Exhibit 10.19

 

REGISTRATION RIGHTS AGREEMENT

 

This Registration Rights Agreement (the “Agreement”) is made and entered into as
of this 8th day of June, 2004 by and among Primal Solutions, Inc., a Delaware
corporation (the “Company”), and the “Investors” named in that certain Purchase
Agreement by and among the Company and the Investors (the “Purchase Agreement”).

 

The parties hereby agree as follows:

 

1.   CERTAIN DEFINITIONS.

 

As used in this Agreement, the following terms shall have the following
meanings:

 

“Affiliate” means, with respect to any person, any other person which directly
or indirectly controls, is controlled by, or is under common control with, such
person.

 

“Business Day” means a day, other than a Saturday or Sunday, on which banks in
New York City are open for the general transaction of business.

 

“Common Stock” shall mean the Company’s common stock, par value $0.01 per share,
and any securities into which such shares may hereinafter be reclassified.

 

“Existing Holders” shall mean, collectively, John Faltys, David Haynes, Joe
Simrell and Mark Neilsen.

 

“Investors” shall mean the Investors identified in the Purchase Agreement and
any Affiliate or permitted transferee of any Investor who is a subsequent holder
of any Warrants or Registrable Securities.

 

“Other Investors” shall mean the purchasers party to the Other Agreements (as
defined in the Purchase Agreement) other than the Existing Holders.

 

“Prospectus” shall mean the prospectus included in any Registration Statement,
as amended or supplemented by any prospectus supplement, with respect to the
terms of the offering of any portion of the Registrable Securities covered by
such Registration Statement and by all other amendments and supplements to the
prospectus, including post-effective amendments and all material incorporated by
reference in such prospectus.

 

“Register,” “registered” and “registration” refer to a registration made by
preparing and filing a Registration Statement or similar document in compliance
with the 1933 Act (as defined below), and the declaration or ordering of
effectiveness of such Registration Statement or document.

 

“Registrable Securities” shall mean the Shares and the shares of Common Stock
issuable (i) upon the exercise of the Warrants, if any, and (ii) any other
securities issued or issuable with respect to or in exchange for Registrable
Securities; provided, that, a security shall cease to be a Registrable Security
upon (A) sale pursuant to a Registration Statement or Rule 144 under the 1933
Act, or (B) such security becoming eligible for sale by the Investors pursuant
to Rule 144(k).

 

“Registration Statement” shall mean any registration statement of the Company
filed under the 1933 Act that covers the resale of any of the Registrable
Securities pursuant to the

 

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provisions of this Agreement, amendments and supplements to such Registration
Statement, including post-effective amendments, all exhibits and all material
incorporated by reference in such Registration Statement.

 

“Required Investors” means the Investors holding a majority of the Registrable
Securities.

 

“SEC” means the U.S. Securities and Exchange Commission.

 

“Shares” means the shares of Common Stock issued pursuant to the Purchase
Agreement.

 

“1933 Act” means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.

 

“1934 Act” means the Securities Exchange Act of 1934, as amended, and the rules
and regulations promulgated thereunder.

 

“Warrants” means, the warrants to purchase shares of Common Stock issued to the
Investors pursuant to the Purchase Agreement, the form of which is attached to
the Purchase Agreement as Exhibit A.

 

“Warrant Shares” means the shares of Common Stock issuable upon the exercise of
the Warrants.

 

2.   REGISTRATION.

 

(a)                                  Registration Statements.

 

(i)                                     Promptly following the closing of the
purchase and sale of the securities contemplated by the Purchase Agreement (the
“Closing Date”) but no later than forty-five (45) days after the Closing Date
(the “Filing Deadline”), the Company shall prepare and file with the SEC one
Registration Statement on Form SB-2 (or, if Form SB-2 is not then available to
the Company, on such form of registration statement as is then available to
effect a registration for resale of the Registrable Securities), covering the
resale of the Registrable Securities in an amount at least equal to the number
of Shares plus the number of shares of Common Stock necessary to permit the
exercise in full of the Warrants.  Such Registration Statement may also include
shares of Common Stock (i) held by the Existing Holders or purchased by the
Existing Holders in the offering as contemplated by Section 6.1(i) of the
Purchase Agreement, (ii) purchased by the Other Holders in the offering as
contemplated by Section 6.1(i) of the Purchase Agreement and (iii) shares of
Common Stock issuable upon the exercise of warrants issued contemporaneously
with the Closing to the Company’s investment advisers as compensation related to
the Closing as described in Schedule 4.20 to the Purchase Agreement
(collectively, the “Other Shares”).  Such Registration Statement shall include
the plan of distribution attached hereto as Exhibit A.  Such Registration
Statement also shall cover, to the extent allowable under the 1933 Act and the
rules promulgated thereunder (including Rule 416), such indeterminate number of
additional shares of Common Stock resulting from stock splits, stock dividends
or similar transactions with respect to the Registrable Securities.  The Company
shall use its reasonable best efforts to obtain from each person who now has
piggyback registration rights, other than the Existing Holders, a waiver of
those rights with respect to the Registration Statement, except with respect to
the Other Shares.  The Registration Statement (and each amendment or supplement
thereto) shall be provided in accordance with Section 3(c) to the

 

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Investors and their counsel prior to its filing or other submission.  If a
Registration Statement covering the Registrable Securities is not filed with the
SEC on or prior to the Filing Deadline, the Company will make pro rata payments
to each Investor, as liquidated damages and not as a penalty, in an amount equal
to 1.5% of the aggregate amount invested by such Investor for each 30-day period
or pro rata for any portion thereof following the date by which such
Registration Statement should have been filed for which no Registration
Statement is filed with respect to the Registrable Securities.  Such payments
shall be in partial compensation to the Investors, and shall not constitute the
Investors’ exclusive remedy for such events.  Such payments shall be made to
each Investor in cash.

 

(ii)                                  Additional Registrable Securities.  Upon
the written demand of any Investor and upon any change in the Warrant Price (as
defined in the Warrant) such that additional shares of Common Stock become
issuable upon the exercise of the Warrants, the Company shall prepare and file
with the SEC one or more Registration Statements on Form SB-2 or amend the
Registration Statement filed pursuant to clause (i) above, if such Registration
Statement has not previously been declared effective (or, if Form SB-2 is not
then available to the Company, on such form of registration statement as is then
available to effect a registration for resale of such additional shares of
Common Stock (the “Additional Shares”), subject to the Required Investors’
consent) covering the resale of the Additional Shares, but only to the extent
the Additional Shares are not at the time covered by an effective Registration
Statement.  Such Registration Statement may also include Additional Shares
issuable to the Existing Holders and the Other Investors pursuant to a change in
the warrant price applicable to warrants purchased by them in the offering as
contemplated by Section 6(i) of the Purchase Agreement. Such Registration
Statement also shall cover, to the extent allowable under the 1933 Act and the
rules promulgated thereunder (including Rule 416), such indeterminate number of
additional shares of Common Stock resulting from stock splits, stock dividends
or similar transactions with respect to the Additional Shares.  The Company
shall use its reasonable best efforts to obtain from each person who now has
piggyback registration rights a waiver of those rights with respect to such
Registration Statement, except with respect to the Additional Shares issuable to
the Existing Holders and the Other Investors.  The Registration Statement (and
each amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided in accordance with Section 3(c) to the
Investors and their counsel prior to its filing or other submission.  If a
Registration Statement covering the Additional Shares is required to be filed
under this Section 2(a)(ii) and is not filed with the SEC within five Business
Days of the request of any Investor or upon the occurrence of any of the events
specified in this Section 2(a)(ii), the Company will make pro rata payments to
each Investor, as liquidated damages and not as a penalty, in an amount equal to
1.5% of the aggregate amount invested by such Investor for each 30-day period or
pro rata for any portion thereof following the date by which such Registration
Statement should have been filed for which no Registration Statement is filed
with respect to the Additional Shares.  Such payments shall be in partial
compensation to the Investors, and shall not constitute the Investors’ exclusive
remedy for such events.  Such payments shall be made to each Investor in cash.

 

(iii)                               Promptly following the date (the
“Qualification Date”) upon which the Company becomes eligible to use a
registration statement on Form S-3 to register the Registrable Securities or
Additional Shares, as applicable, for resale, but in no event more than

 

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ten (10) days after the Qualification Date (the “Qualification Deadline”), the
Company shall file a registration statement on Form S-3 covering the Registrable
Securities or Additional Shares, as applicable (or a post-effective amendment on
Form S-3 to the registration statement on Form SB-2) (a “Shelf Registration
Statement”) and shall use commercially reasonable efforts to cause such Shelf
Registration Statement to be declared effective as promptly as practicable
thereafter.  If a Shelf Registration Statement covering the Registrable
Securities is not filed with the SEC on or prior to the Qualification Deadline,
the Company will make pro rata payments to each Investor, as liquidated damages
and not as a penalty, in an amount equal to 1.5% of the aggregate amount
invested by such Investor for each 30-day period or pro rata for any portion
thereof following the date by which such Shelf Registration Statement should
have been filed for which no such Shelf Registration Statement is filed with
respect to the Registrable Securities or Additional Shares, as applicable.  Such
payments shall be in partial compensation to the Investors, and shall not
constitute the Investors’ exclusive remedy for such events.  Such payments shall
be made to each Investor in cash.

 

(b)                                 Expenses.  The Company will pay all expenses
associated with each registration, including filing and printing fees, the
Company’s counsel and accounting fees and expenses, costs associated with
clearing the Registrable Securities for sale under applicable state securities
laws, listing fees, fees and expenses of one counsel to the Investors, subject
to the overall $30,000 limit in the related Purchase Agreement, and the
Investors’ reasonable expenses in connection with the registration, but
excluding discounts, commissions, fees of underwriters, selling brokers, dealer
managers or similar securities industry professionals with respect to the
Registrable Securities being sold.

 

(c)                                  Effectiveness.

 

(i)                                     The Company shall use commercially
reasonable efforts to have the Registration Statement, any post effective
amendment thereto and any Shelf Registration Statement declared effective as
soon as practicable.  The Company shall notify the Investors by facsimile or
e-mail as promptly as practicable, and in any event, within twenty-four (24)
hours, after any Registration Statement or post effective amendment is declared
effective and shall simultaneously provide the Investors with copies of any
related Prospectus to be used in connection with the sale or other disposition
of the securities covered thereby.  If (A)(x) a Registration Statement covering
the Registrable Securities is not declared effective by the SEC within ninety
(90) days after the Closing Date (120 days if the SEC reviews the Registration
Statement) (the “Effectiveness Deadline”), or (y) a Registration Statement
covering Additional Shares is not declared effective by the SEC within ninety
(90) days following the time such Registration Statement was required to be
filed pursuant to Section 2(a)(ii) (120 days if the SEC reviews the Registration
Statement), or (z) a Shelf Registration Statement is not declared effective by
the SEC within 90 days after the Qualification Deadline (120 days if the SEC
reviews the Shelf Registration Statement), or (B) after a Registration Statement
has been declared effective by the SEC, sales cannot be made pursuant to such
Registration Statement for any reason (including without limitation by reason of
a stop order, or the Company’s failure to update the Registration Statement),
but excluding the inability of any Investor to sell the Registrable Securities
covered thereby due to market conditions, its demand and receipt of material,
non-public information pursuant to Section 4 herein, and except as excused
pursuant to subparagraph (ii) below, then the Company will make pro rata
payments to each Investor, as

 

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liquidated damages and not as a penalty, in an amount equal to 1.5% of the
aggregate amount invested by such Investor for each 30-day period or pro rata
for any portion thereof following the date by which such Registration Statement
should have been effective (the “Blackout Period”).  Such payments shall be in
partial compensation to the Investors, and shall not constitute the Investors’
exclusive remedy for such events.  The amounts payable as liquidated damages
pursuant to this paragraph shall be paid monthly within three (3) Business Days
of the last day of each month following the commencement of the Blackout Period
until the termination of the Blackout Period.  Such payments shall be made to
each Investor in cash.

 

(ii)                                  For not more than twenty (20) consecutive
days or for a total of not more than forty-five (45) days in any twelve (12)
month period, the Company may delay the disclosure of material non-public
information concerning the Company, by suspending the use of any Prospectus
included in any registration contemplated by this Section containing such
information, the disclosure of which at the time is not, in the good faith
opinion of the Company, in the best interests of the Company (an “Allowed
Delay”); provided, however, that so long as the Registration Statement is on
Form SB-2 or on any other form that does not allow for incorporation by
reference of reports and other materials filed by the Company pursuant to
Section 13(a) or 15(d) of the 1934 Act, the Company may upon written notice to
the Investors suspend sales under the Registration Statement to the extent, but
in any such case only to the extent, necessary to allow any post-effective
amendment to the Registration Statement or supplement to the Prospectus to be
prepared and filed with the SEC and, if necessary, declared effective (and such
suspension shall be deemed to be an Allowed Delay without regard to the time
periods mentioned above) for the period commencing at the time that the Company
disseminates a press release announcing its preliminary financial results for
any fiscal period or announcing a material development and ending on the second
Business Day after the earlier of (A) the date that the related report on Form
10-KSB, 10-QSB or 8-K, as applicable, is filed with the SEC and (B) the date on
which such report is required to be filed under the 1934 Act (without regard to
Rule 12b-25 promulgated thereunder); provided, further, that in the event the
Company determines in good faith, based on the advice of counsel, that the
matters disclosed in such press release require the filing of a post-effective
amendment to the Registration Statement, the Company shall file such
post-effective amendment promptly and in no event later than ten (10) Business
Days after the date such matters are first disclosed to the public and shall use
commercially reasonable efforts to have such post-effective amendment to the
Registration Statement declared effective as promptly as practicable and the
period for which the Company may suspend the use of the Registration Statement
shall be extended to the earliest to occur of (W) the date the post-effective
amendment to the Registration Statement is withdrawn by the Company, (X) the
date such post-effective amendment to the Registration Statement is declared
effective by the SEC, (Y) the second Business Day after the SEC has notified the
Company that either (I) it has elected not to review the post-effective
amendment to the Registration Statement or (II) it has no further comments on
the post-effective amendment to the Registration Statement or (Z) 45 days after
the initial filing of the post-effective amendment to the Registration Statement
with the SEC.

 

(iii) The Company shall promptly (a) notify the Investors in writing of the
existence of (but in no event, without the prior written consent of an Investor,
shall the Company disclose to such Investor any of the facts or circumstances
regarding) material non-public information giving rise to an Allowed Delay, (b)
advise the Investors in writing to cease all sales

 

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under the Registration Statement until the end of the Allowed Delay and (c) use
commercially reasonable efforts to terminate an Allowed Delay as promptly as
practicable.

 

3.   COMPANY OBLIGATIONS.  THE COMPANY WILL USE COMMERCIALLY REASONABLE EFFORTS
TO EFFECT THE REGISTRATION OF THE REGISTRABLE SECURITIES IN ACCORDANCE WITH THE
TERMS HEREOF, AND PURSUANT THERETO THE COMPANY WILL, AS EXPEDITIOUSLY AS
POSSIBLE:

 

(a)                                  use commercially reasonable efforts to
cause such Registration Statement to become effective and subject to
Section 2(c)(ii) to remain continuously effective for a period that will
terminate upon the earlier of (i) the date on which all Registrable Securities
covered by such Registration Statement as amended from time to time, have been
sold, and (ii) the date on which all Registrable Securities covered by such
Registration Statement may be sold pursuant to Rule 144(k) (the “Effectiveness
Period”) and advise the Investors in writing when the Effectiveness Period has
expired;

 

(b)                                 prepare and file with the SEC such
amendments and post-effective amendments to the Registration Statement and the
Prospectus as may be necessary to keep the Registration Statement effective for
the period specified in Section 3(a);

 

(c)                                  provide copies to and permit counsel
designated by the SSF Investors (as that term is defined in the Purchase
Agreement) to review each Registration Statement and all amendments and
supplements thereto no fewer than three (3) Business Days prior to their filing
with the SEC and not file any document to which such counsel reasonably objects;

 

(d)                                 furnish to the Investors and counsel to the
SSF Investors (i) promptly after the same is prepared and publicly distributed,
filed with the SEC, or received by the Company (but not later than two (2)
Business Days after the filing date, receipt date or sending date, as the case
may be) one (1) copy of any Registration Statement and any amendment thereto,
each preliminary prospectus and Prospectus and each amendment or supplement
thereto, and each letter written by or on behalf of the Company to the SEC or
the staff of the SEC, and each item of correspondence from the SEC or the staff
of the SEC, in each case relating to such Registration Statement (other than any
portion of any thereof which contains information for which the Company has
sought confidential treatment), and (ii) such number of copies of a Prospectus,
including a preliminary prospectus, and all amendments and supplements thereto
and such other documents as each Investor may reasonably request in order to
facilitate the disposition of the Registrable Securities owned by such Investor
that are covered by the related Registration Statement;

 

(e)                                  use commercially reasonable efforts to (i)
prevent the issuance of any stop order or other suspension of effectiveness and,
(ii) if such order is issued, obtain the withdrawal of any such order at the
earliest possible moment;

 

(f)                                    prior to any public offering of
Registrable Securities, use commercially reasonable efforts to register or
qualify or cooperate with the Investors and counsel to the SSF Investors in
connection with the registration or qualification of such Registrable Securities
for offer and sale under the securities or blue sky laws of such

 

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jurisdictions listed on Schedule 3(f) hereto and do any and all other
commercially reasonable acts or things necessary or advisable to enable the
distribution in such jurisdictions of the Registrable Securities covered by the
Registration Statement; provided, however, that the Company shall not be
required in connection therewith or as a condition thereto to (i) qualify to do
business in any jurisdiction where it would not otherwise be required to qualify
but for this Section 3(f), (ii) subject itself to general taxation in any
jurisdiction where it would not otherwise be so subject but for this
Section 3(f), or (iii) file a general consent to service of process in any such
jurisdiction;

 

(g)                                 use commercially reasonable efforts to cause
all Registrable Securities covered by a Registration Statement to be listed on
each securities exchange, interdealer quotation system or other market on which
similar securities issued by the Company are then listed;

 

(h)                                 promptly notify the Investors, at any time
when a Prospectus relating to Registrable Securities is required to be delivered
under the 1933 Act, upon discovery that, or upon the happening of any event as a
result of which, the Prospectus included in a Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and at the
request of any such holder, promptly prepare and furnish to such holder a
reasonable number of copies of a supplement to or an amendment of such
Prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such Registrable Securities, such Prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing; and

 

(i)                                     otherwise use commercially reasonable
efforts to comply with all applicable rules and regulations of the SEC under the
1933 Act and the 1934 Act, take such other actions as may be reasonably
necessary to facilitate the registration of the Registrable Securities
hereunder; and make available to its security holders, as soon as reasonably
practicable, but not later than the Availability Date (as defined below), an
earnings statement covering a period of at least twelve (12) months, beginning
after the effective date of each Registration Statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the 1933 Act,
including Rule 158 promulgated thereunder (for the purpose of this
subsection 3(i), “Availability Date” means the 45th day following the end of the
fourth fiscal quarter that includes the effective date of such Registration
Statement, except that, if such fourth fiscal quarter is the last quarter of the
Company’s fiscal year, “Availability Date” means the 90th day after the end of
such fourth fiscal quarter).

 

(j)                                     With a view to making available to the
Investors the benefits of Rule 144 (or its successor rule) and any other rule or
regulation of the SEC that may at any time permit the Investors to sell shares
of Common Stock to the public without registration, the Company covenants and
agrees to:  (i) make and keep public information available, as those terms are
understood and defined in Rule 144, until the earlier of (A) six months after
such date as all of the Registrable Securities may be resold pursuant to Rule
144(k) or any other rule of similar effect or (B) such date as all of the
Registrable Securities shall have been resold; (ii) file with the SEC in a
timely manner all reports and other documents required of the Company under

 

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the 1934 Act; and (iii) furnish to each Investor upon request, as long as such
Investor owns any Registrable Securities, (A) a written statement by the Company
that it has complied with the reporting requirements of the 1934 Act, (B) a copy
of the Company’s most recent Annual Report on Form 10-KSB or Quarterly Report on
Form 10-QSB, and (C) such other information as may be reasonably requested in
order to avail such Investor of any rule or regulation of the SEC that permits
the selling of any such Registrable Securities without registration.

 

4.   DUE DILIGENCE REVIEW; INFORMATION.  THE COMPANY SHALL MAKE AVAILABLE,
DURING NORMAL BUSINESS HOURS, FOR INSPECTION AND REVIEW BY THE SSF INVESTORS,
ADVISORS TO AND REPRESENTATIVES OF THE SSF INVESTORS (WHO MAY OR MAY NOT BE
AFFILIATED WITH THE INVESTORS AND WHO ARE REASONABLY ACCEPTABLE TO THE COMPANY),
ALL FINANCIAL AND OTHER RECORDS, ALL SEC FILINGS (AS DEFINED IN THE PURCHASE
AGREEMENT) AND OTHER FILINGS WITH THE SEC, AND ALL OTHER CORPORATE DOCUMENTS AND
PROPERTIES OF THE COMPANY AS MAY BE REASONABLY NECESSARY FOR THE PURPOSE OF SUCH
REVIEW, AND CAUSE THE COMPANY’S OFFICERS, DIRECTORS AND EMPLOYEES, WITHIN A
REASONABLE TIME PERIOD, TO SUPPLY ALL SUCH INFORMATION REASONABLY REQUESTED BY
THE SSF INVESTORS OR ANY SUCH REPRESENTATIVE, ADVISOR OR UNDERWRITER IN
CONNECTION WITH SUCH REGISTRATION STATEMENT (INCLUDING, WITHOUT LIMITATION, IN
RESPONSE TO ALL QUESTIONS AND OTHER INQUIRIES REASONABLY MADE OR SUBMITTED BY
ANY OF THEM), PRIOR TO AND FROM TIME TO TIME AFTER THE FILING AND EFFECTIVENESS
OF THE REGISTRATION STATEMENT FOR THE SOLE PURPOSE OF ENABLING THE SSF INVESTORS
AND SUCH REPRESENTATIVES, ADVISORS AND UNDERWRITERS AND THEIR RESPECTIVE
ACCOUNTANTS AND ATTORNEYS TO CONDUCT INITIAL AND ONGOING DUE DILIGENCE WITH
RESPECT TO THE COMPANY AND THE ACCURACY OF SUCH REGISTRATION STATEMENT.

 

The Company shall not disclose material nonpublic information to the Investors,
or to advisors to or representatives of the Investors, unless prior to
disclosure of such information the Company identifies such information as being
material nonpublic information and provides the Investors, such advisors and
representatives with the opportunity to accept or refuse to accept such material
nonpublic information for review and any Investor wishing to obtain such
information enters into an appropriate confidentiality agreement with the
Company with respect thereto.

 

5.   OBLIGATIONS OF THE INVESTORS.

 

(a)                                  Each Investor shall furnish to the Company
upon request a completed Questionnaire in the form attached to this Agreement as
Exhibit B (a “Selling Holder Questionnaire”).  The Company shall advise the
Investors in writing of the proposed first anticipated filing date of any
Registration Statement (the “Filing Date”) at least four (4) Business Days prior
to such Filing Date which notice shall request that the Investors complete and
return the Selling Holder Questionnaires not later than one (1) Business Day
prior to the Filing Date (the “Information Deadline Date”).  Notwithstanding any
provision herein to the contrary, the Company shall not be required to include
the Registrable Securities of an Investor in a Registration Statement if such
Investor fails to furnish to the Company a fully completed Selling Holder
Questionnaire in writing to the Company on or prior to the close of business on
the Information Deadline Date and shall not be required to pay any liquidated or
other damages under Section 2 hereof to any such Investor resulting solely from
the failure of such Investor to provide a completed Selling Holder Questionnaire
to the Company on or prior to the Information Deadline Date.

 

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(b)                                 Each Investor, by its acceptance of the
Registrable Securities agrees to cooperate with the Company as reasonably
requested by the Company in connection with the preparation and filing of a
Registration Statement hereunder, unless such Investor has notified the Company
in writing of its election to exclude all of its Registrable Securities from
such Registration Statement.

 

(c)                                  Each Investor agrees that, upon receipt of
any notice from the Company of either (i) the commencement of an Allowed Delay
pursuant to Section 2(c)(ii) or (ii) the happening of an event pursuant to
Section 3(h) hereof, such Investor will immediately discontinue disposition of
Registrable Securities pursuant to the Registration Statement covering such
Registrable Securities, until the Investor’s receipt of the copies of the
supplemented or amended prospectus filed with the SEC and until any related
post-effective amendment is declared effective and, if so directed by the
Company, the Investor shall deliver to the Company (at the expense of the
Company) or destroy (and deliver to the Company a certificate of destruction)
all copies in the Investor’s possession of the Prospectus covering the
Registrable Securities current at the time of receipt of such notice.

 

(d)                                 Each Investor hereby acknowledges that it is
aware that the United States securities laws may prohibit a person who has
material, non-public information concerning the Company from purchasing or
selling securities of the Company and agrees to comply with all such laws.

 

(e)                                  Each Investor agrees that in effecting
sales or other dispositions of Registrable Securities, it will comply with all
applicable requirements of the 1933 Act, including any prospectus delivery
requirement applicable to such sales or dispositions.

 

6.   INDEMNIFICATION.

 

(a)                                  Indemnification by the Company.  The
Company will indemnify and hold harmless each Investor and its officers,
directors, members, employees and agents, successors and assigns, and each other
person, if any, who controls such Investor within the meaning of the 1933 Act,
against any losses, claims, damages or liabilities, joint or several, to which
they may become subject under the 1933 Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions in respect thereof) arise out of or
are based upon: (i) any untrue statement or alleged untrue statement of any
material fact contained in any Registration Statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereof; (ii) any blue sky application or other document executed by the Company
specifically for that purpose or based upon written information furnished by the
Company filed in any state or other jurisdiction in order to qualify any or all
of the Registrable Securities under the securities laws thereof (any such
application, document or information herein called a “Blue Sky Application”);
(iii) the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading;
(iv) any violation by the Company or its agents of any rule or regulation
promulgated under the 1933 Act applicable to the Company or its agents and
relating to action or inaction required of the Company in connection with such
registration; or (v) any failure to register or qualify the Registrable
Securities included in any such Registration in any state where the Company or
its

 

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agents has affirmatively undertaken or agreed in writing that the Company will
undertake such registration or qualification on an Investor’s behalf and will
reimburse such Investor, and each such officer, director or member and each such
controlling person for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not be liable in
any such case if and to the extent that any such loss, claim, damage or
liability arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission (i) so made in conformity with
information furnished by such Investor or any such controlling person in writing
specifically for use in such Registration Statement or Prospectus or (ii) in any
Prospectus that is corrected in any subsequent Prospectus that was delivered to
such Investor a reasonable period of time before the pertinent sale or sales by
such Investor; Provided further, that in no event shall the liability of the
Company exceed the greater of the Purchase Price (as defined in the Purchase
Agreement) or the fair market value of the Securities (as defined in the
Purchase Agreement) then held by such Investor at the time of such loss, claim,
damage or liability.

 

(b)                                 Indemnification by the Investors.  Each
Investor agrees, severally but not jointly, to indemnify and hold harmless, to
the fullest extent permitted by law, the Company, its directors, officers,
employees, stockholders and each person who controls the Company (within the
meaning of the 1933 Act) against any losses, claims, damages, liabilities and
expense (including reasonable attorney fees) resulting from (i) any untrue
statement of a material fact or any omission of a material fact required to be
stated in the Registration Statement or Prospectus or preliminary prospectus or
amendment or supplement thereto or necessary to make the statements therein not
misleading, to the extent, but only to the extent that such untrue statement or
omission is contained in any information furnished in writing by such Investor
to the Company specifically for inclusion in such Registration Statement or
Prospectus or amendment or supplement thereto or (ii) any failure of such
Investor to comply with the covenants and agreements contained in this Agreement
respecting resale of the Registrable Securities and such Investor will reimburse
the Company, each of its directors, officers, agents and employees, and any
controlling persons for any reasonable legal and other expense incurred by the
Company, its directors, officers, agents and employees, and any controlling
persons, in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action.  In no event
shall the liability of an Investor be greater in amount than the dollar amount
of the proceeds (net of all expense paid by such Investor in connection with any
claim relating to this Section 6 and the amount of any damages such Investor has
otherwise been required to pay by reason of such untrue statement or omission)
received by such Investor upon the sale of the Registrable Securities included
in the Registration Statement giving rise to such indemnification obligation.

 

(c)                                  Conduct of Indemnification Proceedings. 
Any person entitled to indemnification hereunder shall (i) give prompt notice to
the indemnifying party of any claim with respect to which it seeks
indemnification and (ii) permit such indemnifying party to assume the defense of
such claim with counsel reasonably satisfactory to the indemnified party;
provided that any person entitled to indemnification hereunder shall have the
right to employ separate counsel and to participate in the defense of such
claim, but the fees and expenses of such counsel shall be at the expense of such
person unless (a) the indemnifying party has agreed to pay such fees or
expenses, or (b) the indemnifying party shall have failed to assume the

 

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defense of such claim and employ counsel reasonably satisfactory to such person
or (c) in the reasonable judgment of any such person, based upon written advice
of its counsel, a conflict of interest exists between such person and the
indemnifying party with respect to such claims (in which case, if the person
notifies the indemnifying party in writing that such person elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such claim on behalf of
such person); and provided, further, that the failure of any indemnified party
to give notice as provided herein shall not relieve the indemnifying party of
its obligations hereunder, except to the extent that such failure to give notice
shall materially adversely affect the indemnifying party in the defense of any
such claim or litigation.  It is understood that the indemnifying party shall
not, in connection with any proceeding in the same jurisdiction, be liable for
fees or expenses of more than one separate firm of attorneys at any time for all
such indemnified parties.  No indemnifying party will, except with the consent
of the indemnified party, consent to entry of any judgment or enter into any
settlement that does not include as an unconditional term thereof the giving by
the claimant or plaintiff to such indemnified party of a release from all
liability in respect of such claim or litigation.

 

(d)                                 Contribution.  If for any reason the
indemnification provided for in the preceding paragraphs (a) and (b) is
unavailable to an indemnified party or insufficient to hold it harmless, other
than as expressly specified therein, then the indemnifying party shall
contribute to the amount paid or payable by the indemnified party as a result of
such loss, claim, damage or liability in such proportion as is appropriate to
reflect the relative fault of the indemnified party and the indemnifying party,
as well as any other relevant equitable considerations.  No person guilty of
fraudulent misrepresentation within the meaning of Section 11(f) of the 1933 Act
shall be entitled to contribution from any person not guilty of such fraudulent
misrepresentation.  In no event shall the contribution obligation of a holder of
Registrable Securities be greater in amount than the dollar amount of the
proceeds (net of all expenses paid by such holder in connection with any claim
relating to this Section 6 and the amount of any damages such holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission) received by it upon the sale of the
Registrable Securities giving rise to such contribution obligation.

 

7.   MISCELLANEOUS.

 

(a)                                  Amendments and Waivers.  This Agreement may
be amended only by a writing signed by the Company and the Required Investors. 
The Company may take any action herein prohibited, or omit to perform any act
herein required to be performed by it, only if the Company shall have obtained
the written consent to such amendment, action or omission to act, of the
Required Investors.

 

(b)                                 Notices.  All notices and other
communications provided for or permitted hereunder shall be made as set forth in
Section 9.4 of the Purchase Agreement.

 

(c)                                  Assignments and Transfers by Investors. 
The provisions of this Agreement shall be binding upon and inure to the benefit
of the Investors and their respective successors and assigns.  An Investor may
transfer or assign, in whole or from time to time in part, to one or more
persons its rights hereunder in connection with the transfer of Registrable

 

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Securities by such Investor to such person, provided that such Investor complies
with all laws applicable thereto and provides written notice of assignment to
the Company promptly after such assignment is effected.

 

(d)                                 Assignments and Transfers by the Company. 
This Agreement may not be assigned by the Company (whether by operation of law
or otherwise) without the prior written consent of the Required Investors,
provided, however, that the Company may assign its rights and delegate its
duties hereunder to any surviving or successor corporation in connection with a
merger or consolidation of the Company with another corporation, or a sale,
transfer or other disposition of all or substantially all of the Company’s
assets to another corporation, without the prior written consent of the Required
Investors, after notice duly given by the Company to each Investor.

 

(e)                                  Benefits of the Agreement.  The terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective permitted successors and assigns of the parties.  Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.

 

(f)                                    Counterparts; Faxes.  This Agreement may
be executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.  This Agreement may also be executed via facsimile, which shall be
deemed an original.

 

(g)                                 Titles and Subtitles.  The titles and
subtitles used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.

 

(h)                                 Severability.  Any provision of this
Agreement that is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof but shall
be interpreted as if it were written so as to be enforceable to the maximum
extent permitted by applicable law, and any such prohibition or unenforceability
in any jurisdiction shall not invalidate or render unenforceable such provision
in any other jurisdiction.  To the extent permitted by applicable law, the
parties hereby waive any provision of law which renders any provisions hereof
prohibited or unenforceable in any respect.

 

(i)                                     Further Assurances.  The parties shall
execute and deliver all such further instruments and documents and take all such
other actions as may reasonably be required to carry out the transactions
contemplated hereby and to evidence the fulfillment of the agreements herein
contained.

 

(j)                                     Entire Agreement.  This Agreement is
intended by the parties as a final expression of their agreement and intended to
be a complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained

 

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herein.  This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.

 

(k)                                  Governing Law; Consent to Jurisdiction;
Waiver of Jury Trial.  This Agreement shall be governed by, and construed in
accordance with, the internal laws of the State of New York without regard to
the choice of law principles thereof.  Each of the parties hereto irrevocably
submits to the exclusive jurisdiction of the courts of the State of New York
located in New York County and the United States District Court for the Southern
District of New York for the purpose of any suit, action, proceeding or judgment
relating to or arising out of this Agreement and the transactions contemplated
hereby.  Service of process in connection with any such suit, action or
proceeding may be served on each party hereto anywhere in the world by the same
methods as are specified for the giving of notices under this Agreement.  Each
of the parties hereto irrevocably consents to the jurisdiction of any such court
in any such suit, action or proceeding and to the laying of venue in such
court.  Each party hereto irrevocably waives any objection to the laying of
venue of any such suit, action or proceeding brought in such courts and
irrevocably waives any claim that any such suit, action or proceeding brought in
any such court has been brought in an inconvenient forum.  EACH OF THE PARTIES
HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH
RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED
SPECIFICALLY AS TO THIS WAIVER.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement or caused their
duly authorized officers to execute this Agreement as of the date first above
written.

 

The Company:

PRIMAL SOLUTIONS, INC.

 

 

 

 

 

By:

 

 

 

Name:

Joseph R. Simrell

 

Title:

 President and Chief Executive Officer

 

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[INVESTORS’ SIGNATURE PAGE]

 

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Exhibit A

 

Plan of Distribution

 

The selling stockholders, which as used herein includes donees, pledgees,
transferees or other successors-in-interest selling shares of common stock or
interests in shares of common stock received after the date of this prospectus
from a selling stockholder as a gift, pledge, partnership distribution or other
transfer, may, from time to time, sell, transfer or otherwise dispose of any or
all of their shares of common stock or interests in shares of common stock on
any stock exchange, market or trading facility on which the shares are traded or
in private transactions.  These dispositions may be at fixed prices, at
prevailing market prices at the time of sale, at prices related to the
prevailing market price, at varying prices determined at the time of sale, or at
negotiated prices.

 

The selling stockholders may use any one or more of the following methods when
disposing of shares or interests therein:

 

• ordinary brokerage transactions and transactions in which the broker-dealer
solicits purchasers;

 

• block trades in which the broker-dealer will attempt to sell the shares as
agent, but may position and resell a portion of the block as principal to
facilitate the transaction;

 

• purchases by a broker-dealer as principal and resale by the broker-dealer for
its account;

 

• an exchange distribution in accordance with the rules of the applicable
exchange;

 

• privately negotiated transactions;

 

• short sales effected after the date of this Prospectus;

 

• through the writing or settlement of options or other hedging transactions,
whether through an options exchange or otherwise;

 

• broker-dealers may agree with the selling stockholders to sell a specified
number of such shares at a stipulated price per share;

 

• a combination of any such methods of sale; and

 

• any other method permitted pursuant to applicable law.

 

The selling stockholders may, from time to time, pledge or grant a security
interest in some or all of the shares of common stock owned by them and, if they
default in the performance of their secured obligations, the pledgees or secured
parties may offer and sell the shares of common stock, from time to time, under
this prospectus, or under an amendment to this prospectus under Rule 424(b)(3)
or other applicable provision of the Securities Act amending the

 

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list of selling stockholders to include the pledgee, transferee or other
successors in interest as selling stockholders under this prospectus.  The
selling stockholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this prospectus.

 

In connection with the sale of our common stock or interests therein, the
selling stockholders may enter into hedging transactions with broker-dealers or
other financial institutions, which may in turn engage in short sales of the
common stock in the course of hedging the positions they assume.  The selling
stockholders may also sell shares of our common stock short and deliver these
securities to close out their short positions, or loan or pledge the common
stock to broker-dealers that in turn may sell these securities.  The selling
stockholders may also enter into option or other transactions with
broker-dealers or other financial institutions or the creation of one or more
derivative securities which require the delivery to such broker-dealer or other
financial institution of shares offered by this prospectus, which shares such
broker-dealer or other financial institution may resell pursuant to this
prospectus (as supplemented or amended to reflect such transaction).

 

The aggregate proceeds to the selling stockholders from the sale of the common
stock offered by them will be the purchase price of the common stock less
discounts or commissions, if any.  Each of the selling stockholders reserves the
right to accept and, together with their agents from time to time, to reject, in
whole or in part, any proposed purchase of common stock to be made directly or
through agents.  We will not receive any of the proceeds from this offering.
Upon any exercise of the warrants by payment of cash, however, we will receive
the exercise price of the warrants.

 

The selling stockholders also may resell all or a portion of the shares in open
market transactions in reliance upon Rule 144 under the Securities Act of 1933,
provided that they meet the criteria and conform to the requirements of that
rule.

 

The selling stockholders and any underwriters, broker-dealers or agents that
participate in the sale of the common stock or interests therein may be
“underwriters” within the meaning of Section 2(11) of the Securities Act.  Any
discounts, commissions, concessions or profit they earn on any resale of the
shares may be underwriting discounts and commissions under the Securities Act. 
Selling stockholders who are “underwriters” within the meaning of Section 2(11)
of the Securities Act will be subject to the prospectus delivery requirements of
the Securities Act.

 

To the extent required, the shares of our common stock to be sold, the names of
the selling stockholders, the respective purchase prices and public offering
prices, the names of any agents, dealer or underwriter, any applicable
commissions or discounts with respect to a particular offer will be set forth in
an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this prospectus.

 

In order to comply with the securities laws of some states, if applicable, the
common stock may be sold in these jurisdictions only through registered or
licensed brokers or dealers.  In addition, in some states the common stock may
not be sold unless it has been registered or

 

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qualified for sale or an exemption from registration or qualification
requirements is available and is complied with.

 

We have advised the selling stockholders that the anti-manipulation rules of
Regulation M under the Exchange Act may apply to sales of shares in the market
and to the activities of the selling stockholders and their affiliates.  In
addition, we will make copies of this prospectus (as it may be supplemented or
amended from time to time) available to the selling stockholders for the purpose
of satisfying the prospectus delivery requirements of the Securities Act.  The
selling stockholders may indemnify any broker-dealer that participates in
transactions involving the sale of the shares against certain liabilities,
including liabilities arising under the Securities Act.

 

We have agreed to indemnify the selling stockholders against liabilities,
including liabilities under the Securities Act and state securities laws,
relating to the registration of the shares offered by this prospectus.

 

We have agreed with the selling stockholders to keep the registration statement
of which this prospectus constitutes a part effective until the earlier of (1)
such time as all of the shares covered by this prospectus have been disposed of
pursuant to and in accordance with the registration statement or (2) the date on
which the shares may be sold pursuant to Rule 144(k) of the Securities Act.

 

Each selling stockholder has represented and warranted to us that, at the time
it acquired the securities subject to the registration statement, it did not
have any agreement or understanding, directly or indirectly, with any person to
distribute any of such securities.  We have advised each selling stockholder
that it may not use shares registered on the registration statement to cover
short sales of our common stock made prior to the date on which the registration
statement was declared effective by the Securities and Exchange Commission.

 

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Exhibit B

 

[Form of Questionnaire]

 

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Schedule 3(f)

 

Blue Sky Jurisdictions

 

New York

New Jersey

Connecticut

Massachusetts

Pennsylvania

Texas

California

Nevada

 

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