As filed with the Securities and Exchange Commission on May 5, 2005
SCHEDULE 14C INFORMATION
INFORMATION STATEMENT PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934
Check the appropriate box:
|X| Preliminary Information Statement |_| Confidential, For Use of the
Commission Only (as permitted
by Rule 14c-5(d)(2))
|_| Definitive Information Statement
INCENTRA SOLUTIONS, INC.
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(Name of Registrant as Specified in its Charter)
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statement number, or the form or schedule and the date of its filing.
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(4) Date Filed:
INCENTRA SOLUTIONS, INC.
1140 PEARL STREET
BOULDER, COLORADO 80302
May ___, 2005
Dear Stockholder:
I am writing to inform you that the Board of Directors of Incentra
Solutions, Inc., a Nevada corporation (the "Company"), and holders of a majority
of the issued and outstanding shares of capital stock of the Company (including
the holders of not less than eighty percent (80%) of the Company's issued and
outstanding Series A convertible preferred stock) entitled to vote on the matter
set forth herein, have approved the following corporate actions in lieu of a
meeting pursuant to Section 78.320 of the Nevada General Corporation Law:
1. The amendment to the Company's Articles of Incorporation to
effect a stock combination, or reverse stock split, pursuant
to which every ten (10) shares of the Company's outstanding
common stock, par value $.001 per share (the "Common Stock"),
would be exchanged for one new share of Common Stock.
2. The amendment to the Company's 2000 Equity Incentive Plan to
increase the maximum number of shares of the Company's Common
Stock available for issuance thereunder from 6,000,000 to
22,625,000 shares.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US
A PROXY.
This Information Statement, which describes the above corporate actions
in more detail, is being furnished to stockholders of the Company for
informational purposes only pursuant to Section 14(c) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and the rules and regulations
prescribed thereunder. Pursuant to Rule 14c-2 under the Exchange Act, these
corporate actions will not be effective until at least twenty (20) calendar days
after the mailing of this Information Statement to the stockholders of the
Company. The reverse stock split will be effective at such time after the
expiration of the aforementioned twenty (20) day period as the Board of
Directors has determined the appropriate effective time for the reverse stock
split and, upon such determination, the Company will file a Certificate of
Amendment to its Articles of Incorporation with the Nevada Secretary of State to
effect the reverse stock split of the Company's outstanding Common Stock.
Sincerely,
THOMAS P. SWEENEY III,
CHIEF EXECUTIVE OFFICER
INCENTRA SOLUTIONS, INC.
1140 PEARL STREET
BOULDER, COLORADO 80302
INFORMATION STATEMENT
May 5, 2005
This Information Statement is being mailed to the stockholders of
Incentra Solutions, Inc., a Nevada corporation (hereinafter referred to as the
"Company"), on or about May __, 2005 in connection with the corporate actions
referred to below. The Company's board of directors (the "Board") and holders
(collectively, the "Consenting Stockholders") of a majority of the issued and
outstanding shares of common stock, par value $.001 per share (the "Common
Stock"), of the Company (including not less than eighty percent (80%) of the
Company's issued and outstanding shares of Series A Convertible Preferred Stock,
par value $.001 per share (the "Series A Preferred Stock")) entitled to vote on
the matters set forth herein have approved such matters. Accordingly, this
Information Statement is furnished solely for the purpose of informing
stockholders, in the manner required under Regulation 14(c) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), of these corporate
actions. No other stockholder approval is required. The record date for
determining stockholders entitled to receive this Information Statement has been
established as the close of business on April 4, 2005 (the "Record Date").
THE COMPANY IS NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO
SEND A PROXY.
CORPORATE ACTIONS
The Nevada General Corporation Law permits the holders of a majority of
the shares of the Company's outstanding Common Stock to approve and authorize
actions by written consent of a majority of the shares outstanding as if the
action were undertaken at a duly constituted meeting of the stockholders of the
Company. The Company's Certificate of Designations relating to its Series A
Preferred Stock, provides that the holders of Series A Preferred Stock vote
together with the holders of Common Stock on all matters voted on by the holders
of Common Stock on the basis of twenty (20) shares of Common Stock for each
share of Series A Preferred Stock. Furthermore, the Certificate of Designations
requires the prior approval of the holders of not less than eighty percent (80%)
of the Company's outstanding shares of Series A Preferred Stock of any amendment
to the Company's Articles of Incorporation or its 2000 Equity Incentive Plan. On
April 12, 2005, Consenting Stockholders holding an aggregate of 107,052,776
shares of Common Stock, representing approximately 61% of the total shares of
Common Stock entitled to vote on the matter set forth in Item 1 below (including
2,466,971 shares of Series A Preferred Stock, which for purposes of voting on
such matter, represented 49,339,420 shares of Common Stock), consented in
writing without a meeting to the matter described in Item 1 below. On April 1,
2005, Consenting Stockholders holding an aggregate of 90,435,222 shares of
Common Stock, representing approximately 52% of the total shares of Common Stock
entitled to vote on the matter set forth in Item 2 below (including 2,466,971
shares of Series A Preferred Stock, which for purposes of voting on the such
matter, represented 49,339,420 shares of Common Stock), consented in writing
without a meeting to the matter described in Item 2 below. As a result, no
further votes will be needed to approve the matters set forth herein. As of the
Record Date, the Company had outstanding 126,096,874 shares of Common Stock and
2,466,971 shares of Series A Preferred Stock. The corporate actions described in
this Information Statement will not afford
stockholders the opportunity to dissent from the action described herein or to
receive an agreed or judicially appraised value for their shares.
The Board and the Consenting Stockholders have consented to the
adoption and filing of a Certificate of Amendment ("Certificate of Amendment")
to the Articles of Incorporation of the Company in the form of EXHIBIT A
attached to this Information Statement, which provides for the amendment to the
Company's Articles of Incorporation to effect a stock combination, or reverse
stock split, pursuant to which every ten (10) shares of the Company's
outstanding Common Stock, would be exchanged for one new share of Common Stock.
The Board and the Consenting Stockholders have also consented to the amendment
to the Company's 2000 Equity Incentive Plan to increase the maximum number of
shares of the Company's Common Stock available for issuance thereunder from
6,000,000 to 22,625,000 shares. A copy of the amendment to the Company's 2000
Equity Incentive Plan is attached as EXHIBIT B to this Information Statement. We
will pay the expenses of furnishing this Information Statement, including the
cost of preparing, assembling and mailing this Information Statement.
AMENDMENT TO ARTICLES OF INCORPORATION
TO EFFECT A REVERSE STOCK SPLIT OF COMMON STOCK
(ITEM 1)
On April 12, 2005, the Board and the Consenting Stockholders adopted a
resolution to amend the Company's Articles of Incorporation to effect a stock
combination, or reverse stock split, pursuant to which every ten (10) shares
(the "Old Shares") of the Company's outstanding Common Stock would be exchanged
for one new share (the "New Shares") of Common Stock.
The number of Old Shares for which each New Share is to be exchanged is
referred to as the "Exchange Number". The reverse stock split will be effected
simultaneously for all shares of Common Stock and the Exchange Number will be
the same for all shares of Common Stock. Upon the effectiveness of the reverse
stock split, each option or warrant right for Common Stock would entitle the
holder to acquire a number of shares equal to the number of shares which the
holder was entitled to acquire prior to the reverse stock split divided by the
Exchange Number at the exercise price in effect immediately prior to the reverse
stock split, multiplied by the Exchange Number.
The Board will have the authority to determine the exact timing of the
Effective Date (as defined below) of the reverse stock split, without further
stockholder approval. Such timing will be determined in the judgment of the
Board.
The Board also reserves the right, notwithstanding stockholder approval
and without further action by the stockholders, not to proceed with the reverse
stock split, if, at any time prior to filing the amendment to the Articles of
Incorporation with the Secretary of State of the State of Nevada, the Board, in
its sole discretion, determines that the reverse stock split is no longer in the
best interests of the Company and its stockholders. The Board may consider a
variety of factors in determining whether or not to implement the reverse stock
split including, but not limited to,
o overall trends in the stock market;
o recent changes and anticipated trends in the per share market
price of the Common Stock, business and transactional
developments;
o the Company's actual and projected financial performance; and
o the Company's anticipated merger with another entity.
The reverse stock split will not change the proportionate equity
interests of the Company's stockholders, nor will the respective voting rights
and other rights of stockholders be altered, except for possible immaterial
changes due to the Company's issuance of additional shares in lieu of fractional
shares as described below. The Common Stock issued pursuant to the reverse stock
split will remain fully paid and non-assessable. The Company will continue to be
subject to the periodic reporting requirements of the Exchange Act.
REASONS FOR THE REVERSE STOCK SPLIT
The Board reviewed the Company's current business and financial
performance and the recent trading range of the Company's Common Stock. The
Board determined that a reverse stock split was desirable in order to achieve
the following benefits, each of which is described below in more detail:
o encourage greater investor interest in the Common Stock by
making the stock price more attractive to the many investors,
particularly institutional investors, who refrain from investing
in stocks that trade below $1.00 per share;
o reduce trading fees and commissions incurred by stockholders,
since these costs are based to a significant extent on the
number of shares traded; and
o align the number of authorized shares of Common Stock with the
number of shares reserved for issuance pursuant to the Company's
outstanding options, warrants and convertible securities.
ENCOURAGE GREATER INVESTOR INTEREST IN THE COMPANY'S COMMON STOCK
The Board believes that the reverse stock split will encourage greater
interest in the Company's Common Stock by the investment community. The Board
believes that the current market price of the Common Stock may impair its
acceptability to institutional investors, professional investors and other
members of the investing public. Many institutional and other investors look
upon stock trading at low prices as unduly speculative in nature and, as a
matter of policy, avoid investing in such stocks. Further, various brokerage
house policies and practices tend to discourage individual brokers from dealing
in low-priced stocks. If effected, the reverse stock split would reduce the
number of outstanding shares of Common Stock and increase the trading price of
the Common Stock. The Board believes that raising the trading price of the
Common Stock will increase the attractiveness of the Common Stock to the
investment community and possibly promote greater liquidity for the Company's
existing stockholders.
REDUCE TRADING FEES AND COMMISSIONS INCURRED BY STOCKHOLDERS
Because broker commissions on low-priced stocks generally represent a
higher percentage of the stock price than commissions on higher priced stocks,
the current share price of the Common Stock, in the absence of the reverse stock
split, may continue to result in individual stockholders paying transaction
costs (commissions, markups or markdowns) which are a higher percentage of their
total share value than would be the case if the share price was substantially
higher. This factor may further limit the willingness of institutions to
purchase the Common Stock at its current market price.
ALIGN THE NUMBER OF AUTHORIZED SHARES WITH THE NUMBER OF SHARES RESERVED FOR
ISSUANCE
As reflected on the table below, as of the Record Date, the Company had
126,096,874 shares of Common Stock outstanding and 2,466,971 shares of Series A
Preferred Stock outstanding (that were convertible into 49,339,420 shares of
Common Stock), and an aggregate of 54,140,702 shares of Common Stock were
reserved for issuance pursuant to outstanding convertible notes, options, and
warrants. The number of authorized shares of Common Stock is not sufficient to
permit the issuance all shares of Common Stock issuable pursuant to convertible
notes, options and warrants, although not all such instruments are presently
convertible or exercisable. If effected, the reverse stock split will reduce the
number of outstanding shares of Common Stock, but not the number of authorized
shares of Common Stock. As a result, following the reverse stock split, there
will be a sufficient number of authorized but unissued shares available for
issuance upon the conversion or exercise of the Company's outstanding
convertible notes, options and warrants.
CERTAIN EFFECTS OF THE REVERSE STOCK SPLIT
The reverse stock split will not affect the par value of the Common
Stock. As a result, on the Effective Date (as defined below) of the reverse
stock split, the stated capital on the Company's balance sheet attributable to
the Common Stock will be reduced in proportion to the exchange ratio of one to
ten (10), and the additional paid-in capital account shall be credited with the
amount by which the stated capital is reduced. The per share net income or loss
and net book value of the Company's Common Stock will be increased because there
will be fewer shares of the Company's Common Stock outstanding.
Upon the effectiveness of the reverse stock split, the number of
authorized shares of Common Stock that are not issued or outstanding will
increase, as reflected in the following table:
PRIOR TO REVERSE AFTER REVERSE
STOCK SPLIT STOCK SPLIT
----------- -----------
Number of shares of Common Stock:
Authorized................................ 200,000,000 200,000,000
Outstanding............................... 126,096,874 12,609,688
Reserved for Issuance(1).................. 103,480,122 10,348,012
Available for future issuance............. (29,576,996) 177,042,300
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(1) Includes: (i) 49,339,420 shares issuable upon the conversion of outstanding
shares of Series A Preferred Stock, (ii) 13,835,154 shares that are
issuable upon the conversion of outstanding convertible notes, (iii)
17,945,436 shares issuable upon the exercise of outstanding warrants, (iv)
20,164,103 shares issuable upon the exercise of outstanding options granted
under the Company's 2000 Equity Incentive Plan, and (v) 2,196,009 shares
issuable upon the exercise of outstanding options granted under
ManagedStorage International Inc.'s 2000 Option and Grant Plan. The
foregoing share amounts are as of the Record Date and do not give effect to
the reverse stock split.
This will increase significantly the ability of the Board to issue
authorized and unissued shares without further stockholder action (subject to
the rights of the holders of the Company's Series A Preferred Stock). The
issuance in the future of such additional authorized shares may have the effect
of diluting the earnings per share and book value per share, as well as the
stock ownership and voting rights, of the currently outstanding shares of Common
Stock. Although the increase in the number of authorized but unissued shares
could, under certain circumstances, have an anti-takeover effect (for example,
by permitting issuances which would dilute the stock ownership of a person
seeking to effect a change in the composition of the Board or contemplating a
tender offer or other transaction for the combination of the Company with
another entity), the reverse stock split is not being effected in response to
any effort of which the Company is aware to accumulate shares of Common Stock or
obtain control of the Company, nor is it part of a plan by management to
recommend a series of similar amendments to the Board and stockholders. Other
than the reverse stock split, the Board does not currently contemplate
recommending the adoption of any other amendments to the Company's Articles of
Incorporation that could be construed to affect the ability of third parties to
take over or change control of the Company.
Stockholders should also recognize that if the reverse stock split is
effected they will own a fewer number of shares than they presently own, equal
to the number of shares owned immediately prior
to the filing of the amendment divided by the Exchange Number. While the Company
expects that the reverse stock split will result in an increase in the market
price of the Common Stock, there can be no assurance that the reverse stock
split will increase the market price of the Common Stock by a multiple equal to
the Exchange Number or result in the permanent increase in the market price,
which is dependent upon many factors, including the Company's performance and
prospects. Also, should the market price of the Common Stock decline, the
percentage decline as an absolute number and as a percentage of the Company's
overall market capitalization may be greater than would pertain in the absence
of a reverse stock split. Furthermore, the possibility exists that liquidity in
the market price of the Common Stock could be adversely affected by the reduced
number of shares that would be outstanding after the reverse stock split. In
addition, the reverse stock split will increase the number of the Company's
stockholders who own odd lots, that is, less than 100 shares. Stockholders who
hold odd lots typically will experience an increase in the cost of selling their
shares, as well as possible greater difficulty in effecting such sales.
Consequently, there can be no assurance that the reverse stock split will
achieve the desired results that have been outlined above.
PROCEDURE FOR EFFECTING THE REVERSE STOCK SPLIT AND EXCHANGE OF STOCK
CERTIFICATES
If the Board still believes that the reverse stock split is in the best
interests of the Company and its stockholders, the Company will file the
Certificate of Amendment with the Secretary of State of the State of Nevada at
such time as the Board has determined the appropriate effective time for such
split, but in no event earlier than twenty (20) calendar days following the
mailing of this Information Statement to the stockholders of the Company. The
reverse stock split will become effective on the date of filing the amendment
(the "Effective Date"). Beginning on the Effective Date, each certificate
representing Old Shares will be deemed for all corporate purposes to evidence
ownership of New Shares.
As soon as practicable after the Effective Date, stockholders will be
notified that the reverse stock split has been effected. The Company's transfer
agent will act as exchange agent for the reverse stock split for purposes of
implementing the exchange of stock certificates. Holders of Old Shares will be
asked to surrender to the exchange agent certificates representing Old Shares in
exchange for certificates representing New Shares in accordance with the
procedures to be set forth in a letter of transmittal to be sent by the Company.
No new certificates will be issued to a stockholder until such stockholder has
surrendered such stockholder's outstanding certificate(s), together with the
properly completed and executed letter of transmittal to the exchange agent.
Stockholders should not destroy any stock certificates and should not submit any
certificates until requested to do so.
FRACTIONAL SHARES
No scrip or fractional certificates will be issued in connection with
the reverse stock split. Stockholders who otherwise would be entitled to receive
fractional shares because they hold a number of Old Shares not evenly divisible
by the Exchange Number, will be entitled, upon surrender to the exchange agent
of certificates representing such shares, to receive one whole share of Common
Stock in lieu of a fractional share.
DISSENTERS' RIGHTS
Under Nevada law, stockholders are not entitled to dissenter's rights
with respect to the proposed amendment.
FEDERAL INCOME TAX CONSEQUENCES OF THE REVERSE STOCK SPLIT
The following is a summary of certain material federal income tax
consequences of the reverse stock split, and does not purport to be complete. It
does not discuss any state, local, foreign or minimum income or other U.S.
federal tax consequences. Also, it does not address the tax consequences to
holders that are subject to special tax rules, such as banks, insurance
companies, regulated investment companies, personal holding companies, foreign
entities, nonresident alien individuals, broker-dealers and tax-exempt entities.
The discussion is based on the provisions of the United States federal income
tax law as of the date hereof, which is subject to change retroactively as well
as prospectively. This summary also assumes that the Old Shares were, and the
New Shares will be, held as a "capital asset," as defined in the Internal
Revenue Code of 1986, as amended (the "Code"), generally, property held for
investment. The tax treatment of a stockholder may vary depending upon the
particular facts and circumstances of such stockholder. EACH STOCKHOLDER SHOULD
CONSULT WITH SUCH STOCKHOLDER'S OWN TAX ADVISOR WITH RESPECT TO THE CONSEQUENCES
OF THE REVERSE STOCK SPLIT.
No gain or loss should be recognized by a stockholder of the Company
upon such stockholder's exchange of Old Shares for New Shares pursuant to the
reverse stock split. The aggregate tax basis of the New Shares received in the
reverse stock split, including any fraction of a New Share deemed to have been
received, will be the same as the stockholder's aggregate tax basis in the Old
Shares exchanged therefor. The stockholder's holding period for the New Shares
will include the period during which the stockholder held the Old Shares
surrendered in the reverse stock split.
AMENDMENT TO 2000 EQUITY INCENTIVE PLAN TO
INCREASE SHARES AVAILABLE FOR ISSUANCE
(ITEM 2)
On April 1, 2005, the Consenting Stockholders adopted a resolution to
amend the Company's 2000 Equity Incentive Plan (the "Plan") to increase the
maximum number of shares of the Company's Common Stock available for issuance
thereunder from 6,000,000 to 22,625,000 shares. The aforementioned resolution
was previously adopted by the Board on August 16, 2004. The share amounts set
forth in this Item 2 do not take into account the effect of the reverse stock
split described in Item 1. See "Effect of the Reverse Stock Split" herein.
REASON FOR THE AMENDMENT TO THE PLAN
The Board reviewed the number of shares currently available for
issuance under the Plan upon the exercise of options or grant of restricted
stock awards in light of the Company's foreseeable requirements and determined
that the number of shares available thereunder was insufficient to satisfy such
requirements. Prior to the amendment, a maximum of 6,000,000 shares of Common
Stock was available for issuance under the Plan. As of the Record Date,
20,164,103 shares of Common Stock were reserved for issuance under the Plan upon
the exercise of issued and outstanding options (including options to purchase
10,237,000 shares of Common Stock held by Thomas P. Sweeney III, the Company's
Chief Executive Officer and Chairman of the Board, of which none are presently
exercisable) and no shares were reserved in connection with restricted stock
awards. As a result, the number of shares of Common Stock available for issuance
under the Plan is not sufficient (assuming all options were presently
exercisable) to permit the issuance of all shares reserved for issuance pursuant
to outstanding awards under the Plan and no shares of Common Stock were
available for the grant of future awards under the Plan. Furthermore, the Board
believes that the continued grant of options, as well as grants of restricted
stock awards, will be an important factor in attracting and retaining talented
personnel who are expected to contribute to the growth and success of the
Company. The Company's management relies on the grant of stock options as an
essential component of the total compensation packages necessary to attract and
retain highly-qualified officers and employees. The Board determined that the
amendment to the Plan was necessary to ensure that a sufficient number of shares
of Common Stock would be available for issuance upon the exercise of outstanding
and future awards under the Plan.
ADOPTION OF THE PLAN
The Company adopted the Plan in May 2000. The purpose of the Plan is to
provide qualifying employees (including officers and directors), independent
directors and consultants with equity ownership in the Company, thereby
strengthening their commitment to the success of the Company, promoting the
identity of interests between the Company's stockholders and such employees,
independent directors and consultants and stimulating their efforts on behalf of
the Company, and to assist the Company in attracting and retaining talented
personnel. The Plan provides for the grant of "incentive stock options" within
the meaning of Section 422 of the Internal Revenue Code of 1986, as amended,
non-statutory stock options, stock appreciation rights and restricted stock
awards. The Plan has a term of ten (10) years. As of the Record Date, the
approximate number of persons eligible to participate in the Plan was 168. The
following is a brief summary of the Plan and is qualified in its entirety by the
full text of the Plan.
TERMS OF THE PLAN
Under the Plan, the exercise price for non-statutory stock options may
be equal to or more or less than one hundred percent (100%) of the fair market
value of shares of Common Stock on the date of grant. The exercise price for
incentive stock options may not be less than one hundred percent (100%) of the
fair market value of shares of Common Stock on the date of grant (one hundred
ten percent (110%) of fair market value in the case of incentive stock options
granted to employees who hold more than ten percent (10%) of the voting power of
the Company's issued and outstanding shares of Common Stock). Options granted
under the Plan may not have a term of more than ten (10) years (five (5) years
in the case of incentive stock options granted to employees who hold more than
ten percent (10%) of the voting power of the Common Stock) and generally vest
over a three-year period. Options generally terminate three (3) months after the
optionee's termination of employment by the Company for any reason other than
death, disability or retirement, and are not transferable by the optionee other
than by will or the laws of descent and distribution.
The Plan also provides for grants of stock appreciation rights
("SARs"), which entitle a participant to receive a cash payment, equal to the
difference between the fair market value of a share of Common Stock on the
exercise date and the exercise price of SAR. The exercise price of any SAR
granted under the Plan will be determined by the Board in its discretion at the
time of the grant. SARs granted under the Plan may not be exercisable for more
than a ten-year period. SARs generally terminate one month after the grantee's
termination of employment by the Company for any reason other than death,
disability or retirement.
Restricted stock awards, which are grants of shares of Common Stock
that are subject to a restricted period during which such shares may not be
sold, assigned, transferred, made subject to a gift, or otherwise disposed of,
or mortgaged, pledged or otherwise encumbered, may also be made under the Plan.
ADMINISTRATION OF THE PLAN
The Plan is administered by the Board. The Board will have full
authority, in its sole discretion, to interpret the Plan, to establish from time
to time regulations for the administration of the Plan and to determine when and
to whom awards under the Plan will be granted and the timing and terms of the
exercisability and the vesting of any such award. The Board may delegate all or
part of its authority to administer the Plan to a committee appointed by the
Board and consisting of not less than two (2) members thereof. No director may
serve as a member of such committee unless such director is a "disinterested
person" within the meaning of Rule 16(b)(3) under the Exchange Act.
AMENDMENT OF THE PLAN
The Board may from time to time, in its discretion, amend the Plan
without the approval of the Company's stockholders, except (a) as such
stockholder approval may be required under the listing requirements of any
securities exchange or national market system on which are listed the Company's
equity securities and (b) that the Board may not, without the approval of the
Company's stockholders, amend the Plan to increase the total number of shares
reserved for the purposes of the Plan (other than to reflect a stock
combination, reverse stock split and the like). The Plan shall remain in effect
until the earlier of its termination by the Board or the date on which all of
the shares of Common Stock available for issuance under the Plan have been
issued and all restrictions on such shares under the terms of the
Plan and the agreements evidencing any awards have lapsed. All awards under the
Plan shall be made within ten (10) years from the date the Plan was adopted. The
termination of the Plan shall not affect any award then outstanding under the
Plan.
EFFECT OF THE REVERSE STOCK SPLIT
Upon the effectiveness of the reverse stock split (as discussed in Item
1 of this Information Statement), the aggregate number of shares of Common Stock
available for issuance under the Plan will be adjusted to a number of shares
equal to 22,625,000 shares divided by the Exchange Number. Furthermore, any
outstanding rights to acquire shares of Common Stock pursuant to any award under
the Plan will entitle the holder to acquire a number of shares of Common Stock
equal to the number of shares that the holder was entitled to acquire prior to
the reverse stock split divided by the Exchange Number, at the exercise price in
effect immediately prior to the reverse stock split multiplied by the Exchange
Number.
FEDERAL INCOME TAX CONSEQUENCES
The Company has been advised that incentive stock options,
non-qualified stock options and stock appreciation rights granted under the Plan
are subject to the following Federal income tax treatment:
INCENTIVE STOCK OPTIONS. An employee will recognize no taxable income
and no deduction is available to the Company upon either the grant or exercise
of an incentive stock option.
In general, if Common Stock acquired upon the exercise of an incentive
stock option is subsequently sold, the realized gain or loss, if any, will be
measured by the difference between the exercise price of the option and the
amount realized on the sale. Any such gain or loss on the sale will generally be
treated as long-term capital gain or loss if the holding period requirements
have been satisfied. The holding period requirements will be satisfied if the
shares are not sold within two (2) years of the date of grant of the option
pursuant to which such shares were transferred or within the one-year period
beginning on the day of the transfer of such shares pursuant to the exercise of
the option.
If Common Stock acquired upon the exercise of an incentive stock option
is subsequently sold and the holding period requirements noted above are not
satisfied (a "disqualifying disposition"), the employee will recognize ordinary
income for the year in which the disqualifying disposition occurs in an amount
equal to the excess of the fair market value of such Common Stock on the date
the option was exercised (or, if lower, the amount realized on the sale) over
the exercise price of the option. Any additional gain recognized on the sale
will be a capital gain, and will be long-term or short-term depending upon
whether the sale occurs more than one year after the date of exercise. The
amount recognized by the employee as ordinary income will be treated as
compensation and the Company will receive a corresponding deduction. The Company
may be required to withhold additional taxes from the wages of the employee with
respect to the amount of ordinary income taxable to the employee.
The excess of the fair market value of the Common Stock acquired by
exercise of an incentive stock option (determined on the date of exercise) over
the exercise price is in effect an item of tax preference, which must be taken
into account for purposes of calculating the "alternative minimum tax" of
Section 55 of the Code. If a disqualifying disposition is made of such Common
Stock, however, during the same year acquired, there will be no tax preference
item for alternative minimum tax purposes.
NON-QUALIFIED STOCK OPTIONS AND STOCK APPRECIATION RIGHTS.
Non-qualified stock options granted under the Plan do not result in any income
to the optionee at the time of grant or any tax deduction to the Company at that
time. Except as stated below with respect to officers, upon exercise of a
non-qualified option, the excess of the fair market value of the Common Stock
acquired (determined at the time of exercise) over its cost to the optionee (i)
is taxable to the optionee as ordinary income and (ii) is deductible by the
Company, subject to general rules relating to the reasonableness of
compensation; and the optionee's tax basis for the shares is the fair market
value at the time of exercise.
Gain or loss recognized upon disposition of shares acquired pursuant to
the exercise of a non-qualified option will generally be reportable as short or
long-term gain or loss depending on the length of time the shares were held by
the optionee as of the date of disposition.
The exercise of a stock appreciation right by an employee results in
taxable compensation to such employee in the amount of the cash received plus an
amount equal to the fair market value (determined at the time of exercise) of
any shares received.
The Company believes that compensation received by participants on the
exercise of nonqualified stock options or the disposition of shares acquired
upon the exercise of incentive stock options will be considered
performance-based compensation and thus not subject to the $1,000,000 limit of
Section 162(m) of the Code.
RESTRICTED STOCK AWARDS. Recipients of restricted Common Stock awards
under the Plan generally will not recognize taxable income upon the grant,
unless the recipient makes an election under Section 83(b) of the Code (an
"83(b) Election"). If an 83(b) Election is made within thirty (30) days of the
date of grant, the recipient will recognize ordinary income, for the year the
award is granted, in an amount equal to the difference between the fair market
value of the shares received (determined on the date of the grant) over the
purchase price. If an 83(b) Election is not made, then the recipient will
recognize ordinary income, at the time that the forfeiture provisions or
restrictions on transfer lapse, in an amount equal to the difference between the
fair market value of the Common Stock at the time of such lapse and the original
purchase price paid for the Common Stock. The tax basis in the Common Stock
acquired is equal to the sum of the price paid and the amount of ordinary income
recognized. Upon the disposition of the Common Stock acquired pursuant to a
restricted stock award, a capital gain or loss will be recognized equal to the
difference between the sale price of the Common Stock and the basis in the
Common Stock. The capital gain or loss will be a long-term capital gain or loss
if the shares are held for more than one year.
NEW PLAN BENEFITS
Since the granting of new awards under the Plan is discretionary, the
Company cannot now determine the number of options or other awards (or the value
thereof) to be granted in the future to any particular person or group of
persons.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Information with respect to plan and non-plan compensation paid to the
Company's executive officers and directors, is incorporated herein by reference
to Item 10 of Part III of the Company's Annual Report on Form 10-KSB for the
year ended December 31, 2004, as filed with the Securities and Exchange
Commission on April 6, 2005.
PRINCIPAL STOCKHOLDERS AND SECURITY OWNERSHIP OF MANAGEMENT
Information with respect to the securities holdings of the Company's
directors and executive officers and all persons which the Company has reason to
believe may be deemed the beneficial owners of more than 5% of its outstanding
Common Stock is incorporated herein by reference to Item 11 of Part III of the
Company's Annual Report on Form 10-KSB for the year ended December 31, 2004, as
filed with the Securities and Exchange Commission on April 6, 2005.
INTEREST OF CERTAIN PERSONS IN OR OPPOSITION TO
MATTERS TO BE ACTED UPON
The security holdings of the Company's directors and executive officers
are listed above in the section entitled "Principal Stockholders and Security
Ownership of Management." Except as disclosed above, none of the following
persons has any substantial interest, direct or indirect, by security holdings
or otherwise, in any matter to be acted upon:
(i) Any director or officer since the beginning of the Company's last
fiscal year;
(ii) Any proposed nominee for election as a director; or
(iii) Any associate or affiliate of any of the foregoing persons.
FINANCIAL AND OTHER INFORMATION
The following information contained in the Company's Annual Report on
Form 10-KSB for the year ended December 31, 2004, as filed with the Securities
and Exchange Commission on April 6, 2005 is incorporated herein by reference:
(i) the Company's audited financial statements for the years ended December 31,
2004 and 2003 and (ii) the section entitled "Management's Discussion and
Analysis or Plan of Operation" set forth in Item 6 of Part II thereof.
DELIVERY OF DOCUMENTS TO SECURITY HOLDERS SHARING AN ADDRESS
One Information Statement will be delivered to multiple stockholders
sharing an address unless the Company receives contrary instructions from one or
more of the stockholders sharing such address. Upon receipt of such notice, the
Company will undertake to promptly deliver a separate copy of the Information
Statement to the stockholder at the shared address to which a single copy of the
Information Statement was delivered and provide instructions as to how the
stockholder can notify us that the stockholder wishes to receive a separate copy
of this Information Statement or other communications to the stockholder in the
future. In the event a stockholder desires to provide us with such notice, it
may be given verbally by telephoning the Company's offices at (303) 440-7930 or
by mail to the Company's address at 1140 Pearl Street, Boulder, Colorado 80302,
Attn: Secretary.
INCORPORATION BY REFERENCE
This Information Statement incorporates by reference certain
information contained in the Company's Annual Report on Form 10-KSB for its
fiscal year ended December 31, 2004, as filed with the Securities and Exchange
Commission on April 6, 2005, a copy of which is enclosed herewith.
ADDITIONAL INFORMATION
The Company files annual and quarterly reports, proxy statements, and
other reports and information electronically with the Securities and Exchange
Commission. The Company's filings are available through the Commission's website
at the following address: http://www.sec.gov.
By Order of the Board of Directors,
/s/ THOMAS P. SWEENEY III
THOMAS P. SWEENEY III
CHIEF EXECUTIVE OFFICER
Date: May 5, 2005
EXHIBIT A
CERTIFICATE OF AMENDMENT TO THE
ARTICLES OF INCORPORATION
OF INCENTRA SOLUTIONS, INC.
The undersigned officer of Incentra Solutions, Inc. does hereby certify that:
1. The name of the corporation for which this Certificate of Amendment
to the Articles of Incorporation is being filed is Incentra Solutions, Inc. (the
"Corporation").
2. The original Articles of Incorporation of the Corporation, as
subsequently amended, were filed on September 4, 1996 (the "Articles of
Incorporation").
3. The Articles of Incorporation of the Corporation shall be amended as
follows:
A. Article IV is amended to add a new subparagraph (c) as
follows:
(c) On the date that this Certificate of Amendment is
filed with the Secretary of State of the State of
Nevada (the "Effective Date"), every ten 10) shares of
common stock, par value $.001 per share (the "Common
Stock"), of the Corporation issued and outstanding at
the close of business on the Effective Date (the "Old
Shares") will automatically be converted into one
share of Common Stock (the "New Shares") of the
Corporation. No fractional shares will be issued and,
in lieu thereof, each holder of Common Stock whose
aggregate shares of Old Shares held in one name or
account immediately prior to the Effective Date are
fewer than ten (10) shares or not evenly divisible by
ten (10) shall receive one full share of New Shares in
exchange for such fractional share.
4. This Certificate of Amendment to the Articles of Incorporation has
been approved by the Board of Directors of the Corporation and by more than a
majority of the outstanding stockholders of the Corporation. The number of
shares entitled to vote on this Certificate of Amendment was 175,389,410 and the
number of shares that voted in favor of this Certificate of Amendment was
107,052,776.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]
IN WITNESS WHEREOF, the undersigned officer of the Corporation has hereunto set
his hands this ___ day of May 2005.
----------------------------------
Name: Thomas P. Sweeney III
Title: Chief Executive Officer
STATE OF COLORADO )
) ss.:
COUNTY OF BOULDER )
On the ___ day of May 2005 personally appeared, to me Thomas P. Sweeney III who,
being duly sworn, did depose and say that he is the Chief Executive Officer of
Incentra Solutions, Inc., a Nevada corporation, and which executed the foregoing
Certificate of Amendment to the Articles of Incorporated and that he executed
the same by authority of the Board of Directors and a vote by more than a
majority of the outstanding stockholders of Incentra Solutions, Inc.
---------------------------------------------
Signature of Notary Public
---------------------------------------------
(Notary Seal) (Print, Type or Stamp Commissioned Name
of Notary Public)
EXHIBIT B
AMENDMENT NO. 1 TO THE FRONT PORCH DIGITAL INC.
2000 EQUITY INCENTIVE PLAN
This Amendment No. 1 (the "AMENDMENT") to the Front Porch Digital
Inc. 2000 Equity Incentive Plan (the "PLAN") is made, effective as of the
Effective Date (as defined below), by Incentra Solutions, Inc., a Nevada
corporation (the "COMPANY"). Capitalized terms used herein and not otherwise
defined herein shall have the meanings specified, or ascribed thereto by
reference, in the Plan.
W I T N E S S E T H
WHEREAS, on October 25, 2004, the Company changed its corporate name
from "Front Porch Digital Inc." to "Incentra Solutions, Inc."; and
WHEREAS, on August 16, 2004 and April 1, 2005, respectively, the Board
of Directors and the holders of a majority of the outstanding shares of common
stock of the Company (including the holders of not less than 80% of the
Company's outstanding Series A preferred stock) approved an amendment to the
Plan to increase the maximum number of shares of the Company's common stock
available for issuance thereunder from 6,000,000 shares to 22,625,000 shares;
and
NOW, THEREFORE, in consideration of the premises, the Plan is hereby
amended as follows:
1. All references in the Plan to "Front Porch Digital Inc." are hereby
deleted and replaced with "Incentra Solutions, Inc."
2. Paragraph 2 (Scope of the Plan) of the Plan is by hereby amended to
provide that the total number of Shares for which grants under the Plan shall be
available is 22,625,000.
3. Except as specifically amended above, the Plan and all provisions
thereof shall remain in full force and effect and are hereby ratified and
confirmed.
4. This Amendment shall become effective on the date (the "Effective
Date") which is twenty (20) days after the mailing of an Information Statement
to the stockholders of the Company in accordance with Section 14(c) of the
Securities Exchange Act of 1934, as amended.
5. Upon the effectiveness of this Amendment, on and after the date
hereof, each reference in the Plan to "the Plan", "hereunder", "hereof",
"herein" shall mean and be a reference to the Plan as amended hereby.
6. This Amendment shall be governed by and construed in accordance with
the laws of the State of Nevada.