**Exhibit 10.38**

 

**CHANGE OF CONTROL AGREEMENT**

 

This Change of Control Agreement (this “Agreement”) ismade as of March 25, 2005 by and between Primal Solutions, Inc., a Delawarecorporation (the “Company”), and William C. Bousema (the “Executive”).

 

**RECITALS**

 

A.            TheExecutive has made and is expected to make a major contribution to theprofitability, growth and financial strength of the Company and its affiliates.

 

B.            The Company considers the continued availability of theExecutive’s services, managerial skills and business experience to be in thebest interest of the Company and its stockholders and desires to assure thecontinued services of the Executive on behalf of the Company without thedistraction of the Executive occasioned by the possibility of an abrupt changein control of the Company.

 

C.            TheExecutive is willing to remain in the employ of the Company, particularly inthe event of a threat or the occurrence of a change in control of the Company,upon the understanding that the Company will provide him with income securityand certain other benefits in accordance with the terms and conditionscontained in this Agreement in the event his employment is terminated inconnection with a change in control of the Company.

 

D.            TheCompany and the Executive are also concurrently entering into a LetterAgreement dated as of the date hereof (the “Letter Agreement”), which LetterAgreement describes certain covenants and conditions of Executive’s employmentby the Company.

 

E.             Forpurposes of this Agreement, defined terms in this Agreement shall have themeaning specified or referred to in Section 3.

 

**AGREEMENT**

 

In consideration of the foregoing premises and themutual covenants herein contained, and for other good and valuableconsideration, the receipt and adequacy of which are hereby acknowledged, theparties agree as follows:

 

**1.  EFFECTIVE DATE; TERM**

 

1.1           ThisAgreement shall become effective on the date hereof and shall continue ineffect until one (1) day after the termination of the Executive’s employmentwith the Company for any reason. No termination of this Agreement shall limit,alter or otherwise affect the Executive’s rights hereunder with respect to aChange of Control which has occurred prior to, or within three months after,such employment termination, including without limitation the Executive’srights to receive the various benefits hereunder.

 

**2.  SEVERANCE PAYMENTS UPON ACHANGE OF CONTROL**

 

2.1           EventsGiving Rise to Severance Payments.

 

The Company shall pay or cause to be paid to the Executivethe Severance Payments specified in Section 2.2**and the other benefits specified in this Agreement if:

 

(i)            thereis a Change of Control, and within 12 months after the Change of Control, (A)the Company or any successor to the Company terminates the employment of theExecutive for any reason other than Cause, death, Disability or the Executivereaching the mandatory retirement age established by the Company, if any, or(b) the Executive voluntarily terminates his employment for Good Reason; or

 

(ii)           theExecutive’s employment by the Company is terminated by the Company within threemonths prior to the Change of Control, and such termination arose in connectionwith or in anticipation of the Change of Control (for purposes of thisAgreement, meaning that at the time of such termination, the 

 

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Company had entered into an agreement, theconsummation of which would result in a Change of Control, or the terminationof the Executive’s employment was at the request of a third party who has takensteps to effect a Change of Control), or the Executive voluntarily terminateshis employment for Good Reason during such three-month period, and in eachcase, such Change of Control is consummated, or the Board adopts a resolutionto the effect that a potential Change of Control for purposes of this Agreementhas occurred.

 

2.2           SeverancePayments Upon Termination of Employment.

 

(a)           Ifthe Executive is entitled to benefits pursuant to Section 2.1, the Companyshall pay or provide to the Executive as a severance payment (the “SeverancePayment”), in lieu of any further compensation or other amounts and insettlement and complete release of all claims the Executive may have againstthe Company, the following:

 

(i)            Asingle lump sum payment, payable in cash within ten days of the TerminationDate, or if applicable, the effective date of any release executed by theExecutive in connection with termination of his employment with the Company(provided that any portion thereof may be paid earlier if required by applicablelaw), equal to the sum of:

 

(A)          anyaccrued and unpaid portion of the Executive’s Salary and vacation through theTermination Date and any accrued and unpaid portion of the Executive’sIncentive Compensation and other bonuses for the prior fiscal year;

 

(B)           anamount equal to 100% of the Executive’s then current annual Salary; and

 

(C)           anamount equal to 100% of the amount that would otherwise be payable to theExecutive, if the Executive remained employed by the Company, under theIncentive Compensation and other bonus plans, if any, in which the Executive isthen participating for the fiscal year in progress, calculated assuming that100% of the targets under such bonus plans are achieved.

 

(ii)           Continuation,on the same terms as in effect on the Termination Date, including generalpremium increases, of all medical, dental, life and disability Benefits for theExecutive for 12 months commencing on the Termination Date (the “payment period”),including equivalent coverage for the Executive’s spouse and dependentchildren, if such coverage was provided immediately prior to the TerminationDate. In the event that the Executive is ineligible under the terms of suchinsurance to continue to be so covered, the Company shall provide the Executivewith a lump sum payment equal to the cost to the Executive of obtainingsubstantially similar coverage for the payment period, which lump sum paymentshall be paid no later than 3 months after such Termination Date, but in noevent later than 2-1/2 months following the close of the calendar year in whichtermination under this paragraph occurs. If the Executive, prior to theTermination Date, was receiving any cash-in-lieu payments designed to enablethe Executive to obtain insurance coverage of his choosing, the Company shall,in addition to any other benefits to be provided under thisSection 2.2(a)(ii), provide the Executive with continued payments of suchin-lieu payments that the Executive would have been entitled to receive overthe payment period. In no event will such in-lieu payments extend beyond 2-1/2months following the close of the calendar year in which termination under thisparagraph occurs, and payments will be accelerated, if necessary to preventsuch 2-1/2 month period to be exceeded.  TheCompany’s obligation hereunder with respect to the foregoing Benefits shall belimited to the extent that the Executive obtains any such benefits pursuant toa subsequent employer’s benefit plans, in which case the Company may reduce thecoverage of any Benefits it is required to provide the Executive hereunder solong as the aggregate coverage and benefits of the combined benefit plans areno less favorable to the Executive than the Benefits required to be providedhereunder.

 

(b)           Exceptas set forth herein, the Executive’s compensation by the Company and itsaffiliates and accrual of, or participation in all benefit, bonus, incentiveand other plans or programs of the Company and its affiliates, will cease onthe Termination Date.

 

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(c)           TheExecutive shall not be required to mitigate the amount of any Severance Paymentprovided for in this Agreement by seeking other employment or otherwise and nosuch payment shall be offset or reduced by the amount of any compensation orbenefits provided to the Executive in any subsequent employment, except asprovided in Section 2.2(a)(ii). Notwithstanding the foregoing, to theextent permitted by applicable law, the Severance Payment provided for in thisSection 2 shall be reduced by the amount of any other severance ortermination pay to which the Executive may be entitled by operation of anyapplicable law or under any agreement with the Company, any of its affiliatesor any successors of such entities.

 

(d)           TheCompany may, as a condition to the Executive receiving any Benefits under thisAgreement, require the Executive to execute a release of all claims theExecutive may have against the Company or its affiliates arising from theExecutive’s employment with the Company or its affiliates or any successors,and the termination thereof, in a form reasonably satisfactory to the Company.

 

(e)           Theobligations of the Company hereunder, including its obligation to pay theSeverance Payment provided for herein, are contingent upon the Executive’sperformance of the Executive’s obligations hereunder, including underSection 2.6. If the Executive breaches any of the material terms andprovisions of this Agreement, in addition to any other remedies that theCompany may have for any such breach, the Company may immediately terminateproviding any Severance Payment then being made.

 

(f)            Amounts which are vested benefits or which the Executive isotherwise entitled to receive under any plan or program of the Company shall bepayable in accordance with such plan or program, except as explicitly modifiedby this Agreement.

 

2.3           Noticeof Termination.  Any termination of the Executive’s employment by theCompany or by the Executive (other than termination based on the Executive’sdeath) following or in connection with a Change of Control shall becommunicated by the terminating party in a Notice of Termination to the otherparty hereto.

 

2.4           WithholdingTaxes.  Any payments provided for hereunder shall be paid net of anyapplicable withholding required under federal, state or local law.

 

2.5           Affiliates. Nothing contained herein shall prohibit any affiliates of the Companyfulfilling any obligation of the Company to the Executive hereunder and forsuch purposes will be deemed the act of the Company.

 

2.6           Covenantsof the Executive. Payment of the Severance Payment under this Agreement shall be contingent uponthe Executive complying with the covenants of the Executive set forth in the “Non-Interference”provision of the Letter Agreement as well as under the Employee Confidentialityand Invention Assignment Agreement, through the payment period. The partiesacknowledge that the Executive’s agreement to comply with these covenants is anessential element of this Agreement, and without which the Company would nothave entered into this Agreement.

 

2.7           Indemnificationfor Excise Tax.

 

(a)           Inthe event that (i) the Executive becomes entitled to the Severance Payments inaccordance with this Section 2, and (ii) such Severance Payment and anyother benefits or payments (including transfers of property) that the Executivereceives, or is to receive, pursuant to this Agreement or any other agreement,plan or arrangement with the Company in connection with a Change of Control (“OtherBenefits”) shall be subject to the tax imposed pursuant to Section 4999 ofthe Internal Revenue Code of 1986, as amended (the “Code”) (or any successorthereto) or any comparable provision of state law (collectively, the “ExciseTax”), then the Company or its successor shall pay to the Executive within 30days after the termination of the Executive’s employment with the Company orits successor, an additional amount (the “Gross-Up Payment”) determined inaccordance with the following provisions. The Gross-Up Payment shall be equalto the amount necessary so that the net amount retained by the Executive, aftersubtracting the Excise Tax and after also subtracting all federal, state orlocal income tax, FICA tax and Excise Tax on the Gross-Up Payment, shall beequal to the net amount the Executive would have retained if no Excise Tax hadbeen imposed and no Gross-Up Payment had been made. It is intended that theExecutive shall not suffer any 

 

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loss or expense resulting from the assessment of anyExcise Tax or the Company’s reimbursement of the Executive for any such ExciseTax.

 

(b)           Forpurposes of determining whether any of the Severance Payments or Other Benefitswill be subject to Excise Tax and the amount of such Excise Tax:

 

(i) any payments or benefits received or to bereceived by the Executive in connection with a Change of Control (whetherpursuant to the terms of this Agreement or any other plan, arrangement oragreement with the Company, any Person whose actions result in a Change ofControl or any Person affiliated with the Company or such Person) shall betreated as “parachute payments” within the meaning of Section 280G(b)(2)of the Code (or any successor thereto), and all “excess parachute payments”within the meaning of Section 280G(b)(l) of the Code (or any successorthereto) shall be treated as subject to Excise Tax, unless in the opinion oftax counsel selected by the Company’s independent auditors and acceptable tothe Executive, (A) such other payments or benefits (in whole or in part) do notconstitute such parachute payments or (B) such excess parachute payments (inwhole or in part) represent reasonable compensation for services actuallyrendered within the meaning of Section 280(G)(b)(4) of the Code (or anysuccessor thereto),

 

(ii) the amount of the Severance Payments and OtherBenefits which shall be treated as subject to Excise Tax shall be equal to thelesser of (A) the total amount of the Severance Payments and Other Benefits or(B) the amount of excess parachute payments within the meaning of Sections280G(b)(l) and (4) of the Code (or any successor or successors thereto) afterapplying clause (i) above, and

 

(iii) the value of any non-cash benefits or anydeferred payment or benefit shall be determined by the Company’s independentauditors in accordance with the principles of Sections 280(G)(d)(3) and (4) ofthe Code (or any successor or successors thereto).

 

(c)           Forpurpose of determining the amount of the Gross-Up Payment, the Executive shallbe deemed to pay (i) federal income taxes at the highest marginal rate offederal income taxation in the calendar year in which the Gross-Up Payment isto be made, and (ii) state and local income taxes at the highest marginal ratesof taxation in the state and locality of the Executive’s residence on the dateof termination of the Executive’s employment, net of the maximum reduction infederal income taxes which could be obtained from deduction of such state andlocal taxes.

 

(d)           Inthe event that the actual amount of Excise Tax (the “Actual Excise Tax”) issubsequently determined to be less than the amount taken into account hereunderat the time of the Executive’s termination of employment entitling him toSeverance Payments (the “Pre-determined Excise Tax”), the Executive shall repayto the Company, at the time that the amount of the Actual Excise Tax is finallydetermined, the portion of the Gross-Up Payment attributable to the amount bywhich the Pre-determined Excise Tax exceeds the Actual Excise Tax, plusinterest on the amount of such repayment at the rate provided inSection 1274(b)(2)(B) of the Code (or any successor thereto) (the “ApplicableRate”). In the event that the Actual Excise Tax is determined to exceed theamount of Pre-determined Excise Tax (including by reason of any payment theexistence or amount of which cannot be determined at the time of the Gross-UpPayment), the Company shall make an additional Gross-Up Payment in respect ofsuch excess (plus interest, determined at the Applicable Rate, payable withrespect to such excess) at the time that the amount of the Actual Excise tax isfinally determined.

 

2.8           Accelerationof Vesting of Options.  Notwithstanding anything contained herein tothe contrary, whether or not the Executive’s employment with the Company or itssuccessor is terminated upon a Change of Control, to the extent permitted underapplicable law, upon the occurrence of a Change of Control all outstandingunvested stock options and all previously granted unvested restricted stockawards granted to the Executive by the Company shall accelerate and vest.

 

**3.  DEFINITIONS**

 

For purposes of this Agreement:

 

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3.1           **“Board”** shall mean the Board of Directorsof the Company.

 

3.2           **“Benefits”** shall mean any and all stockoption, restricted stock, pension, profit sharing, bonus, life insurance,hospitalization, major medical, tuition reimbursement, medical flexiblespending accounts,  independent financialand tax consulting services and other employee benefit plans provided by theCompany that may be in effect from time to time.

 

3.3           **“Beneficial Ownership”** shall have themeaning in Rule 13d-3 promulgated under the Exchange Act.

 

3.4           **“Cause”** shall mean: (a) an intentional actwhich materially injures the Company; (b) an intentional refusal or failure tofollow lawful and reasonable directions of the Board of Directors or anindividual to whom the Executive reports (as appropriate); (c) a willful orhabitual neglect of duties; or (d) the conviction of, or the entering of aguilty plea or plea of no contest by the Executive with respect to, a felonyinvolving an act of moral turpitude.

 

3.5           **“Change of Control”** shall mean, after thedate hereof, any of the following events:

 

(a)           Anacquisition in one or a series of related transactions of any voting securitiesof the Company (“Voting Securities”), directly or indirectly by any Person,other than (1) the Company, (2) any wholly-owned subsidiary of the Company, (3)any employee benefit plan of the Company or any wholly-owned subsidiary of theCompany (including an employee stock ownership plan), (4) any trustee or otherfiduciary holding securities under any employee benefit plan adopted by theCompany or any subsidiary of the Company, (5) any underwriter in connectionwith a firm commitment public offering of the Company’s capital stock,immediately after which such Person has beneficial ownership of 35% or more ofthe combined voting power of the Company’s then outstanding Voting Securities,or (6) a Person which includes the Executive.

 

(b)           Anacquisition in one or a series of related transactions of any voting securitiesof any material subsidiary of the Company (being defined for purposes hereof,as any subsidiary representing at least 50% of the Company’s combined revenueor assets), directly or indirectly by any Person, other than (1) the Company,(2) any wholly-owned subsidiary of the Company, (3) any employee benefit planof the Company or any wholly-owned subsidiary of the Company (including anemployee stock ownership plan), (4) any trustee or other fiduciary holdingsecurities under any employee benefit plan adopted by the Company or anysubsidiary of the Company, or (5) any underwriter in connection with a firmcommitment public offering of such subsidiary’s capital stock, immediatelyafter which such Person has beneficial ownership of 50% or more of the combinedvoting power of such subsidiary’s then outstanding voting securities.

 

(c)           Duringany period of 12 consecutive months, the individuals who, as of the beginningof such period, are members of the Board (the “Incumbent Board”), cease for anyreason to constitute at least a majority of the Board; *provided, however,*that if the election,or nomination for election by the Company’s stockholders, of any new directorwas approved by a vote of at least two-thirds of the then Incumbent Board(other than an election or nomination of an individual whose initial assumptionof office is in connection with an actual or threatened election contestrelating to the election of the members of the Board, as such terms are used inRule 14A-11 of Regulation 14A promulgated under the Exchange Act), such newdirector shall, for purposes of this Agreement, be considered a member of theIncumbent Board.

 

(d)           Approvalby the Company’s stockholders of a complete liquidation or dissolution of theCompany.

 

(e)           Consummationof a merger, consolidation or reorganization (or series of relatedtransactions) involving the Company, unless the stockholders of the Companyhaving the power to vote in the ordinary election of directors immediatelybefore such merger, consolidation or reorganization, own, directly orindirectly, immediately following such merger, consolidation or reorganization,at least 50% of the combined voting power of the outstanding voting securitiesof the corporation resulting from such merger, consolidation or reorganizationin substantially the same proportion as their ownership of the VotingSecurities of the Company immediately before such merger, consolidation orreorganization (or series of related transactions).

 

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(f)            Consummationof an agreement for the sale or other disposition of all or substantially allof the assets of the Company (evaluated on a consolidated basis, without regardto whether the sale or other disposition is effected via a sale or otherdisposition of assets of the Company, the sale or other disposition of thesecurities of one or more subsidiaries of the Company or the sale or otherdisposition of the assets of one or more subsidiaries of the Company) to anyPerson (other than a transfer to a subsidiary of the Company).

 

(g)           Theoccurrence of any other event of a nature that would be required to be reportedby the Company in response to Item 5.01 of a Current Report on Form 8-K (or anysuccessor to such form) promulgated pursuant to the Exchange Act.

 

3.6           **“Company”** shall mean Primal Solutions,Inc., a Delaware corporation or any successor of the Company.

 

3.7**          “Disability”** shall haveoccurred, if for physical or mental reasons, the Executive is unable to performthe essential functions of the Executive’s duties under the Letter Agreement,with or without reasonable accommodation.

 

3.8           **“Exchange Act”** shall mean the Securities ExchangeAct of 1934, as amended.

3.9           **“Good Reason”**shall mean any of thefollowing: (a) the Company’s material breach of the Letter Agreement or anyother agreement between Executive and the Company concerning Executive’semployment with the Company; provided, however, that the Company shall have ten(10) days to remedy the breach after receipt of written notice from theExecutive that the breach has occurred if the breach is susceptible of cure;(b) the assignment of the Executive without his express and voluntary writtenconsent to a title, status, overall position, responsibilities, duties,reporting relationship, or general working environment of a materially lesserstatus or degree of responsibility than his title, status, overall position,responsibilities, duties, reporting relationship, and general workingenvironment at the effective date of the Letter Agreement; (c) the requirementby the Company that the Executive relocate the Executive’s personal residenceoutside the metropolitan Orange County, California area; (d) the relocation bythe Company of the Executive’s office more than 50 miles from its location asof the effective date of the Letter Agreement; (e) any failure by the Companyto obtain the assumption of any material written agreement between theExecutive and the Company concerning Executive’s employment by any successor ofthe Company or assignee of substantially all of the business of the Company; or(f) any material change by the Company in the Benefits or IncentiveCompensation offered to the Executive from those in which the Executive isparticipating on the effective date of the Letter Agreement, or the taking ofany action by the Company which would materially and adversely affect theExecutive’s participation in or reduce the Executive’s benefits under any ofthe Benefits or Incentive Compensation plans or deprive the Executive of anyfringe benefit then enjoyed by the Executive; provided, however, that nothingcontained in this subparagraph (f) shall be deemed to permit termination by theExecutive for Good Reason if the Company offers a range of benefit plans andprograms to the Executive which, taken as a whole, are at least comparable tothe Benefits and Incentive Compensation in which the Executive is participatingon the effective date of the Letter Agreement.

 

3.10         **“Incentive Compensation”**shall mean suchadditional compensation  for the servicesto be rendered by the Executive pursuant to the Letter Agreement, as suchadditional compensation relates to and is conditioned up on certain performancegoals of the Company.

 

3.11         **“Notice of Termination”**shall mean awritten notice of termination of the Executive’s employment delivered by theCompany to the Executive or by the Executive to the Company, as applicable,upon termination of the Executive’s employment with the Company which (a) setsforth the specific termination provision in this Agreement relied upon, (b)sets forth in reasonable detail the facts and circumstances claimed to providea basis for termination of the Executive’s employment under the provision soindicated and (c) sets forth the date the Executive’s employment with theCompany shall terminate.

 

3.12         **“Person”**shall have the meaning of “person”as used in Section 13(d) and 14(d) of the Exchange Act, including a “group”as defined in such sections.

 

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3.13         **“Salary”**shall mean the annual salary ofthe Executive as described in the Letter Agreement.

 

3.14          **“Termination Date”**shall mean (a) in thecase of the Executive’s death, his date of death, and (b) in all other cases,the date specified in the Notice of Termination.

 

**4.  MISCELLANEOUS**

 

4.1.          Successors;Binding Agreement.

 

(a)           ThisAgreement shall be binding upon and shall inure to the benefit of the Company,its successors (whether by purchase of assets, merger, consolidation orotherwise) to all or substantially all of the business and/or assets of theCompany and its assigns, and the Company shall require any successors andassigns to expressly assume and agree to perform this Agreement in the samemanner and to the same extent that the Company would be required to perform itif no such succession or assignment had taken place (including the obligationto cause any subsequent successor to also assume the obligations of thisAgreement). Neither this Agreement nor any right or interest hereunder shall beassignable or transferable by the Executive, his beneficiaries or legalrepresentatives, except by will or by the laws of descent and distribution.This Agreement shall inure to the benefit of and be enforceable by theExecutive’s legal personal representative. The duties and covenants of theExecutive under this Agreement, being personal, may not be delegated.

 

(b)           Nothingin this Section 4.1 is intended to require that a Person referred to inSection 3.5 as being the beneficial owner of shares of stock of theCompany must assume the obligations under this Agreement as a result of suchstock ownership.

 

4.2           Non-Exclusivityof Rights; No Guaranteed Employment.

 

(a)           Nothingin this Agreement shall prevent or limit the Executive’s continuing or futureparticipation in any benefit, bonus, incentive or other plan or program providedby the Company and for which the Executive may qualify, nor shall anythingherein limit or reduce such rights as the Executive may have under any otheragreements with the Company, except as expressly stated therein.

 

(b)           TheExecutive and the Company acknowledge that, except as may otherwise be providedunder any other written agreement between the Executive and the Company, theemployment of the Executive by the Company is “at will” and may be terminatedby either the Executive or the Company at any time.

 

4.3           Waiver. The rights and remedies of the parties to this Agreement are cumulative and notalternative. Neither the failure nor any delay by either party in exercisingany right, power, or privilege under this Agreement will operate as a waiver ofsuch right, power, or privilege, and no single or partial exercise of any suchright, power, or privilege will preclude any other or further exercise of suchright, power, or privilege or the exercise of any other right, power, orprivilege. To the maximum extent permitted by applicable law, (a) no claim orright arising out of this Agreement can be discharged by one party, in whole orin part, by a waiver or renunciation of the claim or right unless in writingsigned by the other party; (b) no waiver that may be given by a party will beapplicable except in the specific instance for which it is given; and (c) nonotice to or demand on one party will be deemed to be a waiver of anyobligation of such party or of the right of the party giving such notice ordemand to take further action without notice or demand as provided in thisAgreement.

 

4.4           Notices. All notices, consents, waivers, and other communications under this Agreementmust be in writing and will be deemed to have been duly given when (a)delivered by hand (with written confirmation of receipt), (b) sent by facsimile(with written confirmation of receipt), provided that a copy is mailed byregistered mail, return receipt requested, within 24 hours thereafter, or (c)when received by the addressee, if sent by a nationally recognized overnightdelivery service (receipt requested), in each case to the appropriate addressand facsimile number set forth below (or to such other address and facsimilenumber as a party may designate by notice to the other party pursuant to theterms of this Section 4.4):

 

 

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If to the Executive:

 

William C. Bousema

1815 Port Tiffin Place

Newport Beach, CA 92660

Tel: (949) 759-7585

 

 

If to the Company:

 

Primal Solutions, Inc.

18881 Von Karman Avenue, Suite 500

Irvine, California 92624

Attention: Chairman of the Compensation Committee

Facsimile No. (949) 260-1515

 

4.5           EntireAgreement; Amendments.  This Agreement contains the entire agreementbetween the parties with respect to the subject matter hereof and supersedesall prior agreements and understandings, oral or written, between the partieshereto with respect to the subject matter hereof. The parties acknowledge thatno agreement or representations, oral or otherwise, express or implied, withrespect to the subject matter hereof have been made by either party which arenot expressly set forth in this Agreement. This Agreement may not be amendedorally, but only by an agreement in writing signed by the parties hereto.

 

4.6           Arbitrationof Disputes.

 

(a)           Exceptas set forth in Section 4.6(b), arbitration shall be the sole andexclusive remedy for any dispute, claim, or controversy of any kind or nature(a “Claim”) arising out of, related to, or connected with this Agreement or thetermination of the Executive’s employment relationship with the Company as aresult of or in connection with a Change of Control. This mutual agreement toarbitrate includes any Claim by the Executive against any parent, subsidiary,or affiliated entity of the Company, or any director, officer, general orlimited partner, employee or agent of the Company or of any such parent,subsidiary or affiliated entity. It also includes any claim against theExecutive by the Company, or any parent, subsidiary or affiliated entity of theCompany.

 

(b)           ThisSection 4.6 does not apply to any claims by Executive: (1) for workers’compensation benefits; (2) for unemployment insurance benefits; (3) under abenefit plan where the plan specifies a separate arbitration procedure; (4)filed with an administrative agency which are not legally subject to arbitrationunder this Agreement; or (5) which are otherwise expressly prohibited by lawfrom being subject to arbitration under this Agreement.

 

(c)           Anyarbitration proceedings shall be conducted in Orange County, California. AnyClaim submitted to arbitration shall be decided by a single, neutral arbitrator(the “Arbitrator”). The parties to the arbitration shall mutually select theArbitrator not later than 45 days after service of the demand for arbitration.If the parties for any reason do not mutually select the Arbitrator within the45 day period, then any party may apply to any court of competent jurisdictionto appoint a retired judge as the Arbitrator. The parties agree thatarbitration shall be conducted in accordance with California Code of Civil Proceduresections 1280 etseq., including Code of Civil Proceduresection 1283.05 regarding discovery, except as modified in this Agreement.The Arbitrator shall apply the substantive federal, state, or local law andstatute of limitations governing any Claim submitted to arbitration. In rulingon any Claim submitted to arbitration, the Arbitrator shall have the authorityto award only such remedies or forms of relief as are provided for under thesubstantive law governing such Claim. The Arbitrator shall issue a writtendecision revealing the essential findings and conclusions on which the decisionis based. Judgment on the Arbitrator’s decision may be entered in any court ofcompetent jurisdiction.

 

(d)           TheCompany shall be responsible for paying the fees and costs incurred in thearbitration (e.g., filing fees, transcript costs and Arbitrator’s fees). Theparties shall be responsible for their own attorneys’ fees and costs, exceptthat the Arbitrator shall have the authority to award attorneys’ fees and coststo the prevailing party in accordance with the applicable law governing thedispute.

 

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(e)           TheArbitrator, and not any federal or state court, shall have the exclusiveauthority to resolve any issue relating to the interpretation, formation orenforceability of this Agreement, or any issue relating to whether a Claim issubject to arbitration under this Agreement, except that any party may bring anaction in any court of competent jurisdiction to compel arbitration inaccordance with the terms of this Agreement.

 

4.7           ERISA. This Agreement is an unfunded compensation arrangement for a member of a selectgroup of the Company’s management or that of its subsidiaries and anyexemptions under the Employee Retirement Income Security Act of 1974, asamended, as applicable to such an arrangement shall be applicable to thisAgreement.

 

4.8           Headings;Construction.  The headings in this Agreement are provided forconvenience only and will not affect its construction or interpretation. Allreferences to “Section” or “Sections” refer to the correspondingSection or Sections of this Agreement unless otherwise specified. Allwords used in this Agreement will be construed to be of such gender or numberas the circumstances require. Unless otherwise expressly provided, the word “including”does not limit the preceding words or terms.

 

4.9           Severability. If any provision of this Agreement is held invalid or unenforceable by anyArbitrator or court of competent jurisdiction, to the extent that the rights orobligations of the parties under this Agreement will not be materially andadversely effected thereby, the other provisions of this Agreement will remainin full force and effect. Any provision of this Agreement held invalid orunenforceable only in part or degree will remain in full force and effect tothe extent not held invalid or unenforceable.

 

4.10.        Counterparts. This Agreement may be executed in counterparts, each of which will be deemed tobe an original copy of this Agreement and all of which, when taken together,will be deemed to constitute one and the same agreement.

 

4.11.        GoverningLaw.  This Agreement shall be governed by and construed in accordancewith the laws of the State of California applicable to contracts entered intoand wholly to be performed within the State of California.

 

4.12.        FurtherAssurances.  Each party shall execute such further instruments as theother party may reasonably request in order to carry out the provisions of thisAgreement.

 

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IN WITNESS WHEREOF, the parties have executed anddelivered this Agreement as of the date above first written above.

 

 
|   | THE  EXECUTIVE          |
|--------|-------------------------|
|   |                    |
|   | /s/  William C. Bousema |
|   | William  C. Bousema     |
|   |                    |
|   | THE COMPANY             |
|   |                    |
|   | PRIMAL SOLUTIONS, INC., |
|   | a Delaware corporation  |
|   |                    |
|   | /s/ Joseph R. Simrell   |
|   | President               |
|   | Primal Solutions, Inc.  |

 

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