SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
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DATE OF REPORT: MARCH 29, 2005
(Date of earliest event reported)
INCENTRA SOLUTIONS, INC.
(Exact name of Registrant as specified in its charter)
NEVADA
(State or other jurisdiction of incorporation)
333-16031 86-0793960
(Commission File No.) (I.R.S. Employer
Identification No.)
1140 PEARL STREET
BOULDER, COLORADO 80302
(Address of principal executive offices; zip code)
(303) 440-7930
(Registrant's telephone number, including area code)
N/A
(Former Name or Former Address, if changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (SEE General Instruction A.2. below):
|_| Written communications pursuant to Rule 425 under the Securities
Act (17 CFR 230.425)
|_| Soliciting material pursuant to Rule 14a-12 under the Exchange Act
(17 CFR 240.14a-12)
|_| Pre-commencement communications pursuant to Rule 14-2(b) under the
Exchange Act (17 CFR 240.14d-2(b))
|_| Pre-commencement communications pursuant to Rule 13-4(e) under the
Exchange Act (17 CFR 240.13e-4(c))
SECTION 1 - REGISTRANT'S BUSINESS AND OPERATIONS
ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
(a) In connection with the closing of our acquisition of all of the
outstanding capital stock of PWI Technologies, Inc., a Washington corporation
("PWI"), as discussed in Item 2.01 below, on March 30, 2005, we entered into
several material agreements. The material agreements include a stock purchase
agreement, registration rights agreements and an employment agreement. The
descriptions of such agreements contained in Item 2.01 below are incorporated
herein by reference.
(b) On March 29, 2005, STAR Solutions of Delaware, Inc., one of our
wholly-owned subsidiaries ("SSI"), amended its existing revolving line of credit
from Wells Fargo Bank, N. A. ("Wells Fargo") to make PWI a co-borrower
thereunder. In connection with the amendment, SSI and PWI executed a First
Amendment to Credit Agreement (the "First Amendment") with Wells Fargo and PWI
executed in favor of Wells Fargo a continuing security agreement (rights to
payment and inventory) ("Security Agreement #1") and a security agreement
(equipment) ("Security Agreement #2, and collectively with Security Agreement
#1, the "Security Agreements").
Pursuant to the First Amendment, the maximum principal amount of all
borrowings under the line of credit was increased to an amount that cannot
exceed 80% of the combined eligible accounts receivable of SSI and PWI, plus the
amount of $350,000 from March 29, 2005 through April 15, 2005. Certain financial
covenants contained in the original credit agreement were also amended. There
were no other material amendments to the original credit agreement with Wells
Fargo, a copy of which was filed as Exhibit 10.5 to our Current Report on Form
8-K dated February 23, 2005. Pursuant to the Security Agreements, borrowings
under the line of credit will be further secured by a first priority lien on all
of PWI's assets.
The repayment of borrowings under the line of credit are guaranteed by
us pursuant to that certain Continuing Guaranty in favor of Wells Fargo, dated
as of February 18, 2005 (the "Guaranty"), a copy of which was filed previously
with our Current Report on Form 8-K dated February 23, 2005. Pursuant to a
Standstill Agreement among Wells Fargo, Laurus Master Fund, Ltd., a Cayman
Islands company ("Laurus") and us, dated as of March 23, 2005, Wells Fargo has
agreed that it will not take any action to enforce the Guaranty against us
without the prior written consent of Laurus for so long as Laurus is a secured
creditor of our company.
(c) On March 23, 2005, we entered into a Waiver and Subordination
Agreement with Laurus (the "Laurus Subordination"). The Laurus Subordination
waives our obligation under Section 6.12(e)(ii) of the Securities Purchase
Agreement, dated as of May 13, 2004, between Laurus and us to cause PWI to
become a party to the Master Security Agreement, dated as of May 13, 2004,
between Laurus and us, as amended. Pursuant to the Laurus Subordination, Laurus
also agreed to subordinate to Wells Fargo its security interest in the accounts
receivable and other rights to payments, general intangibles, equipment and
inventory of PWI.
SECTION 2 - FINANCIAL INFORMATION
ITEM 2.01 COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS.
On March 30, 2005 (the "Closing Date"), we acquired all of the
outstanding capital stock (the "PWI Stock") of PWI Technologies, Inc., a
Washington corporation ("PWI"). The acquisition was effected pursuant to a Stock
Purchase Agreement, dated as of the Closing Date (the "Stock Purchase
Agreement"), by and among our company, Barry R. Andersen ("Andersen") and Gary
L. Henderson ("Henderson" and together with Andersen, the "Former PWI
Shareholders").
The consideration paid for the PWI Stock on the Closing Date was
approximately $3.9 million, which consisted of $2.1 million in cash and the
issuance of 8.4 million shares of our common stock. Also as consideration for
the purchase, we agreed to pay $235,000 to Henderson over the 12-month period
subsequent to the Closing Date. In addition, the Stock Purchase Agreement
contains an earn-out provision pursuant to which the Former PWI Shareholders may
receive an amount of cash and a number of unregistered shares of our common
stock based upon certain levels of EBITDA achieved by PWI during the period from
February 1, 2005 until January 31, 2006. The maximum earn-out payable under the
Stock Purchase Agreement is $200,000 in cash plus a number of unregistered
shares of our common stock determined by dividing PWI's EBITDA for the
aforementioned period by $0.21 (subject to customary adjustments for stock
splits, stock dividends and similar transactions). The cash amounts paid on the
Closing Date were provided pursuant to our existing line of credit from Wells
Fargo Bank, N.A, which was amended on the
Closing Date to make PWI a co-borrower thereunder. At the time of the
acquisition, the assets of PWI were pledged to a trade creditor to secure PWI's
payment of outstanding trade payables.
Concurrently with the consummation of the acquisition, we granted
registration rights with respect to the shares of our common stock issued in the
acquisition. Pursuant to the registration rights agreements executed on the
Closing Date, at any time after March 31, 2006, the holders of such rights shall
have the right to cause us to register under the Securities Act of 1933, as
amended, the shares of our common stock issued on the Closing Date and the
shares of common stock issuable pursuant to the earn-out described above. The
agreements also provide that, after March 31, 2006, the holders shall have
`piggy-back' registration rights with respect to such shares.
In connection with the consummation of the acquisition, Barry R.
Andersen, the Chief Executive Officer of PWI prior to the acquisition, was
appointed President of PWI. PWI entered into an "at-will" employment agreement
dated as of the Closing Date with Mr. Anderson that provides that Mr. Andersen
will receive an initial annual base salary of $211,500. The employment agreement
also provides that Mr. Andersen may terminate the agreement upon thirty (30)
days prior written notice and that PWI may terminate Mr. Andersen's employment,
with or without cause, at any time upon written notice to Mr. Andersen. In
addition, Mr. Andersen's right to receive his pro rata share of the earn-out
described above is subject to his continued employment with PWI for a period of
at least one year from the date of the agreement, except in cases of his death
or disability.
Inveraray Partners LLC ("Inveraray") acted as our exclusive mergers and
acquisitions advisor in the acquisition and in consideration of its services we
paid Inveraray the sum of $250,000.
On March 30, 2005, we issued a press release announcing the completion
of our acquisition of PWI and the other transactions described above. A copy of
such press release is filed herewith as Exhibit 99.1.
The above description of the acquisition and the material agreements is
not a complete description of the material terms of the transaction or the
material agreements and is qualified in its entirety by reference to the
agreements entered into in connection with the transaction, copies of which are
included as exhibits to this Current Report on Form 8-K.
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION
On March 30, 2005, we issued a press release announcing our preliminary
financial results for the three and twelve-months ended December 31, 2004. A
copy of the press release is attached hereto as Exhibit 99.2.
The foregoing information (including Exhibit 99.2 hereto) is being
furnished under Item 2.02, "Results of Operations and Financial Condition." As
such, the information (including the exhibit) herein (and therein) shall not be
deemed to be "filed" for the purposes of Section 18 of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the
liabilities of that Section, nor shall it be incorporated by reference into a
filing under the Securities Act of 1933, as amended, or the Exchange Act, except
as shall be expressly set forth by specific reference in such a filing. This
Current Report (including Exhibit 99.2 hereto) will not be deemed an admission
as to the materiality of any information required to be disclosed solely to
satisfy the requirements of Regulation FD.
SECTION 3 - SECURITIES AND TRADING MARKETS
ITEM 3.02 UNREGISTERED SALES OF EQUITY SECURITIES.
On March 30, 2005, in connection with the closing of the transactions
discussed in Item 2.01 above, we issued an aggregate of 8,419,340 shares of
common stock to the Former PWI Shareholders, or their designees. Such shares
were issued in reliance on the exemption from registration provided by Section
4(2) of the Securities Act, on the basis that their issuance did not involve a
public offering, no underwriting fees or sales commissions were paid by us in
connection with such sale and each Former PWI Shareholder represented to us that
he was an "accredited investor," as defined in the Securities Act of 1933, as
amended.
SECTION 9 - FINANCIAL STATEMENTS AND EXHIBITS
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
Financial statements, if any, required by this item will be
filed by within the time period prescribed by this item.
(b) PRO FORMA FINANCIAL INFORMATION.
Pro forma financial information, if any, required by this item
will be filed by within the time period prescribed by this item.
(c) EXHIBITS.
NUMBER DOCUMENTS
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2.1 Stock Purchase Agreement, dated as of March 30, 2005, by and
among Incentra Solutions, Inc., Incentra Merger Corp., Barry
R. Andersen and Gary L. Henderson.
10.1 Registration Rights Agreement, dated as of March 30, 2005, by
and among Incentra Solutions, Inc., Barry R. Andersen and Gary
L. Henderson.
10.2 Employment Agreement, dated as of March 30, 2005, by and
between PWI Technologies, Inc. and Barry R. Andersen.
10.3 Registration Rights Agreement, dated as of March 30, 2005, by
and between Incentra Solutions, Inc. and MRA Systems, Inc.
(d/b/a GE Access).
NUMBER DOCUMENTS
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10.4 First Amendment to Credit Agreement, dated as of March 29,
2005, by and between STAR Solutions of Delaware, Inc. and
Wells Fargo Bank, N.A.
10.5 Continuing Security Agreement, dated as of March 29, 2005, by
PWI Technologies, Inc. in favor of Wells Fargo Bank, N.A.
10.6 Security Agreement, dated as of March 29, 2005, by PWI
Technologies, Inc. in favor of Wells Fargo Bank, N.A.
10.7 Waiver and Subordination Agreement, dated as of March 23,
2005, by and between Incentra Solutions, Inc. and Laurus
Master Fund, Ltd.
10.8 Standstill Agreement, dated as of March 23, 2005, by and among
Incentra Solutions, Inc., Laurus Master Fund, Ltd. and Wells
Fargo Bank, N.A.
99.1 Press Release, dated March 30, 2005, relating to the
acquisition of PWI Technologies, Inc.
99.2 Press release, dated March 30, 2005, relating to preliminary
results of operations for the three months and year ended
December 31, 2005.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this Report to be signed on its behalf
by the undersigned hereunto duly authorized.
INCENTRA SOLUTIONS, INC.
Date: March 31, 2005 By: /s/ THOMAS P. SWEENEY III
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Thomas P. Sweeney III
Chief Executive Officer
EXHBIT INDEX
NUMBER DOCUMENTS
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2.1 Stock Purchase Agreement, dated as of March 30, 2005, by and
among Incentra Solutions, Inc., Incentra Merger Corp., Barry
R. Andersen and Gary L. Henderson.
10.1 Registration Rights Agreement, dated as of March 30, 2005, by
and among Incentra Solutions, Inc., Barry R. Andersen and Gary
L. Henderson.
10.2 Employment Agreement, dated as of March 30, 2005, by and
between PWI Technologies, Inc. and Barry R. Andersen.
10.3 Registration Rights Agreement, dated as of March 30, 2005, by
and between Incentra Solutions, Inc. and MRA Systems, Inc.
(d/b/a GE Access).
10.4 First Amendment to Credit Agreement, dated as of March 29,
2005, by and between STAR Solutions of Delaware, Inc. and
Wells Fargo Bank, N.A.
10.5 Continuing Security Agreement, dated as of March 29, 2005, by
PWI Technologies, Inc. in favor of Wells Fargo Bank, N.A.
10.6 Security Agreement, dated as of March 29, 2005, by PWI
Technologies, Inc. in favor of Wells Fargo Bank, N.A.
10.7 Waiver and Subordination Agreement, dated as of March 23,
2005, by and between Incentra Solutions, Inc. and Laurus
Master Fund, Ltd.
10.8 Standstill Agreement, dated as of March 23, 2005, by and among
Incentra Solutions, Inc., Laurus Master Fund, Ltd. and Wells
Fargo Bank, N.A.
99.1 Press Release, dated March 30, 2005, relating to the
acquisition of PWI Technologies, Inc.
99.2 Press release, dated March 30, 2005, relating to preliminary
results of operations for the three months and year ended
December 31, 2005.