders of the Company entering into the voting agreements collectively hold approximately 64% of the outstanding shares of the Company.
A form of Voting Agreement will be filed as an Exhibit hereto by amendment. The foregoing description of the Voting Agreement does not purport to be complete and is qualified in its entirety by reference to the full text of the Voting Agreement.
| Item 8.01 | Other Events |
A copy of a joint press release issued by the Company and Sphere on May 15, 2014, is attached as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated herein by reference.
Additional Information
This communication may be deemed to be solicitation material in respect of the proposed combination of the Company and Sphere. In connection with the proposed business combination, Sphere intends to file relevant materials with the SEC, including a registration statement on Form F-4 that will include a proxy statement of the Company that also constitutes a prospectus of the Sphere. STOCKHOLDERS OF THE COMPANY ARE URGED TO READ ALL RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE REGISTRATION STATEMENT AND THE PROXY STATEMENT AND PROSPECTUS INCLUDED THEREIN, BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION. Investors and security holders will be able to obtain the documents free of charge at the SEC’s web site, http://www.sec.gov, and the Company’s stockholders will receive information at an appropriate time on how to obtain transaction-related documents for free from the Company. Such documents are not currently available.
This document shall not constitute an offer to sell or the solicitation of an offer to buy any securities, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of any such jurisdiction. No offering of securities shall be made except by means of a prospectus meeting the requirements of Section 10 of the Securities Act.
Safe Harbor Statement
This Current Report on Form 8-K contains forward-looking statements that involve risks, uncertainties, and assumptions that are difficult to predict. Actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of risks and uncertainties including, without limitation, unforeseen changes in the course of the Company’s business or Sphere’s business; any increase in Sphere’s cash needs; possible actions by customers, suppliers, competitors or regulatory authorities with respect to the Company or Sphere; and other risks detailed from time to time in the Company’s periodic reports filed with the Securities and Exchange Commission. 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.
| Item 9.01 | Financial Statements and Exhibits |
The agreements included as exhibits to this report contain representations and warranties by each of the parties to the applicable agreement. These representations and warranties were made solely for the benefit of the other parties to the applicable agreement and (i) were not intended to be treated as categorical statements of fact, but rather as a way of allocating the risk to one of the parties if those statements prove to be inaccurate; (ii) may have been qualified in such agreement by disclosures that were made to the other party in connection with the negotiation of the applicable agreement; (iii) may apply contract standards of “materiality” that are different from “materiality” under the applicable securities laws; and (iv) were made only as of the date of the applicable agreement or such other date or dates as may be specified in the agreement.
(d) Exhibits
| Exhibit Number |
Description | |
| 99.1 | Press Release issued by the Company and Sphere, dated May 15, 2014 | |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report on Form 8-K to be signed on its behalf by the undersigned hereunto duly authorized.
| OVERLAND STORAGE, INC. | ||
| Date: May 15, 2015 | /s/ Kurt L. Kalbfleisch | |
| Name: Kurt L. Kalbfleisch Title: Senior Vice President and Chief Financial Officer | ||
EXHIBIT INDEX
| Exhibit Number |
Description | |
| 99.1 | Press Release issued by the Company and Sphere, dated May 15, 2014 | |
Exhibit 99.1
SPHERE 3D AND OVERLAND STORAGE ENTER INTO DEFINITIVE MERGER AGREEMENT
Combination Creates Leading Virtualization and Data Management Software Solutions Company
Mississauga, ONTARIO and San Diego, CALIFORNIA – May 15, 2014 – Sphere 3D Corporation (TSX-V: ANY; OTCQX: SPIHF) (“Sphere 3D”) and Overland Storage, Inc. (NASDAQ: OVRL) (“Overland”) today announced that both companies’ Boards of Directors have unanimously approved a definitive merger agreement under which the companies would combine to create a leading global virtualization and data management software solutions company. The name of the combined company will be Sphere 3D.
Under the terms of the merger agreement (“Transaction”), each outstanding share of Overland common stock will be exchanged for 0.510594 common shares of Sphere 3D, subject to certain potential adjustments as set forth in the agreement. After completion of the Transaction, it is expected that current holders of Overland Shares will own approximately 28.8% of Sphere 3D on a fully diluted basis as a result of their exchange of shares in the merger. Based on the closing sales price of Sphere 3D common shares on May 14, 2014, the last trading day prior to the announcement of the transaction, on the TSX Venture Exchange (the “TSXV”), the total consideration payable to holders of Overland equity in the transaction has an implied value of approximately US$81.13 million or approximately US$4.43 per Overland Share.
On May 14, 2014, the last trading day prior to the announcement of the Transaction, the closing price of the Overland Shares on the NASDAQ was US$2.90 and the closing price of the Sphere 3D Shares on the TSXV was C$9.46 (or US$8.68). The acquisition price represents a premium of approximately 53% over the closing price of the Overland Shares on the NASDAQ on the last trading day immediately preceding the announcement of the Transaction and a premium of approximately 27% over the weighted average trading price of the Overland Shares on the NASDAQ and Sphere 3D on the TSX-V for the 30 trading days immediately preceding the announcement of the Transaction.
Sphere 3D and Overland have been working in tandem to develop an integrated application virtualization and data storage platform, as well as a virtual desktop infrastructure (VDI) solutions, which are already installed at select strategic customers and partners. The application virtualization platform allows native third party applications to be delivered in the cloud or on premise on a multitude of endpoint devices independent of their operating system. The VDI market, a key segment of the virtualization market, is estimated to be over $5 billion and growing 20% annually, according to Frost & Sullivan. Through the combination, Sphere 3D will have greater financial and operational scale, and a large and well established worldwide distribution network and tier one OEM partnerships.
The combination of Sphere 3D’s Glassware 2.0 virtualization solution and Overland’s data storage solutions will enable mobile device users the full functionality of any software program or application on any device, anywhere, eliminating the application limitations, data management and security problems for enterprises created by the BYOD (Bring Your Own Device) phenomenon. Mobile users that need productivity applications such as word
processing, spreadsheets, presentations and collaborations, specialized software for computer-aided design (CAD), magnetic resonance imaging (MRI), software development, video production or customized legacy applications can now experience full application functionality via the cloud or in the data center.
Management Comments
Commenting on behalf of Sphere 3D, Peter Tassiopoulos, Chief Executive Officer stated: “This transformational deal allows us to immediately gain the scale, infrastructure and resources required become a leading global virtualization company and strengthens Sphere’s ability to service and support partners and customers globally. In addition, transaction provides greater certainty in leveraging Overland’s existing global distribution network as well as their significant Tier One OEM relationships.”
Eric Kelly, President and CEO of Overland Storage, said, “This merger brings together next generation technologies for virtualization and cloud coupled with end-to-end scalable storage offerings enabling us to address the larger and growing virtualization and cloud markets. This along with Overland’s global network of services and reseller partners and our worldwide manufacturing capabilities supports our path for growth and profitability to create significant value for shareholders of both companies.”
Approvals
The Transaction requires customary closing conditions, shareholder approval of Overland and receipt of all necessary regulatory approvals. The Transaction is expected to close in the third calendar quarter of 2014. Upon the completion of the Transaction, Overland’s common stock will cease trading on the NASDAQ and Sphere 3D shares are expected to trade on the TSX and NASDAQ markets.
Pursuant to the Agreement, Overland is subject to customary non-solicitation covenants. In the event a superior proposal is made and if in response, Overland’s board of directors changes its recommendation of the transaction to the Overland shareholders or terminates the Transaction under certain circumstances, Overland has agreed to pay Sphere 3D a termination fee of US$3.5 million.
The Transaction has received the unanimous support of the boards of directors and management of both Sphere 3D and Overland. Certain significant shareholders of Overland, including Cyrus Capital Partners and its affiliates, have entered into voting agreements with Sphere 3D pursuant to which they have agreed to vote the Overland Shares beneficially owned by them (collectively representing approximately 64% of the outstanding Overland Shares) in favor of the Transaction, subject to the terms and conditions set forth in the voting agreements.
Eric Kelly, the Chief Executive Officer, President, and board member of Overland, is also the Chairman of the Board of Sphere 3D and accordingly declared his conflict and recused
himself from casting any vote with respect to the Transaction. Mr. Kelly has non-material share ownership in both Overland and Sphere 3D. No collateral benefit has been paid to Mr. Kelly in connection with the consummation of the Transaction. The Overland board of directors formed a special committee of independent directors to review and evaluate the proposed transaction. Sphere 3D appointed Glenn Bowman, the Chairman of the Audit Committee, as its lead director with respect to the evaluation of this Transaction.
Advisors
Roth Capital Partners was retained to provide a customary fairness opinion to the special committee of the board of directors of Overland. Cormark Securities Inc. has provided a fairness opinion to the board of directors of Sphere 3D. Both Roth and Cormark shall be entitled to fees customary for such advisory and transaction services.
Investor Conference Call
Sphere 3D and Overland Storage will host an investor conference call today, Thursday, May 15, at 5:00 pm ET (2:00 pm PT). To access the call dial 888-846-5003 (+1 480-629-9856 outside the United States) and when prompted provide the pass code “Overland Storage” to the operator. Participants are asked to call the assigned number approximately 10 minutes before the conference call begins. In addition, a live and archived webcast of the conference call will be available over the Internet at www.overlandstorage.com and www.sphere3d.com in the Investor Relations section. A replay of the conference call will also be available via telephone by dialing (800) 406-7325 (+1 (303) 590-3030 outside the United States) and entering access code, 4682043#, beginning 8:00 p.m. ET on May 15, 2014 through 11:59 p.m. ET on May 22, 2014.
Important Information for Investors and Stockholders
This announcement is for informational purposes only and does not constitute an offer to purchase, a solicitation of an offer to sell the Overland Shares or a solicitation of any proxy, vote or approval. Sphere 3D will file with the United States Securities and Exchange Commission (“SEC”) a registration statement on Form F-4 that will include a proxy statement of Overland that also constitutes a prospectus of Sphere 3D. Sphere 3D and Overland also plan to file with or furnish other documents to securities regulatory authorities in Canada and the United States regarding the proposed Transaction.
INVESTORS AND STOCKHOLDERS OF OVERLAND ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS AND OTHER DOCUMENTS THAT WILL BE FILED WITH THE SEC CAREFULLY AND IN THEIR ENTIRETY WHEN THEY BECOME AVAILABLE BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.
Anyone may obtain free copies of these documents when available free of charge under Sphere 3D’s profile on SEDAR at www.sedar.com, or by accessing Sphere’s website at www.sphere3d.com under the heading “Investors” and from Sphere 3D directly by contacting T. Scott Worthington, Chief Financial Officer: (416) 749-5999. Documents will also be available free of charge under Overland’s profile on EDGAR at www.sec.gov, or by
accessing Overland’s website at www.overlandstorage.com under the heading “Investors” and from Overland directly by contacting Kurt Kalbfleisch, Chief Financial Officer: (858) 495-4211. Sphere 3D, Overland, their respective directors and certain of their executive officers may be deemed to be participants in the solicitation of proxies from the shareholders of Overland in connection with the proposed Transaction. Information about the directors and executive officers of Overland is set forth in its proxy statement for its 2014 annual meeting of shareholders, which was filed with the SEC on April 14, 2014. Information about the directors and executive officers of Sphere 3D can be found in its 2014 management information circular dated April 25, 2014, which is available at www.sedar.com. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement/prospectus and other relevant materials to be filed with the SEC when they become available.
About Overland Storage
Overland Storage is a trusted global provider of unified data management and data protection solutions across the data lifecycle. By providing an integrated range of technologies and services for primary, nearline, offline, and archival data storage, Overland makes it easy and cost effective to manage different tiers of information over time, whether distributed data is across the hall or across the globe. Overland SnapServer, RDX removable disk-based technology, SnapScale, SnapServer, SnapSAN, NEO Series and REO Series solutions are available through a global channel of value-added resellers and system integrators. This channel model is supported by OEM agreements with major manufacturers. For more information, visit www.overlandstorage.com and http://www.tandbergdata.com/us/.
About Sphere 3D Corporation
Sphere 3D Corporation (TSX-V:ANY) (OTCQX:SPIHF) is a virtualization technology solution provider. Sphere 3D’s Glassware 2.0™ platform delivers virtualization of many of the most demanding applications in the marketplace today; making it easy to move applications from a physical PC or workstation to a virtual environment either on premise and/or from the cloud. Sphere 3D’s V3 Systems division supplies the industry’s first purpose built appliance for virtualization as well as the Desktop Cloud Orchestrator management software for VDI. Sphere 3D maintains offices in Mississauga, Ontario, Canada and in Salt Lake City, Utah, U.S. For additional information visit www.sphere3d.com or access the Company’s public filings at www.sedar.com.
Forward-Looking Statements
Certain statements contained in this press release include “forward-looking statements” that involve a number of risks and uncertainties, and actual results or events may differ materially from those projected or implied in those statements. Examples include the parties’ ability to consummate the proposed Transaction and timing thereof, the benefits and impact of the proposed Transaction, including tax effects to shareholders, the combined company’s ability to achieve synergies and value creation that are contemplated by the parties, Sphere 3D’s ability to promptly and effectively integrate Overland’s business and the diversion of management time on Transaction-related issues.
Forward-looking statements, without limitation, may contain the words believes, expects, anticipates, estimates, intends, plans, or similar expressions. Forward-looking statements are
not guarantees of future performance. They involve risks, uncertainties and assumptions and actual results could differ materially from those anticipated. Forward-looking statements are based on the opinions and estimates of management at the date the statements are made, and are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking statements.
Sphere 3D and Overland caution you that you should not rely unduly on these forward-looking statements, which reflect their current beliefs and are based on information currently available. Neither Sphere 3D nor Overland undertakes any obligation to update or revise any forward-looking statements as of any future date. Additional information concerning these statements and other factors can be found in Sphere 3D’s and Overland’s filings with securities regulatory authorities in Canada (www.sedar.com) or the SEC (www.sec.gov.), as applicable.
Overland Storage, SnapScale, SnapServer, SnapSAN, NEO Series, REO Series, RDX and the Overland logo are trademarks Overland Storage, Inc., that may be registered in some jurisdictions. All other trademarks used are owned by their respective owners.
Overland Investor Relations Contact:
Todd Kehrli or Jim Byers
MKR Group Inc.
323-468-2300
ovrl@mkr-group.com
Sphere 3D Contact:
Sphere 3D Corporation
Peter Tassiopoulos Chief Executive Officer
416-749-5999
Peter.Tassiopoulos@Sphere3D.com
Neither TSXV nor its Regulation Services Provider (as that term is defined in policies of the TSXV) accepts responsibility for the adequacy or accuracy of this release.