Unassociated Document


    


    
      
        	 
      	
                December
      19, 2008

              


      

    

    


    Incentra
Solutions, Inc.

    1140
Pearl Street

    Boulder,
Colorado  80302

    Attention:
Matthew G. Richman

    


    Re:           Overadvance Side
Letter

    


    Ladies
and Gentlemen:

    


    Reference is hereby made to (i) that
certain Security Agreement, dated as of February 6, 2006, by and among Incentra
Solutions, Inc. (f/k/a Front Porch Digital, Inc.) a Nevada corporation (the
"Parent"), Network
System Technologies, Inc., an Illinois corporation (“NST”), Incentra Solutions of
the Northwest, Inc., an Oregon corporation,  consisting of the merged
predecessor entities of Tactix, Inc. and PWI Technologies, Inc., hereinafter
referred to as “ISNW”),
Incentra Solutions of the Northeast, Inc., a Delaware corporation (“ISNE”), Incentra Solutions of
California, Inc., a Delaware corporation (consisting of the merged predecessor
entities of Incentra Solutions of California, Inc. and Incentra Helio
Acquisition Corp., hereinafter referred to as “ISC”), ManagedStorage
International, Inc., a  Delaware corporation (“MSI”), Incentra Solutions
International, Inc., a Delaware corporation (“ISI”), Sales Strategies, Inc.,
a New Jersey corporation (“SSI” and collectively with
Parent, NST, ISNW, ISNE, ISC, MSI, ISI and SSI, the “Companies”, and individually
each a “Company”)  and
Laurus Master Fund, Ltd. (in Voluntary Liquidation) (“Laurus”) (as amended, modified
and/or supplemented from time to time, the “Security Agreement”), and (ii)
that certain Secured Revolving Note, dated as of February 6, 2006, issued by the
Parent, PWI, ISC, MSI and ISI to Laurus, and subsequently assigned in full to
each of Valens U.S. SPV I, LLC (“Valens US”) and Valens
Offshore SPV II, Corp. (“Valens
Offshore II” together with Valens US, each a “Holder” and collectively, the
“Holders”) (as amended,
modified or supplemented from time to time, the “Revolving Note” and together
with the Security Agreement and the Ancillary Agreements referred to in the
Security Agreement, the “Documents”).  On
September 28, 2007, Laurus, together with other affiliates of Laurus, appointed
LV Administrative Services, Inc. as administrative and collateral agent for
Laurus and such affiliates (the “Agent” and together with
Laurus, Valens US and Valens Offshore ( the “Creditors”).  Capitalized
terms used but not defined herein shall have the meanings ascribed them in the
Security Agreement.

    


    
      
        	
                Overadvance
      Side Letter

              	 
      


      

    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    Subject
to satisfaction of the Overadvance Conditions (as defined below), Agent, on
behalf of the Creditors, is hereby notifying the Companies of the decision made
to exercise discretion granted pursuant to Section 2(a)(ii) of the Security
Agreement to make Loans to the Companies during the Period (as defined below) in
excess of the Formula Amount on the date hereof (the “Overadvance”).  Subject
to satisfaction of the Overadvance Conditions, the aggregate principal amount of
the Overadvance as of the date hereof shall be $1,500,000 (the “Initial Overadvance
Amount”).  The Overadvance shall at no time exceed the lesser
of (x) Initial Overadvance Amount and (y) the remainder of the Capital
Availability Amount less the Formula Amount as of the date of determination (the
“Maximum Overadvance
Amount”).

    


    In
connection with making the Overadvance, until from the date hereof through and
including January 5, 2009 (the “Period”), the Creditors hereby
waive compliance with Section 3 of the Security Agreement, but solely as such
provision relates to the immediate repayment requirement for
Overadvances.  The Creditors further agrees that solely for such
Period (but not thereafter), the incurrence and existence of the Overadvance
shall not trigger an Event of Default under Section 19(a) of the Security
Agreement.  Interest shall be (i) calculated on the basis of a 360 day
year, and (ii) payable monthly, in arrears, commencing on January 1, 2009 and on
the first business day of each consecutive calendar month thereafter (if any)
through and including the expiration of the Period, whether by acceleration or
otherwise.  All other terms and provisions of the Security Agreement
and the Ancillary Agreements shall remain in full force and
effect.  For the avoidance of doubt, all proceeds applied by any
Company in repayment of its obligations to any Lender hereunder and under the
Security Agreement and the Ancillary Agreements shall be first applied as a
repayment of the Overadvance unless otherwise agreed by the
Creditors.  Once repaid, the Overadvance may be reborrowed during the
Period provided that the maximum amount of the Overadvance outstanding shall not
at any time exceed the Maximum Overadvance Amount.

     

    Each
Company hereby acknowledges and agrees that each Holder’s obligation to fund the
Initial Overadvance Amount on the date hereof and each permitted reborrowing
thereof after the date hereof up to the Maximum Overadvance Amount shall, at the
time of such making of such Overadvance or reborrowing, and immediately after
giving effect thereto, be subject to the satisfaction of the following
conditions (the “Overadvance
Conditions”): (i) no Event of Default shall exist and be continuing as of
such date; (ii) all representations, warranties and covenants made by each
Company in connection with the Security Agreement and the Ancillary Agreements
shall be true, correct and complete as of such date; and (iii) each Company and
its Subsidiaries shall have taken all action necessary to grant Agent “control”
over all of such Company’s and its respective Subsidiaries’ Deposit Accounts
(the “Control
Accounts”), with any agreements establishing “control” to be in form and
substance satisfactory to Agent.

     

    The
Companies hereby acknowledge that all amounts outstanding under the Overadvance
(together with accrued interest and fees which remain unpaid in respect thereof)
on the date of expiration of the Period shall, jointly and severally, be repaid
in full by the Companies on such date of expiration.  The failure to
make any required repayment of an Overadvance shall give rise to an immediate
Event of Default.

     

    
      
        	
                Overadvance
      Side Letter

              	
                2

              


      

    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    The
Companies hereby agree that they shall upon the earlier to occur of (i) the
Maturity Date (as defined in the Revolving Note) or (ii) the date upon which all
of the obligations arising under the Security Agreement and the Ancillary
Agreements referred to therein shall have been paid in fully, the Companies
shall jointly and severally pay in cash to the Agent in the amount of $100,000
(the “Overadvance Cash
Payment”).  Upon receipt of the payment by Agent as described
in this paragraph, the Agent shall apply the Overadvance Cash Payment pro rata
to Valens US and Valens Offshore II relative to the amount of principal
indebtedness that each such Holder holds as of the date hereof as a reduction of
the Principal Amount of the Revolving Note held by such Holders (“Applicable Pro Rata
Amount”).  Notwithstanding the foregoing, at the Holders
election, the Overadvance Payment otherwise required to be paid in cash, may be
paid through the issuance by the Parent to the Valens US and Valens Offshore II
of such number of shares (the “Overadvance Stock Payment” together with
the Overadvance Cash Payment, collectively, the “Overadvance Payment”) of the
Parent’s Common stock as determined in the manner set forth below:

    


    
      	
               
      

            	
              ·

            	
              Overadvance
      Stock Payment to Valens US = ((Overadvance Cash Payment)(Valens US’
      Applicable Pro Rata Amount)/Applicable Closing Price (as defined
      below).

            


    

    


    
      	
               
      

            	
              ·

            	
              Overadvance
      Stock Payment to Valens Offshore II = ((Overadvance Cash Payment)(Valens
      Offshore II’s Applicable Pro Rata Amount)/Applicable Closing
      Price.

            


    

    


    For purposes hereof, the term (i)
“Applicable Closing
Price” shall mean the lesser of (x) the volume weighted average trading
price of the Common Stock on the Principal Market for the ten (10) trading days
immediately preceding the date hereof and (y) the volume weighted average
trading price of the Common Stock on the Principal Market for the ten (10)
trading days immediately preceding the Maturity Date. 

    


    The
Overadvance Payment shall be in addition to all other obligations owing under
the Security Agreement and the Ancillary Agreements referred to
therein.

    


    The
Parent understands that it has an affirmative obligation to make prompt public
disclosure of material agreements and material amendments to such agreements.
If, in the Parent’s determination, this letter or the terms and provisions of
this letter, (collectively, the “Information”) are considered
material, Parent agrees to file an 8-K within 4 business days following the date
hereof and in the form otherwise prescribed by the SEC.   In the
event the Information is deemed not to be material and therefore is not
disclosed on Form 8-K, Parent hereby agrees that neither the Agent nor any other
Creditor shall be in violation of any duty to any Company or its shareholders,
nor shall the Agent or any other Creditor be deemed to be misappropriating any
information of any Company, if any Creditor sells shares of common stock of the
Parent, or otherwise engages in transactions with respect to securities of the
Parent, while in possession of the Information.

     

    This
letter may not be amended or waived except by an instrument in writing signed by
each of the Companies, the Agent and each Lender.  This letter may be
executed in any number of counterparts, each of which shall be an original and
all of which, when taken together, shall constitute one
agreement.  Delivery of an executed signature page of this letter by
facsimile transmission shall be effective as delivery of a manually executed
counterpart hereof or thereof, as the case may be.  THIS LETTER SHALL
BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.  This letter sets forth the entire agreement between the parties
hereto as to the matters set forth herein and supersede all prior
communications, written or oral, with respect to the matters
herein.

     

    [REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK]

    


    
      
        	
                Overadvance
      Side Letter

              	
                3

              


      

    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    This
Overadvance Side Letter shall for all purposes be deemed to be an Ancillary
Agreement.

     

    If the
foregoing meets with the Companies’ approval please signify the Companies’
acceptance of the terms hereof by signing below.

    


    
      
        
          
            
              	 
      	
                      LV
      ADMINISTRATIVE SERVICES, INC.

                    
	 
      	
                      as
      Agent

                    
	 
      	 
      
	 
      	
                      By:

                    	/s/
      Scott Bluestein
	 
      	
                      Name:  Scott
      Bluestein

                    
	 
      	
                      Title:    Authorized
      Signatory

                    
	 
      	 
      
	 
      	
                      VALENS
      U.S. SPV I, LLC

                    
	 
      	
                      By:  Valens
      Capital Management, LLC,

                    
	 
      	
                      its
      investment manager

                    
	 
      	 
      
	 
      	
                      By:

                    	/s/
      Scott Bluestein
	 
      	
                      Name:  Scott
      Bluestein

                    
	 
      	
                      Title:    Authorized
      Signatory

                    
	 
      	 
      
	 
      	
                      VALENS
      OFFSHORE SPV II, CORP.

                    
	 
      	
                      By:  Valens
      Capital Management, LLC,

                    
	 
      	
                      its
      investment manager

                    
	 
      	 
      
	 
      	
                      By:

                    	/s/
      Scott Bluestein
	 
      	
                      Name:  Scott
      Bluestein

                    
	 
      	
                      Title:    Authorized
      Signatory

                    


            

          

        

      

    

    


    
      
        	
                Overadvance
      Side Letter

              	
                4

              


      

    


    
      
         


      

      
         


        
          

        

      

      
         


      

    


    AGREED AND ACCEPTED ON THE
DATE HEREOF:

    


    
      
        
          
            
              
                
                  
                    
                      	
                              INCENTRA
      SOLUTIONS, INC.

                            
	 
      
	
                              By:

                            	/s/
      Matthew G. Richman
	
                              Name:
      Matthew G. Richman

                            
	
                              Title:
      Chief Corporate Development Officer and Treasurer

                            
	 
      
	
                              MANAGEDSTORAGE
      INTERNATIONAL, INC.

                            
	 
      
	
                              By:

                            	/s/
      Matthew G. Richman
	
                              Name:
      Matthew G. Richman

                            
	
                              Title:
      Secretary

                            
	 
      
	
                              INCENTRA
      SOLUTIONS INTERNATIONAL, INC.

                            
	 
      
	
                              By:

                            	/s/
      Matthew G. Richman
	
                              Name:
      Matthew G. Richman

                            
	
                              Title:
      Secretary

                            
	 
      
	
                              INCENTRA
      SOLUTIONS OF THE NORTHWEST, INC.

                            
	 
      
	
                              By:

                            	/s/
      Matthew G. Richman
	
                              Name:
      Matthew G. Richman

                            
	
                              Title:
      Secretary

                            
	 
      
	
                              INCENTRA
      SOLUTIONS OF CALIFORNIA, INC.

                            
	 
      
	
                              By:

                            	/s/
      Matthew G. Richman
	
                              Name:
      Matthew G. Richman

                            
	
                              Title:
      Secretary

                            


                    

                  

                

              

            

          

        

      

    

    


    
      
        	
                Overadvance
      Side Letter

              	
                5

              


      

    


    
      
         


      

      
         


        
          

        

      

      
         


      

    

    


    
      
        
          
            
              
                
                  
                    	
                            NETWORK
      SYSTEM TECHNOLOGIES, INC.

                          
	 
      
	
                            By:

                          	/s/
      Matthew G. Richman
	
                            Name:
      Matthew G. Richman

                          
	
                            Title:
      Secretary

                          
	 
      
	
                            INCENTRA
      SOLUTIONS OF THE NORTHEAST, INC.

                          
	 
      
	
                            By:

                          	/s/
      Matthew G. Richman
	
                            Name:
      Matthew G. Richman

                          
	
                            Title:
      Secretary

                          
	 
      
	
                            SALES
      STRATEGIES, INC.

                          
	 
	
                            By:

                          	/s/
      Matthew G. Richman
	
                            Name:
      Matthew G. Richman

                          
	
                            Title:
      Secretary

                          


                  

                

              

            

          

        

      

    

    


    
      
        	
                Overadvance
      Side Letter

              	
                6