Exhibit 10.4


 


REGISTRATION RIGHTS AGREEMENT


 


This Registration Rights Agreement (the “Agreement”) is made and
entered into as of this 31st day of March, 2006 by and among Primal
Solutions, Inc., a Delaware corporation (the “Company”), and the “Investors” named
in that certain Purchase Agreement by and among the Company, Wireless Billing
Systems, a California corporation (“WBS”), and the Investors (the “Purchase
Agreement”).


 


The parties hereby agree as follows:


 


1.             Certain Definitions.


 


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


 


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


 


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


 


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


 


“Conversion Shares” means the shares of Common Stock issuable at
the given time upon conversion of the Notes.


 


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


 


“Notes” means the 5% Senior Secured Convertible Notes issued by
the Company and WBS to the Investors pursuant to the Purchase Agreement, the
form of which is attached to the Purchase Agreement as Exhibit A.


 


“Prospectus” shall mean (i) the prospectus included in any
Registration Statement, as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Securities covered by such Registration Statement and by all other
amendments and supplements to the prospectus, including post-effective
amendments and all material incorporated by reference in such prospectus,
together with (ii) any “free writing prospectus” as defined in Rule 405 under
the 1933 Act.


 


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


 


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


 

















 


“Registration Statement” shall mean any registration statement
of the Company filed under the 1933 Act that covers the resale of any of the
Registrable Securities pursuant to the provisions of this Agreement, amendments
and supplements to such Registration Statement, including post-effective
amendments, all exhibits and all material incorporated by reference in such
Registration Statement.


 


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


 


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


 


“SSF Investors” has the meaning ascribed to such term in the
Purchase Agreement.


 


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


 


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


 


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


 


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


 


2.             Registration.


 


(a)           Registration
Statements.


 


(i)            Promptly following
the closing of the purchase and sale of the securities contemplated by the
Purchase Agreement (the “Closing Date”) but no later than the earlier of (i)
the fourteenth (14th) day after the filing by the Company of its
Annual Report on Form 10-KSB with the SEC or (ii) April 30, 2006 (the earlier
of such dates, the “Filing Deadline”), the Company shall prepare and file with
the SEC one Registration Statement on Form SB-2 (or on such form of
registration statement as is then available to effect a registration for resale
of the Registrable Securities, subject to the Required Investors’ consent),
covering the resale of the Registrable Securities in an amount at least equal
to the Conversion Shares and the Warrant Shares. Subject to any SEC comments,
such Registration Statement shall include the plan of distribution attached
hereto as Exhibit A. Such Registration Statement also shall cover, to
the extent allowable under the 1933 Act and the rules promulgated thereunder
(including Rule 416), such indeterminate number of additional shares of Common
Stock resulting from stock splits, stock dividends or similar transactions with
respect to the Registrable Securities. Such Registration Statement shall not
include any shares of Common Stock or other securities for the account of any
other holder without the prior written consent of the Required Investors. The
Registration Statement (and each amendment or supplement thereto, and each
request for acceleration of effectiveness thereof) shall be provided in
accordance with Section 3(c) to the Investors and their counsel prior to its filing
or other submission. If a Registration Statement covering the Registrable
Securities is not filed with the SEC on or prior to the Filing Deadline, the
Company will make pro rata payments to each Investor, as liquidated damages and
not as a penalty, in an amount equal to 1.5% of the aggregate amount invested
by such Investor for each 


 

















 


30-day period or pro rata for any portion thereof following the Filing
Deadline for which no Registration Statement is filed with respect to the
Registrable Securities. Such payments shall constitute the Investors’ exclusive
monetary remedy for such events, but shall not affect the right of the
Investors to seek injunctive relief. Such payments shall be made to each
Investor in cash.


 


(ii)           Additional
Registrable Securities. Upon the written demand of any Investor and upon
any change in the Conversion Price (as defined in the Notes) or in the Warrant
Price (as defined in the Warrants) such that additional shares of Common Stock
become issuable upon the due conversion of the Notes or the due exercise of the
Warrants (the “Additional Shares”), the Company shall prepare and file with the
SEC one or more Registration Statements on Form SB-2 or amend the Registration
Statement filed pursuant to clause (i) above, if such Registration Statement
has not previously been declared effective (or on such form of registration
statement as is then available to effect a registration for resale of the
Additional Shares, subject to the Required Investors’ consent) covering the
resale of the Additional Shares, but only to the extent the Additional Shares
are not at the time covered by an effective Registration Statement. Subject to
any SEC comments, such Registration Statement shall include the plan of
distribution attached hereto as Exhibit A. Such Registration Statement
also shall cover, to the extent allowable under the 1933 Act and the rules
promulgated thereunder (including Rule 416), such indeterminate number of
additional shares of Common Stock resulting from stock splits, stock dividends
or similar transactions with respect to the Additional Shares. Such
Registration Statement shall not include any shares of Common Stock or other
securities for the account of any other holder without the prior written
consent of the Required Investors. The Registration Statement (and each
amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided in accordance with Section 3(c) to the
Investors and their counsel prior to its filing or other submission. If a
Registration Statement covering the Additional Shares is required to be filed
under this Section 2(a)(ii) and is not filed with the SEC within five Business
Days of the request of any Investor or upon the occurrence of any of the events
specified in this Section 2(a)(ii), the Company will make pro rata payments to
each Investor, as liquidated damages and not as a penalty, in an amount equal
to 1.5% of the aggregate amount invested by such Investor for each 30-day
period or pro rata for any portion thereof following the date by which such
Registration Statement should have been filed for which no Registration
Statement is filed with respect to the Additional Shares. Such payments shall
constitute the Investors’ exclusive monetary remedy for such events, but shall
not affect the right of the Investors to seek injunctive relief. Such payments
shall be made to each Investor in cash.


 


(iii)          S-3
Qualification. Promptly following the date (the “Qualification Date”) upon
which the Company becomes eligible to use a registration statement on Form S-3
to register the Registrable Securities or Additional Shares, as applicable, for
resale, but in no event more than thirty (30) days after the Qualification Date
(the “Qualification Deadline”), the Company shall file a registration statement
on Form S-3 covering the Registrable Securities or Additional Shares, as
applicable (or a post-effective amendment on Form S-3 to the registration
statement on Form SB-2) (a “Shelf Registration Statement”) and shall use
commercially reasonable efforts to cause such Shelf Registration Statement to
be declared effective as promptly as practicable thereafter. If a Shelf
Registration Statement covering the Registrable Securities is not filed with
the SEC on or prior to the Qualification Deadline, the Company will make pro
rata payments to each Investor, as liquidated damages and not as a penalty, in
an 


 

















 


amount equal to 1.5% of the aggregate purchase price paid by such
Investor pursuant to the Purchase Agreement attributable to those Registrable
Securities that remain unsold at that time for each 30-day period or pro rata
for any portion thereof following the date by which such Shelf Registration
Statement should have been filed for which no such Shelf Registration Statement
is filed with respect to the Registrable Securities or Additional Shares, as
applicable. Such payments shall constitute the Investors’ exclusive monetary
remedy for such events, but shall not affect the right of the Investors to seek
injunctive relief. Such payments shall be made to each Investor in cash.


 


(b)          Expenses. The
Company will pay all expenses associated with each registration, including
filing and printing fees, the Company’s counsel and accounting fees and
expenses, costs associated with clearing the Registrable Securities for sale
under applicable state securities laws, listing fees, reasonable fees and
expenses of one counsel to the Investors (not to exceed $5,000) and the
Investors’ reasonable expenses in connection with the registration, but
excluding discounts, commissions, fees of underwriters, selling brokers, dealer
managers or similar securities industry professionals with respect to the
Registrable Securities being sold.


 


(c)           Effectiveness.


 


(i)            The
Company shall use commercially reasonable efforts to have the Registration
Statement declared effective as soon as practicable. The Company shall notify
the Investors by facsimile or e-mail as promptly as practicable, and in any
event, within twenty-four (24) hours, after any Registration Statement is declared
effective and shall simultaneously provide the Investors with copies of any
related Prospectus to be used in connection with the sale or other disposition
of the securities covered thereby. If (A)(x) a Registration Statement covering
the Registrable Securities is not declared effective by the SEC prior to the
earliest of (i) five (5) Business Days after the SEC shall have informed the
Company that no review of the Registration Statement will be made or that the
SEC has no further comments on the Registration Statement, (ii) July 16, 2006
or (iii) the 120th day after the Closing Date if the Registration
Statement is reviewed by the SEC, (y) a Registration Statement covering
Additional Shares is not declared effective by the SEC within ninety (90) days
following the time such Registration Statement was required to be filed
pursuant to Section 2(a)(ii) (120 days if such Registration Statement is
reviewed by the SEC) or (z) a Shelf Registration Statement is not declared
effective by the SEC within ninety (90) days after the Qualification Deadline
(120 days if such Registration Statement is reviewed by the SEC), or (B) after
a Registration Statement has been declared effective by the SEC, sales cannot
be made pursuant to such Registration Statement for any reason (including
without limitation by reason of a stop order, or the Company’s failure to
update the Registration Statement), but excluding the inability of any Investor
to sell the Registrable Securities covered thereby due to (X) market conditions
or its receipt of material nonpublic information at its request in accordance
with Section 4 hereof or (Y) an Allowed Delay (as defined below), then the
Company will make pro rata payments to each Investor, as liquidated damages and
not as a penalty, in an amount equal to 1.5% of the aggregate amount invested
by such Investor for each 30- day period or pro rata for any portion thereof
following the date by which such Registration Statement should have been
effective (the “Blackout Period”). Such payments shall constitute the Investors’
exclusive monetary remedy for such 


 

















 


events, but shall not affect the right of the Investors to seek
injunctive relief. The amounts payable as liquidated damages pursuant to this
paragraph shall be paid monthly within three (3) Business Days of the last day
of each month following the commencement of the Blackout Period until the
termination of the Blackout Period. Such payments shall be made to each
Investor in cash.


 


(ii)           For not more than
twenty (20) consecutive days or for a total of not more than forty-five (45)
days in any twelve (12) month period, the Company may delay the disclosure of
material non-public information concerning the Company, by suspending the use
of any Prospectus included in any registration contemplated by this Section
containing such information, the disclosure of which at the time is not, in the
good faith opinion of the Company, in the best interests of the Company (an “Allowed
Delay”); provided, that (i) the Company shall promptly (a) notify the Investors
in writing of the existence of (but in no event, without the prior written
consent of an Investor, shall the Company disclose to such Investor any of the
facts or circumstances regarding) material non-public information giving rise
to an Allowed Delay, (b) advise the Investors in writing to cease all sales
under the Registration Statement until the end of the Allowed Delay and (c) use
commercially reasonable efforts to terminate an Allowed Delay as promptly as
practicable and (ii) so long as the Registration Statement is on Form SB-2 or
on any other form that does not allow for incorporation by reference of reports
and other materials filed by the Company pursuant to Section 13(a) or 15(d) of
the 1934 Act, the Company may upon written notice to the Investors suspend
sales under the Registration Statement for not more than ten (10) days to the
extent, but in any such case only to the extent, necessary to allow any
post-effective amendment to the Registration Statement or supplement to the
Prospectus to be prepared and filed with the SEC and, if necessary, declared
effective (and such suspension shall be deemed to be an Allowed Delay without
regard to the time periods mentioned above) for the period (not to exceed ten
(10) days) commencing at the time that the Company disseminates a press release
announcing its preliminary financial results for any fiscal period or
announcing a material development and ending on the second Business Day after
the earlier of (A) the date that the related report on Form 10-KSB, 10-QSB or
8-K, as applicable, is filed with the SEC and (B) the date on which such report
is required to be filed under the 1934 Act (without regard to Rule 12b-25
promulgated thereunder).


 


3.             Company Obligations. The
Company will use commercially reasonable efforts to effect the registration of
the Registrable Securities in accordance with the terms hereof, and pursuant
thereto the Company will, as expeditiously as possible:


 


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


 


(b)          prepare and file with
the SEC such amendments and post-effective amendments to the Registration
Statement and the Prospectus as may be necessary to keep the Registration
Statement effective for the Effectiveness Period and to comply with the
provisions of the 1933 Act and the 1934 Act with respect to the distribution of
the Registrable Securities covered thereby;


 

















 


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


 


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


 


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


 


(f)           prior to any public
offering of Registrable Securities, use commercially reasonable efforts to
register or qualify or cooperate with the Investors and their counsel in
connection with the registration or qualification of such Registrable
Securities for offer and sale under the securities or blue sky laws of such
jurisdictions requested by the Investors (other than California) and do any and
all other commercially reasonable acts or things necessary or advisable to
enable the distribution in such jurisdictions of the Registrable Securities
covered by the Registration Statement; provided, however, that the Company
shall not be required in connection therewith or as a condition thereto to (i)
qualify to do business in any jurisdiction where it would not otherwise be
required to qualify but for this Section 3(f), (ii) subject itself to general
taxation in any jurisdiction where it would not otherwise be so subject but for
this Section 3(f), or (iii) file a general consent to service of process in any
such jurisdiction;


 


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


 

















 


(h)          immediately notify
the Investors, at any time prior to the end of the Effectiveness Period, upon
discovery that, or upon the happening of any event as a result of which, the
Prospectus includes an untrue statement of a material fact or omits to state any
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing, and
promptly prepare, file with the SEC and furnish to such holder a supplement to
or an amendment of such Prospectus as may be necessary so that such Prospectus
shall not include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing; and


 


(i)            otherwise use
commercially reasonable efforts to comply with all applicable rules and
regulations of the SEC under the 1933 Act and the 1934 Act, file any final
Prospectus, including any supplement or amendment thereof, with the SEC
pursuant to Rule 424 under the 1933 Act, promptly inform the Investors in
writing if, at any time during the Effectiveness Period, the Company does not
satisfy the conditions specified in Rule 172 and, as a result thereof, the
Investors are required to deliver a Prospectus in connection with any
disposition of Registrable Securities and take such other actions as may be
reasonably necessary to facilitate the registration of the Registrable
Securities hereunder; and make available to its security holders, as soon as
reasonably practicable, but not later than the Availability Date (as defined
below), an earnings statement covering a period of at least twelve (12) months,
beginning after the effective date of each Registration Statement, which earnings
statement shall satisfy the provisions of Section 11(a) of the 1933 Act,
including Rule 158 promulgated thereunder (for the purpose of this subsection
3(i), “Availability Date” means the 45th day following the end of the fourth
fiscal quarter that includes the effective date of such Registration Statement,
except that, if such fourth fiscal quarter is the last quarter of the Company’s
fiscal year, “Availability Date” means the 90th day after the end of such
fourth fiscal quarter).


 


(j)            With a view to making available to
the Investors the benefits of Rule 144 (or its successor rule) and any other
rule or regulation of the SEC that may at any time permit the Investors to sell
shares of Common Stock to the public without registration, the Company covenants
and agrees to:  (i) make and keep public
information available, as those terms are understood and defined in Rule 144,
until the earlier of (A) six months after such date as all of the Registrable
Securities may be resold pursuant to Rule 144(k) or any other rule of similar
effect or (B) such date as all of the Registrable Securities shall have been
resold; (ii) file with the SEC in a timely manner all reports and other
documents required of the Company under the 1934 Act; and (iii) furnish to each
Investor upon request, as long as such Investor owns any Registrable
Securities, (A) a written statement by the Company that it has complied with
the reporting requirements of the 1934 Act, (B) a copy of the Company’s most
recent Annual Report on Form 10-KSB or Quarterly Report on Form 10-QSB, and (C)
such other information as may be reasonably requested in order to avail such
Investor of any rule or regulation of the SEC that permits the selling of any
such Registrable Securities without registration.


 


4.             Due Diligence Review;
Information. The Company shall make available, during normal business
hours, for inspection and review by the Investors, advisors to and
representatives of the Investors (who may or may not be affiliated with the
Investors and who are reasonably acceptable to the Company), all financial and
other records, all SEC Filings (as defined in the Purchase Agreement) and other
filings with the SEC, and all other corporate documents and properties of the
Company as may be reasonably necessary for the purpose of such review, and
cause the Company’s officers, directors and employees, within a reasonable 


 

















 


time period,
to supply all such information reasonably requested by the Investors or any
such representative, advisor or underwriter in connection with such
Registration Statement (including, without limitation, in response to all
questions and other inquiries reasonably made or submitted by any of them),
prior to and from time to time after the filing and effectiveness of the
Registration Statement for the sole purpose of enabling the Investors and such
representatives, advisors and underwriters and their respective accountants and
attorneys to conduct initial and ongoing due diligence with respect to the
Company and the accuracy of such Registration Statement.


 


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


 


5.             Obligations of the Investors.


 


(a)           Each Investor shall
furnish in writing to the Company such information regarding itself, the
Company securities beneficially owned by it, the Registrable Securities held by
it and the intended method of disposition of the Registrable Securities held by
it, as shall be reasonably requested by the Company to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least five (5)
Business Days prior to the first anticipated filing date of any Registration
Statement, the Company shall notify each Investor of the information the
Company requests from such Investor. An Investor shall provide such information
to the Company at least two (2) Business Days prior to the first anticipated
filing date of such Registration Statement. Notwithstanding anything herein to
the contrary, the Company shall not be required to pay any liquidated or other
damages otherwise be liable to any Investor who fails to comply with this
Section 5(a) to the extent such damages result from such failure by the
Investor.


 


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


 


(c)           Each Investor agrees
that, upon receipt of any notice from the Company of either (i) the
commencement of an Allowed Delay pursuant to Section 2(c)(ii) or (ii) the
happening of an event pursuant to Section 3(h) hereof, such Investor will
immediately discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities, until the Investor
is advised by the Company in writing that such dispositions may again be made.


 


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


 

















 


(e)           Each Investor agrees
that in effecting sales or other dispositions of Registrable Securities, it
will comply with all applicable requirements of the 1933 Act, including, if the
Company does not meet the conditions of Rule 163, any prospectus delivery
requirement applicable to such sales or dispositions upon written notice from
the Company that the Company has failed to satisfy the conditions of Rule 163
and that delivery of a prospectus is required as a result thereof.


 


6.             Indemnification.


 


(a)           Indemnification
by the Company. The Company will indemnify and hold harmless each Investor
and its officers, directors, members, employees and agents, successors and
assigns, and each other person, if any, who controls such Investor within the
meaning of the 1933 Act, against any losses, claims, damages or liabilities,
joint or several, to which they may become subject under the 1933 Act or
otherwise, insofar as such losses, claims, damages or liabilities (or actions
in respect thereof) arise out of or are based upon: (i) any untrue statement or
alleged untrue statement of any material fact contained in any Registration
Statement, any preliminary Prospectus or final Prospectus, or any amendment or
supplement thereof; (ii) any blue sky application or other document executed by
the Company specifically for that purpose or based upon written information
furnished by the Company filed in any state or other jurisdiction in order to
qualify any or all of the Registrable Securities under the securities laws
thereof (any such application, document or information herein called a “Blue Sky Application”); (iii) the
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading; (iv)
any violation by the Company or its agents of any rule or regulation
promulgated under the 1933 Act applicable to the Company or its agents and
relating to action or inaction required of the Company in connection with such
registration; or (v) any failure to register or qualify the Registrable
Securities included in any such Registration in any state where the Company or
its agents has affirmatively undertaken or agreed in writing that the Company will
undertake such registration or qualification on an Investor’s behalf and will
reimburse such Investor, and each such officer, director or member and each
such controlling person for any legal or other expenses reasonably incurred by
them in connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the Company
will not be liable in any such case if and to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue statement
or alleged untrue statement or omission or alleged omission so made in
conformity with information furnished by such Investor or any such controlling
person in writing specifically for use in such Registration Statement or
Prospectus.


 


(b)          Indemnification by
the Investors. Each Investor agrees, severally but not jointly, to
indemnify and hold harmless, to the fullest extent permitted by law, the
Company, its directors, officers, employees, stockholders and each person who
controls the Company (within the meaning of the 1933 Act) against any losses,
claims, damages, liabilities and expense (including reasonable attorney fees)
resulting from (i) any untrue statement of a material fact or any omission of a
material fact required to be stated in the Registration Statement or Prospectus
or preliminary Prospectus or amendment or supplement thereto or 


 

















 


necessary to make the statements therein not misleading, to the extent,
but only to the extent that such untrue statement or omission is contained in
any information furnished in writing by such Investor to the Company
specifically for inclusion in such Registration Statement or Prospectus or
amendment or supplement thereto or (ii) any failure of such Investor to comply
with the covenants and agreements contained in this Agreement respecting resale
of the Registrable Securities and such Investor will reimburse the Company,
each of its directors, officers, agents and employees, and any controlling
persons for any reasonable legal and other expense incurred by the Company, its
directors, officers, agents and employees, and any controlling persons, in
connection with investigating, defending, settling, compromising or paying any
such loss, claim, damage, liability, expense or action. In no event shall the
liability of an Investor be greater in amount than the dollar amount of the
proceeds (net of all expense paid by such Investor in connection with any claim
relating to this Section 6 and the amount of any damages such Investor has
otherwise been required to pay by reason of such untrue statement or omission)
received by such Investor upon the sale of the Registrable Securities included
in the Registration Statement giving rise to such indemnification obligation.


 


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


 


(d)          Contribution. If
for any reason the indemnification provided for in the preceding paragraphs (a)
and (b) is unavailable to an indemnified party or insufficient to hold it
harmless, other than as expressly specified therein, then the indemnifying
party shall contribute to the amount paid or payable by the indemnified party
as a result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable 


 

















 


considerations. No person guilty of fraudulent misrepresentation within
the meaning of Section 11(f) of the 1933 Act shall be entitled to contribution
from any person not guilty of such fraudulent misrepresentation. In no event
shall the contribution obligation of a holder of Registrable Securities be
greater in amount than the dollar amount of the proceeds (net of all expenses
paid by such holder in connection with any claim relating to this Section 6 and
the amount of any damages such holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission) received by it upon the sale of the Registrable Securities giving
rise to such contribution obligation.


 


7.             Miscellaneous.


 


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


 


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


 


(c)           Assignments and
Transfers by Investors. The provisions of this Agreement shall be binding
upon and inure to the benefit of the Investors and their respective successors
and assigns. An Investor may transfer or assign, in whole or from time to time
in part, to one or more persons its rights hereunder in connection with the
transfer of Registrable Securities by such Investor to such person, provided
that such Investor complies with all laws applicable thereto and provides
written notice of assignment to the Company promptly after such assignment is
effected.


 


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


 


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


 


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


 

















 


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


 


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


 


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


 


(j)            Entire Agreement.
This Agreement is intended by the parties as a final expression of their
agreement and intended to be a complete and exclusive statement of the
agreement and understanding of the parties hereto in respect of the subject
matter contained herein. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.


 


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


 

















 


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


 


	
  The Company:

  	
  PRIMAL
  SOLUTIONS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Joseph
  R. Simrell

  	
   

  
	
   

  	
  Name: Joseph
  R. Simrell

  
	
   

  	
  Title: Chief
  Executive Officer

  



 

















 


	
  The
  Investors:

  	
  SPECIAL
  SITUATIONS FUND III QP, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Austin W. Marxe

  	
   

  
	
   

  	
  Name: Austin
  W. Marxe

  
	
   

  	
  Title:
  General Partner

  
	
   

  	
   

  
	
   

  	
  SPECIAL
  SITUATIONS FUND III, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Austin W. Marxe

  	
   

  
	
   

  	
  Name: Austin
  W. Marxe

  
	
   

  	
  Title:
  General Partner

  
	
   

  	
   

  
	
   

  	
  SPECIAL
  SITUATIONS PRIVATE EQUITY FUND, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Austin W. Marxe

  	
   

  
	
   

  	
  Name: Austin
  W. Marxe

  
	
   

  	
  Title:
  General Partner

  
	
   

  	
   

  
	
   

  	
  SPECIAL
  SITUATIONS TECHNOLOGY FUND, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Austin W. Marxe

  	
   

  
	
   

  	
  Name: Austin
  W. Marxe

  
	
   

  	
  Title:
  General Partner

  
	
   

  	
   

  
	
   

  	
  SPECIAL
  SITUATIONS TECHNOLOGY FUND II, L.P.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   /s/ Austin W. Marxe

  	
   

  
	
   

  	
  Name: Austin
  W. Marxe

  
	
   

  	
  Title:
  General Partner