EXHIBIT 10.74










March 31,
2008





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.





527
Madison Avenue, Suite 2600


New York,
NY  10022





Attention:  Austin
W. Marxe





Dear
Austin:





Reference is hereby made to (i) the
Purchase Agreement, dated as of March 31, 2006 (the “Purchase Agreement”), by
and among Primal Solutions, Inc. (the “Company”), Wireless Billing Systems
(“WBS”) and 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. and Special Situations Technology Fund II, L.P.
(collectively “SSF”), (ii) the Registration Rights Agreement, dated as of March
31, 2006 (the “Registration Rights Agreement”), by and between the Company and
SSF, (iii) $1,500,000 in aggregate principal amount of 5% Senior Secured
Convertible Notes, dated March 31, 2006 (the “Notes”), made by the Company and
WBS in favor of SSF, (iv) the Pledge and Security Agreement, dated as of March
31, 2006 (the “Security Agreement”), by and among the Company, WBS and SSF, (v)
the Amended and Restated Subordination Agreement, dated as of March 31, 2006 (as
amended and restated as of March 29, 2007) the “Subordination Agreement”), by
and among Lightbridge, Inc. (“Lightbridge”), the Company, WBS and SSF, (vi) the
Warrants, dated March 31, 2006, to purchase an aggregate of 7,500,000 shares of
Common Stock, par value $0.01 per share, of the Company issued to SSF (the
“Warrant”) and (vii) the Adjustable Promissory Notes, dated December 22, 2006
(the “Damages Notes”), made by the Company in favor of SSF.  The
Purchase Agreement, the Registration Rights Agreement, the Notes, the Security
Agreement, the Subordination Agreement, the Warrant and the Damages Notes are
hereinafter collectively referred to herein as the “Transaction
Documents.”  Capitalized terms used herein have the respective
meanings ascribed thereto in the Purchase Agreement unless otherwise defined
herein.





In consideration of the premises and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and intending to be legally bound, the Company, WBS and SSF
hereby agree as follows:





1.           The
Company shall pay to SSF the sum of One Hundred Forty-Four Thousand Eight
Hundred Nineteen and 37/100 United States Dollars ($144,819.37), representing






1




payment
in full of the Damages Notes and payment of all accrued interest on the Notes
through March 31, 2008.  Upon receipt of such payment the Damages
Notes shall be deemed cancelled and SSF shall promptly surrender the original
Damages Notes to the Company.





2.           Effective
as of the close of business on March 31, 2008, the Notes shall be amended and
restated as set forth in Exhibit A attached
hereto (the “Amended and Restated Notes”).  Upon receipt of the
Amended and Restated Notes, the Notes shall be deemed cancelled and SSF shall
promptly surrender the original Notes to the Company.





3.           In
the event that SSF determines to sell, convey or otherwise transfer the Amended
and Restated Notes to any Person, other than an Affiliate of AWM Investment
Company, Inc., SSF shall give the Company not less than 10 days’ prior written
notice thereof, which notice shall set forth a description of the material terms
of such sale, conveyance or transfer and which shall set forth the proposed
closing date thereof (the “Proposed Closing Date”) which shall be not less than
10 days after the date of such notice.  The Company shall have the
right to repurchase the Amended and Restated Notes from SSF on the terms set
forth in SSF’s notice by giving written notice to SSF of its election to do so,
which election shall be irrevocable, not later than the seventh (7th) day after
the date of SSF’s notice.  If the Company timely exercises its right
to repurchase the Amended and Restated Notes, the Company and SSF shall
consummate the sale of the Amended and Restated Notes on the terms specified in
SSF’s notice on the Proposed Closing Date or such other date as the Company and
SSF may agree.  In the event that the Company does not timely exercise
its right to repurchase the Amended and Restated Notes as provided herein, SSF
shall be free to sell, convey or otherwise transfer the Amended and Restated
Notes on terms no less favorable to the purchaser than those set forth in SSF’s
notice; provided, however, that if SSF does not complete such sale, conveyance
or other transfer within 90 days of the date of SSF’s notice, the sale,
conveyance or transfer of the Amended and Restated Notes shall again be subject
to the provisions of this Section 3.





4.           Except
as expressly modified hereby, the Transaction Documents shall remain in full
force and effect, except that references to the Notes shall be deemed to be to
the Amended and Restated Notes.





Each of the parties hereto hereby
represents and warrants to the other parties hereto that this letter agreement
has been duly authorized executed and delivered by it and constitutes its legal,
valid and binding obligation, enforceable against it in accordance with its
terms.





If the foregoing accurately reflects
our agreement, please execute this letter in the space provided below and return
a copy to the undersigned.  This letter may be executed in
counterparts, each of which shall be deemed an original and all of which
together shall constitute one and the same instrument.  This letter
shall be governed by, and construed in accordance with, the laws of the State of
New York, without regard to the choice of law principles thereof.





[Signature
page immediately follows]





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PRIMAL
      SOLUTIONS, INC.By:
                /s/ Joseph R.
      SimrellName:
                Joseph
      R. SimrellTitle:
                Chief Executive
      Officer, President andActing Chief
      Financial Officer
 
 WIRELESS
      BILLING SYSTEMSBy:
                  /s/ Joseph R.
      SimrellName:
                  Joseph
      R. SimrellTitle:
                  Chief Executive
      Officer, President andActing Chief
      Financial Officer
 ACCEPTED
      AND AGREED: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.
      MarxeName:
                  Austin W.
      MarxeTitle:
                  General
      Partner





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EXHIBIT
A






THE
SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH SECURITIES
HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF 1933, AS
AMENDED, (II) SUCH SECURITIES MAY BE SOLD PURSUANT TO RULE 144(K), OR (III) THE
COMPANY HAS RECEIVED AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO IT THAT
SUCH TRANSFER MAY LAWFULLY BE MADE WITHOUT REGISTRATION UNDER THE SECURITIES ACT
OF 1933 OR QUALIFICATION UNDER APPLICABLE STATE SECURITIES LAWS.
 
 
 AMENDED AND RESTATED 10%
SENIOR SECURED CONVERTIBLE NOTE
 
 
  $____________________
              March 31,
      2006, as amended and restated as of March 31,
  2008
  
 
 
 FOR VALUE
RECEIVED, Primal Solutions, Inc., a Delaware corporation (the “Company”), and
Wireless Billing Systems, a California corporation (“WBS”) hereby jointly
and severally unconditionally promise to pay to the order of
____________________, L.P. (the “Holder”), having an
address at 527 Madison Avenue, Suite 2600, New York, NY 10022, at such address
or at such other place as may be designated in writing by the Holder, or its
assigns, the aggregate principal sum of ___________________________ United
States Dollars ($_____________), together with interest from the date set forth
above on the unpaid principal balance of this Note outstanding at a rate equal
to ten percent (10.0%) (computed on the basis of the actual number of days
elapsed in a 360-day year) per annum and continuing on the outstanding principal
until this Amended and Restated 10% Senior Secured Convertible Note (the “Note”) is converted
into Common Stock as provided herein or indefeasibly and irrevocably paid in
full by the Company and/or WBS.  Principal and interest on this Note
shall be payable in accordance with the amortization schedule attached hereto as
Schedule
I.  The date on which interest on this Note is due is
hereinafter referred to herein as an “Interest Payment
Date” and the date in which any installment of principal hereon is due is
hereinafter referred to herein as an “Installment
Date”.  Subject to the other provisions of this Note, the
principal of this Note and all accrued and unpaid interest hereon shall mature
and become due and payable on December 31, 2009 (the “Stated Maturity
Date”).  Except as provided herein, all payments of principal
and interest by the Company under this Note shall be made in United States
dollars in immediately available funds to an account specified by the
Holder.
  In the
event that any amount due hereunder is not paid when due, such overdue amount
shall bear interest at an annual rate of fifteen percent (15%) until paid in
full.  In no event shall any interest charged, collected or reserved
under this Note exceed the maximum rate then permitted by applicable law and if
any such payment is paid by the Company, then such excess sum shall be credited
by the Holder as a payment of principal.
  This Note
is one of a series of Notes (the “Company Notes”) of
like tenor in an aggregate principal amount of One Million Five Hundred Thousand
United States Dollars
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  ($1,500,000)
issued by the Company and WBS pursuant to the terms of the Purchase Agreement
(as defined below).
  1.  Definitions.  Capitalized
terms used herein shall have the respective meanings ascribed thereto in the
Purchase Agreement unless otherwise defined herein.  Unless the
context otherwise requires, when used herein the following terms shall have the
meaning indicated:
  “Additional Rights”
has the meaning set forth in Section 4 hereof.
  “Affiliate” shall
mean, with respect to any Person, any other Person which directly or indirectly
through one or more intermediaries Controls, is controlled by, or is under
common control with, such Person.
  “Board” shall mean the
Board of Directors of Company.
  “Business 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 Common Stock, par value $0.01 per share, of the Company or any
securities into which shares of Common Stock may be reclassified after the date
hereof.
  “Company” has the
meaning set forth in the first paragraph hereof.
  “Company Notes” has
the meaning set forth in the third paragraph hereof.
  “Control” (including
the terms “controlling”, “controlled by” or “under common control with”) means
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.
  “Conversion Price”
shall mean initially $0.10 per share, subject to adjustment as provided in
Section 4.
  “Convertible
Securities” has the meaning set forth in Section 4 hereof.
  “Event of Default” has
the meaning set forth in Section 6 hereof.
  “Exchange Act” shall
mean the Securities Exchange Act of 1934, as amended.
  “Excluded Issuances”
has the meaning set forth in Section 4(j) hereof.
  “First
Regional”  means First Regional Bank, a California banking
corporation, its successors and assigns.
  “First Regional Note”
means the Change in Terms Agreement among the Company, its Subsidiary and First
Regional, dated February 14, 2006 (amending and restating the Promissory Note,
dated February 14, 2005, in the original principal amount of
$100,000.
  “Hedging Agreement”
means any interest rate swap, collar, cap, floor or forward rate agreement or
other agreement regarding the hedging of interest rate risk exposure executed in
connection with hedging the interest rate exposure of any Person and any
confirming letter executed pursuant to such agreement, all as amended,
supplemented, restated or otherwise modified from time to time.
  “Holder” has the
meaning set forth in the first paragraph hereof.
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  “Indebtedness” means
any liability or obligation (i) for borrowed money, other than trade payables
incurred in the ordinary course of business, (ii) evidenced by bonds,
debentures, notes, or other similar instruments, (iii) in respect of letters of
credit or other similar instruments (or reimbursement obligations with respect
thereto), except letters of credit or other similar instruments issued to secure
payment of trade payables or obligations in respect of workers’ compensation,
unemployment insurance and other social security laws or regulation, all arising
in the ordinary course of business consistent with past practices, (iv) to pay
the deferred purchase price of property or services, except trade payables
arising in the ordinary course of business consistent with past practices, (v)
as lessee under capitalized leases, (vi) secured by a Lien on any asset of the
Company or a Subsidiary, whether or not such obligation is assumed by the
Company or such Subsidiary.
  “Installment Date” has
the meaning set forth in the first paragraph hereof.
  “Interest Payment
Date” has the meaning set forth in the first paragraph
hereof.
  “Investment” means,
for any Person: (a) the acquisition (whether for cash, property, services or
securities or otherwise) of capital stock, bonds, notes, debentures, partnership
or other ownership interests or other securities of any other Person or any
agreement to make any such acquisition (including, without limitation, any
“short sale” or any sale of any securities at a time when such securities are
not owned by the Person entering into such sale); (b) the making of any deposit
with, or advance, loan or other extension of credit to, any other Person
(including the purchase of property from another Person subject to an
understanding or agreement, contingent or otherwise, to resell such property to
such Person), but excluding any such advance, loan or extension of credit having
a term not exceeding 90 days arising in connection with the sale of inventory or
supplies by such Person in the ordinary course of business; (c) the entering
into of any guarantee of, or other contingent obligation with respect to,
Indebtedness or other liability of any other Person and (without duplication)
any amount committed to be advanced, lent or extended to such Person; or (d) the
entering into of any Hedging Agreement.
  “Investors” has the
meaning set forth in the Purchase Agreement.
  “Lien” means any lien,
mortgage, deed of trust, pledge, security interest, charge or encumbrance of any
kind (including any conditional sale or other title retention agreement, any
lease in the nature thereof and any agreement to give any of the
foregoing).
  “Lightbridge” means
Lightbridge, Inc., its successors and assigns.
  “Lightbridge Note”
means WBS’s 2006 Amended and Restated Secured Promissory Note, dated March 31,
2006, in the original principal amount of $982,243.40, as amended.
  “Majority Holders” has
the meaning set forth in Section 8 hereof.
  “Market Price”, as of
a particular date (the “Valuation Date”),
shall mean the following with respect to any class of securities: (A) if such
security is then listed on a national stock exchange, the Market Price shall be
the closing bid price of one share of such security on such exchange on the last
Trading Day prior to the Valuation Date, provided that if such security has not
traded in the prior ten (10) trading sessions, the Market Price shall be the
average closing bid price of such security in the most recent ten (10) trading
sessions during which such security has traded; (B) if such security is then
included in The Nasdaq Stock Market, Inc., including the
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  Nasdaq
Capital Market (“Nasdaq”), the Market
Price shall be the closing bid price of one share of such security on Nasdaq on
the last Trading Day prior to the Valuation Date or, if no such closing sale
price is available, the average of the high bid and the low ask price quoted on
Nasdaq as of the end of the last Trading Day prior to the Valuation Date,
provided that if such security has not traded in the prior ten (10) trading
sessions, the Market Price shall be the average closing price of one share of
such security in the most recent ten (10) trading sessions during which such
security has traded; (C) if such security is then included in the
Over-the-Counter Bulletin Board, the Market Price shall be the closing sale
price of one share of such security on the Over-the-Counter Bulletin Board on
the last Trading Day prior to the Valuation Date or, if no such closing sale
price is available, the average of the high bid and the low ask price quoted on
the Over-the-Counter Bulletin Board as of the end of the last Trading Day prior
to the Valuation Date, provided that if such stock has not traded in the prior
ten (10) trading sessions, the Market Price shall be the average closing price
of one share of such security in the most recent ten (10) trading sessions
during which such security has traded; or (D) if such security is then included
in the “pink sheets,” the Market Price shall be the closing sale price of one
share of such security on the “pink sheets” on the last Trading Day prior to the
Valuation Date or, if no such closing sale price is available, the average of
the high bid and the low ask price quoted on the “pink sheets” as of the end of
the last Trading Day prior to the Valuation Date, provided that if such stock
has not traded in the prior ten (10) trading sessions, the Market Price shall be
the average closing price of one share of such security in the most recent ten
(10) trading sessions during which such security has traded.
  “Note” has the meaning
set forth in the first paragraph hereof.
  “Options” has the
meaning set forth in Section 4 hereof.
  “Permitted
Indebtedness” means:
  (a)           Indebtedness
existing on the Closing Date and refinancings, renewals and extensions of any
such Indebtedness if (i) the average life to maturity thereof is greater than or
equal to that of the Indebtedness being refinanced or extended (ii) if the
principal amount thereof or interest payable thereon is not increased, (iii) no
additional Liens are granted and (iv) the terms thereof are not less favorable
to the Company or the Subsidiary incurring such Indebtedness than the
Indebtedness being refinanced, renewed or extended;
  (b)           Guaranties
by any Subsidiary of any “Permitted Indebtedness” of the Company or another
Subsidiary;
  (c)           Indebtedness representing the deferred purchase priceof propertyand capital lease obligations
which collectively does not exceed $1,500,000 in aggregate principal
amount;and
  (d)           Indebtedness
of the Company to any wholly owned Subsidiary and Indebtedness of any wholly
owned Subsidiary to the Company or another wholly owned Subsidiary which
constitutes “Permitted Indebtedness.”
  “Permitted
Investments” means:
  (a)           direct
obligations of the United States of America, or of any agency thereof, or
obligations guaranteed as to principal and interest by the United States of
America, or of any agency thereof, in either case maturing not more than 90 days
from the date of acquisition thereof;
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  (b)           certificates
of deposit issued by any bank or trust company organized under the laws of the
United States of America or any State thereof and having capital, surplus and
undivided profits of at least $500,000,000, maturing not more than 90 days from
the date of acquisition thereof; and
  (c)           commercial
paper rated A-1 or better or P-1 by Standard & Poor’s Ratings Services or
Moody’s Investors Services, Inc., respectively, maturing not more than 90 days
from the date of acquisition thereof; in each case so long as the same (x)
provide for the payment of principal and interest (and not principal alone or
interest alone) and (y) are not subject to any contingency regarding the payment
of principal or interest.
  “Permitted Liens”
means:
  (a)           restrictions
on transfers of securities imposed by applicable securities laws;
  (b)           Liens
on the property of a Person existing at the time such Person became a Subsidiary
or such property was acquired from such Person in a transaction permitted
hereunder securing Indebtedness permitted hereby; provided, however, that any
such Lien may not extend to any other property (other than accessions to and
proceeds thereof) provided, further, that any such Lien was not created in
anticipation of or in connection with the transaction or series of transactions
pursuant to which such Person became a Subsidiary or such property was acquired
from such Person;
  (c)           assignments
of insurance or condemnation proceeds provided to landlords (or their
mortgagees) pursuant to the terms of any lease and Liens or rights reserved in
any lease for rent or for compliance with the terms of such lease;
  (d)           Liens
imposed by law for taxes that are not yet due or are being contested in good
faith and for which adequate reserves have been established on the Company’s
books and records in accordance with U.S. generally accepted accounting
principles, consistently applied;
  (e)           carriers’,
warehousemen’s, mechanics’, materialmen’s, repairmen’s and other like Liens
imposed by law, arising in the ordinary course of business and securing
obligations that are not overdue by more than 30 days or that are being
contested in good faith and by appropriate proceedings;
  (f)           pledges
and deposits made in the ordinary course of business in compliance with workers’
compensation, unemployment insurance and other social security laws or
regulations;
  (g)           deposits
to secure the performance of bids, trade contracts, leases, statutory
obligations, surety and appeal bonds, performance bonds and other obligations of
a like nature, in each case in the ordinary course of business;
  (h)           easements,
zoning restrictions, rights-of-way and similar encumbrances on real property
imposed by law or arising in the ordinary course of business that do not secure
any monetary obligations and do not materially detract from the value of the
affected property or interfere with the ordinary conduct of business of the
Company or any of its Subsidiaries;
  (i)           Liens
granted to secure the obligations of the Company or any Subsidiary under any
Indebtedness permitted under clause (c) of the definition of “Permitted
Indebtedness”
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  provided
the Lien is limited to the property acquired or so financed (and any accessions
thereto and proceeds thereof);
  (j)           Liens
granted to secure the Lightbridge Note provided such Liens are subordinated to
the Notes pursuant to the terms of the Subordination Agreement; and
  (k)           Liens
granted to secure the First Regional Note provided such Liens are limited to the
Company’s right, title and interest in the $100,000 savings account currently on
deposit with First Regional.
  “Person” means an
individual, corporation, partnership, limited liability company, trust, business
trust, association, joint stock company, joint venture, sole proprietorship,
unincorporated organization, governmental authority or any other form of entity
not specifically listed herein.
  “Purchase Agreement”
shall mean the Purchase Agreement, dated as of March 31, 2006, and as that
agreement may be amended from time to time, by and among the Company, WBS and
the Investors.
  “Registration Rights
Agreement” shall mean the Registration Rights Agreement, dated as of
March 31, 2006, and as that agreement may be amended from time to time, by and
among the Company and the Investors.
  “Restricted Payment”
has the meaning set forth in Section 5(b)(iv) hereof.
  “Security Agreement”
has the meaning set forth in the Purchase Agreement.
  “Security Documents”
means the collective reference to (i) the Security Agreement and each other
agreement or writing pursuant to which the Company and/or WBS purports to pledge
or grant a security interest in any property or assets securing the Company’s
and/or WBS’s obligations or any such Person purports to guaranty the payment
and/or performance of the Company’s and/or WBS’s obligations and (ii) the
Subordination Agreement, in each case, as amended, restated, supplemented or
otherwise modified from time to time.
  “Stated Maturity Date”
has the meaning set forth in the first paragraph hereof.
  “Subordination
Agreement” has the meaning set forth in the Purchase
Agreement.
  “Subsidiary” of any
Person means another Person, an amount of the voting securities, other voting
ownership or voting partnership interests of which is sufficient to elect at
least a majority of its Board of Directors or other governing body (or, if there
are no such voting interests, 50% or more of the equity interests of which) is
owned directly or indirectly by such first Person.
  “Trading Day” means
(i) if the relevant stock or security is listed or admitted for trading on The
New York Stock Exchange, Inc. or any other national securities exchange, a day
on which such exchange is open for business; (ii) if the relevant stock or
security is quoted on Nasdaq or any other system of automated dissemination of
quotations of securities prices, a day on which trades may be effected through
such system; or (iii) if the relevant stock or security is not listed or
admitted for trading on any national securities exchange or quoted on Nasdaq or
any other system of automated dissemination of quotation of securities prices, a
day on which the relevant stock or security is traded in a regular way in the
over-the-counter market and for which a closing bid and a closing asked price
for such stock or security are available, shall mean a day,
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  other
than a Saturday or Sunday, on which The New York Stock Exchange, Inc. is open
for trading.
  “Trigger Issuance” has
the meaning set forth in Section 4(i) hereof.
  “WBS” has the meaning
set forth in the first paragraph hereof.
  2.  Purchase
Agreement.  This Note was originally issued pursuant to the
terms of the Purchase Agreement.  This Note is subject to the terms
and conditions of, and entitled to the benefit of, the provisions of the
Purchase Agreement.  This Note is transferable and assignable to any
Person to whom such transfer is permissible under the Purchase Agreement and
applicable law.  The Company and WBS agree to issue from time to time
a replacement Note in the form hereof to facilitate such transfers and
assignments.  In addition, after delivery of an indemnity in form and
substance reasonably satisfactory to the Company, the Company and WBS also agree
to promptly issue a replacement Note if this Note is lost, stolen, mutilated or
destroyed.
  3.  Right of Prepayment or
Redemption.  The Company or WBS may prepay or redeem this Note
in whole only and not in part at any time prior to the Stated Maturity Date upon
not less than 20 days’ prior written notice to the Holder hereof; provided,
however, that the Company or WBS must also prepay or redeem all of the Company
Notes on the same terms and at the same time.  This Note shall be
convertible into Common Stock by the Holder hereof as provided in Section 4 at
any time prior to the effective time of any such prepayment or
redemption.
  4.  Conversion
Rights.
  (a)  Subject
to and upon compliance with the provisions of this Note, the Holder shall have
the right, at its option at any time, to convert some or all of the Note into
such number of fully paid and nonassessable shares of Common Stock as is
obtained by: (i) adding (A) the principal amount of this Note to be converted
and (B) the amount of any accrued but unpaid interest with respect to such
portion of this Note to be converted; and (ii) dividing the result obtained
pursuant to clause (i) above by the Conversion Price then in
effect.  The rights of conversion set forth in this Section 4 shall be
exercised by the Holder by giving written notice to the Company that the Holder
elects to convert a stated amount of this Note into Common Stock and by
surrender of this Note (or, in lieu thereof, by delivery of an appropriate lost
security affidavit in the event this Note shall have been lost or destroyed) to
the Company at its principal office (or such other office or agency of the
Company as the Company may designate by notice in writing to the Holder) at any
time on the date set forth in such notice (which date shall not be earlier than
the Company’s receipt of such notice), together with a statement of the name or
names (with address) in which the certificate or certificates for shares of
Common Stock shall be issued.
  (b)  Promptly
after receipt of the written notice referred to in Section 4(a) above and
surrender of this Note (or, in lieu thereof, by delivery of an appropriate lost
security affidavit in the event this Note shall have been lost or destroyed),
but in no event more than three (3) Business Days thereafter, the Company shall
issue and deliver, or cause to be issued and delivered, to the Holder,
registered in such name or names as the Holder may direct in writing, a
certificate or certificates for the number of whole shares of Common Stock
issuable upon the conversion of such portion of this Note.  To the
extent permitted by law, such conversion shall
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 be deemed
to have been effected, and the Conversion Price shall be determined, as of the
close of business on the date on which such written notice shall have been
received by the Company and this Note shall have been surrendered as aforesaid
(or, in lieu thereof, an appropriate lost security affidavit has been delivered
to the Company), and at such time, the rights of the Holder shall cease with
respect to the principal amount of the Notes being converted, and the Person or
Persons in whose name or names any certificate or certificates for shares of
Common Stock shall be issuable upon such conversion shall be deemed to have
become the holder or holders of record of the shares represented
thereby.
  (c)  No
fractional shares shall be issued upon any conversion of this Note into Common
Stock.  If any fractional share of Common Stock would, except for the
provisions of the first sentence of this Section 4(c), be delivered upon such
conversion, the Company, in lieu of delivering such fractional share, shall pay
to the Holder an amount in cash equal to the Market Price of such fractional
share of Common Stock.  In case the principal amount of this Note
exceeds the principal amount being converted, the Company shall, upon such
conversion, execute and deliver to the Holder, at the expense of the Company, a
new Note for the principal amount of this Note surrendered which is not to be
converted.
  (d)  If the
Company shall, at any time or from time to time while this Note is outstanding,
pay a dividend or make a distribution on its Common Stock in shares of Common
Stock, subdivide its outstanding shares of Common Stock into a greater number of
shares or combine its outstanding shares of Common Stock into a smaller number
of shares or issue by reclassification of its outstanding shares of Common Stock
any shares of its capital stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
corporation), then the Conversion Price in effect immediately prior to the date
upon which such change shall become effective, shall be adjusted by the Company
so that the Holder thereafter converting this Note shall be entitled to receive
the number of shares of Common Stock or other capital stock which the Holder
would have received if the Note had been converted immediately prior to such
event upon payment of a Conversion Price that has been adjusted to reflect a
fair allocation of the economics of such event to the Holder, without regard to
any conversion limitation specified in this Section 4.  Such
adjustments shall be made successively whenever any event listed above shall
occur.
  (e)  If any
capital reorganization, reclassification of the capital stock of the Company,
consolidation or merger of the Company with another corporation in which the
Company is not the survivor, or sale, transfer or other disposition of all or
substantially all of the Company’s assets to another corporation shall be
effected, then, as a condition of such reorganization, reclassification,
consolidation, merger, sale, transfer or other disposition, lawful and adequate
provision shall be made whereby the Holder shall thereafter have the right to
purchase and receive upon the basis and upon the terms and conditions herein
specified and in lieu of the shares of Common Stock immediately theretofore
issuable upon conversion of this Note such shares of stock, securities or assets
as would have been issuable or payable with respect to or in exchange for a
number of shares of Common Stock equal to the number of shares of Common Stock
immediately theretofore issuable upon conversion of this Note, had such
reorganization, reclassification, consolidation, merger, sale, transfer or other
disposition not taken place, and in any such case appropriate provision shall be
made with respect to the rights and interests of the Holder to the end that the
provisions hereof (including, without limitation,
  A -
8
 provision
for adjustment of the Conversion Price) shall thereafter be applicable, as
nearly equivalent as may be practicable in relation to any shares of stock,
securities or assets thereafter deliverable upon the conversion
hereof.  The Company shall not effect any such consolidation, merger,
sale, transfer or other disposition unless prior to or simultaneously with the
consummation thereof the successor corporation (if other than the Company)
resulting from such consolidation or merger, or the corporation purchasing or
otherwise acquiring such assets or other appropriate corporation or entity shall
assume the obligation to deliver to the Holder, at the last address of the
Holder appearing on the books of the Company, such shares of stock, securities
or assets as, in accordance with the foregoing provisions, the Holder may be
entitled to purchase, without regard to any conversion limitation specified in
Section 4, and the other obligations under this Note.  The provisions
of this paragraph (e) shall similarly apply to successive reorganizations,
reclassifications, consolidations, mergers, sales, transfers or other
dispositions.
  (f)  In case
the Company shall fix a payment date for the making of a distribution to all
holders of Common Stock (including any such distribution made in connection with
a consolidation or merger in which the Company is the continuing corporation) of
evidences of indebtedness or assets (other than cash dividends or cash
distributions payable out of consolidated earnings or earned surplus or
dividends or distributions referred to in Section 4(d)), or subscription rights
or Notes, the Conversion Price to be in effect after such payment date shall be
determined by multiplying the Conversion Price in effect immediately prior to
such payment date by a fraction, the numerator of which shall be the total
number of shares of Common Stock outstanding multiplied by the Market Price of
Common Stock immediately prior to such payment date, less the fair market value
(as determined by the Board in good faith) of said assets or evidences of
indebtedness so distributed, or of such subscription rights or Notes, and the
denominator of which shall be the total number of shares of Common Stock
outstanding multiplied by such Market Price immediately prior to such payment
date.  Such adjustment shall be made successively whenever such a
payment date is fixed.
  (g)  An
adjustment to the Conversion Price shall become effective immediately after the
payment date in the case of each dividend or distribution and immediately after
the effective date of each other event which requires an
adjustment.
  (h)  In the
event that, as a result of an adjustment made pursuant to this Section 4, the
Holder shall become entitled to receive any shares of capital stock of the
Company other than shares of Common Stock, the number of such other shares so
receivable upon conversion of this Note shall be subject thereafter to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions contained in this Note.
  (i)  Except as
provided in Section 4(j) hereof, if and whenever the Company shall issue or
sell, or is, in accordance with any of Sections 4(i)(i) through 4(i)(viii)
hereof, deemed to have issued or sold, any shares of Common Stock for no
consideration or for a consideration per share less than the Conversion Price in
effect immediately prior to the time of such issue or sale, then and in each
such case (a “Trigger
Issuance”) the then-existing Conversion Price, shall be reduced, as of
the close of business on the effective date of the Trigger Issuance, to (i) the
lowest price per share at which any share of Common Stock was issued or sold or
deemed to be issued or sold if the Trigger Issuance occurs on or after September
  A -
9
 31, 2006
(the “Full-Ratchet
Date”) or (ii) if the Trigger Issuance occurs prior to the Full-Ratchet
Date, a price determined as follows:
  
 Adjusted
Conversion Price = (A
x B) + D
 A+C
 
 where
 
 “A” equals the number of shares of
Common Stock outstanding, including Additional Shares of Common Stock (as
defined below) deemed to be issued hereunder, immediately preceding such Trigger
Issuance;
 
 “B” equals the Conversion Price in
effect immediately preceding such Trigger Issuance;
 
 “C” equals the number of Additional
Shares of Common Stock issued or deemed issued hereunder as a result of the
Trigger Issuance; and
 
 “D” equals the aggregate consideration,
if any, received or deemed to be received by the Company upon such Trigger
Issuance;
 
 provided,
however, that in no event shall the Conversion Price after giving effect to such
Trigger Issuance be greater than the Conversion Price in effect prior to such
Trigger Issuance.
 
 For
purposes of this subsection (i), “Additional Shares of Common Stock” shall mean
all shares of Common Stock issued by the Company or deemed to be issued pursuant
to this subsection (i), other than Excluded Issuances (as defined in subsection
(j) hereof).
 
  For purposes of this Section 4(i), the
following subsections (i)(i) to (i)(vii) shall also be applicable (subject, in
each such case, to the provisions of Section 4(j) hereof):
 
 (i)  In case
at any time the Company shall in any manner grant (directly and not by
assumption in a merger or otherwise) any Notes or other rights to subscribe for
or to purchase, or any options for the purchase of, Common Stock or any stock or
security convertible into or exchangeable for Common Stock (such Notes, rights
or options being called “Options” and such
convertible or exchangeable stock or securities being called “Convertible
Securities”) whether or not such Options or the right to convert or
exchange any such Convertible Securities are immediately exercisable, and the
price per share for which Common Stock is issuable upon the exercise of such
Options or upon the conversion or exchange of such Convertible Securities
(determined by dividing (i) the sum (which sum shall constitute the applicable
consideration) of (x) the total amount, if any, received or receivable by the
Company as consideration for the granting of such Options, plus (y) the
aggregate amount of additional consideration payable to the Company upon the
exercise of all such Options, plus (z), in the case of such Options which relate
to Convertible Securities, the aggregate amount of additional consideration, if
any, payable upon the issue or sale of such Convertible Securities and upon the
conversion or exchange
  A -
10
 thereof,
by (ii) the total maximum number of shares of Common Stock issuable upon the
exercise of such Options or upon the conversion or exchange of all such
Convertible Securities issuable upon the exercise of such Options) shall be less
than the Market Price of the Common Stock immediately prior to the time of the
granting of such Options, then the total number of shares of Common Stock
issuable upon the exercise of such Options or upon conversion or exchange of the
total amount of such Convertible Securities issuable upon the exercise of such
Options shall be deemed to have been issued for such price per share as of the
date of granting of such Options or the issuance of such Convertible Securities
and thereafter shall be deemed to be outstanding for purposes of adjusting the
Conversion Price.  Except as otherwise provided in subsection
4(i)(iii), no adjustment of the Conversion Price shall be made upon the actual
issue of such Common Stock or of such Convertible Securities upon exercise of
such Options or upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities.
  (ii)  In case
the Company shall in any manner issue (directly and not by assumption in a
merger or otherwise) or sell any Convertible Securities, whether or not the
rights to exchange or convert any such Convertible Securities are immediately
exercisable, and the price per share for which Common Stock is issuable upon
such conversion or exchange (determined by dividing (i) the sum (which sum shall
constitute the applicable consideration) of (x) the total amount received or
receivable by the Company as consideration for the issue or sale of such
Convertible Securities, plus (y) the aggregate amount of additional
consideration, if any, payable to the Company upon the conversion or exchange
thereof, by (ii) the total number of shares of Common Stock issuable upon the
conversion or exchange of all such Convertible Securities) shall be less than
the Market Price of the Common Stock immediately prior to the time of such issue
or sale, then the total maximum number of shares of Common Stock issuable upon
conversion or exchange of all such Convertible Securities shall be deemed to
have been issued for such price per share as of the date of the issue or sale of
such Convertible Securities and thereafter shall be deemed to be outstanding for
purposes of adjusting the Conversion Price, provided that (a) except as
otherwise provided in subsection 4(i)(iii), no adjustment of the Conversion
Price shall be made upon the actual issuance of such Common Stock upon
conversion or exchange of such Convertible Securities and (b) no further
adjustment of the Conversion Price shall be made by reason of the issue or sale
of Convertible Securities upon exercise of any Options to purchase any such
Convertible Securities for which adjustments of the Conversion Price have been
made pursuant to the other provisions of subsection 6(i).
  (iii)  Upon the
happening of any of the following events, namely, if the purchase price provided
for in any Option referred to in subsection 4(i)(i) hereof, the additional
consideration, if any, payable upon the conversion or exchange of any
Convertible Securities referred to in subsections 4(i)(i) or 4(i)(ii), or the
rate at which Convertible Securities referred to in subsections 4(i)(i) or
4(i)(ii) are convertible into or exchangeable for Common Stock shall change at
any time (including, but not limited to, changes under or by reason of
provisions designed to protect against dilution), the Conversion Price in effect
at the time of such event shall forthwith be readjusted to the Conversion Price
which would have been in effect at such time had such Options or Convertible
Securities still outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may be, at the time
initially granted, issued or sold.  On the termination of any Option
for which any adjustment was made pursuant to this subsection 4(i) or any right
to convert or exchange Convertible Securities for which any adjustment was made
pursuant to this subsection 4(i) (including without limitation
  A -
11
 upon the
redemption or purchase for consideration of such Convertible Securities by the
Company), the Conversion Price then in effect hereunder shall forthwith be
changed to the Conversion Price which would have been in effect at the time of
such termination had such Option or Convertible Securities, to the extent
outstanding immediately prior to such termination, never been
issued.
  (iv)  Subject
to the provisions of this Section 4(i), in case the Company shall declare a
dividend or make any other distribution upon any stock of the Company (other
than the Common Stock) payable in Common Stock, Options or Convertible
Securities, then any Common Stock, Options or Convertible Securities, as the
case may be, issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
  (v)  In case
any shares of Common Stock, Options or Convertible Securities shall be issued or
sold for cash, the consideration received therefor shall be deemed to be the net
amount received by the Company therefor, after deduction therefrom of any
expenses incurred or any underwriting commissions or concessions paid or allowed
by the Company in connection therewith.  In case any shares of Common
Stock, Options or Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the consideration other than cash
received by the Company shall be deemed to be the fair value of such
consideration as determined in good faith by the Board, after deduction of any
expenses incurred or any underwriting commissions or concessions paid or allowed
by the Company in connection therewith.  In case any Options shall be
issued in connection with the issue and sale of other securities of the Company,
together comprising one integral transaction in which no specific consideration
is allocated to such Options by the parties thereto, such Options shall be
deemed to have been issued for such consideration as determined in good faith by
the Board of Directors of the Company.  If Common Stock, Options or
Convertible Securities shall be issued or sold by the Company and, in connection
therewith, other Options or Convertible Securities (the “Additional Rights”)
are issued, then the consideration received or deemed to be received by the
Company shall be reduced by the fair market value of the Additional Rights (as
determined using the Black-Scholes option pricing model or another method
mutually agreed to by the Company and the Holder).  The Board shall
respond promptly, in writing, to an inquiry by the Holder as to the fair market
value of the Additional Rights.  In the event that the Board and the
Holder are unable to agree upon the fair market value of the Additional Rights,
the Company and the Holder shall jointly select an appraiser, who is experienced
in such matters.  The decision of such appraiser shall be final and
conclusive, and the cost of such appraiser shall be borne evenly by the Company
and the Holder.
  (vi)  In case
the Company shall take a record of the holders of its Common Stock for the
purpose of entitling them (i) to receive a dividend or other distribution
payable in Common Stock, Options or Convertible Securities or (ii) to subscribe
for or purchase Common Stock, Options or Convertible Securities, then such
record date shall be deemed to be the date of the issue or sale of the shares of
Common Stock deemed to have been issued or sold upon the declaration of such
dividend or the making of such other distribution or the date of the granting of
such right of subscription or purchase, as the case may be.
  (vii)  The
number of shares of Common Stock outstanding at any given time shall not include
shares owned or held by or for the account of the Company or any of its
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12
 wholly-owned
subsidiaries, and the disposition of any such shares (other than the
cancellation or retirement thereof) shall be considered an issue or sale of
Common Stock for the purpose of this subsection (i).
  (j)  Anything herein to the contrary notwithstanding, the
Company shall not be required to make any adjustment of the Conversion Price in
the case of the issuance of(A) capital stock, Options or Convertible
Securities issued to (i) directors, officers, employees or consultants of the
Company in connection with their service as directors of the Company, their
employment by the Company or their retention as consultants by the Company
pursuant to an equity compensation program approved by the Board of Directors of
the Company or the compensation committee of the Board of Directors of the
Company or (ii) landlords and/or commercial lenders; provided, that in the case
of any issuance pursuant to this clause (A), the exercise or conversion price of
any such Options or Convertible Securities shall be at least equal to the Market
Price on the date of grant, (B) shares of Common Stock issued upon the
conversion or exercise of Options or Convertible Securities issued prior to the
date hereof, provided such securities are not amended after the date hereof, (C)
securities issued pursuant to the Purchase Agreement and securities issued upon
the exercise or conversion of those securities, and (D) shares of Common Stock
issued or issuable by reason of a dividend, stock split or other distribution on
shares of Common Stock (but only to the extent that such a dividend, split or
distribution results in an adjustment in the Conversion Price pursuant to the
other provisions of this Note) (collectively, “Excluded
Issuances”).
  (k)  In case
at any time:
  (i)  the
Company shall declare any dividend upon its Common Stock or any other class or
series of capital stock of the Company payable in cash or stock or make any
other distribution to the holders of its Common Stock or any such other class or
series of capital stock;
  (ii)  the
Company shall offer for subscription pro rata to the holders
of its Common Stock or any other class or series of capital stock of the Company
any additional shares of stock of any class or other rights; or
  (iii)  there
shall be any capital reorganization or reclassification of the capital stock of
the Company, any acquisition or a liquidation, dissolution or winding up of the
Company;
  then, in
any one or more of said cases, the Company shall give, by delivery in person or
by certified or registered mail, return receipt requested, addressed to the
Holder at the address of such Holder as shown on the books of the Company, (a)
at least 20 Business Days’ prior written notice of the date on which the books
of the Company shall close or a record shall be taken for such dividend,
distribution or subscription rights or for determining rights to vote in respect
of any event set forth in clause (iii) of this Section 4(k) and (b) in the case
of any event set forth in clause (iii) of this Section 4(k), at least 20
Business Days’ prior written notice of the date when the same shall take
place.  Such notice in accordance with the foregoing clause (a) shall
also specify, in the case of any such dividend, distribution or subscription
rights, the date on which the holders of Common Stock or such other class or
series of capital stock shall be entitled thereto and such notice in accordance
with the foregoing clause (b) shall also specify the date on
  A -
13
 which the
holders of Common Stock and such other series or class of capital stock shall be
entitled to exchange their Common Stock and other stock for securities or other
property deliverable upon consummation of the applicable event set forth in
clause (iii) of this Section 4(k).
 (l)  Upon any
adjustment of the Conversion Price, then and in each such case the Company shall
give prompt written notice thereof, by delivery in person or by certified or
registered mail, return receipt requested, addressed to the Holder at the
address of such Holder as shown on the books of the Company, which notice shall
state the Conversion Price resulting from such adjustment and setting forth in
reasonable detail the method upon which such calculation is based.
  (m)  The
Company shall at all times reserve and keep available out of its authorized
Common Stock, solely for the purpose of issuance upon conversion of this Note as
herein provided, such number of shares of Common Stock as shall then be issuable
upon the conversion of this Note.  The Company covenants that all
shares of Common Stock which shall be so issued shall be duly and validly issued
and fully paid and nonassessable, and free from all taxes, liens and charges
with respect to the issue thereof, and, without limiting the generality of the
foregoing, and that the Company will from time to time take all such action as
may be requisite to assure that the par value per share of the Common Stock is
at all times equal to or less than the Conversion Price in effect at the
time.  The Company shall take all such action as may be necessary to
assure that all such shares of Common Stock may be so issued without violation
of any applicable law or regulation, or of any requirement of any national
securities exchange or trading market upon which the Common Stock may be
listed.  The Company shall not take any action which results in any
adjustment of the Conversion Price if the total number of shares of Common Stock
issued and issuable after such action upon conversion of this Note would exceed
the total number of shares of Common Stock then authorized by the Company’s
Certificate of Incorporation.
  (n)  The
issuance of certificates for shares of Common Stock upon conversion of this Note
shall be made without charge to the holders thereof for any issuance tax in
respect thereof, provided that the Company shall not be required to pay any tax
which may be payable in respect of any transfer involved in the issuance and
delivery of any certificate in a name other than that of the
Holder.
  (o)  The
Company will not at any time close its transfer books against the transfer, as
applicable, of this Note or of any shares of Common Stock issued or issuable
upon the conversion of this Note in any manner which interferes with the timely
conversion of this Note, except as may otherwise be required to comply with
applicable securities laws.
  (p)  To the
extent permitted by applicable law and the listing requirements of any stock
exchange or trading market on which the Common Stock is then listed, the Company
from time to time may decrease the Conversion Price by any amount for any period
of time if the period is at least twenty (20) days, the decrease is irrevocable
during the period and the Board shall have made a determination that such
decrease would be in the best interests of the Company, which determination
shall be conclusive.  Whenever the Conversion Price is decreased
pursuant to the preceding sentence, the Company shall provide written notice
thereof to the Holder at least fifteen (15) days prior to the date the decreased
Conversion Price takes
  A -
14
  effect,
and such notice shall state the decreased Conversion Price and the period during
which it will be in effect.
  5.  Covenants.
  (a)  So long
as any amount due under this Note is outstanding and until indefeasible payment
in full of all amounts payable by the Company and WBS hereunder:
  (i)  The
Company shall and shall cause each of its Subsidiaries to (A) carry on and
conduct its business in substantially the same manner and in substantially the
same fields of enterprise as it is presently conducting, (B) do all things
necessary to remain duly organized, validly existing, and in good standing as a
domestic corporation under the laws of its state of incorporation and (C)
maintain all requisite authority to conduct its business in those jurisdictions
in which its business is conducted.
  (ii)  The
Company shall promptly notify the Holder in writing of (A) any change in the
business or the operations the Company or any Subsidiary which could reasonably
be expected to have a Material Adverse Effect, and (B) any information which
indicates that any financial statements which are the subject of any
representation contained in the Transaction Documents, or which are furnished to
the Holder pursuant to the Transaction Documents, fail, in any material respect,
to present fairly, as of the date thereof and for the period covered thereby,
the financial condition and results of operations purported to be presented
therein, disclosing the nature thereof.
  (iii)  The
Company shall promptly notify the Holder of the occurrence of any Event of
Default or any event which, with the giving of notice, the lapse of time or both
would constitute an Event of Default, which notice shall include a written
statement as to such occurrence, specifying the nature thereof and the action
(if any) which is proposed to be taken with respect thereto.
  (iv)  The
Company shall promptly notify the Holder of any action, suit or proceeding at
law or in equity or by or before any governmental instrumentality or other
agency against the Company or any Subsidiary or to which the Company or any
Subsidiary may be subject which alleges damages in excess of One Hundred
Thousand United States Dollars ($100,000).
  (v)  The
Company shall promptly notify the Holder of any default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any agreement or instrument to which the Company or any Subsidiary
is a party which default could reasonably be expected to have a Material Adverse
Effect.
  (vi)  The
Company shall and shall cause each Subisidiary to promptly take any and all
actions necessary to execute any definitive documentation (which documentation
shall include customary representations, warranties, covenants, conditions and
agreements, and any UCC financing statements) reasonably requested by the
Holder, for obtaining the benefits of the Security Agreement, subject to the
terms and conditions stated therein.
  A -
15
 (vii)  The
Company shall and shall cause each Subsidiary to pay when due all taxes,
assessments and governmental charges and levies upon it or its income, profits
or property, except those that are being contested in good faith by appropriate
proceedings and with respect to which adequate reserves have been set
aside.
  (viii)  The
Company shall and shall cause each Subsidiary to all times maintain with
financially sound and reputable insurance companies insurance covering its
assets and its businesses in such amounts and covering such risks (including,
without limitation, hazard, business interruption and public liability) as is
consistent with sound business practice and as may be obtained at commercially
reasonable rates.  The insurance policies will comply with the
provisions of Section 11 of the Security Agreement.
  (ix)  The
Company shall and shall cause each Subsidiary to comply with all laws, rules,
regulations, orders, writs, judgments, injunctions, decrees or awards to which
they may be subject except where the failure to so comply could not reasonably
be expected to have a Material Adverse Effect.
  (x)  The
Company shall and shall cause each Subsidiary to use commercially reasonable
efforts to do all things necessary to maintain, preserve, protect and keep its
properties in good repair, working order and condition and use commercially
reasonable efforts to make all necessary and proper repairs, renewals and
replacements so that its business carried on in connection therewith may be
properly conducted.
  (xi)  The
Company shall deliver to the Holder as soon as reasonably practicable but in any
event within three (3) Business Days, upon receipt or delivery, copies of any
and all material notices and other material communications from and to any
federal or state regulatory body with jurisdiction over the products, business
and/or processes of the Company or any Subsidiary (i) with respect to products
or practices and (ii) with respect to any Intellectual Property with counsel to
the Company or any Subsidiary (including any non-infringement opinions of
counsel or advisors to the Company or any Subsidiary or any other Person), the
United States Patent & Trademark Office and any other Person.  The
Company shall and shall cause each Subsidiary to as soon as reasonably
practicable, notify the Holder of any infringement or threatened infringement of
its Intellectual Property may at any time come to its notice.
  (xii)  At its
own expense, the Company shall and shall cause each Subsidiary to make, execute,
endorse, acknowledge file and/or deliver any documents and take all commercially
reasonable actions necessary or required to maintain its ownership rights in its
Intellectual Property, including, without limitation, (i) any action reasonably
required to protect the Intellectual Property in connection with any
infringement, suspected infringement, passing off, act of unfair competition or
other unlawful interference with the rights of the Company or any Subsidiary in
and to such Intellectual Property, and (ii) any registrations with the United
States Patent & Trademark Office and any corresponding foreign patent and/or
trademark office required for the Company or any Subsidiary to carry on its
business as presently conducted and as presently proposed to be
conducted.  Except for non-exclusive licenses granted in the ordinary
course of business, the Company shall not and shall cause each Subsidiary not to
transfer, assign or otherwise convey the Intellectual Property, any
registrations or applications thereof and all goodwill associated therewith, to
any person or entity.
  A -
16
  (xiii)  Promptly
after the occurrence thereof, the Company shall and shall cause each Subsidiary
to inform the Holder of the following material developments: (i) entering into
material agreements outside the ordinary course of business consistent with past
practice, (ii) any issuance of debt securities by the Company or any Subsidiary,
(iii) the incurrence of any Indebtedness by the Company or any Subsidiary, (iv)
a change in the number of the Board of Directors of the Company, (v) a sale,
lease or transfer of any material portion of the assets of the Company or any
Subisdiary and (vi) any change in ownership of any Subsidiary (specifying the
details of any such change, including the identity and ownership amount of any
new owner).
  (b)  So long
as any amount due under this Note is outstanding and until indefeasible payment
in full of all amounts payable by the Company hereunder, without the prior
written consent of the holders of at least a majority of the outstanding
principal amount of the Company Notes then outstanding (for purposes of this
Section 5(b), any Company Notes held by any employee, director or officer of the
Company or any Subsidiary shall not be deemed to be outstanding):
  (i)  The
Company shall not and shall cause each Subsidiary not to create, incur,
guarantee, issue, assume or in any manner become liable in respect of any
Indebtedness, other than Permitted Indebtedness.
  (ii)  The
Company shall not and shall cause each Subsidiary not to create, incur, assume
or suffer to exist any Lien upon any of its property, whether now owned or
hereafter acquired other than (i) Liens created pursuant to the Security
Agreement and (ii) Permitted Liens.  The Company shall not, and shall
cause each Subsidiary not to, be bound by any agreement which limits the ability
of the Company or any Subsidiary to grant Liens.
  (iii)  The
Company shall not and shall cause each Subsidiary not to, directly or
indirectly, enter into or permit to exist any transaction or series of related
transactions (including, without limitation, the purchase, sale, lease or
exchange of any property or the rendering of any service) with, or for the
benefit of, any of its Affiliates other than a wholly owned Subsidiary, except
for consulting arrangements with directors approved by the Board.
  (iv)  The
Company shall not, and shall cause each of its Subsidiaries not to, directly or
indirectly, declare or pay any dividends on account of any shares of any class
or series of its capital stock now or hereafter outstanding, or set aside or
otherwise deposit or invest any sums for such purpose, or redeem, retire,
defease, purchase or otherwise acquire any shares of any class of its capital
stock (or set aside or otherwise deposit or invest any sums for such purpose)
for any consideration or apply or set apart any sum, or make any other
distribution (by reduction of capital or otherwise) in respect of any such
shares or pay any interest, premium if any, or principal of any Indebtedness or
redeem, retire, defease, repurchase or otherwise acquire any Indebtedness (or
set aside or otherwise deposit or invest any sums for such purpose) for any
consideration or apply or set apart any sum, or make any other payment in
respect thereof or agree to do any of the foregoing (each of the foregoing is
herein called a “Restricted Payment”);
provided, that (i) the Company may make payments of interest, premium if any,
and principal of the Notes in accordance with the terms hereof, (ii) provided
that no Event of Default or event which, with the giving of notice, the lapse of
time or both would constitute an Event of Default has occurred and is
continuing, the Company and its Subsidiaries may make regularly scheduled
  A -
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 payments
of interest and principal of any Permitted Indebtedness, (iii) any Subsidiary
directly or indirectly wholly owned by the Company may pay dividends on its
capital stock and (iv) the Company may repurchase capital stock from a former
employee in connection with the termination or other departure of such employee,
strictly in accordance with the terms of any agreement entered into with such
employee and in effect on the Closing Date (as defined in the Purchase
Agreement), provided that (A) such repurchase is approved by a majority of the
Board, (B) payments permitted under this clause (iv) shall not exceed $1,000,000
in the aggregate, and (C) no such payment may be made if an Event of Default or
an event which, with the giving of notice, the lapse of time or both would
constitute an Event of Default has occurred and is continuing or would result
from such payment.
  (v)  The
Company shall not and shall cause each Subsidiary not to, directly or
indirectly, engage in any business other than the business of providing Internet
protocol transaction platforms, billing and related services to communications
providers.
  (vi)  The
Company shall not and shall cause each Subsidiary not to make or own any
Investment in any Person, including without limitation any joint venture, other
than (A) Permitted Investments, (B) operating deposit accounts with banks, (C)
Hedging Agreements entered into in the ordinary course of the Company’s
financial planning and not for speculative purposes and (D) investments by the
Company in the capital stock of any wholly owned Subsidiary.
  (vii)  The
Company shall not and shall cause each Subsidiary not to, directly or
indirectly, become or remain liable as lessee or as a guarantor or other surety
with respect to any lease of any property (whether real, personal or mixed),
whether now owned or hereafter acquired, which the Company or any Subsidiary (a)
has sold or transferred or is to sell or to transfer to any other Person, or (b)
intends to use for substantially the same purpose as any other property which
has been or is to be sold or transferred by the Company or any Subsidiary to any
Person in connection with such lease.
  (viii)  The
Company shall not and shall cause each Subsidiary not to settle, or agree to
indemnify or defend third parties against, any material lawsuit, except as may
be required by judicial or regulatory order or by agreements entered into prior
to the date hereof on a basis consistent with past practice.  A
material lawsuit shall be any lawsuit in which the amount in controversy exceeds
$100,000.
  (ix)  The
Company shall not and shall cause each Subsidiary not to amend its bylaws,
certificate of incorporation or other charter document in a manner adverse to
the Holder.
  6.  Event of
Default.  The occurrence of any of following events shall
constitute an “Event
of Default” hereunder:
  (a)  the
failure of the Company or WBS to make any payment of principal on this Note when
due, whether on an Installment Date, at maturity, upon acceleration or
otherwise;
  (b)  the
failure of the Company or WBS to make any payment of interest on this Note, or
any other amounts due under the other Transaction Documents (as defined under
   A -
18
 the
Purchase Agreement) when due, whether on an Interest Payment Date, at maturity,
upon acceleration or otherwise, and such failure continues for more than five
(5) days;
  (c)  the
Company and/or its Subsidiaries fail to make a required payment or payments on
Indebtedness of One Hundred Thousand United States Dollars ($100,000) or more in
aggregate principal amount and such failure continues for more than ten (10)
days;
  (d)  there
shall have occurred an acceleration of the stated maturity of any Indebtedness
of the Company or its Subsidiaries of One Hundred Thousand United States Dollars
($100,000) or more in aggregate principal amount (which acceleration is not
rescinded, annulled or otherwise cured within ten (10) days of receipt by the
Company or a Subsidiary of notice of such acceleration);
  (e)  the
Company or WBS makes an assignment for the benefit of creditors or admits in
writing its inability to pay its debts generally as they become due; or an
order, judgment or decree is entered adjudicating the Company or WBS as bankrupt
or insolvent; or any order for relief with respect to the Company or WBS is
entered under the Federal Bankruptcy Code or any other bankruptcy or insolvency
law; or the Company or WBS petitions or applies to any tribunal for the
appointment of a custodian, trustee, receiver or liquidator of the Company or
WBS or of any substantial part of the assets of the Company or WBS, or commences
any proceeding relating to it under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation law of any
jurisdiction; or any such petition or application is filed, or any such
proceeding is commenced, against the Company or WBS and either (i) the Company
or WBS by any act indicates its approval thereof, consents thereto or
acquiescence therein or (ii) such petition application or proceeding is not
dismissed within sixty (60) days;
  (f)  a final,
non-appealable judgment which, in the aggregate with other outstanding final
judgments against the Company and its Subsidiaries, exceeds One Hundred Thousand
United States Dollars ($100,000) shall be rendered against the Company or a
Subsidiary and within sixty (60) days after entry thereof, such judgment is not
discharged or execution thereof stayed pending appeal, or within sixty (60) days
after the expiration of such stay, such judgment is not discharged; provided,
however, that a judgment that provides for the payment of royalties subsequent
to the date of the judgment shall be deemed to be discharged so long as the
Company or the Subsidiary affected thereby is in compliance with the terms of
such judgment;
  (g)  the
Company or WBS is in breach of the requirements of Section 5(b)
hereof;
  (h)  if any
representation or statement of fact made in any Transaction Document or
furnished to the Holder at any time by or on behalf of the Company or WBS proves
to have been false in any material respect when made or furnished;
  (i)  any Liens
created by the Security Documents shall at any time not constitute a valid and
perfected first priority Lien on the collateral intended to be covered thereby
(to the extent perfection by filing, registration, recordation or possession is
required herein or
  A -
19
 therein)
in favor of the Holders, free and clear of all other Liens (other than Permitted
Liens), or any of the security interests granted pursuant to the Security
Documents shall be determined to be void, voidable, invalid or unperfected, are
subordinated or are ineffective to provide the Holder with a perfected, first
priority security interest in the collateral covered by the Security Documents,
free and clear of all other Liens (other than Permitted Liens) or, except for
expiration or termination in accordance with their terms, the Security Agreement
shall for whatever reason be terminated or cease to be in full force and effect,
or the enforceability thereof or any other Transaction Documents shall be
contested by the Company or WBS; or
  (j)  if the
Company or WBS fails to observe or perform in any material respect any of its
covenants contained in the Transaction Documents (other than any failure which
is covered by Section 5(a), (b) or (g)), and such failure continues for thirty
(30) days after receipt by the Company of notice thereof.
  Upon the occurrence of any such Event
of Default all unpaid principal and accrued interest under this Note shall
become immediately due and payable (A) upon election of the Holder, with respect
to (a) through (d) and (f) through (j), and (B) automatically, with respect to
(e).  Upon the occurrence of any Event of Default, the Holder may, in
addition to declaring all amounts due hereunder to be immediately due and
payable, pursue any available remedy, whether at law or in equity, including,
without limitation, exercising its rights under the other Transaction
Documents.  If an Event of Default occurs, the Company and WBS shall
jointly and severally pay to the Holder the reasonable attorneys' fees and
disbursements and all other reasonable out-of-pocket costs incurred by the
Holder in order to collect amounts due and owing under this Note or otherwise to
enforce the Holder's rights and remedies hereunder and under the other
Transaction Documents.
  7.  No
Waiver.  No delay or omission on the part of the Holder in
exercising any right under this Note shall operate as a waiver of such right or
of any other right of the Holder, nor shall any delay, omission or waiver on any
one occasion be deemed a bar to or waiver of the same or any other right on any
future occasion.
  8.  Amendments in
Writing.  Any term of this Note may be amended or waived upon
the written consent of the Company, WBS and the holders of Company Notes
representing at least 50% of the principal amount of Company Notes then
outstanding (the “Majority Holders”);
provided, that
(x) any such amendment or waiver must apply to all outstanding Company Notes;
and (y) without the consent of the Holder hereof, no amendment or waiver shall
(i) change the Stated Maturity Date of this Note, (ii) reduce the principal
amount of this Note or the interest rate due hereon, (iii) change the Conversion
Price or (iv) change the place of payment of this Note.  No such
waiver or consent on any one instance shall be construed to be a continuing
waiver or a waiver in any other instance unless it expressly so
provides.
  9.  Waivers.  The
Company and WBS hereby forever waive presentment, demand, presentment for
payment, protest, notice of protest, notice of dishonor of this Note and all
other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note.
  10.  Waiver of Jury
Trial.  EACH
OF THE COMPANY AND WBS HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION
  A -
20
  ARISING OUT OF OR BASED UPON THIS
NOTE OR ANY CONTEMPLATED TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY
AND ALL OTHER CLAIMS.  EACH OF THE COMPANY AND WBS HAS REVIEWED THIS
WAIVER WITH ITS COUNSEL.
  11.  Secured
Obligation.  This Note is one of the Notes referred to in the
Security Agreement and is secured by the collateral described
therein.  The Security Agreement grants the Holder certain rights with
respect to such collateral upon an Event of Default.
  12.  Governing Law; Consent to
Jurisdiction.  This Note shall be governed by and construed
under the law of the State of New York, without giving effect to the conflicts
of law principles thereof.  The Company, WBS and, by accepting this
Note, the Holder, each irrevocably submits to the exclusive jurisdiction of the
courts of the State of New York located in New York County and the United States
District Court for the Southern District of New York for the purpose of any
suit, action, proceeding or judgment relating to or arising out of this Note 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 Note.  The Company, WBS and, by accepting this
Note, the Holder, each irrevocably consents to the jurisdiction of any such
court in any such suit, action or proceeding and to the laying of venue in such
court.  The Company, WBS and, by accepting this Note, the Holder, each
irrevocably waives any objection to the laying of venue of any such suit, action
or proceeding brought in such courts and irrevocably waives any claim that any
such suit, action or proceeding brought in any such court has been brought in an
inconvenient forum.
  13.  Costs.  If
action is instituted to collect on this Note, the Company and WBS jointly and
severally promise to pay all reasonable costs and expenses, including reasonable
attorney’s fees, incurred in connection with such action.
  14.  Notices.  All
notices hereunder shall be given in writing and shall be deemed delivered when
received by the other party hereto at the address set forth in the Purchase
Agreement or at such other address as may be specified by such party from time
to time in accordance with the Purchase Agreement.
  15.  Successors and
Assigns.  This Note shall be binding upon the successors or
assigns of the Company and WBS and shall inure to the benefit of the successors
and assigns of the Holder.
  [Remainder
of Page Intentionally Left Blank]
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21
  IN WITNESS WHEREOF, the Company and WBS
have caused this Amended and Restated 10% Senior Secured Convertible Note to be
signed in their names effective as of the date first above written.
 
  PRIMAL
      SOLUTIONS, INC.By:___________________________________Name:
                  Joseph R.
      SimrellTitle:
                  Chief Executive
      Officer
 
  WIRELESS
      BILLING SYSTEMSBy:___________________________________Name:
                    Joseph R.
      SimrellTitle:
                    Chief Executive
      Officer
  A -
22
  Primal Solutions,
Inc.


10% Senior Convertible Debt, amended and restated as
of 3.31.08


Schedule 1








Payment
      Breakout
            
            
            
            Breakdown
      of PaymentPayment
      Date
            
            Quarterly
      Payment
            Principal
            Interest
            Principal
              Balance
            Interest
      Rate
            
            SSPEF
            SSTF
            SSTF2
            SSF3
            SSF3QP
            Total03/31/08
            0
            
            
            
            1,500,000.0004/30/08
            1
            —
            —
            —
            1,500,000.00
            10.0%05/31/08
            2
            —
            —
            —
            1,500,000.00
            10.0%06/30/08
            3
            60,000.00
            22,500.00
            37,500.00
            1,477,500.00
            10.0%
            
            27,240.00
            22,920.00
            4,360.00
            440.00
            5,040.00
            60,000.0007/31/08
            4
            —
            —
            —
            1,477,500.00
            10.0%08/31/08
            5
            —
            —
            —
            1,477,500.00
            10.0%09/30/08
            6
            125,000.00
            88,062.50
            36,937.50
            1,389,437.50
            10.0%
            
            56,749.99
            47,750.00
            9,083.34
            916.67
            10,500.00
            125,000.0010/31/08
            7
            —
            —
            —
            1,389,437.50
            10.0%11/30/08
            8
            —
            —
            —
            1,389,437.50
            10.0%12/31/08
            9
            174,173.44
            139,437.50
            34,735.94
            1,250,000.00
            10.0%
            
            79,074.75
            66,534.25
            12,656.60
            1,277.27
            14,630.57
            174,173.4401/31/09
            10
            —
            —
            —
            1,250,000.00
            10.0%02/28/09
            11
            —
            —
            —
            1,250.000.00
            10.0%03/31/09
            12
            211,863.41
            180,613.41
            31,250.00
            1,069,386.59
            10.0%
            
            96,185.99
            80,931.82
            15,395.40
            1,553.67
            17,796.53
            211,863.4104/30/09
            13
            —
            —
            —
            1,069,386.59
            10.0%05/31/09
            14
            —
            —
            —
            1,069,386.59
            10.0%06/30/09
            15
            211,863.41
            185,128.75
            26,734.66
            884,257.84
            10.0%
            
            96,185.99
            80,913.82
            15,395.41
            1,553.66
            17,796.53
            211,863.4107/31/09
            16
            —
            —
            —
            884,257.84
            10.0%08/31/09
            17
            —
            —
            —
            884,257.84
            10.0%09/30/09
            18
            211,863.41
            189,756.96
            22,106.45
            694,500.88
            10.0%
            
            96,185.99
            80,913.83
            15,395.41
            1,553.66
            17,796.52
            211,863.4110/31/09
            19
            —
            —
            —
            694,500.88
            10.0%11/30/09
            20
            —
            —
            —
            694,500.88
            10.0%12/31/09
            21
            711,863.41
            694,500.88
            17,362.53
            —
            10.0%
            
            323,185.98
            271,931.83
            51,728.74
            5,220.34
            59,796.52
            711,863.41Total
            
            1,706,627.08
            1,500,000.00
            206,627.08
            
            
            
            774,808.69
            651,931.55
            124,014.90
            12,515.27
            143,356.67
            1,706,627.08


















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