Good info from the F4:
Q: How will Sphere 3D be managed after the closing of the merger?
A: Upon completion of the merger, the Sphere 3D board of directors will be comprised of seven members. In addition to the five individuals serving on the Sphere 3D board of directors at the effective time of the merger (or any other Sphere 3D nominees), which will include Mr. Kelly who will continue to serve as Chairman of Sphere 3D, upon the closing of the merger, two additional board members to be designated by Overland will be appointed to the Sphere 3D board of directors. In addition, Mr. Kelly, current President and Chief Executive Officer of Overland shall be appointed as the Chief Executive Officer of Sphere 3D at the closing of the merger, and Kurt Kalbfleisch, current Senior Vice President, Chief Financial Officer, and Secretary of Overland shall be appointed as the Chief Financial Officer of Sphere 3D at the closing of the merger and Mr. Tassiopoulos, current Chief Executive Officer of Sphere 3D shall become the President and Vice Chairman of Sphere 3D. The directors of Overland will resign as of the effective time of the merger.
Sphere 3D believes that the combination of these two businesses will benefit shareholders of both Sphere 3D and Overland by creating a strong platform for growth with the following characteristics and synergies:
• The creation of a large and diverse combined company to immediately gain the scale, infrastructure and resources required to become a leading global virtualization company and strengthens Sphere’s ability to service and support partners and customers globally;
• The combination provides greater certainty in leveraging Overland’s existing global distribution network of reseller, integrators and significant Tier One OEM’s, along with Overland’s global manufacturing, delivery and support networks;
• The complementary nature of the respective products brings together next generation technologies for virtualization and cloud computing coupled with end-to-end scalable storage offerings enabling the combined company to address the larger and growing virtualization and cloud markets;
• The additional revenue growth opportunities presented by the expanded product offerings of the combined company allowing Sphere 3D to access the large and diverse customer base of Overland, including government, education and business enterprises worldwide;
• The expected market capitalization, balance sheet and capital structure of the combined company relative to Sphere 3D on a stand-alone basis, including the potential for the combined company to participate in strategic opportunities that otherwise might not be available to Sphere 3D;
• The opportunity for the combined company to retain Overland’s executive management and other key personnel, including Mr. Kelly and Mr. Kalbfleisch, which together with key management of Sphere 3D, including Mr. Tassiopoulos, potentially leading to enhanced financial performance.
Based on the foregoing analysis, Sphere 3D’s board of directors has unanimously determined that the merger agreement and the transactions contemplated thereby are advisable and in the best interests of Sphere 3D and its shareholders.
Strategic Benefits of the Merger
The Overland board of directors believes that the combination of Overland and Sphere 3D should result in significant strategic benefits to the combined company, which would benefit Overland and its shareholders as shareholders of the combined company. These strategic benefits include the following:
• The creation of a larger and more diversified combined company than Overland currently is alone, including a significantly expanded presence in Canada and a more diversified business in the U.S.;
• The advantages presented by the larger scale and expanded scope of the combined company in meeting the challenges facing the storage industry in light of current and potential future changes in regulatory, financial and economic conditions affecting the industry, including possible industry consolidation;
• The complementary nature of the respective products and geographic markets of Overland and Sphere 3D, and the opportunity created by the transaction to enhance the capabilities of both companies to operate more effectively and efficiently;
• The additional revenue growth opportunities presented by the expanded product offerings of the combined company;
• The expected market capitalization, balance sheet and capital structure of the combined company relative to Overland on a stand-alone basis, including the potential for the combined company to participate in strategic opportunities that otherwise might not be available to Overland;
• The opportunity for the combined company to achieve significant synergy benefits;
• The opportunity for the combined company to retain Sphere 3D’s corporate structure, potentially leading to enhanced financial performance; and
• The opportunity for the combined company to enhance its senior management led by Mr. Kelly and Mr. Tassiopoulos, relative to that of Overland and Sphere 3D separately.
Financial Benefits of the Merger
The Overland board of directors believes that the combination of Overland and Sphere 3D should result in significant financial benefits to Overland’s shareholders and the combined company. These financial benefits include the following:
• The fact that the Exchange Ratio of Sphere 3D common shares for each Overland share is fixed and would not fluctuate based upon changes in the market price of Overland or Sphere 3D common shares between the date of the merger agreement and the date of the consummation of the proposed merger, as well as the opportunity that Overland shareholders may have as a result of the fixed Exchange Ratio to benefit from any increase in the trading price of Sphere 3D common shares between the announcement and completion of the merger;
• The fact that Overland shareholders would receive the merger consideration (excluding any cash received in lieu of fractional shares) in the form of Sphere 3D common shares, which would allow Overland shareholders to share in value-creation opportunities of the combined company, including the realization of synergies;
• The significant value to Overland shareholders represented by the potential earnings improvement of the combined company and the views of Overland’s management as to the expected realization of synergies by the combined company;
• The belief that, after closing, the combined company will have a stronger financial profile, relative to that of Overland and Sphere 3D separately; and
• The business operations and prospects of the combined company and each of Overland and Sphere 3D, and the then-current financial market conditions and historical market prices, volatility and trading information with respect to common shares of Overland and Sphere 3D.
Corporate Governance Benefits of the Merger
During the course of its deliberations relating to the merger, the Overland board of directors also considered factors related to the corporate governance of the combined company, including the following benefits:
• The initial composition of Sphere 3D’s board of directors comprised of 7 directors, including 2 representatives of Overland and Mr. Kelly, who currently serves on Overland’s board of directors and Sphere 3D’s board of directors;
• The fact that directors of Overland, who have an in-depth knowledge of Overland and its business, would have substantial representation on the board of directors of Sphere 3D following the merger;
• The fact that the executive management of Overland who have an in-depth knowledge of Overland and its business would continue as part of the executive management team of Sphere 3D following the merger.
Other Factors Considered
During the course of its deliberations relating to the merger, the Overland board of directors considered the following factors in addition to the benefits described above:
• The Overland board of directors’ and management’s analysis and understanding of the business, operations, financial performance, financial condition, liquidity earnings, strategy and future prospects of Overland on a stand-alone basis (including Overland’s need to raise significant additional capital if it were to continue on a stand-alone basis, which could be highly dilutive to its shareholders, and its recent inability to do so), and the assessment, based on such analysis and understanding, that the merger would be more favorable to Overland and its shareholders in the long-term in light of the potential rewards, risks and uncertainties associated with Overland continuing to operate as a stand-alone entity;
• The alternatives available to Overland if it continued on a stand-alone basis;
• The fact that a significant portion of the future compensation of the executives of the combined company will be in the form of equity in the combined company and will accordingly be contingent on the performance of the combined company’s common shares;
• The financial analyses reviewed and discussed with the special committee of the Overland board of directors by representatives of Roth, as well as the opinion rendered by Roth to such special committee to the effect that, as of May 15, 2014 and based upon and subject to the various considerations set forth in its opinion, the consideration to be received by shareholders of Overland (other than the shareholders that are also shareholders of Sphere 3D (or holders of securities exercisable or convertible for shares of Sphere)) in their capacity as such pursuant to the proposed merger agreement was fair, from a financial point of view, to such holders;
• The fact that the shareholders of Overland would vote on approval of the transaction, including the fact that the required vote of Overland shareholders for the adoption of the merger agreement is a majority of the Overland shares outstanding and entitled to vote;
• The fact that the Cyrus Funds and an entity owned by the Cyrus Funds, owning approximately 63% of the Overland shares outstanding as of the date of the merger agreement, which will receive the same per share consideration as all other Overland shareholders, entered into voting agreements with Sphere 3D to vote in favor of the merger and the merger agreement (see “Agreements Entered into in Connection with the Merger Agreement—Voting Agreements” beginning on page 108);
• The results of the due diligence investigations of Sphere 3D by Overland’s management and financial, legal and other advisors;
• The structure of the merger and terms and conditions of the merger agreement, including the commitment by Overland and Sphere 3D to take all actions to complete the merger as soon as reasonably possible (see “The Agreement and Plan of Merger—Commercially Reasonable Efforts to Complete the Merger” beginning on page 102); and
• The fact that the merger agreement does not preclude a third party from making a proposal for an acquisition of or business combination with Overland and that, under certain circumstances more fully described in the sections “The Agreement and Plan of Merger—Overland is Prohibited from Soliciting Other Offers” beginning on page 100 of this proxy statement/prospectus, Overland may provide information to and negotiate with such a third party and the Overland board may change its recommendation to Overland shareholders regarding the transaction with Sphere 3D.
Future Developments
Sphere 3D intends to continue to build its organization with a focus on revenue generation, marketing and a continuation of its aggressive technology innovation cycle.
Sphere 3D’s core focus of providing access to fully functional software applications on otherwise incompatible devices has expanded to include the availability of enhanced performance on compatible devices.
Sphere 3D plans to increasingly market targeted services to enterprise level customers, to provide secure, fully functioning access to third party legacy software and/or operating systems without the requirement to rewrite them to the Cloud.
Additionally, Sphere 3D will consider other possible strategic acquisitions that may enhance its technology offering and market position.
To support its marketing strategy, Sphere 3D intends to continue to increase its service delivery capacity within the scalable model it has already established, and add selective technology functionality to its platform to enhance specific vertical and/or client offerings.
With the announcement of the merger agreement, Sphere 3D and Overland have accelerated their efforts to develop an integrated application virtualization and data storage platform, as well as a VDI solution, which have already been 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. It is expected that the combined businesses will accelerate Sphere 3D’s go to market strategy and allow it to leverage Overland’s robust third party reseller and OEM distribution model.
Business Highlights
Sphere 3D invested considerable resources in fiscal 2013 to ensure its Glassware 2.0™ platform is ready for commercialization and for the operational demands associated with the launch of new products. Sphere 3D commenced testing outside of the lab or otherwise controlled environments in late 2012 and completed the first “alpha” testing of its technology for consumer use.
The initial application was launched through a third party, with no reference to Sphere 3D at the time, for internal testing and to gather much needed user feedback, demographic information, use cases, testing of load balancing and validating the installation process.
The client side technology utilized for this alpha testing was a demo version deployed specifically for the purpose of testing certain proprietary libraries and communication protocols but was not the proprietary client technology utilized today. After completing the alpha testing phase, Sphere 3D removed the application from Apple Inc.’s (“Apple”) iTunes App Store. One positive consequence of the testing phase was that it provided a proof of concept for Corel, with whom Sphere 3D subsequently entered into an agreement as an early adopter.
Corel:
On April 8, 2014, Corel introduced WordPerfect X7™ along with an iPad companion product offering on a limited availability and trial basis. As of the end of June 2014, Sphere 3D and Corel had entered into negotiations for a commercial version of the WordPerfect X7 companion product for release later in calendar 2014.
Competitive Conditions
Management believes that the Sphere 3D’s Glassware 2.0™ proprietary virtualization platform design and architecture is unique and innovative, such that any measurable competition is limited to somewhat similar technologies within the device and software emulation and virtualization market place.
While some of our competitors appear to have similar product offerings, management believes that Sphere 3D’s products represent a significant advance in terms of functionality and usability.
Our new CEO post merger:
Eric L. Kelly, Chairman and Director
Mr. Kelly is a current member of the Board and serves as its Chairman, since July 2013. Mr. Kelly has served as Chief Executive Officer of Overland (NASDAQ: OVRL) since January 2009, President and Chief Executive Officer of Overland since January 2010 and has been a member of Overland’s board of directors since November 2007. Mr. Kelly currently serves on the U.S. Department of Commerce’s Manufacturing Council, and the White House’s Advance Manufacturing Partnership, where he offers advice and counsel to the Obama Administration on strategies and policy recommendations on ways to promote and advance U.S. manufacturing. He also participates on advisory boards for the University of San Francisco and San Francisco State University. From April 2007 to January 2009, Mr. Kelly served as President of Silicon Valley Management Partners Inc., a management consulting and M&A advisory firm, which he co-founded in April 2007. Mr. Kelly has spent over 30 years in computer technology developing distinct operational, marketing and sales expertise. His previous corporate affiliations include Adaptec Inc., Maxtor Corp., Dell Computer Corp., Diamond Multimedia, Conner Peripherals and IBM. Mr. Kelly earned an M.B.A. from San Francisco State University and a B.S. in Business from San Jose State University.
