Exhibit 10.6
THIS OPTION AND THE SHARES OF COMMON STOCK ISSUABLE UPON
EXERCISE OF THIS OPTION HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS. THIS OPTION AND THE COMMON STOCK ISSUABLE UPON EXERCISE OF
THIS OPTION MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT AS TO THIS OPTION UNDER SAID ACT AND ANY APPLICABLE
STATE SECURITIES LAWS OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO INCENTRA SOLUTIONS INC. THAT SUCH REGISTRATION
IS NOT REQUIRED.
Right to Purchase up to 1,071,428 Shares of Common Stock of
Incentra Solutions Inc.
(subject to adjustment as provided herein)
COMMON STOCK PURCHASE OPTION
No. _________________ Issue Date: February 6, 2006
INCENTRA SOLUTIONS INC. (f/k/a Front Porch Digital Inc.), a corporation
organized under the laws of the State of Nevada ("ICNS"), hereby certifies that,
for value received, LAURUS MASTER FUND, LTD., or assigns (the "Holder"), is
entitled, subject to the terms set forth below, to purchase from the Company (as
defined herein) from and after the Issue Date of this Option and at any time or
from time to time before 5:00 p.m., New York time, through the close of business
February 6, 2026 (the "Expiration Date"), up to 1,071,428 fully paid and
nonassessable shares of Common Stock (as hereinafter defined), at the applicable
Exercise Price (as defined below) per share. The number and character of such
shares of Common Stock and the applicable Exercise Price per share are subject
to adjustment as provided herein.
As used herein the following terms, unless the context otherwise
requires, have the following respective meanings:
(a) The term "Company" shall include ICNS and any
corporation which shall succeed, or assume the obligations of, ICNS
hereunder.
(b) The term "Common Stock" includes (i) the Company's
Common Stock, par value $0.001 per share; and (ii) any other securities
into which or for which any of the securities described in (a) may be
converted or exchanged pursuant to a plan of recapitalization,
reorganization, merger, sale of assets or otherwise.
(c) The term "Other Securities" refers to any stock (other
than Common Stock) and other securities of the Company or any other
person (corporate or otherwise) which the Holder of this Option at any
time shall be entitled to receive, or shall have received, on the
exercise of the Option, in lieu of or in addition to Common Stock, or
15
which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities
pursuant to Section 4 or otherwise.
(d) The "Exercise Price" applicable under this Option shall
be $.001.
1. EXERCISE OF OPTION.
1.1 NUMBER OF SHARES ISSUABLE UPON EXERCISE. From and after
the date hereof, the Holder shall be entitled to receive, upon exercise of this
Option in whole or in part, by delivery of an original or fax copy of an
exercise notice in the form attached hereto as Exhibit A (the "Exercise Notice")
up to 1,071,428 shares of Common Stock of the Company, subject to adjustment
pursuant to Section 4.
1.2 FAIR MARKET VALUE. For purposes hereof, the "Fair Market
Value" of a share of Common Stock as of a particular date (the "Determination
Date") shall mean:
(a) If the Company's Common Stock is traded on the American
Stock Exchange or another national exchange or is quoted on the National
or SmallCap Market of The Nasdaq Stock Market, Inc. ("Nasdaq"), then the
closing or last sale price, respectively, reported for the last business
day immediately preceding the Determination Date.
(b) If the Company's Common Stock is not traded on the
American Stock Exchange or another national exchange or on the Nasdaq
but is traded on the National Association of Securities Dealers, Inc.
Over-the-Counter Bulletin Board, then the mean of the average of the
closing bid and asked prices reported for the last business day
immediately preceding the Determination Date.
(c) Except as provided in clause (d) below, if the Company's
Common Stock is not publicly traded, then as the Holder and the Company
agree or in the absence of agreement by arbitration in accordance with
the rules then in effect of the American Arbitration Association, before
a single arbitrator to be chosen from a panel of persons qualified by
education and training to pass on the matter to be decided.
(d) If the Determination Date is the date of a liquidation,
dissolution or winding up, or any event deemed to be a liquidation,
dissolution or winding up pursuant to the Company's charter, then all
amounts to be payable per share to holders of the Common Stock pursuant
to the charter in the event of such liquidation, dissolution or winding
up, plus all other amounts to be payable per share in respect of the
Common Stock in liquidation under the charter, assuming for the purposes
of this clause (d) that all of the shares of Common Stock then issuable
upon exercise of the Option are outstanding at the Determination Date.
1.3 COMPANY ACKNOWLEDGMENT. The Company will, at the time of
the exercise of this Option, upon the request of the Holder hereof, acknowledge
in writing its continuing obligation to afford to such Holder any rights to
which such Holder shall continue to be entitled after such exercise in
accordance with the provisions of this Option. If the Holder
2
shall fail to make any such request, such failure shall not affect the
continuing obligation of the Company to afford to such Holder any such rights.
1.4 TRUSTEE FOR OPTION HOLDERS. In the event that a bank or
trust company shall have been appointed as trustee for the Holder of this Option
pursuant to Subsection 3.2, such bank or trust company shall have all the powers
and duties of an Option agent (as hereinafter described) and shall accept, in
its own name for the account of the Company or such successor person as may be
entitled thereto, all amounts otherwise payable to the Company or such
successor, as the case may be, on exercise of this Option pursuant to this
Section 1.
2. PROCEDURE FOR EXERCISE.
2.1 DELIVERY OF STOCK CERTIFICATES, ETC., ON EXERCISE. The
Company agrees that the shares of Common Stock purchased upon exercise of this
Option shall be deemed to be issued to the Holder as the record owner of such
shares as of the close of business on the date on which this Option shall have
been surrendered and payment made for such shares in accordance herewith. As
soon as practicable after the exercise of this Option in full or in part, and in
any event within three (3) business days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the Holder, or as such Holder (upon
payment by such Holder of any applicable transfer taxes) may direct in
compliance with applicable securities laws, a certificate or certificates for
the number of duly and validly issued, fully paid and nonassessable shares of
Common Stock (or Other Securities) to which such Holder shall be entitled on
such exercise, plus, in lieu of any fractional share to which such Holder would
otherwise be entitled, cash equal to such fraction multiplied by the then Fair
Market Value of one full share, together with any other stock or other
securities and property (including cash, where applicable) to which such Holder
is entitled upon such exercise pursuant to Section 1 or otherwise.
2.2 EXERCISE. Payment may be made either (i) in cash or by
certified or official bank check payable to the order of the Company equal to
the applicable aggregate Exercise Price, (ii) by delivery of this Option, or
shares of Common Stock and/or Common Stock receivable upon exercise of this
Option in accordance with Section (b) below, or (iii) by a combination of any of
the foregoing methods, for the number of Common Shares specified in such
Exercise Notice (as such exercise number shall be adjusted to reflect any
adjustment in the total number of shares of Common Stock issuable to the Holder
per the terms of this Option); provided, however, that if at the time of
delivery of an Exercise Notice the shares of Common Stock to be issued upon
payment of the Exercise Price have been registered under the Securities Act of
1933, as amended (the "Securities Act"), and are covered by an effective
registration statement under the Securities Act, payment of the Exercise Price
may only be made pursuant to clause (i) above and may not be made pursuant to
clause (ii) or (iii) above. Upon receipt by the Company of an Exercise Notice
and proper payment of the aggregate Exercise Price, the Holder shall thereupon
be entitled to receive the number of duly authorized, validly issued, fully-paid
and non-assessable shares of Common Stock (or Other Securities) determined as
provided herein. Notwithstanding any provisions herein to the contrary, if the
Fair Market Value of one share of Common Stock is greater than the Exercise
Price (at the date of calculation as set forth below), in lieu of exercising
this Option for cash, the Holder may elect to receive shares equal to the value
(as determined below) of this Option (or the portion thereof being exercised) by
3
surrender of this Option at the principal office of the Company together with
the properly endorsed Exercise Notice, in which event the Company shall issue to
the Holder a number of shares of Common Stock computed using the following
formula:
X=Y (A-B)
-----
A
Where X = the number of shares of Common Stock to be issued to the
Holder
Y = the number of shares of Common Stock purchasable under
this Option or, if only a portion of this Option is
being exercised, the portion of this Option being
exercised (at the date of such calculation)
A = the Fair Market Value of one share of the Company's
Common Stock (at the date of such calculation)
B = the Exercise Price (as adjusted to the date of such
calculation)
3. EFFECT OF REORGANIZATION, ETC.; ADJUSTMENT OF EXERCISE PRICE.
3.1 REORGANIZATION, CONSOLIDATION, MERGER, ETC. In case at
any time or from time to time, the Company shall (a) effect a reorganization,
(b) consolidate with or merge into any other person, or (c) transfer all or
substantially all of its properties or assets to any other person under any plan
or arrangement contemplating the dissolution of the Company, then, in each such
case, as a condition to the consummation of such a transaction, proper and
adequate provision shall be made by the Company whereby the Holder of this
Option, on the exercise hereof as provided in Section 1 at any time after the
consummation of such reorganization, consolidation or merger or the effective
date of such dissolution, as the case may be, shall receive, in lieu of the
Common Stock (or Other Securities) issuable on such exercise prior to such
consummation or such effective date, the stock and other securities and property
(including cash) to which such Holder would have been entitled upon such
consummation or in connection with such dissolution, as the case may be, if such
Holder had so exercised this Option, immediately prior thereto, all subject to
further adjustment thereafter as provided in Section 4.
3.2 DISSOLUTION. In the event of any dissolution of the
Company following the transfer of all or substantially all of its properties or
assets, the Company, concurrently with any distributions made to holders of its
Common Stock, shall at its expense deliver or cause to be delivered to the
Holder the stock and other securities and property (including cash, where
applicable) receivable by the Holder of this Option pursuant to Section 3.1, or,
if the Holder shall so instruct the Company, to a bank or trust company
specified by the Holder and having its principal office in New York, NY as
trustee for the Holder of this Option (the "Trustee").
3.3 CONTINUATION OF TERMS. Upon any reorganization,
consolidation, merger or transfer (and any dissolution following any transfer)
referred to in this Section 3, this Option shall continue in full force and
effect and the terms hereof shall be applicable to the shares of stock and other
securities and property receivable on the exercise of this Option after the
consummation of such reorganization, consolidation or merger or the effective
date of
4
dissolution following any such transfer, as the case may be, and shall be
binding upon the issuer of any such stock or other securities, including, in the
case of any such transfer, the person acquiring all or substantially all of the
properties or assets of the Company, whether or not such person shall have
expressly assumed the terms of this Option as provided in Section 4. In the
event this Option does not continue in full force and effect after the
consummation of the transactions described in this Section 3, then the Company's
securities and property (including cash, where applicable) receivable by the
Holders of the Option will be delivered to Holder or the Trustee as contemplated
by Section 3.2.
4. EXTRAORDINARY EVENTS REGARDING COMMON STOCK. In the event that the
Company shall (a) issue additional shares of the Common Stock as a
dividend or other distribution on outstanding Common Stock, (b)
subdivide its outstanding shares of Common Stock, or (c) combine its
outstanding shares of the Common Stock into a smaller number of shares
of the Common Stock, then, in each such event, the Exercise Price shall,
simultaneously with the happening of such event, be adjusted by
multiplying the then Exercise Price by a fraction, the numerator of
which shall be the number of shares of Common Stock outstanding
immediately prior to such event and the denominator of which shall be
the number of shares of Common Stock outstanding immediately after such
event, and the product so obtained shall thereafter be the Exercise
Price then in effect. The Exercise Price, as so adjusted, shall be
readjusted in the same manner upon the happening of any successive event
or events described herein in this Section 4. The number of shares of
Common Stock that the Holder of this Option shall thereafter, on the
exercise hereof as provided in Section 1, be entitled to receive shall
be increased to a number determined by multiplying the number of shares
of Common Stock that would otherwise (but for the provisions of this
Section 4) be issuable on such exercise by a fraction of which (a) the
numerator is the Exercise Price that would otherwise (but for the
provisions of this Section 4) be in effect, and (b) the denominator is
the Exercise Price in effect on the date of such exercise.
5. CERTIFICATE AS TO ADJUSTMENTS. In each case of any adjustment or
readjustment in the shares of Common Stock (or Other Securities)
issuable on the exercise of this Option, the Company at its expense will
promptly cause its Chief Financial Officer or other appropriate designee
to compute such adjustment or readjustment in accordance with the terms
of this Option and prepare a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based, including a statement of (a) the
consideration received or receivable by the Company for any additional
shares of Common Stock (or Other Securities) issued or sold or deemed to
have been issued or sold, (b) the number of shares of Common Stock (or
Other Securities) outstanding or deemed to be outstanding, and (c) the
Exercise Price and the number of shares of Common Stock to be received
upon exercise of this Option, in effect immediately prior to such
adjustment or readjustment and as adjusted or readjusted as provided in
this Option. The Company will forthwith mail a copy of each such
certificate to the Holder of this Option and any Option agent of the
Company (appointed pursuant to Section 11 hereof).
6. RESERVATION OF STOCK, ETC., ISSUABLE ON EXERCISE OF OPTION. The Company
will at all times reserve and keep available, solely for issuance and
delivery on the exercise of this
5
Option, shares of Common Stock (or Other Securities) from time to time
issuable on the exercise of this Option.
7. ASSIGNMENT; EXCHANGE OF OPTION. Subject to compliance with applicable
securities laws, this Option, and the rights evidenced hereby, may be
transferred by any registered holder hereof (a "Transferor") in whole or
in part. On the surrender for exchange of this Option, with the
Transferor's endorsement in the form of Exhibit B attached hereto (the
"Transferor Endorsement Form") and together with evidence reasonably
satisfactory to the Company demonstrating compliance with applicable
securities laws, which shall include, without limitation, the provision
of a legal opinion from the Transferor's counsel that such transfer is
exempt from the registration requirements of applicable securities laws,
and with payment by the Transferor of any applicable transfer taxes)
will issue and deliver to or on the order of the Transferor thereof a
new Option of like tenor, in the name of the Transferor and/or the
transferee(s) specified in such Transferor Endorsement Form (each a
"Transferee"), calling in the aggregate on the face or faces thereof for
the number of shares of Common Stock called for on the face or faces of
the Option so surrendered by the Transferor.
8. REPLACEMENT OF OPTION. On receipt of evidence reasonably satisfactory to
the Company of the loss, theft, destruction or mutilation of this Option
and, in the case of any such loss, theft or destruction of this Option,
on delivery of an indemnity agreement or security reasonably
satisfactory in form and amount to the Company or, in the case of any
such mutilation, on surrender and cancellation of this Option, the
Company at its expense will execute and deliver, in lieu thereof, a new
Option of like tenor.
9. REGISTRATION RIGHTS. The Holder of this Option has been granted certain
registration rights by the Company. These registration rights are set
forth in the Amended and Restated Registration Rights Agreement dated as
of February 1, 2006 entered into by the Company and the initial Holder
of this Option.
10. MAXIMUM EXERCISE. The Holder shall not be entitled to exercise this
Option on an exercise date, in connection with that number of shares of
Common Stock which would be in excess of the sum of (i) the number of
shares of Common Stock beneficially owned by the Holder and its
affiliates on such exercise date, and (ii) the number of shares of
Common Stock issuable upon the exercise of this Option with respect to
which the determination of this proviso is being made on such exercise
date, which would result in beneficial ownership by the Holder and its
affiliates of more than 4.99% of the outstanding shares of Common Stock
of the Company on such date. For the purposes of the proviso to the
immediately preceding sentence, beneficial ownership shall be determined
in accordance with Section 13(d) of the Securities Exchange Act of 1934,
as amended, and Regulation 13d-3 thereunder. Notwithstanding the
foregoing, the restriction described in this paragraph may be revoked
upon 75 days prior notice from the Holder to the Company and is
automatically null and void upon an Event of Default under the Note.
11. VOLUME LIMITATION. In consideration of the foregoing, and for other good
and valuable consideration receipt of which is hereby acknowledged,
assuming no Event of Default
6
shall exist (as defined in any of the Agreements), Laurus hereby agrees
that without the prior written consent of the Company, Laurus will not
sell any shares of Common Stock for which it has exercised this Option
during a twenty two (22) day trading period in a number that exceeds
thirty-five percent (35%) of the aggregate dollar trading volume of the
common stock of the Company for the twenty two (22) day trading period
immediately preceding such sales by Laurus. Such restriction shall not
in any way affect Laurus' right to exercise all or any portion of this
Option to purchase Common Stock issued by the Company and/or any
subsidiary thereof or to exercise or convert any of its other options,
warrants or convertible notes issued by the Company and/or any
subsidiary thereof.
12. OPTION AGENT. The Company may, by written notice to the Holder of this
Option, appoint an agent for the purpose of issuing Common Stock (or
Other Securities) on the exercise of this Option pursuant to Section 1,
exchanging this Option pursuant to Section 7, and replacing this Option
pursuant to Section 8, or any of the foregoing, and thereafter any such
issuance, exchange or replacement, as the case may be, shall be made at
such office by such agent.
13. TRANSFER ON THE COMPANY'S BOOKS. Until this Option is transferred on the
books of the Company, the Company may treat the registered Holder hereof
as the absolute owner hereof for all purposes, notwithstanding any
notice to the contrary.
14. NOTICES, ETC. All notices and other communications from the Company to
the Holder of this Option shall be mailed by first class registered or
certified mail, postage prepaid, at such address as may have been
furnished to the Company in writing by such Holder or, until any such
Holder furnishes to the Company an address, then to, and at the address
of, the last Holder of this Option who has so furnished an address to
the Company.
15. MISCELLANEOUS. This Option and any term hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or
termination is sought. This Option shall be governed by and construed in
accordance with the laws of State of New York without regard to
principles of conflicts of laws. Any action brought concerning the
transactions contemplated by this Option shall be brought only in the
state courts of New York or in the federal courts located in the state
of New York; provided, however, that the Holder may choose to waive this
provision and bring an action outside the State of New York. The
individuals executing this Option on behalf of the Company agree to
submit to the jurisdiction of such courts and waive trial by jury. In
the event that any provision of this Option 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 Option. The headings in this Option are for purposes
of reference only, and shall not limit or otherwise affect any of the
terms hereof. The invalidity or unenforceability of any provision hereof
shall in no way affect the validity or enforceability of any other
provision hereof. The Company acknowledges that legal counsel
participated in the preparation of this Option and, therefore,
stipulates that the rule of construction that ambiguities are to be
resolved
7
against the drafting party shall not be applied in the interpretation of
this Option to favor any party against the other party.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK;
SIGNATURE PAGE FOLLOWS.]
8
IN WITNESS WHEREOF, the Company has executed this Option as of the date
first written above.
INCENTRA SOLUTIONS INC.
WITNESS:
By: /s/ Thomas P. Sweeney, III
---------------------------------
Name: Thomas P. Sweeney, III
---------------------------------
Title: Chairman and CEO
- ------------------------------------- ---------------------------------
9
EXHIBIT A
FORM OF SUBSCRIPTION
(To Be Signed Only On Exercise Of Option)
TO: INCENTRA SOLUTIONS INC.
1140 Pearl Street
Boulder, CO 80302
Attention: Chief Financial Officer
The undersigned, pursuant to the provisions set forth in the attached
Option (No.____), hereby irrevocably elects to purchase (check applicable box):
_________ ________ shares of the Common Stock covered by such Option; or
_________ the maximum number of shares of Common Stock covered by such Option
pursuant to the cashless exercise procedure set forth in Section 2.
The undersigned herewith makes payment of the full Exercise Price for
such shares at the price per share provided for in such Option, which is
$___________. Such payment takes the form of (check applicable box or boxes):
_________ $__________ in lawful money of the United States; and/or
_________ the cancellation of such portion of the attached Option as is
exercisable for a total of _______ shares of Common Stock (using a
Fair Market Value of $_______ per share for purposes of this
calculation); and/or
_________ the cancellation of such number of shares of Common Stock as is
necessary, in accordance with the formula set forth in Section 2.2,
to exercise this Option with respect to the maximum number of shares
of Common Stock purchasable pursuant to the cashless exercise
procedure set forth in Section 2.
The undersigned requests that the certificates for such shares be issued
in the name of, and delivered to ______________________________________________
whose address is ______________________________________________________________.
The undersigned represents and Options that all offers and sales by the
undersigned of the securities issuable upon exercise of the within Option shall
be made pursuant to registration of the Common Stock under the Securities Act of
1933, as amended (the "Securities Act") or pursuant to an exemption from
registration under the Securities Act.
Dated: __________________________ __________________________________________
(Signature must conform to name of holder
as specified on the face of the Option)
Address: _________________________________
_________________________________
A-1
EXHIBIT B
FORM OF TRANSFEROR ENDORSEMENT
(To Be Signed Only On Transfer Of Option)
For value received, the undersigned hereby sells, assigns, and transfers
unto the person(s) named below under the heading "Transferees" the right
represented by the within Option to purchase the percentage and number of shares
of Common Stock of INCENTRA SOLUTIONS INC. into which the within Option relates
specified under the headings "Percentage Transferred" and "Number Transferred,"
respectively, opposite the name(s) of such person(s) and appoints each such
person Attorney to transfer its respective right on the books of INCENTRA
SOLUTIONS INC. with full power of substitution in the premises.
PERCENTAGE NUMBER
TRANSFEREES ADDRESS TRANSFERRED TRANSFERRED
- -------------------------------- ----------------------------------- ----------------- ----------------
- -------------------------------- ----------------------------------- ----------------- ----------------
- -------------------------------- ----------------------------------- ----------------- ----------------
- -------------------------------- ----------------------------------- ----------------- ----------------
Dated:
------------------------------------------ --------------------------------------------------------
(Signature must conform to name of holder as
specified on the face of the Option)
Address: -----------------------------------------------
-----------------------------------------------
SIGNED IN THE PRESENCE OF:
--------------------------------------------------------
(Name)
ACCEPTED AND AGREED:
[TRANSFEREE]
- -------------------------------------------------------
(Name)
B-1