EXHIBIT 10.3
THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS. THIS NOTE AND THE COMMON SHARES ISSUABLE UPON CONVERSION OF
THIS NOTE MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT AS TO THIS NOTE UNDER SAID ACT
AND ANY APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO INCENTRA SOLUTIONS, INC. (F/K/A FRONT PORCH DIGITAL, INC.) THAT
SUCH REGISTRATION IS NOT REQUIRED.
SECURED CONVERTIBLE MINIMUM BORROWING NOTE
FOR VALUE RECEIVED, each of INCENTRA SOLUTIONS, INC. (f/k/a
Front Porch Digital, Inc.), a Nevada corporation (the "PARENT"), and the other
companies listed on EXHIBIT A attached hereto (such other companies together
with the Parent, each a "COMPANY" and collectively, the "COMPANIES"), jointly
and severally, promises to pay to LAURUS MASTER FUND, LTD., c/o M&C Corporate
Services Limited, P.O. Box 309 GT, Ugland House, South Church Street, George
Town, Grand Cayman, Cayman Islands, Fax: 345-949-8080 (the "HOLDER") or its
registered assigns or successors in interest, the sum of Three Million Dollars
($3,000,000), or, if different, the aggregate principal amount of all Loans (as
defined in the Security Agreement referred to below), together with any accrued
and unpaid interest hereon, on June 30, 2008 (the "MATURITY DATE") if not sooner
paid.
Capitalized terms used herein without definition shall have
the meanings ascribed to such terms in the Security Agreement among the
Companies and the Holder dated as of the date hereof (as amended, modified
and/or supplemented from time to time, the "SECURITY AGREEMENT").
The following terms shall apply to this Minimum Borrowing Note
(this "NOTE"):
ARTICLE I
CONTRACT RATE
1.1 CONTRACT RATE. Subject to Sections 4.2 and 5.10, interest
payable on the outstanding principal amount of this Note (the "PRINCIPAL
AMOUNT") shall accrue at a rate per annum equal to the "prime rate" published in
THE WALL STREET JOURNAL from time to time (the "PRIME RATE"), plus one percent
(1.0%) (the "CONTRACT RATE"). The Contract Rate shall be increased or decreased
as the case may be for each increase or decrease in the Prime Rate in an amount
equal to such increase or decrease in the Prime Rate; each change to be
effective as of the day of the change in the Prime Rate. Subject to Section 1.2,
the Contract Rate shall not at any time be less than seven percent (7.0%).
Interest shall be (i) calculated on the basis of a 360 day year, and (ii)
payable monthly, in arrears, commencing on August 1, 2005 on the first business
day of each consecutive calendar month thereafter through and including the
Maturity Date and on the Maturity Date, whether by acceleration or otherwise.
1.2 CONTRACT RATE ADJUSTMENTS AND PAYMENTS. The Contract Rate
shall be calculated on the last business day of each calendar month hereafter
(other than for increases or decreases in the Prime Rate which shall be
calculated and become effective in accordance with the terms of Section 1.1)
until the Maturity Date (each a "DETERMINATION DATE") and shall be subject to
adjustment as set forth herein. If (i) the Parent shall have registered the
shares of the Common Stock underlying the conversion of each Minimum Borrowing
Note and each Warrant on a registration statement declared effective by the
Securities and Exchange Commission (the "SEC"), and (ii) the market price (the
"MARKET PRICE") of the Common Stock as reported by Bloomberg, L.P. on the
Principal Market for the five (5) trading days immediately preceding a
Determination Date exceeds the then applicable Fixed Conversion Price by at
least twenty-five percent (25%), the Contract Rate for the succeeding calendar
month shall automatically be reduced by 200 basis points (200 b.p.) (2%) for
each incremental twenty-five percent (25%) increase in the Market Price of the
Common Stock above the then applicable Fixed Conversion Price. If (i) the Parent
shall not have registered the shares of the Common Stock underlying the
conversion of each Minimum Borrowing Note and each Warrant on a registration
statement declared effective by the SEC and which remains effective, and (ii)
the Market Price of the Common Stock as reported by Bloomberg, L.P. on the
principal market for the five (5) trading days immediately preceding a
Determination Date exceeds the then applicable Fixed Conversion Price by at
least twenty-five percent (25%), the Contract Rate for the succeeding calendar
month shall automatically be decreased by 100 basis points (100 b.p.) (1%) for
each incremental twenty-five percent (25%) increase in the Market Price of the
Common Stock above the then applicable Fixed Conversion Price. Notwithstanding
the foregoing (and anything to the contrary contained herein), in no event shall
the Contract Rate at any time be less than zero percent (0%).
ARTICLE II
LOANS; PAYMENTS UNDER THIS NOTE
2.1 LOANS. All Loans evidenced by this Note shall be made in
accordance with the terms and provisions of the Security Agreement.
2.2 NO EFFECTIVE REGISTRATION. Notwithstanding anything to the
contrary herein, the Holder shall not be required to accept shares of Common
Stock as payment following a conversion by the Holder if there fails to exist an
effective current Registration Statement (as defined in the Registration Rights
Agreement) covering the shares of Common Stock to be issued, or if an Event of
Default hereunder exists and is continuing, unless such requirement is otherwise
waived in writing by the Holder in whole or in part at the Holder's option.
2.3 OPTIONAL REDEMPTION IN CASH. The Companies will have the
option of prepaying this Note ("OPTIONAL REDEMPTION") by paying to the Holder a
sum of money equal to one hundred twenty five percent (125%) of the principal
amount of this Note together with accrued but unpaid interest thereon and any
and all other sums due, accrued or payable to the Holder arising under this
Note, the Security Agreement, or any other Ancillary Agreement (the "REDEMPTION
AMOUNT") outstanding on the Redemption Payment Date (as defined below). The
Company shall deliver to the Holder a written notice of redemption (the "NOTICE
OF REDEMPTION") specifying the date for such Optional Redemption (the
"REDEMPTION PAYMENT DATE"), which date shall be ten (10) days after the date of
the Notice of Redemption (the "REDEMPTION PERIOD"). A Notice of Redemption shall
not be effective with respect to any
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portion of this Note for which the Holder has previously delivered a Notice of
Conversion (defined below) pursuant to Section 3.1, or for conversions elected
to be made by the Holder pursuant to Section 3.1 during the Redemption Period.
The Redemption Amount shall be determined as if such Holder's conversion
elections had been completed immediately prior to the date of the Notice of
Redemption. On the Redemption Payment Date, the Redemption Amount (plus any
additional interest and fees accruing on the Notes during the Redemption Period)
must be irrevocably paid in full in immediately available funds to the Holder.
In the event the Companies fail to pay the Redemption Amount on the Redemption
Payment Date, then such Redemption Notice shall be null and void.
ARTICLE III
CONVERSION RIGHTS AND FIXED CONVERSION PRICE
3.1 (a) OPTIONAL CONVERSION. Subject to the terms of this
Article III, the Holder shall have the right, but not the obligation, at any
time until the Maturity Date, or during an Event of Default (as defined in
Article IV), and, subject to the limitations set forth in Section 3.2 hereof, to
convert all or any portion of the outstanding Principal Amount and/or accrued
interest and fees due and payable into fully paid and nonassessable shares of
the Common Stock at the Fixed Conversion Price. For purposes hereof, subject to
Section 3.6 hereof, the initial "FIXED CONVERSION PRICE" means $2.05 which has
been determined on the date of this Note as an amount equal to one hundred
twenty percent (120%) of the average closing price of the Common Stock for the
ten (10) trading days immediately prior to the date of this Note; but in no
event shall the initial Fixed Conversion Price exceed one hundred twenty five
percent (125%) of the closing price of the Common Stock on the date hereof. The
shares of Common Stock to be issued upon such conversion are herein referred to
as the "CONVERSION SHARES."
3.1(b) CONVERSION Priority. Before any Conversion Shares are
issued pursuant hereto, if the provisions contained in Section 2.1 of the Term
Note dated as of May 13, 2004 issued by Company to the Holder, shall require the
Holder to make conversions as set forth therein, the Holder shall convert,
subject to all of the terms and conditions thereof, such outstanding principal
amount and/or accrued interest and fees due and payable in connection with the
Term Note (as defined in the Purchase Agreement). Otherwise the Holder may make
conversions under this Minimum Borrowing Note, subject to the terms and
conditions otherwise contained herein.
3.2 CONVERSION LIMITATION. Notwithstanding anything contained
herein to the contrary, the Holder shall not be entitled to convert pursuant to
the terms of this Note an amount that would be convertible into that number of
Conversion Shares which would exceed the difference between (i) 4.99% of the
issued and outstanding shares of Common Stock and (ii) the number of shares of
Common Stock beneficially owned by the Holder. For purposes of the immediately
preceding sentence, beneficial ownership shall be determined in accordance with
Section 13(d) of the Exchange Act and Regulation 13d-3 thereunder. The
Conversion Shares limitation described in this Section 3.2 shall automatically
become null and void following notice to any Company upon the occurrence and
during the continuance of an Event of Default, or upon 75 days prior notice to
the Parent. Notwithstanding anything contained herein to the contrary, the
provisions of this Section 3.2 are irrevocable and may not be waived by the
Holder or any Company.
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3.3 MECHANICS OF HOLDER'S CONVERSION. In the event that the
Holder elects to convert this Note into Common Stock, the Holder shall give
notice of such election by delivering an executed and completed notice of
conversion in substantially the form of Exhibit A hereto (appropriately
completed) ("NOTICE OF CONVERSION") to the Parent and such Notice of Conversion
shall provide a breakdown in reasonable detail of the Principal Amount, accrued
interest and fees that are being converted. On each Conversion Date (as
hereinafter defined) and in accordance with its Notice of Conversion, the Holder
shall make the appropriate reduction to the Principal Amount, accrued interest
and fees as entered in its records and shall provide written notice thereof to
the Parent within two (2) Business Days after the Conversion Date. Each date on
which a Notice of Conversion is delivered or telecopied to the Parent in
accordance with the provisions hereof shall be deemed a Conversion Date (the
"CONVERSION DATE"). Pursuant to the terms of the Notice of Conversion, the
Parent will issue instructions to the transfer agent accompanied by an opinion
of counsel within two (2) Business Day of the date of the delivery to the Parent
of the Notice of Conversion and shall cause the transfer agent to transmit the
certificates representing the Conversion Shares to the Holder by crediting the
account of the Holder's designated broker with the Depository Trust Corporation
("DTC") through its Deposit Withdrawal Agent Commission ("DWAC") system within
three (3) Business Days after receipt by the Parent of the Notice of Conversion
(the "DELIVERY DATE"). In the case of the exercise of the conversion rights set
forth herein the conversion privilege shall be deemed to have been exercised and
the Conversion Shares issuable upon such conversion shall be deemed to have been
issued upon the date of receipt by the Parent of the Notice of Conversion. The
Holder shall be treated for all purposes as the record holder of the Conversion
Shares, unless the Holder provides the Parent written instructions to the
contrary.
3.4 LATE PAYMENTS. Each Company understands that a delay in
the delivery of the Conversion Shares in the form required pursuant to this
Article beyond the Delivery Date could result in economic loss to the Holder. As
compensation to the Holder for such loss, in addition to all other rights and
remedies which the Holder may have under this Note, applicable law or otherwise,
the Companies shall, jointly and severally, pay late payments to the Holder for
any late issuance of Conversion Shares in the form required pursuant to this
Article III upon conversion of this Note, in the amount equal to $150 per
Business Day after the Delivery Date. The Companies shall, jointly and
severally, make any payments incurred under this Section in immediately
available funds upon demand.
3.5 CONVERSION MECHANICS. The number of shares of Common Stock
to be issued upon each conversion of this Note shall be determined by dividing
that portion of the principal and interest and fees to be converted, if any, by
the then applicable Fixed Conversion Price.
3.6 ADJUSTMENT PROVISIONS. The Fixed Conversion Price and
number and kind of shares or other securities to be issued upon conversion
determined pursuant to Section 3.1 shall be subject to adjustment from time to
time upon the occurrence of certain events during the period that this
conversion right remains outstanding, as follows:
(a) RECLASSIFICATION. If the Parent at any time
shall, by reclassification or otherwise, change the Common Stock into the same
or a different number of securities of any class or classes, this Note, as to
the unpaid Principal Amount and accrued interest thereon, shall
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thereafter be deemed to evidence the right to purchase an adjusted number of
such securities and kind of securities as would have been issuable as the result
of such change with respect to the Common Stock (i) immediately prior to or (ii)
immediately after such reclassification or other change at the sole election of
the Holder.
(b) STOCK SPLITS, COMBINATIONS AND DIVIDENDS. If the
shares of Common Stock are subdivided or combined into a greater or smaller
number of shares of Common Stock, or if a dividend is paid on the Common Stock
or any preferred stock issued by the Parent in shares of Common Stock, the Fixed
Conversion Price shall be proportionately reduced in case of subdivision of
shares or stock dividend or proportionately increased in the case of combination
of shares, in each such case by the ratio which the total number of shares of
Common Stock outstanding immediately after such event bears to the total number
of shares of Common Stock outstanding immediately prior to such event.
(c) SHARE ISSUANCES. Subject to the provisions of
this Section 3.6, if the Parent shall at any time prior to the conversion or
repayment in full of the Principal Amount issue any shares of Common Stock or
securities convertible into Common Stock to a person other than the Holder
(except (i) pursuant to Sections 3.6(a) or (b) above; (ii) pursuant to options,
warrants, or other obligations to issue shares outstanding on the date hereof as
disclosed to the Holder in writing; or (iii) pursuant to options that may be
issued under any employee incentive stock option and/or any qualified stock
option plan adopted by the Parent) for a consideration per share (the "OFFER
PRICE") less than the Fixed Conversion Price in effect at the time of such
issuance, then the Fixed Conversion Price shall be immediately reset to such
lower Offer Price. For purposes hereof, the issuance of any security of the
Parent convertible into or exercisable or exchangeable for Common Stock shall
result in an adjustment to the Fixed Conversion Price upon the issuance of such
securities.
(d) COMPUTATION OF CONSIDERATION. For purposes of any
computation respecting consideration received pursuant to Section 3.6(c) above,
the following shall apply:
(i) in the case of the issuance of shares of
Common Stock for cash, the consideration shall be the amount of such
cash, provided that in no case shall any deduction be made for any
commissions, discounts or other expenses incurred by the Parent for any
underwriting of the issue or otherwise in connection therewith;
(ii) in the case of the issuance of shares
of Common Stock for a consideration in whole or in part other than
cash, the consideration other than cash shall be deemed to be the fair
market value thereof as determined in good faith by the Board of
Directors of the Parent (irrespective of the accounting treatment
thereof); and
(iii) upon any such exercise, the aggregate
consideration received for such securities shall be deemed to be the
consideration received by the Parent for the issuance of such
securities plus the additional minimum consideration, if any, to be
received by the Parent upon the conversion or exchange thereof (the
consideration in each case to be determined in the same manner as
provided in subsections (i) and (ii) of this Section 2.5).
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3.7 RESERVATION OF SHARES. During the period the conversion
right exists, the Parent will reserve from its authorized and unissued Common
Stock a sufficient number of shares to provide for the issuance of Conversion
Shares upon the full conversion of this Note and the warrant. The Parent
represents that upon issuance, the Conversion Shares will be duly and validly
issued, fully paid and non-assessable. The Parent agrees that its issuance of
this Note shall constitute full authority to its officers, agents, and transfer
agents who are charged with the duty of executing and issuing stock certificates
to execute and issue the necessary certificates for the Conversion Shares upon
the conversion of this Note.
3.8 REGISTRATION RIGHTS. The Holder has been granted
registration rights with respect to the Conversion Shares as set forth in a
Registration Rights Agreement.
3.9 ISSUANCE OF NEW NOTE. Upon any partial conversion of this
Note, a new Note containing the same date and provisions of this Note shall, at
the request of the Holder, be issued by the Parent to the Holder for the
principal balance of this Note and interest which shall not have been converted
or paid. Subject to the provisions of Article IV of this Note, the Parent shall
not pay any costs, fees or any other consideration to the Holder for the
production and issuance of a new Note.
3.10 SUBSEQUENT MINIMUM BORROWING NOTE Pricing. The fixed
conversion price of each Unissued Serialized Note shall be set at one hundred
fifteen percent (115%) of the average closing price of the Common Stock for the
ten (10) trading days immediately prior to the date of issuance of such new
Serialized Minimum Borrowing Note.
ARTICLE IV
EVENTS OF DEFAULT AND DEFAULT RELATED PROVISIONS
4.1 EVENTS OF DEFAULT. The occurrence of an Event of Default
under the Security Agreement shall constitute an event of default ("EVENT OF
DEFAULT") hereunder.
4.2 DEFAULT INTEREST. Following the occurrence and during the
continuance of an Event of Default, the Companies shall, jointly and severally,
pay additional interest on the outstanding principal balance of this Note in an
amount equal to one and one half percent (1.5%) per month, and all outstanding
Obligations, including unpaid interest, shall continue to accrue interest at
such additional interest rate from the date of such Event of Default until the
date such Event of Default is cured or waived.
4.3 DEFAULT PAYMENT. Following the occurrence and during the
continuance of an Event of Default beyond any applicable grace period, the
Holder, at its option, within five (5) days after written notice from Holder to
Borrower elect, in addition to all rights and remedies of the Holder under the
Security Agreement and the Ancillary Agreements and all obligations of each
Company under the Security Agreement and the Ancillary Agreements, to require
the Companies, jointly and severally, to make a Default Payment ("DEFAULT
PAYMENT"). The Default Payment shall be one hundred twenty five percent (125%)
or, if after June __, 2007, one hundred fifteen percent (115%) of the
outstanding principal amount of the Note, plus accrued but unpaid interest, all
other fees then remaining unpaid, and all other amounts payable hereunder. The
Default Payment shall be applied first to any fees due and payable to the Holder
pursuant to
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the Notes and/or the Ancillary Agreements, then to accrued and unpaid interest
due on the Notes, the Security Agreement and then to the outstanding principal
balance of the Notes. The Default Payment shall be due and payable immediately
on the date that the Holder has exercised its rights pursuant to this Section
4.3.
ARTICLE V
MISCELLANEOUS
5.1 CONVERSION PRIVILEGES. The conversion privileges set forth
in Article III shall remain in full force and effect immediately from the date
hereof until the date this Note is indefeasibly paid in full and irrevocably
terminated.
5.2 CUMULATIVE REMEDIES. The remedies under this Note shall be
cumulative.
5.3 FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on
the part of the Holder hereof in the exercise of any power, right or privilege
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power, right or privilege preclude other or further
exercise thereof or of any other right, power or privilege. All rights and
remedies existing hereunder are cumulative to, and not exclusive of, any rights
or remedies otherwise available.
5.4 NOTICES. Any notice herein required or permitted to be
given shall be in writing and shall be deemed effectively given: (a) upon
personal delivery to the party notified, (b) when sent by confirmed telex or
facsimile if sent during normal business hours of the recipient, if not, then on
the next business day, (c) five days after having been sent by registered or
certified mail, return receipt requested, postage prepaid, or (d) one day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications shall be sent
to the respective Company at the addresses provided for such Company in the
Security Agreement executed in connection herewith, and to the Holder at the
address provided in the Security Agreement for such Holder, with a copy to John
E. Tucker, Esq., 825 Third Avenue, 14th Floor, New York, New York 10022,
facsimile number (212) 541-4434, or at such other address as the respective
Company or the Holder may designate by ten days advance written notice to the
other parties hereto.
5.5 AMENDMENT PROVISION. The term "Note" and all references
thereto, as used throughout this instrument, shall mean this instrument as
originally executed, or if later amended or supplemented, then as so amended or
supplemented, and any successor instrument as such successor instrument may be
amended or supplemented.
5.6 ASSIGNABILITY. This Note shall be binding upon each
Company and its successors and assigns, and shall inure to the benefit of the
Holder and its successors and assigns, and may be assigned by the Holder in
accordance with the requirements of the Security Agreement. No Company may
assign any of its obligations under this Note without the prior written consent
of the Holder, any such purported assignment without such consent being null and
void.
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5.7 COST OF COLLECTION. In case of any Event of Default under
this Note, the Companies shall, jointly and severally, pay the Holder's
reasonable costs of collection, including reasonable attorneys' fees.
5.8 GOVERNING LAW, JURISDICTION AND WAIVER OF JURY TRIAL.
(a) THIS NOTE SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO
PRINCIPLES OF CONFLICTS OF LAW.
(b) EACH COMPANY HEREBY CONSENTS AND AGREES THAT THE
STATE OR FEDERAL COURTS LOCATED IN THE COUNTY OF NEW YORK, STATE OF NEW YORK
SHALL HAVE EXCLUSIVE JURISDICTION TO HEAR AND DETERMINE ANY CLAIMS OR DISPUTES
BETWEEN ANY COMPANY, ON THE ONE HAND, AND THE HOLDER, ON THE OTHER HAND,
PERTAINING TO THIS NOTE, THE SECURITY AGREEMENT OR ANY OF THE OTHER ANCILLARY
AGREEMENTS OR TO ANY MATTER ARISING OUT OF OR RELATED TO THIS NOTE, THE SECURITY
AGREEMENT OR ANY OF THE OTHER ANCILLARY AGREEMENTS; PROVIDED, THAT EACH COMPANY
ACKNOWLEDGES THAT ANY APPEALS FROM THOSE COURTS MAY HAVE TO BE HEARD BY A COURT
LOCATED OUTSIDE OF THE COUNTY OF NEW YORK, STATE OF NEW YORK; AND FURTHER
PROVIDED, THAT NOTHING IN THIS NOTE SHALL BE DEEMED OR OPERATE TO PRECLUDE THE
HOLDER FROM BRINGING SUIT OR TAKING OTHER LEGAL ACTION IN ANY OTHER JURISDICTION
TO COLLECT THE OBLIGATIONS, TO REALIZE ON THE COLLATERAL OR ANY OTHER SECURITY
FOR THE OBLIGATIONS, OR TO ENFORCE A JUDGMENT OR OTHER COURT ORDER IN FAVOR OF
THE HOLDER. EACH COMPANY EXPRESSLY SUBMITS AND CONSENTS IN ADVANCE TO SUCH
JURISDICTION IN ANY ACTION OR SUIT COMMENCED IN ANY SUCH COURT, AND EACH COMPANY
HEREBY WAIVES ANY OBJECTION WHICH IT MAY HAVE BASED UPON LACK OF PERSONAL
JURISDICTION, IMPROPER VENUE OR FORUM NON CONVENIENS. EACH COMPANY HEREBY WAIVES
PERSONAL SERVICE OF THE SUMMONS, COMPLAINT AND OTHER PROCESS ISSUED IN ANY SUCH
ACTION OR SUIT AND AGREES THAT SERVICE OF SUCH SUMMONS, COMPLAINT AND OTHER
PROCESS MAY BE MADE BY REGISTERED OR CERTIFIED MAIL ADDRESSED TO THE COMPANY AT
THE ADDRESS SET FORTH IN THE SECURITY AGREEMENT AND THAT SERVICE SO MADE SHALL
BE DEEMED COMPLETED UPON THE EARLIER OF THE COMPANY'S ACTUAL RECEIPT THEREOF OR
THREE (3) DAYS AFTER DEPOSIT IN THE U.S. MAILS, PROPER POSTAGE PREPAID.
(c) EACH COMPANY DESIRES THAT ITS DISPUTES BE
RESOLVED BY A JUDGE APPLYING SUCH APPLICABLE LAWS. THEREFORE, TO ACHIEVE THE
BEST COMBINATION OF THE BENEFITS OF THE JUDICIAL SYSTEM AND OF ARBITRATION, EACH
COMPANY HERETO WAIVES ALL RIGHTS TO TRIAL BY JURY IN ANY ACTION, SUIT, OR
PROCEEDING BROUGHT TO RESOLVE ANY DISPUTE, WHETHER ARISING IN CONTRACT, TORT, OR
OTHERWISE BETWEEN THE HOLDER, AND/OR ANY COMPANY ARISING OUT OF, CONNECTED WITH,
RELATED OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THEM IN
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CONNECTION WITH THIS NOTE, THE SECURITY AGREEMENT, ANY OTHER ANCILLARY AGREEMENT
OR THE TRANSACTIONS RELATED HERETO OR THERETO.
5.9 SEVERABILITY. In the event that any provision of this Note
is invalid or unenforceable under any applicable statute or rule of law, then
such provision shall be deemed inoperative to the extent that it may conflict
therewith and shall be deemed modified to conform with such statute or rule of
law. Any such provision which may prove invalid or unenforceable under any law
shall not affect the validity or enforceability of any other provision of this
Note.
5.10 MAXIMUM PAYMENTS. Nothing contained herein shall be
deemed to establish or require the payment of a rate of interest or other
charges in excess of the maximum permitted by applicable law. In the event that
the rate of interest required to be paid or other charges hereunder exceed the
maximum rate permitted by such law, any payments in excess of such maximum rate
shall be credited against amounts owed by the Companies to the Holder and thus
refunded to the Companies.
5.11 SECURITY INTEREST AND GUARANTEE. The Holder has been
granted a security interest (i) in certain assets of the Companies as more fully
described in the Security Agreement and (ii) pursuant to the Stock Pledge
Agreement dated as of the date hereof. The obligations of the Companies under
this Note are guaranteed by certain Subsidiaries of the Companies pursuant to
the Subsidiary Guaranty dated as of the date hereof.
5.12 CONSTRUCTION. Each party acknowledges that its legal
counsel participated in the preparation of this Note and, therefore, stipulates
that the rule of construction that ambiguities are to be resolved against the
drafting party shall not be applied in the interpretation of this Note to favor
any party against the other.
[Balance of page intentionally left blank; signature page follows]
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IN WITNESS WHEREOF, each Company has caused this Secured
Convertible Minimum Borrowing Note to be signed in its name effective as of this
30th day of June 2005.
INCENTRA SOLUTIONS, INC. (F/K/A FRONT
PORCH DIGITAL, INC.)
By: /s/ Matthew Richman
-------------------------------------
Name: Matthew Richman
Title: Sr. Vice President & Treasurer
WITNESS:
/s/ Mindy Boatright
- ------------------------------
PWI TECHNOLOGIES, INC.
By: /s/ Matthew Richman
-------------------------------------
Name: Matthew Richman
Title: Secretary & Treasurer
WITNESS:
/s/ Mindy Boatright
- ------------------------------
STAR SOLUTIONS OF DELAWARE, INC.
By: /s/ Matthew Richman
-------------------------------------
Name: Matthew Richman
Title: Secretary & Treasurer
WITNESS:
/s/ Mindy Boatright
- ------------------------------
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EXHIBIT A
OTHER COMPANIES
PWI Technologies, Inc. a Washington corporation
Star Solutions of Delaware, Inc., a Delaware corporation
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EXHIBIT B
NOTICE OF CONVERSION
(To be executed by the Holder in order to convert the
Secured Convertible Minimum Borrowing Note)
The undersigned hereby elects to convert $_________ of the
principal and $_________ of the interest due on the Secured Convertible Minimum
Borrowing Note dated as of _________, 200__ (the "NOTE") issued by Incentra
Solutions, Inc. (f/k/a Front Porch Digital, Inc.) (the "PARENT") and the other
Companies named and as defined therein into shares of Common Stock of the Parent
in accordance with the terms and conditions set forth in the Note, as of the
date written below.
Date of Conversion: _____________________________________________________
Conversion Price: _____________________________________________________
Shares To Be Delivered: _____________________________________________________
Signature: _____________________________________________________
Print Name: _____________________________________________________
Address: _____________________________________________________
Holder DWAC instructions _____________________________________________________
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