Document:

Sphere 3D Corporation.: Exhibit 10.4 - Filed by newsfilecorp.com

EXECUTION VERSION

	 
	 
	 
	 
	SECURITY AND PLEDGE AGREEMENT 
	(Stock, Membership Interests, Partnership Interests)
  
	 
	  
	Dated as of November 13, 2018 
	 
	  
	From 
	 
	SPHERE 3D CORP., 
	as Debtor 
	 
	To 
	 
	FBC HOLDINGS S.À R.L., 
	as Pledgee 
	 
	 
	 
	 

SECURITY AND PLEDGE AGREEMENT 
(Stock, Membership
Interests, Partnership Interests) 

THIS SECURITY AND PLEDGE
AGREEMENT (Stock, Membership Interests, Partnership Interests) (this “Pledge
Agreement”), is made as of November 13, 2018 by and among SPHERE 3D
CORP., a corporation organized under the laws of Ontario, Canada (the
“Debtor”), and FBC HOLDINGS S.À R.L., a société à
responsabilité limitée incorporated under the laws of Luxembourg with R.C.S.
number B.142.133 (the “Pledgee”). 

RECITALS 

A.      The
Debtor and the Pledgee are (among others) party to an exchange and buy-out
agreement dated on or around the date of this Pledge Agreement (the “Exchange
Agreement”). 

B.      In
consideration for the Pledgee entering into the Exchange Agreement, the Debtor,
as owner of the assets encumbered hereby, desires to enter into this Pledge
Agreement to secure its obligations to the Pledgee under the Exchange Agreement.

AGREEMENT 

NOW, THEREFORE, for good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties hereto agree as follows: 

1.      DEFINITIONS.
For purposes of this Pledge Agreement, the following terms shall have the
meanings specified below. 

1.1     
Bankruptcy Code. The term “Bankruptcy Code” shall mean the
Bankruptcy Reform Act of 1978 (11 U.S.C. §101-1130) as amended and as hereafter
modified. 

1.2      Business
Day. “Business Day” shall mean each Monday, Tuesday, Wednesday,
Thursday and Friday which is not a day on which banks in Delaware, Luxembourg or
New York are generally authorized or obligated, by law or executive order, to
close. 

1.3      Collateral.
“Collateral” shall mean, collectively: 

(a)      All
securities, warrants, assets, security entitlements, investment property,
promissory notes, and other equivalents described in Exhibit A (collectively,
the “Pledged Securities”); 

(b)      All
proceeds, and revenues of or from the Pledged Securities whether now owned (and
as described in Exhibit A attached hereto) or hereafter acquired, all
substitutions for such Pledged Securities, and all additions thereto
(collectively, the “Collateral Revenues”), including (i) stock rights,
rights to subscribe, liquidating dividends, stock dividends, cash dividends,
interest, stock splits, warrants, options, conversion rights, puts, calls, new
securities and other property to which the Debtor is or may hereafter become
entitled to receive on account of such personal property; and (ii) all Proceeds
of such personal property which consist of accounts, contract rights,
instruments, documents, chattel paper, inventory, goods, merchandise, equipment,
and general intangibles as these terms are defined in the UCC; and 

PLEDGE AGREEMENT 

(c)      All
Collateral Records. 

1.4      Collateral
Records. The term “Collateral Records” shall mean all of the Debtor’s
existing and hereafter acquired books, records, data and other documents
relating to the assets referred to in Section 1.3(a) and (b). 

1.5      Debtor.
The term “Debtor” shall have the meaning given to such term in the
preamble to this Pledge Agreement. 

1.6      Debtor
Relief Laws. The term “Debtor Relief Laws” means the Bankruptcy Code,
and all other liquidation, conservatorship, bankruptcy, assignment for the
benefit of creditors, moratorium, rearrangement, receivership, insolvency,
reorganization, or similar debtor relief laws of the United States of America or
other applicable jurisdictions from time to time in effect affecting the rights
of creditors generally. 

1.7      Default.
“Default” means any event that has occurred and is in a cure period and
which if not cured or waived on or before the end of such cure period will be an
Event of Default. 

1.8      Event
of Default. “Event of Default” means any event of default set forth
in Section 6 of this Pledge Agreement. 

1.9      Liabilities.
The term “Liabilities” means the obligations and liabilities of the
Debtor to the Pledgee under the Exchange Agreement including but not limited to
all debts, liabilities, obligations, covenants and duties of the Debtor, whether
direct or indirect (including those acquired by assumption), absolute or
contingent, due or to become due, now existing or hereafter arising and
including interest that accrues after the commencement of any proceeding under
any Debtor Relief Laws by or against the Debtor. 

1.10     
Lien. The term “Lien” means any mortgage, pledge, hypothecation,
assignment, deposit arrangement (including in the nature of, cash collateral
accounts or security interests), encumbrance, lien (statutory or other), fixed
or floating charge, or other security interest of any kind or nature whatsoever
(including any conditional sale or other title retention agreement, any
financing lease having substantially the same economic effect as any of the
foregoing, and the filing of any financing statement under the Uniform
Commercial Code or comparable Laws of any jurisdiction), including the interest
of a purchaser of accounts receivable. 

1.11     
Pledge Agreement. The term “Pledge Agreement” shall mean this
Pledge Agreement, any concurrent or subsequent rider to this Pledge Agreement
and any extensions, supplements, amendments or modifications to this Pledge
Agreement and/or to any such rider. 

1.12     
Pledgee. The term “Pledgee” shall have the meaning given to such term in
the preamble to this Pledge Agreement. 

1.13      Pledgee
Expenses. The term “Pledgee Expenses” means all reasonable costs and
expenses incurred by Pledgee in connection with this Pledge Agreement or the
Exchange Agreement. 

-2- 

PLEDGE AGREEMENT 

1.14      Proceeds.
The term “Proceeds” shall have the meaning provided in the UCC and shall
include without limitation whatever is received upon the sale, lease, exchange,
collection or other disposition of Collateral or proceeds, including, without
limitation, proceeds of insurance covering Collateral, tax refunds, and any and
all accounts, notes, instruments, chattel paper, equipment, money, deposit
accounts, goods, or other tangible and intangible property of the Debtor
resulting from the sale or other disposition of the Collateral, and the proceeds
thereof. 

1.15     
Second-Ranking Pledge. The term “Second-Ranking Pledge” means the
second-ranking pledge agreement dated on or around the date of this Pledge
Agreement granted by the Debtor in favour of Overland Storage, Inc. 

1.16      UCC.
The term “UCC” means the Uniform Commercial Code as in effect from time
to time in the State of Delaware; provided, in the event that, by reason
of mandatory provisions of law, any or all of the perfection or priority of, or
remedies with respect to, any Collateral is governed by the Uniform Commercial
Code as enacted and in effect in a jurisdiction other than the State of
Delaware, the term “UCC” means the Uniform Commercial Code as enacted and in
effect in such other jurisdiction solely for purposes of the provisions hereof
relating to such perfection, priority or remedies. 

1.17      Other
Terms. All terms with an initial capital letter that are used but not
defined in this Pledge Agreement shall have the respective meanings given to
such terms in the UCC. 

2.      GRANT
OF SECURITY INTEREST IN COLLATERAL. As security for the prompt and complete
payment and performance of all the Liabilities, the Debtor hereby grants to
Pledgee, a first priority security interest in all of the Debtor’s right, title
and interest in, to and under the Collateral. 

3.      DELIVERY
OF COLLATERAL AND VOTING. 

3.1     
Collateral Delivery.

(a)      Initial
Delivery of Collateral. Within 10 days after the Debtor’s execution of this
Pledge Agreement and delivery of this Pledge Agreement to the Pledgee (or such
later date as Pledgee may agree), as secured party, the Debtor shall deliver
physical possession to the Pledgee of every stock certificate, document,
instrument and chattel paper which constitutes Collateral and obtain the fully
executed Consent in the form attached hereto as Exhibit B. Any such items of
Collateral that are certificated securities shall be duly endorsed in blank
without restriction or with a duly executed assignment separate from certificate
(stock power) duly endorsed in blank without restriction and with all necessary
transfer tax stamps affixed. 

(b)     
Future Delivery of Collateral. If at any time after the date of this
Pledge Agreement, the Debtor obtains possession of any certificate or instrument
constituting or representing any item of Collateral, (i) the Debtor shall
promptly (and in any event within ten (10) days or such later date as Pledgee
may agree in writing in its sole discretion) deliver or arrange for the prompt
delivery of such certificate or instrument to Pledgee; (ii) to the extent such
item represents a certificated security, the Debtor shall duly endorse such
certificate in blank without restriction or deliver a duly executed assignment
separate from certificate (stock power) duly endorsed in blank without restriction and with all
necessary transfer tax stamps affixed; and (iii) the Debtor shall hold such
Collateral separate and apart from the Debtor’s other funds and property in
trust for the benefit of the Pledgee until paid or delivered to the Pledgee. 

-3- 

PLEDGE AGREEMENT

(c)     
  Uncertificated Securities. If any item of Collateral is an uncertificated
  “security” (as such term is defined in Article 8 of the UCC), the Debtor shall
  either (i) procure the issuance of a security certificate to represent such
  Collateral and endorse and deliver such certificate as required by Section 3.1
  above; or (ii) cause the issuer thereof to register the Pledgee as the
  registered owner of such uncertificated security; or (iii) cause the issuer
  thereof to enter into an agreement, in form and substance reasonably
  satisfactory to the Pledgee, among the Pledgee, the registered owner of such
  security, and the issuer to the effect that the issuer will comply with
  instructions originated by the Pledgee without further consent by the registered
  owner; or (iv) cause the security to be credited to a securities account and
  execute an agreement in form reasonably acceptable to Pledgee to permit Pledgee
to gain control of such asset. 

3.2      Control.
If any Collateral is not capable of being delivered, the Debtor shall deliver to
Pledgee such financing statements or other instruments as are deemed necessary
by Pledgee to enable it to perfect its security interest in such Collateral and
obtain “control” or “possession” of such Collateral under applicable law. 

3.3     
Voting. Provided that no Event of Default has occurred and is continuing,
the Debtor shall have the right to exercise all voting rights and other
consensual rights and powers with respect to the Collateral for any purpose not
inconsistent with the terms of this Pledge Agreement; provided, however, that
(a) the Debtor shall not exercise any such right or power if, in Pledgee’s
reasonable discretion, such action would, in the opinion of the Pledgee, have a
material adverse effect on the value of the Collateral or impair or otherwise
adversely affect the security interest or other rights of the Pledgee under this
Pledge Agreement; and (b) the Debtor shall not be permitted to trade, invest, or
sell the Financial Assets (as such term is defined in Article 8 of the UCC)
without the prior written consent of the Pledgee, except pursuant to the
Exchange Agreement. 

4.     
DISPOSITION OF COLLATERAL REVENUES.

4.1      Delivery
to Debtor; No Event of Default. Provided that no Event of Default has
occurred and is continuing, the Collateral Revenues shall be retained by Debtor
to the extent provided in Section 4.3 below. 

4.2      Occurrence
of Event of Default. If an Event of Default has occurred and is continuing,
the Pledgee shall have the right to hold and apply the Collateral Revenues as
provided below. 

4.3      Payment
of Cash Dividends and Interest. Provided that no Default or Event of Default
shall have occurred and be continuing, the Debtor shall be entitled to receive
all cash dividends and interest payable in connection with the Collateral, and
all Collateral Revenues, including without limitation the following, which are
referred to as “Liquidation Dividends,” (a) cash dividends paid or payable in
respect of any Collateral in connection with a partial or total liquidation or dissolution or in connection
with a reduction of capital, capital surplus, or paid-in capital of the issuer
of such Collateral; and (b) cash paid, payable, or otherwise distributed in
respect of principal of, or in redemption of, or in exchange for, any
Collateral. If at any time and for any reason the Debtor receives any Collateral
Revenues other than those that the Debtor is entitled to receive under this
Section 4.3, the Debtor (i) shall immediately deliver such Collateral Revenues
to the Pledgee in the original form received by the Debtor; (ii) shall execute
and deliver to the Pledgee such documents of transfer respecting such Collateral
Revenues as the Pledgee may require, including an endorsement in blank of any
certificate evidencing such Collateral Revenues; (iii) shall not commingle such
Collateral Revenues with any of the Debtor’s other funds or property; and (iv)
shall hold such Collateral Revenues separate and apart from the Debtor’s other
funds and property in trust for Pledgee until paid or delivered to the Pledgee. 

-4- 

PLEDGE AGREEMENT

5.      COVENANTS,
REPRESENTATIONS AND WARRANTIES. 

5.1     
Debtor’s Covenants. The Debtor hereby covenants and agrees that during
the term hereof and until all Liabilities (other than contingent indemnification
obligations) are fully paid and performed: 

(a)      Article 8 Opt In. The
  Debtor shall not take any action to cause any membership interest, partnership
  interest, or other equity interest issued by it or any of its Subsidiaries to be
  or become a “security” within the meaning of, or to be governed by Article 8 of
  the UCC as in effect under the laws of any state having jurisdiction and shall
  not itself, and shall not cause or permit any of its Subsidiaries to, “opt in”
  or to take any other action seeking to establish any such membership interest,
  partnership interest or other equity interest as a “security” or to become
  certificated unless certificates evidencing such membership interest,
  partnership interest or other equity interest are pledged and delivered to the
  Pledgee, together with all assignments separate from certificate and other
  documents as the Pledgee shall reasonably request. 

(b)      Further
Assurances. The Debtor shall deliver to Pledgee promptly or ensure that
Pledgee promptly receives (i) all Collateral that the Debtor is obligated to
deliver to the Pledgee under Section 3.1 above; (ii) all financing statements
and all other documents that Pledgee deems necessary or desirable to evidence
the transfer and pledge of the Collateral to Pledgee as provided in this Pledge
Agreement; (iii) such specific acknowledgments, assignments, stock or bond
powers, Regulation U Statement of Purpose forms, and other documents as the
Pledgee may request relating to the Collateral; and (iv) copies of records and
other reports relating to the Collateral in such form and detail and at such
times as the Pledgee may from time to time reasonably require. 

(c)     
Changes in Collateral. The Debtor shall give prompt notice to Pledgee of
any threatened or asserted dispute or claim with respect to the Collateral,
which could reasonably be expected, in the opinion of the Pledgee, to have a
material adverse effect on the Collateral. 

(d)      Dealings.
The Debtor may not (i) sell, assign (by operation of law or otherwise),
otherwise dispose of, grant any option with respect to, or otherwise deal with,
any of the Collateral, except pursuant to the Exchange Agreement or (ii) create
or permit to exist any Lien upon or with respect to any of the Collateral, except for
(A) the security interest in favor of Pledgee under this Pledge Agreement and
(B) the Second-Ranking Pledge. 

-5- 

PLEDGE AGREEMENT

(e)      
  Perfection. From time to time upon Pledgee’s request, the Debtor (i)
  shall execute and deliver to Pledgee, and give, file or record, at the Debtor’s
  expense, all notices and other documents that Pledgee deems reasonably necessary
  or appropriate in order for the Pledgee to maintain a first priority perfected
  security interest in the Collateral; and (ii) shall perform such other acts, and
  execute and deliver to Pledgee such additional assignments, agreements,
  instruments and other documents, as Pledgee may reasonably request in connection
  with the administration and enforcement of this Pledge Agreement or the
  Pledgee’s exercise of any or all of its rights, powers and remedies under this
Pledge Agreement. 

(f)       
Litigation Cooperation. The Debtor, at its expense, shall appear in and
use commercially reasonable efforts to defend any action or proceeding which may
materially and adversely affect the Debtor’s title to all or part of the
Collateral or Pledgee’s security interest in the Collateral. 

(g)      
Changes. Without prior written notice to Pledgee, the Debtor will not
change its name, mailing address, or its state of incorporation. 

(h)      
Pledge Amendment. The Debtor will, upon obtaining ownership of any
additional Equity Security or promissory notes or instruments constituting
Collateral or Equity Security or promissory notes or instruments otherwise
required to be pledged to Pledgee, which Equity Securities, notes or instruments
are not already pledged under this Pledge Agreement, promptly (and in any event
within five (5) Business Days or such later date as Pledgee may agree in writing
in its sole discretion) deliver to Pledgee a Pledge Amendment, duly executed by
the Debtor, in substantially the form of Schedule I hereto (a “Pledge
Amendment”) in respect of any such additional Equity Security, notes or
instruments, pursuant to which the Debtor shall pledge to Pledgee all of such
additional Equity Security, notes and instruments. The Debtor hereby authorizes
Pledgee to attach each Pledge Amendment to this Pledge Agreement and agrees that
all Collateral listed on any Pledge Amendment delivered to Pledgee shall for all
purposes hereunder be considered Collateral. 

5.2      Debtor’s
Representations. The Debtor represents and warrants to Pledgee as follows:

(a)      Ownership of Collateral. The Debtor is the sole legal and beneficial
  owner of the Collateral, free and clear of all Liens, except (i) for the
  security interest in favor of Pledgee under this Pledge Agreement (ii) as
  provided in the Exchange Agreement and (iii) the Second-Ranking Pledge. 

(b)     
Status of Collateral. All of the Collateral consisting of securities has
been duly and validly issued and is fully paid for and non-assessable. Except
for Collateral that the Debtor has previously disclosed to Pledgee as
“restricted securities” or securities held by an “affiliate” (as such terms are
defined in Rule 144 under the Securities Act of 1933, as amended), including
Collateral consisting of the stock of any subsidiary of the Debtor, or as may be
specifically stated to the Pledgee in writing prior to the date of this Pledge
Agreement, all of the Collateral is transferable without prior notice to, or
approval or consent from, any person or governmental or regulatory authority,
and there exists no condition or restriction or restrictive legend to or
affecting the transfer of the Collateral. 

-6- 

PLEDGE AGREEMENT

(c)      Authority
  to Pledge. The Debtor has full rights and authority to pledge the Collateral
  in the manner hereby specified; and (except for approvals which have already
  been obtained) no consent of any governmental body or regulatory authority is
necessary for the rights created hereunder to be valid. 

(d)     
Continuing Warranties. The Debtor’s warranties and representations set forth in
this Section 5 and in any exhibit hereto shall be true and correct at the time
of execution of this Pledge Agreement by the Debtor and on a continuing basis
until the Liabilities have been satisfied. 

(e)      Warranties
and Representations Cumulative. The warranties, representations and
agreements set forth herein shall be cumulative and in addition to any and all
other warranties, representations and agreements which the Debtor shall give, or
cause to be given, to Pledgee, either now or hereafter, in connection with the
Exchange Agreement. 

6.      EVENTS
OF DEFAULT. The occurrence of any of the following shall constitute an Event
of Default under this Pledge Agreement, at the option of the Pledgee. 

6.1      Breach
of Pledge Agreement. (i) Any representation or warranty hereunder proves to
have been incorrect in any material respect when made or deemed made, (ii) the
Debtor breaches any provision of this Pledge Agreement which cannot be cured or
(iii) the breach by the Debtor of any other provision of this Pledge Agreement
that remains uncured for a period of thirty (30) days after the earlier of (a)
the Debtor’s actual knowledge of such Event of Default or failure and (b) the
Debtor’s receipt of Pledgee’s written notice hereof. 

6.2      Breach
of Other Agreements. The occurrence and continuance of a breach by the
Debtor of its obligations under the Exchange Agreement. 

6.3      Lien
Priority. Pledgee shall cease to have a valid and perfected first priority
Lien upon any material item of the Collateral purported to be covered by such
security interest. 

6.4      Seizure
of Assets. If all or any material item(s) of the Collateral is attached,
seized, subjected to a writ or distress warrant, or is levied upon and such
action could reasonably be expected, in the opinion of the Pledgee, to cause a
material adverse effect on the Collateral. 

7.      PLEDGEE’S
RIGHTS AND REMEDIES ON DEFAULT. The exercise of remedies hereunder shall be
made by Pledgee upon the terms and conditions contained herein. If an Event of
Default shall have occurred and be continuing and has not been cured or waived
in writing by the Pledgee, Pledgee shall have the following rights and powers
and may, at Pledgee’s option, without notice of its election and without demand,
do any one or more of the following, all of which are hereby authorized by the
Debtor: 

-7- 

PLEDGE AGREEMENT 

7.1      UCC
Rights. The Pledgee shall have all of the rights and remedies of a secured
party under the UCC and under all other applicable laws. 

7.2      Assembly
of Collateral. The Pledgee may require the Debtor to assemble the Collateral
and make it available to the Pledgee at a place designated by the Pledgee.

7.3      Possession
of Collateral. Pledgee, without a breach of the peace, may enter any of the
premises of the Debtor and search for, take possession of, remove, keep or store
any or all of the Collateral. If the Pledgee seeks to take possession of any or
all of the Collateral by court process, the Debtor irrevocably and
unconditionally agrees that a receiver may be appointed by a court for such
purpose without regard to the adequacy of the security for the Liabilities. 

7.4      Foreclose
on Collateral. Pledgee shall have the right to sell and dispose of the
Collateral, or any part thereof, at public or private sale or at any broker’s
board or on any securities exchange, for cash, upon credit or for future
delivery, and at such price or prices as the Pledgee may deem satisfactory.
Pledgee may be the purchaser of any or all of the Collateral so sold at any
public sale (or, if the Collateral is of a type customarily sold in a recognized
market or is of a type which is the subject of widely distributed standard price
quotations, at any private sale) and thereafter hold the same, absolutely free
from any right or claim of whatsoever kind. Pledgee is authorized, at any such
sale, if it deems it advisable so to do, to restrict the prospective bidders or
purchasers of any of the Collateral to persons who will represent and agree that
they are purchasing for their own account for investment, and not with a view to
the distribution or sale of any of the Collateral. Upon any such sale the
Pledgee shall have the right to deliver, assign, and transfer to the purchaser
thereof the Collateral so sold. Each purchaser at any such sale shall hold the
Collateral so sold free from any claim or right of whatsoever kind of the Debtor
or any other Person, including any equity or right of redemption of the Debtor,
who, to the extent permitted by law, specifically waives any now existing or
hereafter acquired rights of redemption, stay or appraisal. Pledgee shall give
Debtor: (i) ten (10) days written notice of its intention to make any such
public or private sale; or (ii) two (2) days’ notice of any sale at a broker’s
board or on a securities exchange. Such notice, in case of a public sale, shall
state the time and place fixed for such sale, and, in case of sale at a broker’s
board or on a securities exchange, shall state the board or exchange at which
such sale is to be made and the day on which the Collateral, or the portion
thereof being so sold, will first be offered for sale at such board or exchange.
Any such public sale shall be held at such time or times within ordinary
business hours and at such place or places as the Pledgee may fix in the notice
of such sale. At any such sale the Collateral may be sold in one lot as an
entirety or in separate parcels, as the Pledgee may determine. Pledgee shall not
be obligated to make any such sale pursuant to any such notice. Pledgee may,
without notice or publication, postpone any public or private sale or cause the
same to be postponed from time to time by announcement at the time and place
fixed for the sale, and such sale may be made at any time or place to which the
same may be so postponed. In case of any sale of all or any part of the
Collateral on credit or for future delivery, the Collateral so sold may be
retained by the Pledgee until the selling price is paid by the purchaser
thereof, but the Pledgee shall not incur any liability in case of the failure of
such purchaser to take up and pay for the Collateral so sold and, in case of any
such failure, such Collateral may again be sold upon like notice. 

-8- 

PLEDGE AGREEMENT 

7.5      Judicial
Action. Pledgee, in its discretion, may proceed by a suit or suits at law or
in equity to foreclose its security interests in the Collateral under a judgment
or decree of a court or courts of competent jurisdiction. The Debtor agrees that
any disposition of Collateral by way of a private placement or other method
which, in the opinion of the Pledgee, is required or advisable under federal and
state securities laws is commercially reasonable. 

7.6      Collateral
Revenues. The Debtor’s rights, if any, to receive any Collateral Revenues
shall automatically cease, and all Collateral Revenues shall be paid to the
Pledgee. Any and all Collateral Revenues received by the Pledgee may be retained
by the Pledgee as additional Collateral or, in the Pledgee’s discretion, may be
applied toward the satisfaction of the Liabilities. In such event the Pledgee
shall have the right and power to receive, endorse and collect all checks and
other orders for payment of money made payable to the Debtor representing any
dividend or other distribution payable or distributable in respect of any
Collateral. 

7.7     
Information. Without limiting the generality of this Section 7, it shall
conclusively be deemed to be commercially reasonable for the Pledgee to direct
any prospective purchaser of any or all of the Collateral to the Debtor to
ascertain all information concerning the status of the Collateral. 

7.8      Commercially
Reasonable Actions by Pledgee. The Debtor acknowledges that it may be
impracticable or extremely difficult to effect a public sale of all or part of
the Collateral by reason of certain restrictions contained in state and federal
securities laws, as now or hereafter in effect. Because of such restrictions,
and without limiting the generality of this Section 7, it shall conclusively be
deemed to be commercially reasonable for the Pledgee to do any or all of the
following: 

(a)      To
resort to one or more private sales to a single purchaser or a restricted group
of purchasers who may be obligated to agree, among other things, to acquire the
Collateral for their own account, for investment and not with a view to the
distribution or resale thereof; and 

(b)      To
impose restrictions and conditions with respect to (i) the ability of a
purchaser or bidder to bear the economic risk of an investment in the
Collateral; (ii) the knowledge and experience of business and financial matters
of a purchaser or bidder; (iii) the access of a purchaser or bidder to
information regarding the Collateral; and (iv) such other matters as the Pledgee
determines to be necessary or advisable to comply with any state or federal
securities laws. 

7.9      No
Registration Required. The Debtor acknowledges that some or all of the
conditions and restrictions which may be imposed by the Pledgee pursuant to
Section 7.8 above may result in reduced proceeds being received upon the sale of
the Collateral than would otherwise have been obtained. Pledgee shall have no
obligation to delay the sale of any or all of the Collateral for the period of
time necessary to permit registration by the issuer of any securities comprising
the Collateral, even if such registration would be possible under applicable
state and federal securities law. 

-9- 

PLEDGE AGREEMENT 

7.10      Other
Procedures. Pledgee’s disposition of any or all of the Collateral shall not
be deemed to be commercially unreasonable solely because the manner of
disposition differs from the procedures specified in this Section 7. 

7.11     
Foreclosure. If the Pledgee has reduced its claims for breach of any of
the obligations to judgment, the lien of any levy which may be made on any or
all of the Collateral by virtue of any execution based upon such judgment shall
relate back to the date of the Pledgee’s perfection of its security interest in
such Collateral. A judicial sale pursuant to such execution shall constitute a
foreclosure of the Pledgee’s security interest by judicial procedure, and the
Pledgee may purchase at such sale and thereafter hold the Collateral free of all
rights of the Debtor therein. 

7.12      Discharge
Claims. Pledgee may discharge claims, demands, liens, security interests,
encumbrances and taxes affecting any or all of the Collateral and take such
other actions as the Pledgee determines to be necessary or appropriate to
protect the Collateral and the Pledgee’s security interest therein. Pledgee,
without releasing the Debtor or any other Person from any of the Liabilities,
may perform any of the Liabilities in such manner and to such extent as the
Pledgee determines to be necessary or appropriate to protect the Collateral and
the Pledgee’s security interest therein. 

7.13     
Proceeds of Sale. The proceeds of any sale or disposition of the
Collateral by the Pledgee shall be applied in the following order of priority:

(a)     
First, to all liabilities, obligations, costs, and expenses, including
reasonable attorneys’ fees and costs, incurred by the Pledgee in exercising any
of its rights or remedies under this Pledge Agreement, including the costs and
expenses of retaking, holding, and selling any or all of the Collateral; 

(b)      Second,
to the payment of the Liabilities in such order and amounts as the Pledgee may
determine in its discretion; 

(c)     
Third, to the satisfaction of indebtedness secured by any subordinate
security interest in the Collateral if written demand therefor is received by
the Pledgee before distribution of any such proceeds. If requested by the
Pledgee, the holder of a subordinate security interest in the Collateral shall
furnish the Pledgee with proof of its interest in the Collateral acceptable to
the Pledgee, and unless such holder does so, the Pledgee shall have no
obligation to comply with such holder’s demand; and 

(d)      Fourth,
the surplus, if any, shall be paid to Debtor. 

7.14      Voting
Rights. Following not less than one (1) Business Day’s advance written
notice to the Debtor, Pledgee may exercise any or all warrants, options,
conversion rights, puts, calls, voting rights, and other rights with respect to
any or all of the Collateral (collectively the “Voting and Stock Rights”)
in such manner and to such extent as the Pledgee in its reasonable discretion
determines to be necessary or appropriate, and the Debtor’s rights and authority
to exercise the Voting and Stock Rights shall automatically terminate upon the
delivery of such notice. Notwithstanding anything to the contrary contained in
this Pledge Agreement, the Pledgee shall have no obligation to exercise any or
all Voting and Stock Rights, and the Pledgee shall have no liability or responsibility of any kind to the
Debtor or any other party for the Pledgee’s exercise or delay or failure to
exercise any or all of the Voting and Stock Rights. In connection with the
Pledgee’s exercise of any or all of the Voting and Stock Rights, the Pledgee
shall have the right (a) to deposit or surrender control of any or all of the
Collateral to any third Person; (b) to accept other property in exchange for the
Collateral; and (c) to take such other actions as the Pledgee in its discretion
determines to be necessary or appropriate. 

-10- 

PLEDGE AGREEMENT

8.      LIABILITY
  FOR DEFICIENCY. The Debtor shall at all times remain liable for any
  deficiency remaining on the Liabilities, and is liable after any disposition of
  any or all of the Collateral and after the Pledgee’s application of any proceeds
to the Liabilities. 

9.      POWER
OF ATTORNEY. The Debtor irrevocably (until the Liabilities are paid in full
and the Revolving Commitments have been terminated) appoints the Pledgee, with
full power of substitution, as the Debtor’s attorney-in-fact, coupled with an
interest, with full power, in the Pledgee’s own name or in the name of the
Debtor: 

9.1      At
any time after the occurrence and during the continuation of an Event of
Default, to do any or all of the following: 

(a)      Endorse
any checks, drafts, money orders, notes, and other instruments or documents
representing or evidencing the Collateral; 

(b)      Pay
or discharge claims, demands, liens, security interests, encumbrances, or taxes
affecting or threatening the Collateral; 

(c)      Receive
payment of all Collateral Revenues; 

(d)      Commence,
prosecute or defend any suit, action or proceeding relating to any or all of the
Collateral; 

(e)      Instruct
any accountant or other third Person having custody or control of any Collateral
Records to deliver such records to the Pledgee; 

(f)      Sell,
transfer, pledge, make any agreement with respect to, or otherwise deal with the
Collateral as though the Pledgee were the owner thereof for all purposes; and

(g)     
To execute any security agreement, assignment, notice, and all other documents
which the Pledgee, in its discretion, determines to be necessary or appropriate
in order to (a) perfect or maintain the Pledgee’s security interest in the
Collateral; (b) exercise any or all of the Pledgee’s rights under this Pledge
Agreement; or (c) to consummate or effectuate any of the transactions
contemplated by this Pledge Agreement. 

10.      WAIVERS.
Except as expressly provided hereunder, the Debtor hereby waives presentment,
demand for payment, protest, notice of demand, dishonor, protest and nonpayment,
and all other notices and demands in connection with the delivery, acceptance,
performance, default under, and enforcement of the Liabilities. The Debtor
waives the right to assert any statute of limitations as a defense to the
enforcement of any of the Liabilities to the fullest extent permitted by law.
The Debtor hereby irrevocably waives, to the fullest extent permitted by law,
all defenses in the nature of suretyship that at any time may
be available in respect of the Debtor’s obligations hereunder by virtue of any
statute of limitations, valuation, stay, moratorium law or other similar law now
or hereafter in effect. 

-11- 

PLEDGE AGREEMENT

11.      CUMULATIVE
  REMEDIES. The Pledgee’s rights and remedies under this Pledge Agreement are
  cumulative with and in addition to all other rights and remedies which the
  Pledgee may have. The Pledgee may exercise any one or more of its rights and
  remedies under this Pledge Agreement at the Pledgee’s option and in such order
  as the Pledgee may determine in its discretion. The Pledgee may exercise its
  rights under this Pledge Agreement from time to time and at such times as the
Pledgee may determine. 

12.      ACTIONS.
The Pledgee shall have the right, but not the obligation, to commence, appear
in, or defend any action or proceeding which affects or which the Pledgee
determines may affect (a) the Collateral; or (b) the Debtor’s or the Pledgee’s
rights under this Pledge Agreement. 

13.     
INDEMNITY. The Debtor agrees to defend, indemnify and hold harmless
Pledgee, and its respective officers, employees, and agents against: (a) all
obligations, demands, claims, and liabilities claimed or asserted by any other
party related to or in connection with the transactions contemplated by this
Pledge Agreement or the Collateral, and (b) all losses or expenses in any way
suffered, incurred, or paid by Pledgee as a result of or in any way arising out
of, following or consequential to the transactions between Pledgee and the
Debtor under this Pledge Agreement or the Collateral (including without
limitation, reasonable attorneys fees and reasonable expenses), except for
losses arising from or out of Pledgee’s gross negligence or willful misconduct.

14.      GENERAL.

14.1     
Taxes and Other Expenses Regarding the Collateral. If the Debtor fails to
pay promptly when due to any person or entity monies which the Debtor is
required to pay by reason of any provision in this Pledge Agreement, Pledgee
may, but need not, pay the same and charge the Debtor’s account therefor, and
the Debtor shall promptly reimburse Pledgee therefor. Any payments made by
Pledgee shall not constitute: (a) an agreement by Pledgee to make similar
payments in the future, or (b) a waiver by Pledgee of any default under this
Pledge Agreement. Pledgee need not inquire as to, or contest the validity of,
any such expense, tax, security interest, encumbrance or lien and the receipt of
the usual official notice for the payment thereof shall be conclusive evidence
that the same was validly due and owing. 

(a)      14.2
Notices. Any notice made or required to be given pursuant to this Pledge
Agreement shall be in writing and shall be transmitted to the relevant address
set forth below, may be delivered by the following modes of delivery, and shall
be effective as follows: 

	 	Mode of Delivery 	Effective on earlier of actual receipt
      and: 
	 	  	  
	 	Courier: 	Scheduled delivery date 
	 	Electronic Mail 	When receipt of the transmission has been
  
	 	  	confirmed by the recipient (including upon
      receipt 
	 	  	of a “read receipt” from the recipient) 
	 	  	  
	 	Mail: 	Fourth Business Day after deposit in U.S. mail
      first 
	 		class postage
    pre-paid  
	 	Personal delivery: 	When received 

-12- 

PLEDGE AGREEMENT 

	 	(a) 	if to the Debtor, at 
	 	  	  
	 	  	Address: Sphere 3D Corp. 
	 	  	9112 Spectrum Center Blvd. 
	 	  	San Diego, CA 92123 
	 	  	Attn: Kurt Kalbfleisch, CFO 
	 	  	E-mail: kkalbfleisch@sphere3d.com 
	 	  	  
	 	  	with a copy (which shall not constitute notice)
      to: 
	 	  	O’Melveny & Myers LLP 
	 	  	Two Embarcadero Center, 28th Floor 
	 	  	San Francisco, CA 94111 
	 	  	Attn: Jennifer Taylor and Paul Sieben 
	 	  	Email: jtaylor@omm.com and psieben@omm.com
  
	 	  	  
	 	  	or at such other address for notice as the
      Debtor shall last have 
	 	  	furnished in writing to the Pledgee; and 
	 	  	  
	 	(b) 	if to the Pledgee, at 
	 	  	  
	 	  	FBC Holdings S.à r.l. 
	 	  	c/o Cyrus Capital Partners, L.P. 
	 	  	65 East 55th Street, 
	 	  	New York, NY 10022 
	 	  	Attention: Daniel Bordessa 
	 	  	Email: dbordessa@cyruscapital.com and
      ops@cyruscapital.com 
	 	  	  
	 	  	with a copy (which shall not constitute notice)
      to: 
	 	  	  
	 	  	Morgan, Lewis & Bockius UK LLP 
	 	  	Condor House, 5-10 St. Paul's Churchyard 
	 	  	London EC4M 8AL United Kingdom 
	 	  	Attn: Georgia Quenby and Victoria Thompson
  
	 	  	Email: georgia.quenby@morganlewis.com and

	 	  	victoria.thompson@morganlewis.com 
	 	  	  
	 	  	or at such other address for notice as the
      Pledgee shall last have 
	 	  	furnished in writing to the Debtor.
  

-13- 

PLEDGE AGREEMENT 

14.3     
Termination. At such time as the Debtor shall completely satisfy all of
the Liabilities (other than contingent indemnification obligations) secured
hereunder, this Pledge Agreement shall terminate and Pledgee shall promptly, but
in no event more than five (5) Business Days after such satisfaction, execute
and deliver to the Debtor all instruments as may be necessary or proper to
reinvest in the Debtor full title to the property assigned hereunder, subject to
any disposition thereof which may have been made by Pledgee pursuant hereto.

14.4      Course
of Dealing. No course of dealing, nor any failure to exercise, nor any delay
in exercising any right, power or privilege hereunder shall operate as a waiver
thereof. 

14.5      Amendment.
This Pledge Agreement may be modified only by a written agreement signed by the
Debtor and the Pledgee. 

14.6      Agreement
Binding; Assignment. This Pledge Agreement shall be binding and deemed
effective when executed by the Debtor and Pledgee. This Pledge Agreement shall
bind and inure to the benefit of the respective successors and assigns of each
of the parties; provided, however, that the Debtor may not assign
this Pledge Agreement, or any rights hereunder without Pledgee’s prior written
consent and any prohibited assignment shall be absolutely void. No consent to an
assignment by Pledgee shall release the Debtor from its obligations to Pledgee.

14.7      Time
of Essence. Time is of the essence of each provision of this Pledge
Agreement. 

14.8      Article
and Section Headings. Article and section headings and article and section
numbers have been set forth herein for convenience only. Unless the contrary is
compelled by the context, everything contained in each article and section
applies equally to this entire Pledge Agreement. 

14.9      Construction.
Neither this Pledge Agreement nor any uncertainty or ambiguity herein shall be
construed or resolved against Pledgee or the Debtor, whether under any rule of
construction or otherwise. On the contrary, this Pledge Agreement has been
reviewed by all parties and shall be construed and interpreted according to the
ordinary meaning of the words used so as to fairly accomplish the purposes and
intentions of all parties hereto. 

14.10      Performance
of Covenants. The Debtor shall perform all of its covenants under this
Pledge Agreement at its sole cost and expense. 

14.11      Term.
This Pledge Agreement shall continue in full force and effect as long as any of
the Liabilities are outstanding or until terminated by written agreement of the
Pledgee. 

14.12      Severability.
Each provision of this Pledge Agreement shall be severable from every other
provision of this Pledge Agreement for the purpose of determining the legal
enforceability of a specific provision. Without limiting the generality of the
preceding sentence, if the Pledgee’s security interest in any part of the
Collateral is held to be unlawful, void, voidable or unenforceable for any
reason, such defect shall in no way affect the validity or enforceability of the
remaining terms and conditions of this Pledge Agreement. 

-14- 

PLEDGE AGREEMENT 

14.13     
No Third Party Beneficiaries. This Pledge Agreement is entered into for
the sole protection and benefit of Pledgee and the Debtor, as applicable, and
their respective permitted successors and assigns. No other Person shall have
any rights or causes of action under this Agreement. 

14.14     
Counterparts. This Pledge Agreement may be executed in two or more
counterparts, each of which is deemed an original but all of which together
shall constitute the same instrument. 

14.15      No
Waiver By Pledgee. No waiver by the Pledgee or any of its rights or remedies
in connection with the Liabilities or any of the terms and conditions of this
Pledge Agreement shall be effective unless such waiver is in writing and signed
by the Pledgee. 

14.16      Choice
of Law. The validity of this Pledge Agreement, its construction,
interpretation and enforcement, and the rights of the parties hereunder and
concerning the Collateral, shall be determined under, governed by and construed
in accordance with the laws of the State of Delaware. The parties agree that all
actions or proceedings arising in connection with this Pledge Agreement shall be
tried and litigated only in the courts of the State of Delaware. 

[Signature page follows] 

-15- 

PLEDGE AGREEMENT 

All terms and conditions set
forth in the Exhibits and any Addendum(s) attached to this Pledge Agreement are
incorporated by this reference. 

		SPHERE 3D CORP., a corporation
      organized under the laws of Ontario, Canada, as Debtor 
	 	  	 
	 	By: 	/s/ Peter Tassiopoulos 
	 	  	Name: 	Peter
      Tassiopoulos 
	 	  	Its: 	President 

[Signature page to Sphere Security and Pledge Agreement] 

PLEDGE AGREEMENT 

	FBC HOLDINGS S.À R.L., a société à
      responsabilité limitée incorporated under the laws of Luxembourg, as
      Pledgee 	 
	  	 
	  	 
	  	 
	By: /s/ Trustmoore Luxembourg S.A. 	 
	Name: Trustmoore Luxembourg S.A. 	 
	Title: Manager A 	 
	  	 
	  	 
	  	 
	  	 
	By: /s/ Cyrus Capital Partners, L.P. 	 
	Name: Cyrus Capital Partners, L.P. 	 
	Title: Manager B 	 

[Signature page to Sphere Security and Pledge Agreement] 

Exhibit A 

This Exhibit is attached to and
made a part of the Security and Pledge Agreement (Stock, Membership Interests,
Partnership Interests) dated as of November 13, 2018. 

	Debtor 	Number of Shares
      or 
Description of Other 
Assets Pledged as
      
Collateral 	Issuer’s Name 	Issuer’s
      
Jurisdiction of 
Formation 	Number of Issued
      
and Outstanding 
shares of the Issuer 	Par
      
Value 	Identification
      
No.* 
	Sphere 3D Corp. 	1,879,669 Series A 
Preferred Stock 	Silicon Valley 
Technology Partners, Inc 	Delaware 	8,444,444 Series A 
Preferred Stock 	$0.0001 	PS A-1 

* Certificate Number or CUSIP Number 

A-1 

EXHIBIT B

 CONSENT OF COMPANY 

[NAME OF COMPANY], a
_________________________(“Company”), hereby consents to the collateral
assignment by [__________], a [_________] (“Debtor”), of all of its
right, title and interest in [ ]% of all [shares][limited liability company
interests] in Company to FBC HOLDINGS S.À R.L., as Pledgee (“Pledgee”)
subject to the terms and conditions of that certain Security and Pledge
Agreement granted by the Debtor in favour of the Pledgee dated November , 2018
(as amended, supplemented, restated or modified from time to time, “Pledge
Agreement”) and agrees to be bound by the terms of the Pledge Agreement to
which this consent is attached. 

	 	COMPANY: 	 
	 	  	 
	 	[NAME OF COMPANY] 
	 	  	 
	 	By: 	 
	 	Name: 	 
	 	Title: 	 

B-1 

SCHEDULE I 

PLEDGE AMENDMENT

This Pledge Amendment, dated
_______________, 20__ is delivered pursuant to Section 5.1(h) of
the Pledge Agreement referred to below. All defined terms herein shall have the
meanings ascribed thereto or incorporated by reference in the Pledge Agreement.
The undersigned hereby certifies that the representations and warranties in
Section 5.2 of the Pledge Agreement are and continue to be true and
correct, both as to the promissory notes, instruments and Equity Securities
pledged prior to this Pledge Amendment and as to the promissory notes,
instruments and Equity Securities pledged pursuant to this Pledge Amendment. The
undersigned further agrees that this Pledge Amendment may be attached to that
certain Security and Pledge Agreement, dated November [ ] , 2018 between the
undersigned, as Debtor and FBC Holdings S.à r.l., a société à responsabilité
limitée incorporated under the laws of Luxembourg with R.C.S. number
B.142.133, as Pledgee (as amended, supplemented, restated or modified from time
to time, the “Pledge Agreement”; capitalized terms used herein shall have
the same meanings as in the Pledge Agreement) and that the Collateral listed on
this Pledge Amendment shall be and become a part of the Collateral referred to
in said Pledge Agreement and shall secure all Liabilities referred to in said
Pledge Agreement. 

	 	SPHERE 3D CORP. 
	 	  	 
	 	By: 	 
	 	Name: 	 
	 	Title: 	 

Additional Collateral: 

[TBD]Sphere 3D Corporation.: Exhibit 10.5 - Filed by newsfilecorp.com

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE “ACT”), OR UNDER THE SECURITIES LAWS OF ANY
STATES IN THE UNITED STATES. THIS NOTE IS SUBJECT TO RESTRICTIONS ON
TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER THE ACT AND THE APPLICABLE STATE SECURITIES LAWS, PURSUANT TO
REGISTRATION OR EXEMPTION THEREFROM. THE ISSUER OF THIS NOTE MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS. 

SECURED PROMISSORY NOTE 

	Date of Note: 	 	November 13, 2018 
	 	 	 
	Principal Amount of Note: 	 	$500,000 

For value received, SPHERE 3D
CORP., a corporation organized under the laws of Ontario, Canada (the
“Canadian Borrower”) and HVE Inc., a Delaware
corporation (together with the Canadian Borrower, the “Borrowers”
and each a “Borrower”), jointly and severally, promise to pay to
the undersigned holder or such party’s assigns (the “Holder”) the
principal amount set forth above with interest on the outstanding principal
amount at a rate equal to 8% per annum. Interest shall commence with the date
hereof and shall continue on the outstanding principal amount until paid in
full. Interest shall be computed on the basis of a year of 365 days for the
actual number of days elapsed and shall compound annually. All interest and
principal, unless previously paid in accordance with the terms hereof, shall be
due and payable on the six (6) month anniversary of the date of this Note. 

1.      BASIC
TERMS. 

(a)      Payments.
All payments of interest and principal on this Note shall be in lawful money of
the United States of America and shall be made to the Holder or, if applicable,
to the Holder’s permitted assigns. All payments shall be applied first to
accrued interest, and thereafter to principal. 

(b)      Payment
Dates. Borrowers shall pay the interest accrued on the unpaid principal
amount of this Note in arrears on first day of each calendar month from the date
of this Note until paid in full (whether by acceleration or otherwise). 

(c)      Voluntary
Prepayment. The Borrowers may prepay this Note in whole or in part at
any time without the consent of the Holder, together with all accrued but unpaid
interest and the other amounts due hereunder in respect of the amount prepaid.

(d)      Mandatory
Prepayment. The Borrowers shall immediately prepay this Note in full,
together with all accrued but unpaid interest and other amounts due hereunder,
upon receipt of aggregate proceeds of $5,000,000 or more from equity, debt or
any combination thereof.

(e)     
Late Payments. In addition to interest as set forth herein, the
Borrowers shall pay to Holder a late charge equal to five percent (5%) of any
amounts due under hereunder in the event any such amount is not paid within
three (3) days after the date when due. 

2.      REPRESENTATIONS
AND WARRANTIES. 

(a)      Representations
and Warranties of the Borrowers. Each Borrower hereby represents and
warrants to the Holder as of the date this Note was issued as follows: 

(i)      Organization,
Good Standing and Qualification. Such Borrower is a corporation duly
organized, validly existing and in good standing under the laws of Ontario or
the State of Delaware. Such Borrower has the requisite corporate power to own
and operate its properties and assets and to carry on its business as now
conducted and as proposed to be conducted. Such Borrower is duly qualified and
is authorized to do business and is in good standing as a foreign corporation in
all jurisdictions in which the nature of its activities and of its properties
(both owned and leased) makes such qualification necessary, except for those
jurisdictions in which failure to do so would not have a material adverse effect
on such Borrower or its business (a “Material Adverse Effect”).

(ii)      Corporate
Power. Such Borrower has all requisite corporate power to issue this
Note and to carry out and perform its obligations under this Note. Such
Borrower’s board of directors has approved the issuance of this Note based upon
a reasonable belief that the issuance of this Note is appropriate for such
Borrower after reasonable inquiry concerning such Borrower’s financing
objectives and financial situation. 

(iii)     
Authorization. All corporate action on the part of such Borrower
necessary for the issuance and delivery of this Note has been taken. This Note
constitutes a valid and binding obligation of such Borrower enforceable in
accordance with its terms, subject to laws of general application relating to
bankruptcy, insolvency, the relief of debtors and, with respect to rights to
indemnity, subject to federal and state securities laws. 

(iv)     
Governmental Consents. All consents, approvals, orders or
authorizations of, or registrations, qualifications, designations, declarations
or filings with, any governmental authority required on the part of such
Borrower in connection with issuance of this Note has been obtained.

(v)      Compliance
with Laws. To its knowledge, such Borrower is not in violation of any
applicable statute, rule, regulation, order or restriction of any domestic or
foreign government or any instrumentality or agency thereof in respect of the
conduct of its business or the ownership of its properties, which violation of
which would have a Material Adverse Effect. 

(vi)      Compliance
with Other Instruments. Such Borrower is not in violation or default of
any term of its certificate of incorporation or bylaws, or of any provision of
any mortgage, indenture or contract to which it is a party and by which it is
bound or of any judgment, decree, order or writ, other than such violation(s)
that would not have a Material Adverse Effect. The execution, delivery and
performance of this Note will not result in any such violation or be in conflict
with, or constitute, with or without the passage of time and giving of notice,
either a default under any such provision, instrument, judgment, decree, order
or writ or an event that results in the creation of any lien, charge or
encumbrance upon any assets of such Borrower or the suspension, revocation,
impairment, forfeiture or nonrenewal of any material permit, license,
authorization or approval applicable to such Borrower, its business or
operations or any of its assets or properties.

(vii)      No
“Bad Actor” Disqualification. Such Borrower has exercised reasonable
care to determine whether any Borrower Covered Person (as defined below) is
subject to any of the “bad actor” disqualifications described in Rule
506(d)(1)(i) through (viii), as modified by Rules 506(d)(2) and (d)(3), under
the Act (“Disqualification Events”). To such Borrower’s knowledge,
no Borrower Covered Person is subject to a Disqualification Event. Such Borrower
has complied, to the extent required, with any disclosure obligations under Rule
506(e) under the Act. For purposes of this Note, “Borrower Covered Persons” are those
persons specified in Rule 506(d)(1) under the Act; provided, however, that
Borrower Covered Persons do not include (a) the Holder, or (b) any person or
entity that is deemed to be an affiliated issuer of either Borrower solely as a
result of the relationship between the Borrowers and the Holder.

2 

(viii)      Offering.
  Assuming the accuracy of the representations and warranties of the Holder
  contained in subsection (b) below, the offer, issue and sale of this Note are
  and will be exempt from the registration and prospectus delivery requirements of
  the Act, and have been registered or qualified (or are exempt from registration
  and qualification) under the registration, permit or qualification requirements
of all applicable state securities laws. 

(ix)      Use
of Proceeds. The Borrower shall use the proceeds of this Note solely
for the operations of its business, and not for any personal, family or
household purpose.

(b)      Representations
and Warranties of the Holder. The Holder hereby represents and warrants
to the Borrower as of the date hereof as follows:

 (i)      Purchase
for Own Account. The Holder is acquiring this Note solely for the
Holder’s own account and beneficial interest for investment and not for sale or
with a view to distribution of this Note or any part thereof, has no present
intention of selling (in connection with a distribution or otherwise), granting
any participation in, or otherwise distributing the same, and does not presently
have reason to anticipate a change in such intention. 

(ii)      Information
and Sophistication. Without lessening or obviating the representations
and warranties of the Borrowers set forth in subsection (a) above, the Holder
hereby: (A) acknowledges that the Holder has received all the information the
Holder has requested from the Borrowers and the Holder considers necessary or
appropriate for deciding whether to acquire this Note, (B) represents that the
Holder has had an opportunity to ask questions and receive answers from the
Borrowers regarding the terms and conditions of the offering of this Note and to
obtain any additional information necessary to verify the accuracy of the
information given the Holder and (C) further represents that the Holder has such
knowledge and experience in financial and business matters that the Holder is
capable of evaluating the merits and risk of this investment. 

(iii)      Ability
to Bear Economic Risk. The Holder acknowledges that investment in this
Note involves a high degree of risk, and represents that the Holder is able,
without materially impairing the Holder’s financial condition, to hold this Note
for an indefinite period of time and to suffer a complete loss of the Holder’s
investment. 

(iv)     
Further Limitations on Disposition. Without in any way limiting the
representations set forth above, the Holder further agrees not to make any
disposition of all or any portion of this Note unless and until:

(1)      there
is then in effect a registration statement under the Act covering such proposed
disposition and such disposition is made in accordance with such registration
statement; or

(2)     
the Holder shall have notified the Borrowers of the proposed
disposition and furnished the Borrowers with a detailed statement of the
circumstances surrounding the proposed disposition, and if reasonably requested
by the Borrowers, the Holder shall have furnished the Borrowers with an opinion
of counsel, reasonably satisfactory to the Borrowers, that such disposition will
not require registration under the Act or any applicable state securities laws;
provided that no such opinion shall be required for dispositions in compliance with
Rule 144 under the Act, except in unusual circumstances. 

3 

Notwithstanding the provisions of paragraphs (1) and (2) above,
  no such registration statement or opinion of counsel shall be necessary for a
  transfer by the Holder to any other entity who, directly or indirectly,
  controls, is controlled by, or is under common control with the Holder, if all
  transferees agree in writing to be subject to the terms hereof to the same
extent as if they were the Holders hereunder. 

(v)      Accredited
Investor Status. The Holder is an “accredited investor” as such term is
defined in Rule 501 under the Act. 

(vi)      No
“Bad Actor” Disqualification. The Holder represents and warrants that
neither (A) the Holder nor (B) any entity that controls the Holder or is under
the control of, or under common control with, the Holder, is subject to any
Disqualification Event, except for Disqualification Events covered by Rule
506(d)(2)(ii) or (iii) or (d)(3) under the Act and disclosed in writing in
reasonable detail to the Borrowers. The Holder represents that the Holder has
exercised reasonable care to determine the accuracy of the representation made
by the Holder in this paragraph, and agrees to notify the Borrowers if the
Holder becomes aware of any fact that makes the representation given by the
Holder hereunder inaccurate. 

(vii)      Foreign
Investors. If the Holder is not a United States person (as defined by
Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended (the
“Code”)), the Holder hereby represents that he, she or it has
satisfied itself as to the full observance of the laws of the Holder’s
jurisdiction in connection with any invitation to subscribe for this Note or any
use of this Note, including (A) the legal requirements within the Holder’s
jurisdiction for the purchase of this Note, (B) any foreign exchange
restrictions applicable to such purchase, (C) any governmental or other consents
that may need to be obtained, and (D) the income tax and other tax consequences,
if any, that may be relevant to the purchase, holding, redemption, sale or
transfer of this Note. The Holder’s subscription, payment for and continued
beneficial ownership of this Note will not violate any applicable securities or
other laws of the Holder’s jurisdiction. 

(viii)      Forward-Looking
Statements. With respect to any forecasts, projections of results and
other forward-looking statements and information provided to the Holder, the
Holder acknowledges that such statements were prepared based upon assumptions
deemed reasonable by the Borrowers at the time of preparation. There is no
assurance that such statements will prove accurate, and the Borrowers have no
obligation to update such statements. 

3.      EVENTS
OF DEFAULT. 

If there shall be any Event of
Default (as defined below) hereunder, at the option and upon the declaration of
the Holder and upon written notice to each Borrower (which election and notice
shall not be required in the case of an Event of Default under subsection (ii)
or (iii) below), this Note shall accelerate and all principal and unpaid accrued
interest shall become immediately due and payable and the interest rate shall
increase to 13% per annum. The occurrence of any one or more of the following
shall constitute an “Event of Default”:

 (i)      the
Borrowers fail to pay timely any of the principal amount due under this Note on
the date the same becomes due and payable or any unpaid accrued interest or
other amounts due under this Note on the date the same becomes due and
payable;

 (ii)      either
Borrower files any petition or action for relief under any bankruptcy, reorganization, insolvency or moratorium law or any
other law for the relief of, or relating to, debtors, now or hereafter in
effect, or makes any assignment for the benefit of creditors or takes any
corporate action in furtherance of any of the foregoing;

4 

 (iii)      an
  involuntary petition is filed against either Borrower (unless such petition is
  dismissed or discharged within 60 days under any bankruptcy statute now or
  hereafter in effect, or a custodian, receiver, trustee or assignee for the
  benefit of creditors (or other similar official) is appointed to take
possession, custody or control of any property of the Borrower); or

 (iv)     
the occurrence of a transaction in which any “person” or “group”
(within the meaning of Section 13(d) and 14(d)(2) of the Securities Exchange Act
of 1934) becomes the “beneficial owner” (as defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of a sufficient number
of shares of all classes of stock then outstanding of either Borrower ordinarily
entitled to vote in the election of directors, empowering such “person” or
“group” to elect a majority of the board of managers such Borrower, who did not
have such power before such transaction.

4.     
MISCELLANEOUS PROVISIONS. 

(a)      Waivers.
The Borrowers hereby waive demand, notice, presentment, protest and notice of
dishonor. 

(b)      Further
Assurances. The Holder agrees and covenants that at any time and from
time to time the Holder will promptly execute and deliver to the Borrowers such
further instruments and documents and take such further action as the Borrowers
may reasonably require in order to carry out the full intent and purpose of this
Note and to comply with state or federal securities laws or other regulatory
approvals. 

(c)      Transfers
of Notes. This Note may be transferred only upon its surrender to the
Borrowers for registration of transfer, duly endorsed, or accompanied by a duly
executed written instrument of transfer in form reasonably satisfactory to the
Borrowers. Thereupon, this Note shall be reissued to, and registered in the name
of, the transferee, or a new Note for like principal amount and interest shall
be issued to, and registered in the name of, the transferee. Interest and
principal as well as any fees provided herein shall be paid solely to the
registered holder of this Note. Such payment shall constitute full discharge of
the Borrowers’ obligation to pay such interest and principal. Notwithstanding
the foregoing, the Holder may not assign this Note, whether by operation of law
or otherwise, or any rights or duties hereunder without the prior written
consent of the Borrowers’, and any prohibited assignment will be void and of no
force or effect; provided that the Holder may assign its right, title and
interest in this Note to any person that is controlled by, controls or is under
common control with the Holder. 

(d)      Amendment
and Waiver. Any term of this Note may be amended or waived with the
written consent of the Borrowers’ and the Holder. Upon the effectuation of such
waiver or amendment with the consent of the Holder in conformance with this
paragraph, such amendment or waiver shall be effective as to, and binding
against any future holder of this Note. 

(e)      Governing
Law. This Note shall be governed by, and construed in accordance with,
the laws of the State of Delaware. In any action among or between any of the
parties arising out of or relating to this Note, including any action seeking
equitable relief, each of the parties irrevocably and unconditionally consents
and submits to the exclusive jurisdiction and venue of the state and federal
courts located in Delaware. Each party hereby irrevocably waives all right to
trial by jury in any action, proceeding or counterclaim (whether based on
contract, tort or otherwise) arising out of or relating to this Note, the transactions contemplated hereby and thereby or the
actions of such parties in the negotiation, administration, performance and
enforcement hereof and thereof. The Canadian Borrower hereby irrevocably
appoints HVE Inc., a Delaware corporation (the “Process Agent”), with an
office at HVE Inc., 100 Executive Ct., Suite 2, Waxahachie, TX 75165 as its
agent to receive on behalf of the Canadian Borrower and its property service of
copies of the summons and complaints and any other process which may be served
in any such action or proceeding. 

5 

(f)      Binding
  Agreement. The terms and conditions of this Note shall inure to the
  benefit of and be binding upon the respective successors and assigns of the
  parties. Nothing in this Note, expressed or implied, is intended to confer upon
  any third party any rights, remedies, obligations or liabilities under or by
reason of this Note, except as expressly provided in this Note. 

(g)      Counterparts;
Manner of Delivery. This Note 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. Counterparts may be
delivered via facsimile, electronic mail (including pdf or any electronic
signature complying with the U.S. federal ESIGN Act of 2000, Uniform Electronic
Transactions Act or other applicable law) or other transmission method and any
counterpart so delivered shall be deemed to have been duly and validly delivered
and be valid and effective for all purposes. 

(h)      Titles
and Subtitles. The titles and subtitles used in this Note are used for
convenience only and are not to be considered in construing or interpreting this
Note. 

(i)      Notices.
All notices required or permitted hereunder shall be in writing and shall be
deemed effectively given: (i) upon personal delivery to the party to be
notified, (ii) when sent by confirmed electronic mail or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day, (iii) five days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (iv) one day after deposit with a
nationally recognized overnight courier (or two days after deposit with a
recognized international overnight courier with respect to international
delivery), specifying next day delivery, with written verification of receipt.
All communications to a party shall be sent to the party’s address set forth on
the signature page hereto or at such other address(es) as such party may
designate by 10 days’ advance written notice to the other party hereto.

(j)     
Expenses. The Borrowers and the Holder shall each bear their respective
expenses and legal fees incurred with respect to the negotiation, execution and
delivery of this Note and the transactions contemplated herein. 

(k)      Delays
or Omissions. It is agreed that no delay or omission to exercise any
right, power or remedy accruing to the Holder, upon any breach or default of
either Borrower under this Note shall impair any such right, power or remedy,
nor shall it be construed to be a waiver of any such breach or default, or any
acquiescence therein, or of or in any similar breach or default thereafter
occurring; nor shall any waiver of any single breach or default be deemed a
waiver of any other breach or default theretofore or thereafter occurring. It is
further agreed that any waiver, permit, consent or approval of any kind or
character by the Holder of any breach or default under this Note, or any waiver
by the Holder of any provisions or conditions of this Note, must be in writing
and shall be effective only to the extent specifically set forth in writing and
that all remedies, either under this Note, or by law or otherwise afforded to
the Holder, shall be cumulative and not alternative. This Note shall be void and
of no force or effect in the event that the Holder fails to remit the full
principal amount to the Borrowers within five calendar days of the date of this
Note. 

(l)      Borrower
Liability. Each Borrower hereby appoints the other as agent for the
other for all purposes hereunder. Each Borrower hereunder shall be jointly and
severally obligated to repay this Note, regardless of which Borrower actually receives
the proceeds of this Note, as if each Borrower hereunder directly received all
of the proceeds of this Note. Each Borrower waives (a) any suretyship defenses
available to it under any applicable law, and (b) any right to require the
Holder to: (i) proceed against any Borrower or any other person; (ii) proceed
against or exhaust any security; or (iii) pursue any other remedy. The Holder
may exercise or not exercise any right or remedy it has against any Borrower or
any security it holds (including the right to foreclose by judicial or
non-judicial sale) without affecting any Borrower’s liability. Notwithstanding
any other provision of this Note or other related document, each Borrower
irrevocably waives all rights that it may have at law or in equity (including,
without limitation, any law subrogating Borrower to the rights of the Holder
under this Note) to seek contribution, indemnification or any other form of
reimbursement from any other Borrower, or any other person now or hereafter
primarily or secondarily liable for any of the obligations hereunder, for any
payment made by a Borrower with respect to the obligations hereunder in
connection with this Note or otherwise and all rights that it might have to
benefit from, or to participate in, any security for the obligations hereunder
as a result of any payment made by a Borrower with respect to the obligations
hereunder in connection with this Note or otherwise. Any agreement providing for
indemnification, reimbursement or any other arrangement prohibited under this
Section shall be null and void. If any payment is made to a Borrower in
contravention of this Section, such Borrower shall hold such payment in trust
for the Holder and such payment shall be promptly delivered to the Holder for
application to the obligations hereunder, whether matured or unmatured. 

6 

(m)      Security
  Interest. The full amount of this Note is secured by the collateral
  identified and described as security therefor in that certain Pledge Agreement
  dated as of even date herewith and executed by the Canadian Borrower in favor of
  the Holder (as the same may from time to time be amended, modified or
  supplemented or restated, the “Pledge Agreement”).
  Additional rights and obligations of the Holder are set forth in the Pledge
Agreement. 

(n)      Entire
Agreement. This Note constitutes the full and entire understanding and
agreement between the parties with regard to the subjects hereof, and no party
shall be liable or bound to any other party in any manner by any
representations, warranties, covenants and agreements except as specifically set
forth herein. 

[Signature pages follow] 

7 

The parties have executed this SECURED
PROMISSORY NOTE as of the date first noted above.

	BORROWERS: 
	 
	SPHERE 3D CORP. 
	 	 
	By: 	/s/ Peter Tassipoulos 
	 	 
	 	Name: 	Peter Tassiopoulos 
	 	Title: 	President 

	E-mail: 	 	 
	 	 	 
	Address: 	 	 

	HVE INC. 
	 
	 	 
	By: 	/s/ Peter Tassipoulos 
	 	 
	 	Name: 	Peter Tassiopoulos 
	 	Title: 	President 

	E-mail: 	 	 
	 	 	 
	Address: 	 	 

    [Signature Page – OSI / Sphere Note] 

The parties have executed this SECURED
PROMISSORY NOTE as of the date first noted above.

	HOLDER: 
	 
	OVERLAND STORAGE, INC. 
	 	 
	By: 	/s/ Eric Kelly 
	 	 
	 	Name: 	Eric
      Kelly 
	 	Title: 	Chief
      Executive Officer 

	E-mail: 	 	 
	 	 	 
	Address: 	 	 
	 	 	 
	 	 	 

[Signature Page – OSI / Sphere Note]

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