Exhibit 10.2


 


PLEDGE AND SECURITY AGREEMENT


 


PLEDGE
AND SECURITY AGREEMENT (this “Agreement”),
dated as of March 31, 2006, is by and among Primal Solutions, Inc., a Delaware
corporation (the “Borrower”), Wireless Billing Solutions, a California
corporation (“WBS”), and such other parties as may become Grantors
hereunder on or after the date hereof (together with the Borrower and WBS, the
“Grantors” and, individually, a “Grantor”) and the Investors
named as such in the Purchase Agreement, dated March 31, 2006 (the “Purchase
Agreement”), among the Borrower and such Investors (collectively, the “Purchasers”).


 


WHEREAS,
pursuant to the terms of the Purchase Agreement, the Purchasers are acquiring
from the Borrower, $1,500,000 in an aggregate principal amount of the
Borrower’s 5% Senior Secured Convertible Notes (the “Notes”); and


 


WHEREAS,
the Grantors wish to grant security interests in favor of the Purchasers as
herein provided to secure the obligations of the Borrower under the Notes;


 


NOW
THEREFORE, in consideration of the promises contained
herein and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:


 


1.             Definitions. All
capitalized terms used herein without definitions shall have the respective
meanings provided therefor in the Purchase Agreement or the Notes. As used
herein the term “Obligations” shall mean all principal, interest
(including interest accrued after the filing of a bankruptcy or similar
petition whether or not a claim therefor is enforceable), fees, expenses and
indemnities payable from time to time by the Grantors under the Notes and the
other Transaction Documents, including reimbursements under Section 9.5 of the
Purchase Agreement. The term “State,” as used herein, means the State of
New York. All terms defined in the Uniform Commercial Code of the State and
used herein shall have the same definitions herein as specified therein. However,
if a term is defined in Article 9 of the Uniform Commercial Code of the State
differently than in another Article of the Uniform Commercial Code of the
State, the term has the meaning specified in Article 9.


 


2.             Grant of Security Interest. Each
Grantor hereby grants to the Purchasers, to secure the payment and performance
in full of all of the Obligations, a security interest in and so pledges to the
Purchasers the following properties, assets and rights of such Grantor,
wherever located, whether now owned or hereafter acquired or arising, and all
proceeds and products thereof (all of the same being hereinafter called the “Collateral”):


 


(i)            goods (including inventory,
equipment and any accessions thereto),


 


(ii)           instruments (including promissory
notes),


 


(iii)          documents,


 

















 


(iv)          accounts,


 


(v)           chattel paper (whether tangible or
electronic),


 


(vi)          deposit accounts,


 


(vii)         letter-of-credit rights (whether or not
the letter of credit is evidenced by a writing),


 


(viii)        commercial tort claims,


 


(ix)           securities and all other investment
property (“Investment Property”),


 


(x)            supporting obligations,


 


(xi)           contract rights or rights to the
payment of money, insurance claims and proceeds,


 


(xii)          general intangibles including, without
limitation, all payment intangibles, patents, patent applications, trademarks,
trademark applications, trade names, copyrights, copyright applications,
software, engineering drawings, service marks, customer lists, goodwill, and
all licenses, permits, agreements of any kind or nature pursuant to which the
Grantors possess, use or have authority to possess or use property (whether
tangible or intangible) of others or others possess, use or have authority to
possess or use property (whether tangible or intangible) of the Grantors, and
all recorded data of any kind or nature, regardless of the medium of recording
including, without limitation, all software, writings, plans, specifications
and schematics; and


 


(xiii)         all now existing and hereafter acquired
or arising (A) capital stock, equity securities or interests or other
Investment Property (including the capital stock described on Schedule A
hereto), (B) all cash dividends and cash distributions with respect to the
foregoing (“Dividends”), (C) all non-cash dividends paid on capital
securities, liquidating dividends paid on capital securities, shares of capital
securities resulting from (or in connection with the exercise of) stock splits,
reclassifications, warrants, options, non-cash dividends, mergers,
consolidations, and all other distributions (whether similar or dissimilar to
the foregoing) on or with respect to any capital securities constituting
Collateral (excluding Dividends, “Distributions”), and (D) all
certificates, agreements (including stockholders agreements, partnership
agreements, operating agreements and limited liability company agreements),
books, records, writings, data bases, information and other property relating
to, used or useful in connection with, evidencing, embodying, incorporating or
referring to, any of the foregoing.


 


The Purchasers
acknowledge that the attachment of the security interest in any commercial tort
claim as original collateral is subject to the Grantor’s compliance with §4.7.


 


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Notwithstanding the foregoing, Collateral shall not include any of the
following (collectively, the “Excluded Collateral”) (1) vehicles subject
to a certificate of title statute, and (2) rights under licenses, permits and
contracts and other general intangibles to the extent that the granting of a
security interest therein or assignment thereof would violate any applicable
law or any enforceable provision of any such license, permit, contract or other
general intangible, provided, that
the Grantors shall not permit any such prohibitions in any contracts, licenses,
general intangibles and permits entered into after the date hereof except in
the ordinary course on usual and customary terms or consistent with past
practice.


 


3.             Authorization to File Financing
Statements. The Grantors hereby irrevocably authorize the
Purchasers at any time and from time to time to file in any applicable Uniform
Commercial Code jurisdiction any initial financing statements and amendments
thereto against each Grantor that (a) indicate the Collateral (i) as all assets
of such Grantor or words of similar effect, regardless of whether any
particular asset comprised in the Collateral falls within the scope of Article
9 of the Uniform Commercial Code of the State or such jurisdiction, or (ii) as
being of an equal or lesser scope or with greater detail, and (b) contain any
other information required by part 5 of Article 9 of the Uniform Commercial
Code of the State for the sufficiency or filing office acceptance of any
financing statement or amendment, including whether such Grantor is an
organization, the type of organization and any organization identification
number issued to such Grantor. The Grantors agree to furnish any such
information to the Purchasers promptly upon request. Each Grantor also ratifies
its authorization for the Purchasers to have filed in any Uniform Commercial
Code jurisdiction any like initial financing statements or amendments thereto
if filed prior to the date hereof.


 


4.             Other Actions. Further
to insure the attachment, perfection and first priority (subject to Permitted
Liens) of, and the ability of the Purchasers to enforce, the Purchasers’
security interest in the Collateral, the Grantors agree, in each case at the
Grantor’s own expense, to take the following actions with respect to the
following Collateral:


 


4.1.         Promissory Notes and Tangible Chattel Paper. If any Grantor shall at any
time hold or acquire any promissory notes or tangible chattel paper, such
Grantor shall forthwith endorse, pledge and deliver the same to the Purchasers,
accompanied by such instruments of transfer or assignment duly executed in
blank as the Purchasers may from time to time specify.


 


4.2.         Deposit Accounts. For each deposit account
(each, a “Deposit Account”) that any Grantor at any time opens or
maintains at any depository bank (each, a “Depository Bank”), the Grantor
shall, at the Purchasers’ request and option, pursuant to an agreement in form
and substance satisfactory to the Purchasers (each, a “Deposit Account
Control Agreement”), upon an Event of Default either (a) cause the
Depositary Bank to agree to comply at any time with instructions from the
Purchasers to such Depositary Bank directing the disposition of funds from time
to time credited to such Deposit Account, without further 


 


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consent of the
Grantor, or (b) arrange for the Purchasers to become the customers of the
Depositary Bank with respect to the Deposit Account, with the Grantors being
permitted, only with the consent of the Purchasers, to exercise rights to
withdraw funds from such Deposit Account. The Purchasers agree with the
Grantors that the Purchasers shall not give any such instructions or withhold
any withdrawal rights from the Grantors, unless an Event of Default has
occurred and is continuing, or, after giving effect to any withdrawal not otherwise
permitted by the Transaction Documents, would occur. The provisions of this
paragraph shall not apply to (i) any Deposit Account for which the Grantors,
the Depositary Bank and the Purchasers have entered into a cash collateral
agreement specially negotiated among any Grantor, the Depositary Bank and the
Purchasers for the specific purpose set forth therein (ii) Deposit Accounts for
which any Purchaser is the depositary, and (iii) any Deposit Account which
holds exclusively sales tax and/or withholding remittances.


 


4.3.         Investment Property. If any Grantor shall at any
time hold or acquire any certificated securities, the Grantor shall forthwith
endorse, pledge and deliver the same to the Purchasers, accompanied by such
instruments of transfer or assignment duly executed in blank as the Purchasers
may from time to time specify. If any securities now or hereafter acquired by
any Grantor are uncertificated and are issued to the Grantor or its nominee
directly by the issuer thereof, the Grantor shall immediately notify the
Purchasers thereof and, at the Purchasers’ request and option, pursuant to an
agreement in form and substance satisfactory to the Purchasers, either (a)
cause the issuer to agree to comply with instructions from the Purchasers as to
such securities, without further consent of the Grantor or such nominee, or (b)
arrange for the Purchasers to become the registered owners of the securities.
If any securities, whether certificated or uncertificated, or other investment
property now or hereafter acquired by any Grantor are held by the Grantor or
its nominee through a securities intermediary or commodity intermediary, the
Grantor shall immediately notify the Purchasers thereof and, at the Purchasers’
request and option, pursuant to an agreement in form and substance satisfactory
to the Purchasers, either (i) cause such securities intermediary or (as the
case may be) commodity intermediary to agree to comply with entitlement orders
or other instructions from the Purchasers to such securities intermediary as to
such securities or other investment property, or (as the case may be) to apply
any value distributed on account of any commodity contract as directed by the
Purchasers to such commodity intermediary, in each case without further consent
of the Grantor or such nominee, or (ii) in the case of financial assets or
other investment property held through a securities intermediary, arrange for
the Purchasers to become the entitlement holders with respect to such
investment property, with the Grantor being permitted, only with the consent of
the Purchasers, to exercise rights to withdraw or otherwise deal with such
investment property. The Purchasers agree with the Grantors that the Purchasers
shall not give any such entitlement orders or instructions or directions to any
such issuer, securities intermediary or commodity intermediary, and shall not
withhold its consent to the exercise of any withdrawal or dealing rights by the
Grantors, 


 


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unless an Event of
Default has occurred and is continuing, or, after giving effect to any such
investment and withdrawal rights not otherwise permitted by the Transaction
Documents, would occur. The provisions of this paragraph shall not apply to any
financial assets credited to a securities account for which any Purchaser is
the securities intermediary.


 


4.4.         Collateral in the Possession of a Bailee. If any goods are at any time
in the possession of a bailee, the Grantors shall promptly notify the
Purchasers thereof and, if requested by the Purchasers, shall promptly obtain
an acknowledgment from the bailee, in form and substance satisfactory to the
Purchasers, that the bailee holds such Collateral for the benefit of the
Purchasers and shall act upon the instructions of the Purchasers, without the
further consent of the Grantor. The Purchasers agree with the Grantors that the
Purchasers shall not give any such instructions unless an Event of Default has
occurred and is continuing or would occur after taking into account any action
by the Grantors with respect to the bailee.


 


4.5.         Electronic Chattel Paper and Transferable Records. If any Grantor at any time
holds or acquires an interest in any electronic chattel paper, the Grantor
shall promptly notify the Purchasers thereof and, at the request of the
Purchasers, shall take such action as the Purchasers may reasonably request to
vest in the Purchasers control, under §9-105 of the Uniform Commercial Code, of
such electronic chattel paper. The Purchasers agree with the Grantors that the
Purchasers will arrange, pursuant to procedures satisfactory to the Purchasers
and so long as such procedures will not result in the Purchasers’ loss of
control, for the Grantors to make alterations to the electronic chattel paper
or transferable record permitted under UCC §9-105, unless an Event of Default
has occurred and is continuing or would occur after taking into account any
action by the Grantors with respect to such electronic chattel paper or
transferable record.


 


4.6.         Letter-of-credit Rights. If any Grantor is at any time
a beneficiary under a letter of credit now or hereafter issued in favor of the
Grantor, the Grantor shall promptly notify the Purchasers thereof and, at the
request and option of the Purchasers, the Grantor shall, pursuant to an
agreement in form and substance satisfactory to the Purchasers, either (i) use
commercially reasonable efforts (including, but not limited to, the payment of
customary transfer and assignment fees) to have the issuer and any confirmer of
such letter of credit to consent to an assignment to the Purchasers of the
proceeds of any drawing under the letter of credit or (ii) use commercially
reasonable efforts (including, but not limited to, the payment of customary
transfer and assignment fees) to have the Purchasers become the transferee
beneficiaries of the letter of credit, with the Purchasers agreeing, in each
case, that the proceeds of any drawing under the letter to credit are to be
applied as provided in the Note.


 


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4.7.         Commercial Tort Claims. If any Grantor shall at any
time hold or acquire a commercial tort claim, the Grantor shall immediately
notify the Purchasers in a writing signed by the Grantor of the brief details
thereof and grant to the Purchasers in such writing a security interest therein
and in the proceeds thereof, all upon the terms of this Agreement, with such
writing to be in form and substance satisfactory to the Purchasers.


 


5.             Other Actions as to any and all
Collateral. The Grantors further agree to take any
other action reasonably requested by the Purchasers to insure the attachment,
perfection and first priority (subject to Permitted Liens) of, and the ability
of the Purchasers to enforce, the Purchasers’ security interest in any and all
of the Collateral including, without limitation, (a) executing, delivering and,
where appropriate, filing financing statements and amendments relating thereto
under the Uniform Commercial Code, to the extent, if any, that any Grantor’s
signature thereon is required therefor, (b) causing the Purchasers’ names to be
noted as secured parties on any
certificate of title for a titled good if such notation is a condition to
attachment, perfection or priority of, or ability of the Purchasers to enforce,
the Purchasers’ security interest in such Collateral, (c) complying with any
provision of any statute, regulation or treaty of the United States as to any
Collateral if compliance with such provision is a condition to attachment,
perfection or priority of, or ability of the Purchasers to enforce, the
Purchasers’ security interest in such Collateral, (d) obtaining governmental
and other third party consents and approvals, including without limitation any
consent of any licensor, lessor or other person obligated on Collateral, (e)
utilizing commercially reasonable efforts (including, but not limited to, the
payment of a reasonable fee to the applicable landlord) to obtain waivers from
landlords in form and substance satisfactory to the Purchasers, (f) taking all
actions required by any earlier versions of the Uniform Commercial Code or by
other law, as applicable in any relevant Uniform Commercial Code jurisdiction,
or by other law as applicable in any foreign jurisdiction, and (g) delivery to
the Purchasers of stock certificates (and stock powers duly executed in blank
in favor of the Purchasers) covering all of the capital stock described on Schedule
A.


 


6.             Relation to Other Security Documents. The
provisions of this Agreement supplement the provisions of the other Transaction
Documents. Nothing contained in any such Transaction Document shall derogate
from any of the rights or remedies of the Purchasers hereunder. The provisions of this Agreement shall be read and
construed with the other Security Documents referred to below in the manner so
indicated.


 


6.1.         Copyright Security Agreements. If requested by the
Purchasers, each Grantor shall execute and deliver to the Purchasers the
Copyright Security Agreement (attached hereto as Exhibit I) pursuant to
which the Grantor shall grant to the Purchasers security interests in certain
Collateral consisting of copyrights, and copyright registrations. The
provisions of the Copyright Security Agreement are supplemental to the
provisions of this Agreement, and nothing contained in the Copyright Security
Agreement shall derogate from any of the rights or remedies of the Purchasers
hereunder. Neither the delivery of, nor anything contained in, the Copyright
Security Agreement shall be deemed to prevent or postpone the time of
attachment or perfection of any security interest in such Collateral created
hereby.


 


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6.2.         Trademark Security Agreements. If requested by the
Purchasers, each Grantor shall execute and deliver to the Purchasers the
Trademark Security Agreement (attached hereto as Exhibit II) pursuant to
which the Grantor shall grant to the Purchasers security interests in certain
Collateral consisting of trademarks, and trademark registrations. The
provisions of the Trademark Security Agreement are supplemental to the
provisions of this Agreement, and nothing contained in the Trademark Security
Agreement shall derogate from any of the rights or remedies of the Purchasers
hereunder. Neither the delivery of, nor anything contained in, the Trademark
Security Agreement shall be deemed to prevent or postpone the time of
attachment or perfection of any security interest in such Collateral created
hereby.


 


6.3.         Patent Security Agreements. If requested by the
Purchasers, each Grantor shall execute and deliver to the Purchasers the Patent
Security Agreement (attached hereto as Exhibit III) pursuant to which
the Grantor shall grant to the Purchasers security interests in certain
Collateral consisting of patents, and patent registrations. The provisions of
the Patent Security Agreement are supplemental to the provisions of this
Agreement, and nothing contained in the Patent Security Agreement shall
derogate from any of the rights or remedies of the Purchasers hereunder. Neither
the delivery of, nor anything contained in, the Patent Security Agreement shall
be deemed to prevent or postpone the time of attachment or perfection of any
security interest in such Collateral created hereby.


 


7.             Representations and Warranties
Concerning Grantor’s Legal Status. Each
Grantor has previously delivered to the Purchasers a certificate signed by each
Grantor and entitled “Perfection Certificate” (the “Perfection Certificate”).
Each Grantor represents and warrants to the Purchasers as follows: (a) the Grantor’s
exact legal name is that indicated on the Perfection Certificate and on the
signature page hereof, (b) the Grantor is an organization of the type and
organized in the jurisdiction set forth in the Perfection Certificate, (c) the
Perfection Certificate accurately sets forth the Grantor’s organizational
identification number or accurately states that the Grantor has none, (d) the
Perfection Certificate accurately sets forth the Grantor’s place of business
or, if more than one, its chief executive office as well as the Grantor’s
mailing address if different and (e) all other information set forth on the
Perfection Certificate pertaining to the Grantor is accurate and complete.


 


8.             Covenants Concerning Grantor’s
Legal Status. Each Grantor covenants with the
Purchasers as follows: (a) without providing at least 30 days prior written
notice to the Purchasers, the Grantor will not change its name, its place of
business or, if more than one, chief executive office, or its mailing address
or organizational identification number if it has one, (b) if the Grantor does
not have an 


 


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organizational
identification number and later obtains one, the Grantor shall forthwith notify
the Purchasers of such organizational identification number, and (c) the
Grantor will not change its type of organization, jurisdiction of organization
or other legal structure.


 


9.             Representations and Warranties
Concerning Collateral. Each Grantor further represents and
warrants to the Purchasers as follows: 
(a) the Grantor is the owner of or has other rights in the Collateral,
free from any adverse lien, security interest or other encumbrance, except for
the security interest created by this Agreement and the Permitted Liens, (b)
none of the Collateral constitutes, or is the proceeds of, “farm products”
as defined in §9-102(a)(34) of the Uniform Commercial Code of the State, (c)
none of the account debtors or other persons obligated on any of the Collateral
is a governmental authority subject to the Federal Assignment of Claims Act or
like federal, state or local statute or rule in respect of such Collateral, (d)
the Grantor holds no commercial tort claim except as indicated on Schedule B
hereto as modified from time to time, (e) the Grantor has at all times operated
its business in compliance with all applicable provisions of the federal Fair
Labor Standards Act, as amended, and with all applicable provisions of federal,
state and local statutes and ordinances dealing with the control, shipment,
storage or disposal of hazardous materials or substances and (f) all other
information set forth on the Perfection Certificate pertaining to the
Collateral is accurate and complete.


 


10.          Covenants Concerning Collateral Etc.
Each Grantor further covenants with the Purchasers as
follows: (a) the Collateral, to the extent not delivered to the Purchasers
pursuant to §4 or in transit within the United States will be kept at those
locations listed on the Perfection Certificate and the Grantor will not remove
the Collateral from such locations, without providing at least 20 days prior
written notice to the Purchasers, (b) except for the security interest herein
granted and Permitted Liens, the
Grantor shall be the owner of or have other rights in the Collateral free from
any lien, security interest or other encumbrance, and the Grantor shall defend
the same against all claims and demands of all persons at any time claiming the
same or any interests therein adverse to the Purchasers, (c) the Grantor shall
not pledge, mortgage or create, or suffer to exist a security interest in the
Collateral in favor of any person other than the Purchasers except for
Permitted Liens, (d) the Grantor will not use the Collateral in violation of
any policy of insurance thereon, (e) the Grantor will permit the Purchasers, or
their designee, to inspect the Collateral, wherever located, at any reasonable
time during business hours upon prior notice of at least three Business Days
(unless a Default or an Event of Default has occurred and is continuing, in
which event no prior notice shall be required), (f) the Grantor will pay
promptly when due all taxes, assessments, governmental charges and levies upon
the Collateral or incurred in connection with the use or operation of such
Collateral or incurred in connection with this Agreement other than any taxes
contested in good faith and for which appropriate reserves have been
established by the Grantor, (g) the Grantor will continue to operate, its
business in compliance with all applicable provisions of the federal Fair Labor
Standards Act, as amended, and with all applicable provisions of federal, state
and local statutes and ordinances dealing with the control, shipment, storage
or disposal of hazardous materials


 


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or
substances, and (h) the Grantor will not sell or otherwise dispose, or offer to
sell or otherwise dispose, of the Collateral or any interest therein except for
as permitted by the Notes and except for equipment not used by the Company in
the ordinary course of its business.


 


11.          Insurance.


 


11.1.       Maintenance of Insurance. Each Grantor will maintain
with financially sound and reputable insurers insurance with respect to its
properties and business against such casualties and contingencies as shall be
in accordance with general practices of businesses engaged in similar
activities in similar geographic areas; provided, however,
that the Borrower shall at all times maintain with financially sound and
reputable insurers such insurance in amounts not less than the insurance
maintained by the Borrower as of the date hereof, except with the Purchasers’
prior written consent (which will not be unreasonably withheld or delayed). Such
insurance shall be in such minimum amounts that the Grantor will not be deemed
a coinsurer under applicable insurance laws, regulations and policies and
otherwise shall be in such amounts, contain such terms, be in such forms and be
for such periods as may be reasonably satisfactory to the Purchasers. In addition,
all such insurance shall be payable to the Purchasers as loss payee. Without
limiting the foregoing, the Grantors will (i) keep all of its physical property
insured with casualty or physical hazard insurance on an “all risks” basis,
with broad form flood and earthquake coverages and electronic data processing
coverage, (ii) maintain all such workers’ compensation or similar insurance as
may be required by law and (iii) maintain, in amounts and with deductibles
equal to those generally maintained by businesses engaged in similar activities
in similar geographic areas, general public liability insurance against claims
of bodily injury, death or property damage occurring, on, in or about the
properties of the Grantors; business interruption insurance; and product
liability insurance.


 


11.2.       Insurance Proceeds. The proceeds of any casualty
insurance in respect of any casualty loss of any of the Collateral shall,
subject to the rights, if any, of other parties with a prior interest in the
property covered thereby, (i) so long as no Default or Event of Default has
occurred and is continuing and to the extent that the amount of such proceeds
is less than $150,000, be disbursed to the Grantor for direct application by
the Grantor solely to the repair or replacement of the Grantor’s property so
damaged or destroyed and (ii) in all other circumstances, be held by the
Purchasers as cash collateral for the Obligations and (except to the extent
disbursed pursuant to the next sentence) may be applied to the Obligations. The
Purchasers may, at their sole option, disburse from time to time all or any
part of such proceeds so held as cash collateral (in an interest-bearing
account, provided that the Grantor shall execute and deliver to the Purchasers
a properly completed Form W-9), upon such terms and conditions as the
Purchasers may reasonably prescribe, for direct application by the Grantor
solely to the repair or replacement of the Grantor’s property so damaged or destroyed,
or the Purchasers may apply all or any part of such proceeds to the
Obligations.


 


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11.3.       Notice of Cancellation etc. All policies of insurance shall
provide for at least 30 days prior written cancellation notice to the
Purchasers, unless a shorter period is mandated under applicable law. In the
event of failure by any Grantor to provide and maintain insurance as herein
provided, the Purchasers may, at their option, provide such insurance and
charge the amount thereof to the Grantor. Each Grantor shall furnish the
Purchasers with certificates of insurance and policies evidencing compliance
with the foregoing insurance provision.


 


12.          Collateral Protection Expenses;
Preservation of Collateral.


 


12.1.       Expenses Incurred by Purchasers. In their discretion, the Purchasers
may discharge encumbrances at any time levied or placed on any of the
Collateral (other than to the extent constituting Permitted Liens), make
repairs thereto and pay any necessary filing fees or, if any Grantor fails to
do so, insurance premiums. Each Grantor agrees to reimburse the Purchasers on
demand for any and all expenditures so made. The Purchasers shall have no
obligation to the Grantors to make any such expenditures, nor shall the making
thereof relieve the Grantor of any default. Any expenses incurred under this
Section 12 shall constitute Obligations.


 


12.2.       Purchasers’ Obligations and Duties. Anything herein to the
contrary notwithstanding, each Grantor shall remain liable under each contract
or agreement comprised in the Collateral to be observed or performed by the
Grantor thereunder. The Purchasers shall not have any obligation or liability
under any such contract or agreement by reason of or arising out of this
Agreement or the receipt by the Purchasers of any payment relating to any of
the Collateral, nor shall the Purchasers be obligated in any manner to perform
any of the obligations of the Grantor under or pursuant to any such contract or
agreement, to make inquiry as to the nature or sufficiency of any payment
received by the Purchasers in respect of the Collateral or as to the
sufficiency of any performance by any party under any such contract or
agreement, to present or file any claim, to take any action to enforce any
performance or to collect the payment of any amounts which may have been
assigned to the Purchasers or to which the Purchasers may be entitled at any
time or times. The Purchasers’ sole duty with respect to the custody, safe
keeping and physical preservation of the Collateral in their possession, under
§9-207 of the Uniform Commercial Code of the State or otherwise, shall be to
deal with such Collateral in the same manner as the Purchasers deal with
similar property for their own accounts.


 


13.          Securities and Deposits. The
Purchasers may at any time following and during the continuance of an Event of
Default, at their option, transfer to themselves or any nominee any securities
constituting Collateral, receive any income thereon and hold such income as
additional Collateral or apply it to the Obligations. Whether or not any 


 


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Obligations
are due, the Purchasers may following and during the continuance of an Event of
Default demand, sue for, collect, or make any settlement or compromise which it
deems desirable with respect to the Collateral. Regardless of the adequacy of
Collateral or any other security for the Obligations, any deposits or other
sums at any time credited by or due from the Purchasers to the Grantors may at
any time be applied to or set off against any of the Obligations then due and
owing.


 


14.          Notification to Account Debtors and
Other Persons Obligated on Collateral. If an
Event of Default shall have occurred and be continuing, the Grantors shall, at
the request of the Purchasers, notify account debtors and other persons
obligated on any of the Collateral of the security interest of the Purchasers
in any account, chattel paper, general intangible, instrument or other
Collateral and that payment thereof is to be made directly to the Purchasers or
to any financial institution designated by the Purchasers as their agent
therefor, and the Purchasers may themselves, if an Event of Default shall have
occurred and be continuing, without notice to or demand upon the Grantor, so
notify account debtors and other persons obligated on Collateral. After the
making of such a request or the giving of any such notification, the Grantors
shall hold any proceeds of collection of accounts, chattel paper, general
intangibles, instruments and other Collateral received by the Grantor as
trustee for the Purchasers without commingling the same with other funds of the
Grantor and shall turn the same over to the Purchasers in the identical form
received, together with any necessary endorsements or assignments. The
Purchasers shall apply the proceeds of collection of accounts, chattel paper,
general intangibles, instruments and other Collateral received by the
Purchasers to the Obligations, such proceeds to be immediately entered after
final payment in cash or other immediately available funds of the items giving
rise to them.


 


15.          Investment Property. (i)  The Grantors, at their cost and expense
(including the cost and expense of any of the following referenced consents,
approvals etc.) will promptly execute and deliver or cause the execution and
delivery of all applications, certificates, instruments, registration
statements, and all other documents and papers the Purchasers may request
during the continuance of an Event of Default in connection with the obtaining
of any consent, approval, registration, qualification, permit, license,
accreditation, or authorization of any other official body or other Person
necessary or appropriate for the effective exercise of any rights hereunder or
under the other Transaction Documents. Without limiting the generality of the
foregoing, the Grantors agree that in the event the Purchasers shall exercise
their rights hereunder or pursuant to the other Transaction Documents during
the continuance of an Event of Default, to sell, transfer, or otherwise dispose
of, or vote, consent, operate, or take any other action in connection with any
of the Collateral, the Grantors shall execute and deliver (or cause to be
executed and delivered) all applications, certificates, assignments and other
documents that the Purchasers request to facilitate such actions and shall
otherwise promptly, fully, and diligently cooperate with the Purchasers and any
other Persons in making any application for the prior consent or approval of
any official body or any other Person to the exercise by the Purchasers of any
such rights relating to all or any of the Collateral.


 


11

















 


(ii)           The Grantors agree promptly upon the
occurrence and continuance of an Event of Default and without any request
therefor by the Purchasers, so long as such Event of Default shall continue, to
deliver (properly endorsed where required hereby or requested by Purchasers) to
the Purchasers all Dividends and Distributions with respect to Investment
Property and all proceeds of the Collateral, in each case thereafter received
by the Grantor, all of which shall be held by Purchasers as additional
Collateral.


 


(iii)          Except when an Event of Default has
occurred and is continuing, the Grantors may continue to vote all Investment
Property included in the Collateral except in a manner which is inconsistent or
in violation of the Transaction Documents. The Grantors agree promptly upon the
occurrence and during the continuance of an Event of Default, (i) that
Purchasers may exercise (to the exclusion of the Grantor) the voting power and
all other incidental rights of ownership with respect to any Collateral
constituting Investment Property of the Grantor and the Grantor hereby grants
Purchasers an irrevocable proxy, exercisable under such circumstances, to vote
such Investment Property; and (ii) that it shall promptly deliver to the
Purchasers such additional proxies and other documents as may be necessary to
allow the Purchasers to exercise such voting power.


 


(iv)          All Dividends, Distributions,
interest, principal, cash payments, payment intangibles and proceeds which may
at any time and from time to time be held by any Grantor but which the Grantor
is then obligated to deliver to the Purchasers, shall, until delivery to the Purchasers,
be held by the Grantor separate and apart from its other property in trust for
the Purchasers. The Purchasers agree that unless an Event of Default shall have
occurred and be continuing, the Grantors will have the exclusive voting power
with respect to any Investment Property constituting the Grantor’s Collateral
and the Purchasers will, upon the written request of any Grantor, promptly
deliver such proxies and other documents, if any, as shall be reasonably
requested by the Grantor which are necessary to allow the Grantor to exercise
that voting power; provided that
no vote shall be cast, or consent, waiver, or ratification given, or action
taken by the Grantor that would violate any provision of any Transaction
Document.


 


The Grantors
hereby acknowledge that the sale by Purchasers of any Investment Property
pursuant to the terms hereof in compliance with the Securities Act, as well as
applicable “Blue Sky” or other state securities laws may require strict
limitations as to the manner in which Purchasers or any subsequent transferee
of the Investment Property may dispose thereof. The Grantors acknowledge and
agree that, to protect Purchasers’ interests, it may be necessary to sell the
Investment Property at a price less than the maximum price attainable if a sale
were delayed or made in another manner, such as a public offering under the
Securities Act. The Grantors do not have an objection to a sale in such manner
and the Grantors agree that Purchasers do not have an obligation to obtain the
maximum possible price for all or any part of the Investment Property. Without
limiting the generality of the foregoing, the Grantors agree that Purchasers
may, pursuant to the terms hereof and subject to applicable law, from time to
time attempt to sell all or any part of the Investment Property by a private
placement, restricting the bidders and prospective purchasers to those Persons
who will represent and agree that they are 


 


12

















 


purchasing for
investment only and not for distribution. In so doing, Purchasers may solicit
offers to buy the Investment Property or any part thereof for cash from a
limited number of investors deemed by Purchasers, in their reasonable judgment,
to be institutional investors or other responsible Persons who might be
interested in purchasing the Investment Property. If Purchasers shall solicit
such offers, then acceptance by Purchasers of one of the offers shall be deemed
to be a commercially reasonable method of disposition of the Collateral.


 


16.          Power of Attorney.


 


16.1.       Appointment and Powers of Purchasers. The Grantors hereby
irrevocably constitute and appoint the Purchasers and any officer or agent
thereof, with full power of substitution, as its true and lawful
attorney-in-fact with full irrevocable power and authority in the place and
stead of the Grantors or in the Purchasers’ own name, for the purpose of
carrying out the terms of this Agreement, to take any and all appropriate
action and to execute any and all documents and instruments that may be
necessary or desirable to accomplish the purposes of this Agreement and,
without limiting the generality of the foregoing, hereby gives said attorney
the power and right, on behalf of the Grantors, without notice to or assent by
the Grantors, to do the following:


 


(a) 
upon the occurrence and during the continuance of an
Event of Default, generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral in such manner as is
consistent with the Uniform Commercial Code of the State and as fully and
completely as though the Purchasers were the absolute owners thereof for all
purposes, and to do at the Grantors’ expense, at any time, or from time to
time, all acts and things which the Purchasers deem necessary to protect,
preserve or realize upon the Collateral and the Purchasers’ security interest
therein, in order to effect the intent of this Agreement, all as fully and
effectively as the Grantor might do, including, without limitation, (i) the
filing and prosecuting of registration and transfer applications with the
appropriate federal or local agencies or authorities with respect to
trademarks, copyrights and patentable inventions and processes, (ii) upon
written notice to the Grantors, the exercise of voting rights with respect to
voting securities, which rights may be exercised, if the Purchasers so elect,
with a view to causing the liquidation in a commercially reasonable manner of
assets of the issuer of any such securities and (iii) the execution, delivery
and recording, in connection with any sale or other disposition of any
Collateral, of the endorsements, assignments or other instruments of conveyance
or transfer with respect to such Collateral; and


 


(b)  to
the extent that the Grantors’ authorization given in §3 is not sufficient, to
file such financing statements with respect hereto, with or without the
Grantor’ signature, as the Purchasers may deem appropriate and to execute in
the Grantor’s name such financing statements and amendments thereto and
continuation statements which may require the Grantor’s signature.


 


13

















 


16.2.       Ratification by Grantors. To the extent permitted by
law, the Grantors hereby ratify all that said attorney shall lawfully do or
cause to be done by virtue hereof. This power of attorney is a power coupled
with an interest and shall be irrevocable.


 


16.3.       No Duty on Purchasers. The powers conferred on the
Purchasers hereunder are solely to protect its interests in the Collateral and
shall not impose any duty upon it to exercise any such powers. The Purchasers
shall be accountable only for the amounts that they actually receive as a
result of the exercise of such powers and neither any Purchaser nor any of its
officers, directors, employees or agents shall be responsible to the Grantor
for any act or failure to act, except for such Purchaser’s own gross negligence
or willful misconduct.


 


16.4. Purchasers hereby agree that
they will not exercise any rights conferred by this Section 16 absent the
occurrence of an Event of Default.


 


17.          Remedies. If an
Event of Default shall have occurred and be continuing, the Purchasers may,
without notice to or demand upon the Grantors, declare this Agreement to be in
default, and the Purchasers shall thereafter have in any jurisdiction in which
enforcement hereof is sought, in addition to all other rights and remedies, the
rights and remedies of a purchaser under the Uniform Commercial Code of the
State or of any jurisdiction in which Collateral is located, including, without
limitation, the right to take possession of the Collateral, and for that
purpose the Purchasers may, so far as the Grantors can give authority therefor,
enter upon any premises on which the Collateral may be situated and remove the
same therefrom. The Purchasers may in their discretion require the Grantors to
assemble all or any part of the Collateral at such location or locations within
the jurisdiction(s) of the Grantors’ principal office(s) or at such other
locations as the Purchasers may reasonably designate. Unless the Collateral is
perishable or threatens to decline speedily in value or is of a type
customarily sold on a recognized market, the Purchasers shall give to the
Grantors at least ten Business Days prior written notice of the time and place
of any public sale of Collateral or of the time after which any private sale or
any other intended disposition is to be made. The Grantors hereby acknowledge
that ten Business Days prior written notice of such sale or sales shall be
reasonable notice. In addition, the Grantors waive any and all rights that it
may have to a judicial hearing in advance of the enforcement of any of the
Purchasers’ rights hereunder, including, without limitation, its right
following an Event of Default to take immediate possession of the Collateral
and to exercise its rights with respect thereto.


 


18.          Standards for Exercising Remedies.
To the extent that applicable law imposes duties on the
Purchasers to exercise remedies in a commercially reasonable manner, the
Grantors acknowledge and agree that it is not commercially unreasonable for the
Purchasers (a) to fail to incur expenses reasonably deemed significant by the 


 


14

















 


Purchasers
to prepare Collateral for disposition or otherwise to complete raw material or
work in process into finished goods or other finished products for disposition,
(b) to fail to obtain third party consents for access to Collateral to be
disposed of, or to obtain or, if not required by other law, to fail to obtain
governmental or third party consents for the collection or disposition of
Collateral to be collected or disposed of, (c) to fail to exercise collection
remedies against account debtors or other persons obligated on Collateral or to
remove liens or encumbrances on or any adverse claims against Collateral, (d)
to exercise collection remedies against account debtors and other persons
obligated on Collateral directly or through the use of collection agencies and
other collection specialists, (e) to advertise dispositions of Collateral
through publications or media of general circulation, whether or not the
Collateral is of a specialized nature, (f) to contact other persons, whether or
not in the same business as the Grantor, for expressions of interest in
acquiring all or any portion of the Collateral, (g) to hire one or more
professional auctioneers to assist in the disposition of Collateral, whether or
not the collateral is of a specialized nature, (h) to dispose of Collateral by
utilizing Internet sites that provide for the auction of assets of the types
included in the Collateral or that have the reasonable capability of doing so,
or that match buyers and sellers of assets, (i) to dispose of assets in
wholesale rather than retail markets, (j) to disclaim disposition warranties,
(k) to purchase insurance or credit enhancements to insure the Purchasers
against risks of loss, collection or disposition of Collateral or to provide to
the Purchasers a guaranteed return from the collection or disposition of
Collateral, or (1) to the extent deemed appropriate by the Purchasers, to
obtain the services of other brokers, investment bankers, consultants and other
professionals to assist the Purchasers in the collection or disposition of any
of the Collateral. The Grantors acknowledge that the purpose of this §18 is to
provide non-exhaustive indications of what actions or omissions by the
Purchasers would not be commercially unreasonable in the Purchasers’ exercise
of remedies against the Collateral and that other actions or omissions by the
Purchasers shall not be deemed commercially unreasonable solely on account of
not being indicated in this §18. Without limitation upon the foregoing, nothing
contained in this §18 shall be construed to grant any rights to the Grantors or
to impose any duties on the Purchasers that would not have been granted or
imposed by this Agreement or by applicable law in the absence of this §18.


 


19.          No Oral
Change; Amendments; Security Agreement Supplements for Additional Grantors. No
amendment of any provision of this Agreement shall be effective unless it is in
writing and signed by the Grantors and the Purchasers, and no waiver of any
provision of this Agreement, and no consent to any departure by the Grantors
therefrom, shall be effective unless it is in writing and signed by the
Purchasers, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given. Notwithstanding
the foregoing, additional Persons may become Grantors under this Agreement
without consent of any other Grantor through execution and delivery to the
Purchasers of an Assumption Agreement in the form of Annex 1 hereto or any
other form of supplement acceptable to the Purchasers. Nothing in this Section
19 shall be construed to permit any Grantor to form a Subsidiary unless
expressly permitted to do so under the Note.


 


15

















 


20.          Suretyship Waivers by Grantors. Each
Grantor waives demand, notice, protest, notice of acceptance of this Agreement,
notice of loans made, credit extended, Collateral received or delivered or
other action taken in reliance hereon and all other demands and notices of any
description. With respect to both the Obligations and the Collateral, the
Grantors assent to any extension or postponement of the time of payment or any
other indulgence, to any substitution, exchange or release of or failure to
perfect any security interest in any Collateral, to the addition or release of
any party or person primarily or secondarily liable, to the acceptance of
partial payment thereon and the settlement, compromising or adjusting of any
thereof, all in such manner and at such time or times as the Purchasers may
deem advisable. The Purchasers shall have no duty as to the collection or
protection of the Collateral or any income thereon, nor as to the preservation
of rights against prior parties, nor as to the preservation of any rights
pertaining thereto beyond the safe custody thereof as set forth in §11.2. The
Grantors further waive any and all other suretyship defenses.


 


21.          Marshalling. The
Purchasers shall not be required to marshal any present or future collateral
security (including but not limited to this Agreement and the Collateral) for,
or other assurances of payment of, the Obligations or any of them or to resort
to such collateral security or other assurances of payment in any particular
order, and all of its rights hereunder and in respect of such collateral
security and other assurances of payment shall be cumulative and in addition to
all other rights, however existing or arising. To the extent that it lawfully
may, each Grantors hereby agrees that it will not invoke any law relating to
the marshalling of collateral which might cause delay in or impede the
enforcement of the Purchasers’ rights under this Agreement or under any other
instrument creating or evidencing any of the Obligations or under which any of
the Obligations is outstanding or by which any of the Obligations is secured or
payment thereof is otherwise assured, and, to the extent that it lawfully may,
each Grantor hereby irrevocably waives the benefits of all such laws.


 


22.          Proceeds of Dispositions; Expenses. The
Grantors shall pay to the Purchasers on demand any and all expenses, including
reasonable attorneys’ fees and disbursements, incurred or paid by the
Purchasers in protecting, preserving or enforcing the Purchasers’ rights under
or in respect of any of the Obligations or any of the Collateral. After deducting
all of said expenses, the residue of any proceeds of collection or sale of the
Obligations or Collateral shall, to the extent actually received in cash, be
applied to the payment of the Obligations in such order or preference as the
Purchasers may determine, proper allowance and provision being made for any
Obligations not then due. Upon the final payment and satisfaction in full of
all of the Obligations (other than indemnification obligations which have not
matured as of the date thereof) and after making any payments required by
Sections 9-608(a)(1)(C) or 9615(a)(3) of the Uniform Commercial Code of the
State, any excess shall be returned to the Grantors, and the Grantors shall
remain liable for any deficiency in the payment of the Obligations.


 


23.          Overdue Amounts. Until
paid, all amounts due and payable by the Grantors hereunder shall be a debt
secured by the Collateral and shall bear, whether before or after judgment,
interest at the rate of interest set forth in the Note.


 


16

















 


24.          Governing Law; Consent to
Jurisdiction.


 


(a)           Governing
Law. This Agreement shall be governed by, and construed in accordance with,
the law of the State (other than those conflict of law rules that would defer
to the substantive laws of another jurisdiction). Without in any way limiting
the preceding choice of law, the parties elect to be governed by the law of the
State in accordance with, and are relying (at least in part) on, Section 5-1401
of the General Obligations Law of the State, as amended, or any corresponding
or succeeding provisions thereof.


 


(b)           Submission
to Jurisdiction. The Grantors hereby submit to the exclusive personal
jurisdiction of the United States District Court for the Southern District of
New York and of the Supreme Court of the State of New York sitting in New York
County (including its Appellate Division), and of any other appellate court in
the State of New York, for the purposes of all legal proceedings arising out of
or relating to this Agreement or the transactions contemplated hereby.


 


(c)           Waiver
of Venue. The Grantors hereby irrevocably waive, to the fullest extent
permitted by applicable law, any objection that it may now or hereafter have to
the laying of the venue of any such proceeding brought in such a court and any
claim that any such proceeding brought in such a court has been brought in an
inconvenient forum. Without in any way limiting the preceding consents to
personal jurisdiction and venue, the parties agree to submit to the jurisdiction
of the courts of the State of New York in accordance with Section 5-1402 of the
General Obligations Law of the State, as amended, or any corresponding or
succeeding provisions thereof.


 


(d)           Service
of Process; Notices. Each party to this Agreement irrevocably consents to
service of process and delivery of notices provided for hereunder in the manner
provided for notices in the Purchase Agreement. Nothing in this Agreement will
affect the right of any party to this Agreement to serve process in any other
manner permitted by law.


 


25.          Waiver of Jury Trial. THE GRANTORS AND THE PURCHASERS HEREBY IRREVOCABLY
WAIVE, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, ANY AND ALL RIGHT TO
TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.


 


26.          Miscellaneous; Agreement to be
Bound by Provisions of Transaction Documents Applicable to Grantor. The
headings of each section of this Agreement are for convenience only and shall
not define or limit the provisions thereof. This Agreement and all rights and
obligations hereunder shall be binding upon the Grantors and their 


 


17

















 


respective
successors and assigns, and shall inure to the benefit of the Purchasers and
their respective successors and assigns. If any term of this Agreement shall be
held to be invalid, illegal or unenforceable, the validity of all other terms
hereof shall in no way be affected thereby, and this Agreement shall be
construed and be enforceable as if such invalid, illegal or unenforceable term
had not been included herein. The Grantors acknowledge receipt of a copy of
this Agreement. Each Grantor agrees to be bound by each provision of every
other Transaction Document which purports to be applicable to it as if such
provision were set forth herein.


 


27.          Subsidiaries. Borrower
shall cause each existing and future Subsidiary that has assets of $10,000 or
more to complete, execute and deliver to the Purchasers, the form of Assumption
Agreement attached as Annex 1 and such other documents as the Purchasers
shall reasonably request, including, without limitation, evidence of good
standing of such Affiliate and lien searches, all in form and substance
acceptable to the Purchasers.


 


28.          Limited
Recourse Guaranty. Each Subsidiary that becomes a Grantor (each a “Subsidiary
Grantor”) hereby unconditionally guarantees the payment when due of all
Obligations, provided, however, that recourse under this provision is limited
to the assets of the Subsidiary Grantor that are, or will be, included as part
of the Collateral. This guaranty is irrevocable and will not be affected by any
release of any Grantor or surrender, exchange, compromise or release any
Collateral, by any failure to perfect any liens, by any irregularity,
enforceability or invalidity of any Obligations or any part thereof or any
security or guaranty thereof. Each Subsidiary Grantor waives all defenses based
on suretyship or on impairment of Collateral. Without notice to, or the consent
of, any Subsidiary Grantor, the terms of the Obligations and any related
documents may be changed, extended, renewed or compromised.


 


29.          Further
Assurances. Borrower and each Subsidiary Grantor 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.


 


30.          Administrative and Collateral Agency; Actions of
Purchasers. Purchasers hereby designate Special
Situations Fund III (QP), L.P. (the “Agent”) as their agent hereunder to
act on their behalf and to deal with the Grantor in all matters in connection
with this Agreement; and Grantors may deliver to Agent all items required to be
delivered from time to time to Purchasers hereunder. All actions authorized to
be taken or to not taken by the Purchasers hereunder shall be taken or not
taken by the Agent on behalf of the Purchasers.


 


[The remainder of this page has been intentionally
left blank.]


 


18

















 


IN
WITNESS WHEREOF, intending to be legally bound, the
Grantors and Purchasers have caused this Agreement to be duly executed as of
the date first above written.


 


	
   

  	
  GRANTORS:

  
	
   

  	
   

  
	
   

  	
  PRIMAL SOLUTIONS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph R. Simrell

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Joseph R. Simrell

  
	
   

  	
   

  	
  Title:

  	
  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WIRELESS BILLING SYSTEMS

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph R. Simrell

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Joseph R. Simrell

  
	
   

  	
   

  	
  Title:

  	
  Chief Executiv Officer

  
					



 


PURCHASERS:


 


 


SPECIAL SITUATIONS FUND III (QP), L.P.


SPECIAL SITUATIONS FUND III, L.P.


SPECIAL SITUATIONS PRIVATE EQUITY FUND, L.P.


SPECIAL SITUATIONS TECHNOLOGY FUND, L.P.


SPECIAL SITUATIONS TECHNOLOGY FUND II, L.P.


 


	
  By:

  	
   /s/ Austin W. Marxe

  	
   

  
	
   

  	
  Name:

  	
  Austin W. Marxe

  
	
   

  	
  Title:

  	
  General Partner