Exhibit 10.3


 


THE SECURITIES
REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES HAVE BEEN
REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, (II)
SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144(K), OR (III) THE COMPANY HAS
RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT SUCH TRANSFER
MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT OF 1933 OR
QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.


 


SUBJECT TO THE
PROVISIONS OF SECTION 10 HEREOF, THIS WARRANT SHALL BE VOID AFTER 5:00 P.M.
EASTERN TIME ON MARCH 31, 2011 (THE “EXPIRATION DATE”).


 


No.                     


 


PRIMAL
SOLUTIONS, INC.


 


WARRANT TO
PURCHASE            SHARES OF


COMMON
STOCK, PAR VALUE $0.01 PER SHARE


 


For VALUE RECEIVED,
                                  
(“Warrantholder”), is entitled to purchase, subject to the provisions of this
Warrant, from Primal Solutions, Inc., a Delaware corporation (“Company”), at
any time not later than 5:00 P.M., Eastern time, on the Expiration Date (as
defined above), at an exercise price per share equal to $0.15 (the exercise
price in effect being herein called the “Warrant Price”),                
shares (“Warrant Shares”) of the Company’s Common Stock, par value $0.01 per
share (“Common Stock”). The number of Warrant Shares purchasable upon exercise
of this Warrant and the Warrant Price shall be subject to adjustment from time
to time as described herein.


 


Section 1.               Registration.
The Company shall maintain books for the transfer and registration of the
Warrant. Upon the initial issuance of this Warrant, the Company shall issue and
register the Warrant in the name of the Warrantholder.


 


Section 2.               Transfers.
As provided herein, this Warrant may be transferred only pursuant to a registration
statement filed under the Securities Act of 1933, as amended (the “Securities
Act”), or an exemption from such registration. Subject to such restrictions,
the Company shall transfer this Warrant from time to time upon the books to be
maintained by the Company for that purpose, upon surrender hereof for transfer,
properly endorsed or accompanied by appropriate instructions for transfer and
such other documents as may be reasonably required by the Company, including,
if required by the Company, an opinion of its counsel to the effect that such
transfer is exempt from the registration requirements of the Securities Act, to
establish that such transfer is being made in accordance with the terms hereof,
and a new Warrant shall be issued to the transferee and the surrendered Warrant
shall be canceled by the Company.


 

















 


Section 3.               Exercise
of Warrant. Subject to the provisions hereof, the Warrantholder may
exercise this Warrant, in whole or in part, at any time prior to its expiration
upon surrender of the Warrant, together with delivery of a duly executed
Warrant exercise form, in the form attached hereto as Appendix A (the “Exercise
Agreement”) and payment by cash, certified check or wire transfer of funds (or,
in certain circumstances, by cashless exercise as provided below) of the
aggregate Warrant Price for that number of Warrant Shares then being purchased,
to the Company during normal business hours on any business day at the
Company’s principal executive offices (or such other office or agency of the Company
as it may designate by notice to the Warrantholder). The Warrant Shares so
purchased shall be deemed to be issued to the Warrantholder or the
Warrantholder’s designee, as the record owner of such shares, as of the close
of business on the date on which this Warrant shall have been surrendered (or
the date evidence of loss, theft or destruction thereof and security or
indemnity satisfactory to the Company has been provided to the Company), the
Warrant Price shall have been paid and the completed Exercise Agreement shall
have been delivered. Certificates for the Warrant Shares so purchased shall be
delivered to the Warrantholder within a reasonable time, not exceeding three
(3) business days, after this Warrant shall have been so exercised. The
certificates so delivered shall be in such denominations as may be requested by
the Warrantholder and shall be registered in the name of the Warrantholder or
such other name as shall be designated by the Warrantholder, as specified in
the Exercise Agreement. If this Warrant shall have been exercised only in part,
then, unless this Warrant has expired, the Company shall, at its expense, at
the time of delivery of such certificates, deliver to the Warrantholder a new
Warrant representing the right to purchase the number of shares with respect to
which this Warrant shall not then have been exercised. As used herein,
“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. Each exercise
hereof shall constitute the re-affirmation by the Warrantholder that the
representations and warranties contained in Section 5 of the Purchase Agreement
(as defined below) are true and correct in all material respects with respect
to the Warrantholder as of the time of such exercise.


 


Section 4.               Compliance
with the Securities Act of 1933. Except as provided in the Purchase
Agreement (as defined below), the Company may cause the legend set forth on the
first page of this Warrant to be set forth on each Warrant, and a similar
legend on any security issued or issuable upon exercise of this Warrant, unless
counsel for the Company is of the opinion as to any such security that such
legend is unnecessary.


 


Section 5.               Payment
of Taxes. The Company will pay any documentary stamp taxes attributable to
the initial issuance of Warrant Shares issuable upon the exercise of the
Warrant; provided, however, that the Company shall not be required to pay any
tax or taxes which may be payable in respect of any transfer involved in the
issuance or delivery of any certificates for Warrant Shares in a name other
than that of the Warrantholder in respect of which such shares are issued, and
in such case, the Company shall not be required to issue or deliver any
certificate for Warrant Shares or any Warrant until the person requesting the
same has paid to the Company the amount of such tax or has established to the
Company’s reasonable satisfaction that such tax has been paid. The
Warrantholder shall be responsible for income taxes due under federal, state or
other law, if any such tax is due.


 


Section 6.               Mutilated
or Missing Warrants. In case this Warrant shall be mutilated, lost, stolen,
or destroyed, the Company shall issue in exchange and substitution of and upon
surrender and cancellation of the mutilated Warrant, or in lieu of and
substitution for the Warrant 


 


2

















 


lost, stolen or destroyed, a new Warrant of like tenor and for the
purchase of a like number of Warrant Shares, but only upon receipt of evidence
reasonably satisfactory to the Company of such loss, theft or destruction of
the Warrant, and with respect to a lost, stolen or destroyed Warrant,
reasonable indemnity or bond with respect thereto, if requested by the Company.


 


Section 7.               Reservation
of Common Stock. The Company hereby represents and warrants that there have
been reserved, and the Company shall at all applicable times keep reserved
until issued (if necessary) as contemplated by this Section 7, out of the
authorized and unissued shares of Common Stock, sufficient shares to provide
for the exercise of the rights of purchase represented by this Warrant. The
Company agrees that all Warrant Shares issued upon due exercise of the Warrant
shall be, at the time of delivery of the certificates for such Warrant Shares,
duly authorized, validly issued, fully paid and non-assessable shares of Common
Stock of the Company.


 


Section 8.               Adjustments. Subject and
pursuant to the provisions of this Section 8, the Warrant Price and number of
Warrant Shares subject to this Warrant shall be subject to adjustment from time
to time as set forth hereinafter.


 


(a)           If the Company shall, at any time or
from time to time while this Warrant is outstanding, pay a dividend or make a
distribution on its Common Stock in shares of Common Stock, subdivide its
outstanding shares of Common Stock into a greater number of shares or combine
its outstanding shares of Common Stock into a smaller number of shares or issue
by reclassification of its outstanding shares of Common Stock any shares of its
capital stock (including any such reclassification in connection with a
consolidation or merger in which the Company is the continuing corporation),
then (i) the Warrant Price in effect immediately prior to the date on which
such change shall become effective shall be adjusted by multiplying such
Warrant Price by a fraction, the numerator of which shall be the number of
shares of Common Stock outstanding immediately prior to such change and the
denominator of which shall be the number of shares of Common Stock outstanding
immediately after giving effect to such change and (ii) the number of Warrant
Shares purchasable upon exercise of this Warrant shall be adjusted by
multiplying the number of Warrant Shares purchasable upon exercise of this
Warrant immediately prior to the date on which such change shall become
effective by a fraction, the numerator of which is shall be the Warrant Price
in effect immediately prior to the date on which such change shall become effective
and the denominator of which shall be the Warrant Price in effect immediately
after giving effect to such change, calculated in accordance with clause (i)
above. Such adjustments shall be made successively whenever any event listed
above shall occur.


 


(b)           If any capital reorganization,
reclassification of the capital stock of the Company, consolidation or merger
of the Company with another corporation in which the Company is not the
survivor, or sale, transfer or other disposition of all or substantially all of
the Company’s assets to another corporation shall be effected, then, as a
condition of such reorganization, reclassification, consolidation, merger,
sale, transfer or other disposition, lawful and adequate provision shall be
made whereby each Warrantholder shall thereafter have the right to purchase and
receive upon the basis and upon the terms and conditions herein specified and
in lieu of the Warrant Shares immediately theretofore issuable upon exercise of
the Warrant, such 


 


3

















 


shares of stock, securities or assets as would have been issuable or
payable with respect to or in exchange for a number of Warrant Shares equal to
the number of Warrant Shares immediately theretofore issuable upon exercise of
the Warrant, had such reorganization, reclassification, consolidation, merger,
sale, transfer or other disposition not taken place, and in any such case
appropriate provision shall be made with respect to the rights and interests of
each Warrantholder to the end that the provisions hereof (including, without
limitation, provision for adjustment of the Warrant Price) shall thereafter be
applicable, as nearly equivalent as may be practicable in relation to any
shares of stock, securities or assets thereafter deliverable upon the exercise
hereof. The Company shall not effect any such consolidation, merger, sale,
transfer or other disposition unless prior to or simultaneously with the
consummation thereof the successor corporation (if other than the Company) resulting
from such consolidation or merger, or the corporation purchasing or otherwise
acquiring such assets or other appropriate corporation or entity shall assume
the obligation to deliver to the Warrantholder, at the last address of the
Warrantholder appearing on the books of the Company, such shares of stock,
securities or assets as, in accordance with the foregoing provisions, the
Warrantholder may be entitled to purchase, and the other obligations under this
Warrant. The provisions of this paragraph (b) shall similarly apply to
successive reorganizations, reclassifications, consolidations, mergers, sales,
transfers or other dispositions.


 


(c)           In case the Company shall fix a
payment date for the making of a distribution to all holders of Common Stock (including
any such distribution made in connection with a consolidation or merger in
which the Company is the continuing corporation) of evidences of indebtedness
or assets (other than cash dividends or cash distributions payable out of
consolidated earnings or earned surplus or dividends or distributions referred
to in Section 8(a)), or subscription rights or warrants, the Warrant Price to
be in effect after such payment date shall be determined by multiplying the
Warrant Price in effect immediately prior to such payment date by a fraction,
the numerator of which shall be the total number of shares of Common Stock
outstanding multiplied by the Market Price (as defined below) per share of
Common Stock immediately prior to such payment date, less the fair market value
(as determined by the Company’s Board of Directors in good faith) of said
assets or evidences of indebtedness so distributed, or of such subscription
rights or warrants, and the denominator of which shall be the total number of
shares of Common Stock outstanding multiplied by such Market Price per share of
Common Stock immediately prior to such payment date. “Market Price” as of a
particular date (the “Valuation Date”) shall mean the following: (a) if the
Common Stock is then listed on a national stock exchange, the closing sale
price of one share of Common Stock on such exchange on the last trading day
prior to the Valuation Date; (b) if the Common Stock is then quoted on The
Nasdaq Stock Market, Inc. (“Nasdaq”), the National Association of Securities
Dealers, Inc. OTC Bulletin Board (the “Bulletin Board”) or such similar
quotation system or association, the closing sale price of one share of Common
Stock on Nasdaq, the Bulletin Board or such other quotation system or
association on the last trading day prior to the Valuation Date or, if no such
closing sale price is available, the average of the high bid and the low asked
price quoted thereon on the last trading day prior to the Valuation Date; or
(c) if the Common Stock is not then listed on a national stock exchange or
quoted on Nasdaq, the Bulletin Board or such other quotation system or
association, the fair market value of one share of Common Stock as of the
Valuation Date, as determined in good faith by the Board of Directors of the
Company and the Warrantholder. If the Common Stock is not then listed on a
national securities exchange, 


 


4

















 


Nasdaq, the Bulletin Board or such other quotation system or
association, the Board of Directors of the Company shall respond promptly, in
writing, to an inquiry by the Warrantholder prior to the exercise hereunder as
to the fair market value of a share of Common Stock as determined by the Board
of Directors of the Company. In the event that the Board of Directors of the
Company and the Warrantholder are unable to agree upon the fair market value in
respect of subpart (c) of this paragraph, the Company and the Warrantholder
shall jointly select an appraiser, who is experienced in such matters. The
decision of such appraiser shall be final and conclusive, and the cost of such
appraiser shall be borne equally by the Company and the Warrantholder. Such
adjustment shall be made successively whenever such a payment date is fixed.


 


(d)           An adjustment to the Warrant Price shall
become effective immediately after the payment date in the case of each
dividend or distribution and immediately after the effective date of each other
event which requires an adjustment.


 


(e)           In the event that, as a result of an
adjustment made pursuant to this Section 8, the Warrantholder shall become
entitled to receive any shares of capital stock of the Company other than
shares of Common Stock, the number of such other shares so receivable upon
exercise of this Warrant shall be subject thereafter to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Warrant Shares contained in this Warrant.


 


(f)            Except as provided in subsection (g)
hereof, if and whenever the Company shall issue or sell, or is, in accordance
with any of subsections (f)(l) through (f)(7) hereof, deemed to have issued or
sold, any Additional Shares of Common Stock for no consideration or for a
consideration per share less than the Warrant Price in effect immediately prior
to the time of such issue or sale, then and in each such case (a “Trigger
Issuance”) the then-existing Warrant Price, shall be reduced, as of the
close of business on the effective date of the Trigger Issuance, to (i) the
lowest price per share at which any share of Common Stock was issued or sold or
deemed to be issued or sold if the Trigger Issuance occurs on or after
September      , 2006 (the “Full-Ratchet Date”)
or (ii) if the Trigger Issuance occurs prior to the Full-Ratchet Date, a price
determined as follows:


 


	
  Adjusted
  Warrant Price = (A x B) + D

  
	
  A+C

  



 


where


 


“A” equals the
number of shares of Common Stock outstanding, including Additional Shares of
Common Stock (as defined below) deemed to be issued hereunder, immediately
preceding such Trigger Issuance;


 


“B” equals the
Warrant Price in effect immediately preceding such Trigger Issuance;


 


“C” equals the
number of Additional Shares of Common Stock issued or deemed issued hereunder
as a result of the Trigger Issuance; and


 


5

















 


“D” equals the
aggregate consideration, if any, received or deemed to be received by the
Company upon such Trigger Issuance;


 


provided, however, that in no event shall the
Warrant Price after giving effect to such Trigger Issuance be greater than the
Warrant Price in effect prior to such Trigger Issuance.


 


For purposes
of this subsection (f), “Additional Shares of Common Stock” shall mean all
shares of Common Stock issued by the Company or deemed to be issued pursuant to
this subsection (f), other than Excluded Issuances (as defined in subsection
(g) hereof).


 


For purposes
of this subsection (f), the following subsections (f)(l) to (f)(7) shall also
be applicable:


 


(f)(1)  Issuance of Rights or
Options. In case at any time the Company shall in any manner grant (directly
and not by assumption in a merger or otherwise) any warrants or other rights to
subscribe for or to purchase, or any options for the purchase of, Common Stock
or any stock or security convertible into or exchangeable for Common Stock
(such warrants, rights or options being called “Options” and such convertible
or exchangeable stock or securities being called “Convertible Securities”)
whether or not such Options or the right to convert or exchange any such Convertible
Securities are immediately exercisable, and the price per share for which
Common Stock is issuable upon the exercise of such Options or upon the
conversion or exchange of such Convertible Securities (determined by dividing
(i) the sum (which sum shall constitute the applicable consideration) of (x)
the total amount, if any, received or receivable by the Company as
consideration for the granting of such Options, plus (y) the aggregate amount
of additional consideration payable to the Company upon the exercise of all
such Options, plus (z), in the case of such Options which relate to Convertible
Securities, the aggregate amount of additional consideration, if any, payable
upon the issue or sale of such Convertible Securities and upon the conversion or
exchange thereof, by (ii) the total maximum number of shares of Common Stock
issuable upon the exercise of such Options or upon the conversion or exchange
of all such Convertible Securities issuable upon the exercise of such Options)
shall be less than the Warrant Price in effect immediately prior to the time of
the granting of such Options, then the total number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of
the total amount of such Convertible Securities issuable upon the exercise of
such Options shall be deemed to have been issued for such price per share as of
the date of granting of such Options or the issuance of such Convertible
Securities and thereafter shall be deemed to be outstanding for purposes of
adjusting the Warrant Price. Except as otherwise provided in subsection
8(f)(3), no adjustment of the Warrant Price shall be made upon the actual issue
of such Common Stock or of such Convertible Securities upon exercise of such
Options or upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities.


 


6

















 


(f)(2)  Issuance of Convertible
Securities. In case the Company shall in any manner issue (directly and not by
assumption in a merger or otherwise) or sell any Convertible Securities,
whether or not the rights to exchange or convert any such Convertible
Securities are immediately exercisable, and the price per share for which
Common Stock is issuable upon such conversion or exchange (determined by
dividing (i) the sum (which sum shall constitute the applicable consideration)
of (x) the total amount received or receivable by the Company as consideration
for the issue or sale of such Convertible Securities, plus (y) the aggregate
amount of additional consideration, if any, payable to the Company upon the
conversion or exchange thereof, by (ii) the total number of shares of Common
Stock issuable upon the conversion or exchange of all such Convertible
Securities) shall be less than the Warrant Price in effect immediately prior to
the time of such issue or sale, then the total maximum number of shares of
Common Stock issuable upon conversion or exchange of all such Convertible
Securities shall be deemed to have been issued for such price per share as of
the date of the issue or sale of such Convertible Securities and thereafter
shall be deemed to be outstanding for purposes of adjusting the Warrant Price,
provided that (a) except as otherwise provided in subsection 8(f)(3), no
adjustment of the Warrant Price shall be made upon the actual issuance of such
Common Stock upon conversion or exchange of such Convertible Securities and (b)
no further adjustment of the Warrant Price shall be made by reason of the issue
or sale of Convertible Securities upon exercise of any Options to purchase any
such Convertible Securities for which adjustments of the Warrant Price have
been made pursuant to the other provisions of subsection 8(f).


 


(f)(3) Change in Option Price or Conversion Rate. Upon the happening of
any of the following events, namely, if the purchase price provided for in any
Option referred to in subsection 8(f)(l) hereof, the additional consideration,
if any, payable upon the conversion or exchange of any Convertible Securities
referred to in subsections 8(f)(l) or 8(f)(2), or the rate at which Convertible
Securities referred to in subsections 8(f)(l) or 8(f)(2) are convertible into
or exchangeable for Common Stock shall change at any time (including, but not
limited to, changes under or by reason of provisions designed to protect
against dilution), the Warrant Price in effect at the time of such event shall
forthwith be readjusted to the Warrant Price which would have been in effect at
such time had such Options or Convertible Securities still outstanding provided
for such changed purchase price, additional consideration or conversion rate,
as the case may be, at the time initially granted, issued or sold. On the
termination of any Option for which any adjustment was made pursuant to this
subsection 8(f) or any right to convert or exchange Convertible Securities for
which any adjustment was made pursuant to this subsection 8(f) (including
without limitation upon the redemption or purchase for consideration of such
Convertible Securities by the Company), the Warrant Price then in effect
hereunder shall forthwith be changed to the Warrant Price which would have been
in effect at the time of such termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such termination,
never been issued.


 


7

















 


(f)(4) Stock Dividends. Subject to the provisions of this Section 8(f),
in case the Company shall declare or pay a dividend or make any other distribution
upon any stock of the Company (other than the Common Stock) payable in Common
Stock, Options or Convertible Securities (other than a dividend or distribution
for which an adjustment has been made pursuant to Section 8(a)), then any
Common Stock, Options or Convertible Securities, as the case may be, issuable
in payment of such dividend or distribution shall be deemed to have been issued
or sold without consideration.


 


(f)(5) Consideration for Stock. In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the net amount received
by the Company therefor, after deduction therefrom of any expenses incurred or
any underwriting commissions or concessions paid or allowed by the Company in
connection therewith. In case any shares of Common Stock, Options or
Convertible Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the Company
shall be deemed to be the fair value of such consideration as determined in
good faith by the Board of Directors of the Company, after deduction of any
expenses incurred or any underwriting commissions or concessions paid or
allowed by the Company in connection therewith. In case any Options shall be
issued in connection with the issue and sale of other securities of the
Company, together comprising one integral transaction in which no specific
consideration is allocated to such Options by the parties thereto, such Options
shall be deemed to have been issued for such consideration as determined in
good faith by the Board of Directors of the Company. If Common Stock, Options
or Convertible Securities shall be issued or sold by the Company and, in
connection therewith, other Options or Convertible Securities (the “Additional
Rights”) are issued, then the consideration received or deemed to be received
by the Company shall be reduced by the fair market value of the Additional
Rights (as determined using the Black-Scholes option pricing model or another
method mutually agreed to by the Company and the Warrantholder). The Board of
Directors of the Company shall respond promptly, in writing, to an inquiry by
the Warrantholder as to the fair market value of the Additional Rights. In the
event that the Board of Directors of the Company and the Warrantholder are
unable to agree upon the fair market value of the Additional Rights, the
Company and the Warrantholder shall jointly select an appraiser, who is
experienced in such matters. The decision of such appraiser shall be final and
conclusive, and the cost of such appraiser shall be borne evenly by the Company
and the Warrantholder.


 


(f)(6) Record Date. In case the Company shall take a record of the
holders of its Common Stock for the purpose of entitling them (i) to receive a
dividend or other distribution payable in Common Stock, Options or Convertible
Securities or (ii) to subscribe for or purchase Common Stock, Options or
Convertible Securities, then such record date shall be deemed to be the date of
the issue or sale of the shares of Common Stock deemed to have been issued or
sold upon the declaration of such dividend or the making of such other
distribution or the date of the granting of such right of subscription or
purchase, as the case may be.


 


8

















 


(f)(7) Treasury Shares. The number of shares of Common Stock
outstanding at any given time shall not include shares owned or held by or for
the account of the Company or any of its wholly-owned subsidiaries, and the
disposition of any such shares (other than the cancellation or retirement
thereof) shall be considered an issue or sale of Common Stock for the purpose
of this subsection (f).


 


(g)           Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustment of
the Warrant Price in the case of the issuance of (A) capital stock, Options or
Convertible Securities issued to (i) directors, officers, employees, advisers
or consultants of the Company in connection with their service as directors of
the Company, their employment by the Company or their retention as advisers or
consultants by the Company pursuant to an equity compensation program approved
by the Board of Directors of the Company or the compensation committee of the
Board of Directors of the Company or (ii) landlords and/or commercial lenders;
provided, that in the case of any issuance pursuant to this clause (A), the
exercise or conversion price of any such Options or Convertible Securities
shall be at least equal to the Market Price on the date of grant, (B) shares of
Common Stock issued upon the conversion or exercise of Options or Convertible
Securities issued prior to the date hereof, provided such securities are not
amended after the date hereof to increase the number of shares of Common Stock
issuable thereunder or to lower the exercise or conversion price thereof, (C)
securities issued pursuant to that certain Purchase Agreement dated March 31,
2006, among the Company, Wireless Billing Systems and the Investors named
therein (the “Purchase Agreement”) and securities issued upon the exercise or
conversion of those securities, and (D) shares of Common Stock issued or
issuable by reason of a dividend, stock split or other distribution on shares
of Common Stock (but only to the extent that such a dividend, split or
distribution results in an adjustment in the Warrant Price pursuant to the
other provisions of this Warrant) (collectively, “Excluded Issuances”).


 


(h)           Upon any adjustment to the Warrant Price pursuant to
Section 8(f) above, the number of Warrant Shares purchasable hereunder shall be
adjusted by multiplying such number by a fraction, the numerator of which shall
be the Warrant Price in effect immediately prior to such adjustment and the
denominator of which shall be the Warrant Price in effect immediately
thereafter.


 


(i)            To the extent permitted by
applicable law and the listing requirements of any stock market or exchange on
which the Common Stock is then listed, the Company from time to time may
decrease the Warrant Price by any amount for any period of time if the period
is at least twenty (20) days, the decrease is irrevocable during the period and
the Board shall have made a determination that such decrease would be in the
best interests of the Company, which determination shall be conclusive. Whenever
the Warrant Price is decreased pursuant to the preceding sentence, the Company
shall provide written notice thereof to the Warrantholder at least five (5)
days prior to the date the decreased Warrant Price takes effect, and such
notice shall state the decreased Warrant Price and the period during which it
will be in effect.


 


9

















 


Section 9.               Fractional Interest. The
Company shall not be required to issue fractions of Warrant Shares upon the
exercise of this Warrant. If any fractional share of Common Stock would, except
for the provisions of the first sentence of this Section 9, be deliverable upon
such exercise, the Company, in lieu of delivering such fractional share, shall
pay to the exercising Warrantholder an amount in cash equal to the Market Price
of such fractional share of Common Stock on the date of exercise.


 


Section 10.             Extension of Expiration Date.
If the Company fails to cause any Registration Statement covering Registrable
Securities (unless otherwise defined herein, capitalized terms are as defined
in the Registration Rights Agreement relating to the Warrant Shares (the
“Registration Rights Agreement”)) to be declared effective prior to the
applicable dates set forth therein, or if any of the events specified in
Section 2(c)(ii) of the Registration Rights Agreement occurs, and the Blackout
Period (whether alone, or in combination with any other Blackout Period) continues
for more than 60 days in any 12 month period, or for more than a total of 90
days, then the Expiration Date of this Warrant shall be extended one day for
each day beyond the 60-day or 90-day limits, as the case may be, that the
Blackout Period continues.


 


Section 11.             Benefits. Nothing in this
Warrant shall be construed to give any person, firm or corporation (other than
the Company and the Warrantholder) any legal or equitable right, remedy or
claim, it being agreed that this Warrant shall be for the sole and exclusive
benefit of the Company and the Warrantholder.


 


Section 12.             Notices to Warrantholder. Upon
the happening of any event requiring an adjustment of the Warrant Price, the
Company shall promptly give written notice thereof to the Warrantholder at the
address appearing in the records of the Company, stating the adjusted Warrant
Price and the adjusted number of Warrant Shares resulting from such event and
setting forth in reasonable detail the method of calculation and the facts upon
which such calculation is based. Failure to give such notice to the
Warrantholder or any defect therein shall not affect the legality or validity
of the subject adjustment.


 


Section 13.             Identity of Transfer Agent. The
Transfer Agent for the Common Stock is Liberty Transfer. Upon the appointment
of any subsequent transfer agent for the Common Stock or other shares of the
Company’s capital stock issuable upon the exercise of the rights of purchase
represented by the Warrant, the Company will mail to the Warrantholder a
statement setting forth the name and address of such transfer agent.


 


Section 14.             Notices. Unless otherwise
provided, any notice required or permitted under this Warrant shall be given in
writing and shall be deemed effectively given as hereinafter described (i) if
given by personal delivery, then such notice shall be deemed given upon such
delivery, (ii) if given by telex or facsimile, then such notice shall be deemed
given upon receipt of confirmation of complete transmittal, (iii) if given by
mail, then such notice shall be deemed given upon the earlier of (A) receipt of
such notice by the recipient or (B) three days after such notice is deposited
in first class mail, postage prepaid, and (iv) if given by an internationally
recognized overnight air courier, then such notice shall be deemed given one
business day after delivery to such carrier. All notices shall be addressed as
follows: if to the Warrantholder, at its 


 


10

















 


address as set forth in the
Company’s books and records and, if to the Company, at the address as follows,
or at such other address as the Warrantholder or the Company may designate by
ten days’ advance written notice to the other:


 


If to the
Company:


 


Primal
Solutions, Inc.


18881 Von Karman
Avenue, Suite 500


Irvine,
California 92612


Attention:  Joseph R. Simrell


Fax:  (949) 221-8594


 


With a copy
to:


(which shall
not constitute notice)


 


Bryan Cave LLP


2020 Main
Street, Suite 600


Irving,
California 92614


Attention:  Brett J. Souza, Esq.


Fax:  (949) 223-7100


 


Section 15.             Registration Rights. The
initial Warrantholder is entitled to the benefit of certain registration rights
with respect to the shares of Common Stock issuable upon the exercise of this
Warrant as provided in the Registration Rights Agreement, and any subsequent
Warrantholder may be entitled to such rights.


 


Section 16.             Successors. All the
covenants and provisions hereof by or for the benefit of the Warrantholder
shall bind and inure to the benefit of its respective successors and assigns
hereunder.


 


Section 17.             Governing Law; Consent to
Jurisdiction; Waiver of Jury Trial. This Warrant shall be governed by, and
construed in accordance with, the internal laws of the State of New York,
without reference to the choice of law provisions thereof. The Company and, by
accepting this Warrant, the Warrantholder, each 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 Warrant 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 Warrant. The Company and, by accepting
this Warrant, the Warrantholder, each 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. The Company and, by accepting this Warrant, the
Warrantholder, each 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
COMPANY AND, BY ITS ACCEPTANCE 


 


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HEREOF, THE WARRANTHOLDER HEREBY WAIVES ANY RIGHT TO REQUEST A TRIAL BY
JURY IN ANY LITIGATION WITH RESPECT TO THIS WARRANT AND REPRESENTS THAT COUNSEL
HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.


 


Section 18.             Call Provision. (a)  Subject to the provisions of clauses (b) and
(c) below, in the event that the closing bid price per share of Common Stock as
reported by the Bulletin Board (or such other exchange or stock market on which
the Common Stock may then be listed or quoted) equals or exceeds $0.3375
(appropriately adjusted for any stock split, reverse stock split, stock
dividend or other reclassification or combination of the Common Stock occurring
after the date hereof) for at least twenty (20) consecutive trading days
commencing on the later of September 30, 2006 and the date on which the
Registration Statement (as defined in the Registration Rights Agreement) is
initially declared effective, the Company, upon thirty (30) days prior written
notice (the “Notice Period”) given to the Warrantholder within one business day
immediately following the end of such twenty (20) trading day period, may
demand that the Warrantholder exercise its cash exercise rights hereunder, and
the Warrantholder must exercise its rights hereunder prior to the end of the
Notice Period; provided that (i) the Company simultaneously gives a similar
notice to all holders of Company Warrants (as defined below), (ii) all of the
shares of Common Stock issuable hereunder either (A) are registered pursuant to
an effective Registration Statement (as defined in the Registration Rights
Agreement) which has not been suspended and for which no stop order is in
effect, and pursuant to which the Warrantholder is able to sell such shares of
Common Stock at all times during the Notice Period or (B) no longer constitute
Registrable Securities (as defined in the Registration Rights Agreement) (this
clause (ii) being hereinafter referred to as the “Trading Condition”) and (iii)
this Warrant is fully exercisable for the full amount of Warrant Shares covered
hereby. If, in violation of this Section 18(a), such exercise is not made or if
only a partial exercise is made, any and all rights to further exercise the
Warrant shall cease upon the expiration of the Notice Period without prejudice
to any rights the Company may have at law or in equity.


 


(b)           In any 90-day period, no more than
the lesser of (i) 25% of the aggregate amount of Warrants initially issued to a
Warrantholder or (ii) the number of Warrants held by the Warrantholder, may be
called by the Company and the Company may not call additional Warrants in any
subsequent three-month period unless all the conditions specified in Section
18(a) are again met (including without limitation, the Trading Condition) at
the time that any subsequent call notice is given.


 


(c)           In connection with any transfer or
exchange of less than all of this Warrant, the transferring Warrantholder shall
deliver to the Company an agreement or instrument executed by the transferring
Warrantholder and the new Warrantholder allocating between them on whatever
basis they may determine in their sole discretion any subsequent call of this
Warrant by the Company, such that after giving effect to such transfer the
Company shall have the right to call the same number of Warrants that it would
have had if the transfer or exchange had not occurred.


 


12

















 


Section 19.             Cashless Exercise. Notwithstanding
any other provision contained herein to the contrary, from and after the first
anniversary of the Closing Date (as defined in the Purchase Agreement) upon the
occurrence and during the continuance of any breach by the Company of its
obligations under the Registration Rights Agreement, the Warrantholder may
elect to receive, without the payment by the Warrantholder of the aggregate
Warrant Price in respect of the shares of Common Stock to be acquired, shares
of Common Stock of equal value to the value of this Warrant, or any specified
portion hereof, by the surrender of this Warrant (or such portion of this Warrant
being so exercised) together with a Net Issue Election Notice, in the form
annexed hereto as Appendix B, duly executed, to the Company. Thereupon, the
Company shall issue to the Warrantholder such number of fully paid, validly
issued and nonassessable shares of Common Stock as is computed using the
following formula:


 


	
   

  	
  X = Y (A - B)

  	
   

  
	
   

  	
     A

  	
   

  



 


where


 


X =          the number of shares of Common Stock
to which the Warrantholder is entitled upon such cashless exercise;


 


Y =          the total number of shares of Common
Stock covered by this Warrant for which the Warrantholder has surrendered
purchase rights at such time for cashless exercise (including both shares to be
issued to the Warrantholder and shares as to which the purchase rights are to
be canceled as payment therefor);


 


A =         the “Market Price” of one share of
Common Stock as at the date the net issue election is made; and


 


B =          the Warrant Price in effect under this
Warrant at the time the net issue election is made.


 


Section 20.             No Rights as Stockholder. Prior
to the exercise of this Warrant, the Warrantholder shall not have or exercise
any rights as a stockholder of the Company by virtue of its ownership of this
Warrant.


 


Section 21.             Amendment; Waiver. This
Warrant is one of a series of Warrants of like tenor issued by the Company
pursuant to the Purchase Agreement and initially covering an aggregate of
7,500,000 shares of Common Stock (collectively, the “Company Warrants”).
Any term of this Warrant may be amended or waived (including the adjustment
provisions included in Section 8 of this Warrant) upon the written consent of
the Company and the holders of Company Warrants representing at least 50% of
the number of shares of Common Stock then subject to all outstanding Company
Warrants (the “Majority Holders”); provided, that (x) any such
amendment or waiver must apply to all Company Warrants; and (y) the number of
Warrant Shares subject to this Warrant, the Warrant Price and the Expiration
Date may not be amended, and the right to exercise this Warrant may not be altered
or waived, without the written consent of the Warrantholder.


 


Section 23.             Section Headings. The
section headings in this Warrant are for the convenience of the Company and the
Warrantholder and in no way alter, modify, amend, limit or restrict the provisions
hereof.


 


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IN WITNESS WHEREOF, the Company has caused
this Warrant to be duly executed, as of the 31st day of March, 2006.


 


	
   

  	
  PRIMAL
  SOLUTIONS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name: Joseph
  R. Simrell

  
	
   

  	
  Title: Chief
  Executive Officer

  



 


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