8-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report: December 19, 2008

(Date of earliest event reported)

INCENTRA SOLUTIONS, INC.

(Exact name of Registrant as specified in its charter)

Nevada

(State or other jurisdiction of incorporation)

333-16031	86-0793960
(Commission File No.)	(I.R.S. Employer Identification No.)

1140 Pearl Street

Boulder, Colorado 80302

(Address of principal executive offices; zip code)

(303) 449-8279

(Registrant’s telephone number, including area code)

N/A

(Former Name or Former Address, if changed Since Last Report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see  General Instruction A.2. below):

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) 

o Pre-commencement communications pursuant to Rule 14-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13-4(e) under the Exchange Act (17 CFR 240.13e-4(c))

SECTION 1 – REGISTRANTS BUSINESS AND OPERATIONS

Item 1.01 Entry Into A Material Definitive Agreement

Effective December 19, 2008, we entered into an agreement with LV Administrative Services, Inc., as administrative and collateral agent,  for each of Valens U.S. SPV I, LLC ( “Valens U.S.”) and Valens Offshore SPV II ( “Valens Offshore”) that allows us to borrow up to $1.5 million (the “Overadvance”) in excess of the formula amount otherwise permitted to be borrowed under our existing revolving loan facility with Laurus Master Fund, Ltd. up through and including January 5, 2009.  Interest on the amount of any Overadvance is payable monthly in arrears at our current rate which is equal to ten percent (10%) per annum. The terms of the revolving loan facility were previously reported.

In connection with the Overadvance, we agreed to pay a fee of $100,000 at the earlier to occur of (i) February 6, 2010 or (ii) the date upon which all of our loan obligations arising under the Security Agreement, dated February 6, 2006, are paid in full.  At the election of Valens U.S. and Valens Offshore, the cash fees may be paid through the issuance of our common stock based on the share price that is the lesser of the volume weighted average trading price of our common stock for the ten (10) trading days immediately preceding the date of this agreement and the volume weighted trading price of our common stock for the ten (10) trading days immediately preceding the date upon which all of our loan obligations arising under the Security Agreement dated February 6, 2006, are paid in full.

As an inducement to the Overadvance, on December 19, 2008, we also entered into a Reaffirmation and Ratification Agreement with the aforementioned parties pursuant to which we reaffirmed our indebtedness, security and other provisions under the Security Agreement to Valens U.S. and Valens Offshore.

SECTION 2 – FINANCIAL INFORMATION

Item 2.03 Creation Of A Direct Financial Obligation Or An Obligation Under An Off-Balance Sheet Arrangement Of A Registrant.

The disclosures contained in Item 1.01 are incorporated herein by reference.

SECTION 9 – FINANCIAL STATEMENTS AND EXHIBITS.

Item 9.01 Financial Statements and Exhibits.

(c)	Exhibits.
Number	Documents
10.1	Overadvance Letter dated as of December 19, 2008 by and among Incentra Solutions, Inc., Incentra Solutions of the Northwest, Inc. , ManagedStorage International, Incentra Solutions International, Inc. Incentra Solutions of California, Inc., Network System Technologies, Inc., Sales Strategies, Inc. and LV Administrative Services, Inc. as administrative and collateral agent for each of Valens U.S. SPV I, LLC, and Valens Offshore SPV II.
10.2	Reaffirmation and Ratification Agreement dated as of December 19, 2008  by and among Incentra Solutions, Inc., Incentra Solutions of the Northwest, Inc. , ManagedStorage International, Incentra Solutions International, Inc. Incentra Solutions of California, Inc., Network System Technologies, Inc., Sales Strategies, Inc. and LV Administrative Services, Inc. as administrative and collateral agent for each of Valens U.S. SPV I, LLC, and Valens Offshore SPV II.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Report to be signed on its behalf by the undersigned hereunto duly authorized.

	Incentra Solutions, Inc.
Date: December 24, 2008	By:	/s/ Anthony Di Paolo
		Anthony Di Paolo
		Chief Financial Officer

EX-10.1

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

EX-10.2

REAFFIRMATION AND RATIFICATION AGREEMENT

December 19, 2008

LVAdministrative Services, Inc.

335 Madison Avenue, 10th Floor

New York, New York 10017

Ladies and Gentlemen:

Reference is 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”), (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”), (iii)  Subsidiary Guarantee dated as of February 6, 2006 made by MSI, PWI, ISNE and ISI in favor of Laurus (as amended, modified or supplemented from time to time, including on the date hereof, the “Subsidiary Guarantee”), (b) Master Security Agreement dated as of May 13, 2004 made by the Companies in favor of Laurus (as amended, modified or supplemented from time to time, including on the date hereof, the “Master Security Agreement”), (c) Stock Pledge Agreement dated as of February 6, 2006 made by the Companies in favor of Laurus (as amended, modified or supplemented from time to time, including on the date hereof, the “Stock Pledge Agreement”)  and (d) all other agreements, documents and instruments executed in connection therewith (each as amended, restated, modified and/or supplemented from time to time together with the agreements, documents and instruments described in subsections (a) through (d) above, each an “Existing Agreement” and collectively, the “Existing Agreements”).  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”).

To induce Creditors to enter into that certain Overadvance Letter dated as of the date hereof between Creditors and the Company (the “Overadvance Letter”), each Loan Party hereby:

(a)           has reviewed and approved the terms and provisions of the Overadvance Letter and the documents, instruments and agreements entered into in connection therewith;

(b)           acknowledges, ratifies and confirms that all of the indebtedness incurred by, and all other obligations and liabilities of, each of the undersigned contained in the Documents, including, without limitation, the Overadvance Payment (as defined in the Overadvance Letter), are deemed “Obligations” under and as defined in the Documents, are in full force and effect and shall remain in full force and effect as of and after the date hereof;

(c)           acknowledges, ratifies and confirms that all liabilities and obligations of each of the undersigned under the Documents include, without limitation, all obligations and liabilities of the undersigned in respect of the Overadvance Payment the;

(d)           represents and warrants that no offsets, counterclaims or defenses exist as of the date hereof with respect to any of the undersigned’s obligations under any Document, including, without limitation, in respect of the Overadvance Payment; and

(e)           acknowledges, ratifies and confirms the grant by each such undersigned to each Creditor of a security interest and charge, to the extent applicable, in the assets of such undersigned as more specifically set forth in the Documents, as applicable, and to the extent such grant of a security interest and charge was not previously made, the undersigned hereby grants to Creditors a security interest in the collateral of such undersigned as set forth and described in the Documents.

(f)           represents and warrants that all of the representations made by or on behalf of the Companies in the Existing Agreements are true and correct in all material respects on and as of the date hereof.

This letter agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns and shall be governed by and construed in accordance with the laws of the State of New York.

[Remainder of Page Intentionally Left Blank]

2

This letter agreement may be executed by the parties hereto in one or more counterparts, each of which shall be deemed an original and all of which when taken together shall constitute one and the same agreement.  Any signature delivered by a party by facsimile transmission shall be deemed to be an original signature hereto.

Very truly yours,
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

SIGNATURE PAGE TO

REAFFIRMATION AND

RATIFICATION AGREEMENT

INCENTRA SOLUTIONS OF CALIFORNIA, INC.
By:	/s/ Matthew G. Richman
Name: Matthew G. Richman
Title: Secretary
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

SIGNATURE PAGE TO

REAFFIRMATION AND

RATIFICATION AGREEMENT

ACCEPTED AND AGREED TO:
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

SIGNATURE PAGE TO

REAFFIRMATION AND

RATIFICATION AGREEMENT