Exhibit 10.24


 


PRIMAL SOLUTIONS, INC.


Lock-Up Agreement


 


June 8, 2004


 


Special Situations Fund
III, L.P.


153 E. 53rd
Street


55th Floor


New York, NY  10022


 


Re:                               Primal
Solutions, Inc.


 


Ladies and Gentlemen:


 


The undersigned
understands that you and certain of your affiliates (collectively, the
“Purchaser”), propose to enter into a Purchase Agreement (the “Purchase
Agreement”) with Primal Solutions, Inc., a Delaware corporation (the
“Company”), providing for the purchase and sale of shares of the Company’s Common
Stock, par value $0.01 per share (“Common Stock”), and (ii) warrants to
purchase shares of Common Stock (collectively, the “Securities”), in reliance
upon the exemption from securities registration afforded by the provisions of
Regulation D, as promulgated by the U.S. Securities and Exchange Commission
(the SEC”) under the Securities Act of 1933, as amended.  Capitalized terms used herein have the
respective meanings ascribed thereto in the Purchase Agreement unless otherwise
defined herein.


 


In consideration
of, among other things, the agreement by the Purchaser to purchase the
Securities, and the Company’s agreement (with the Purchaser’s consent) to
include certain shares of Common Stock beneficially owned by the undersigned to
be included in a registration statement to be filed pursuant to the terms of a
registration rights agreement to be entered into by the Company and the
Purchaser and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the undersigned agrees that,
during the period (the “Lock-Up Period”) beginning on the date hereof and
ending on the earliest of (i) 18 months from the closing of the transactions
contemplated by the Purchase Agreement (the “Closing”), (ii) the end of a
period of twenty consecutive trading days, which period commences after the
six-month anniversary of the Closing, for which the closing bid price of a
share of Common Stock as reported on Bloomberg equals or exceeds $0.60
(appropriately adjusted for any stock split, reverse stock split, stock
dividend or other reclassification or combination of the Common Stock occurring
after the date hereof), (iii) the date on which the Purchaser no longer
beneficially owns (as defined pursuant to Rule 13d-3 promulgated under the 1934
Act) at least 50% of the aggregate Shares and Warrant Shares issuable to the
Purchaser pursuant to the Purchase Agreement, (iv) the completion by the
Company of an underwritten public offering of shares of its Common Stock for
the account of the Company (which public offering may also include shares sold
on behalf of one or more selling stockholders)[,][or] (v) a “Change in Control”
(as defined below) [or (vi) the termination of the undersigned’s employment
with the Company other than for cause (as such term is defined below)] (the
earliest of such dates, the “Restricted


 

















 


Period”), the undersigned
will not, except as provided herein, offer, sell, contract to sell, pledge,
grant any option to purchase, make any short sale or otherwise dispose
(collectively, a “Transfer”) of any shares of Common Stock of the Company, or
any options or warrants to purchase any shares of Common Stock of the Company,
or any securities convertible into, exchangeable for or that represent the
right to receive shares of Common Stock of the Company, whether now owned or
hereinafter acquired, owned directly by the undersigned (including holding as a
custodian) or with respect to which the undersigned has beneficial ownership
within the rules and regulations of the SEC (collectively the “Undersigned’s
Shares”).


 


As used herein,
“Change in Control” shall mean the occurrence of any of the following events:


 


(A) the
consummation of any consolidation or merger of the Company in which the Company
is not the continuing or surviving corporation or pursuant to which shares of
Common Stock would be converted into cash, securities or other property, other
than a merger or consolidation of the Company in which the holders of the
shares of Common Stock immediately prior to the merger or consolidation own at
least 50% of the voting power of (i) the surviving corporation immediately
after a merger or (ii) the new corporation created pursuant to the
consolidation, immediately after such consolidation, as applicable; or


 


(B)                                the
consummation of any sale, lease, exchange or other transfer (in one transaction
or a series of related transactions) of all, or substantially all, of the
assets of the Company, other than to a subsidiary or affiliate; or


 


(C)                                the
approval of the stockholders of the Company of any plan or proposal for the
complete liquidation or dissolution of the Company; or


 


(D)                               any
person or group (as such term is defined pursuant to Rule 13d-3 under the
Securities Exchange Act of 1934, as amended) shall become the “beneficial
owner” (as such term is defined in Rule 13d-3 under the Exchange Act) of shares
of capital stock entitled to vote generally for the election of directors of
the Company (“Voting Securities”) representing more than fifty (50%) percent of
the combined voting power of the Company’s then outstanding Voting Securities
(calculated as provided in Rule 13d-3(d) in the case of rights to acquire any
such securities); or


 


(E)                                 the
individuals (x) who, as of the date on which this Lock-up Agreement is entered
into, constitute the Board of Directors of the Company (the “Original
Directors”) and (y) who thereafter are elected to the Board and whose election,
or nomination for election, to the Board was approved by a vote of at least two
thirds of the Original Directors then still in office (such Directors being
called “Additional Original Directors”) and (z) who thereafter are elected to
the Board and whose election or nomination for election to the Board was
approved by a vote of at least two thirds of the Original Directors and
Additional Original Directors then still in office, cease for any reason to
constitute a majority of the members of the Company’s Board of Directors.


 


[As used herein,
“cause” shall have the meaning specified in any employment agreement or
contract between the undersigned and the Company and, if no such agreement
exists, shall


 

















 


mean: (a) a material
breach or material failure by the undersigned to perform my duties under
applicable law, (b) the use by the undersigned of any controlled substance or
the abuse of alcohol, (c) the commitment by the undersigned of an act of
dishonesty in the performance of the undersigned’s duties or engaging in
conduct materially detrimental to the business of the Company, (d) the
conviction of the undersigned of a felony or misdemeanor involving moral
turpitude, (e) the failure of the undersigned to follow any lawful directive of
the Board of Directors or any officer of the Company to whom the undersigned
reports or (f) any other matter constituting “cause” as determined in good
faith by a majority of the Board of Directors of the Company.]


 


Except as provided
herein, the foregoing restriction is expressly agreed to preclude the
undersigned from engaging in any hedging or other transaction which is designed
to or which reasonably could be expected to lead to or result in a sale or
disposition of the Undersigned’s Shares during the Restricted Period even if
such Common Stock of the Company would be disposed of by someone other than the
undersigned.  Such prohibited hedging or
other transactions would include without limitation any short sale or any
purchase, sale or grant of any right (including without limitation any put or
call option) with respect to any of the Undersigned’s Shares or with respect to
any security that includes, relates to, or derives any significant part of its
value from the Common stock of the Company.


 


The undersigned
now has, and for the duration of the Restricted Period will have, good and
marketable title to the Undersigned’s Shares, free and clear of all liens, encumbrances
and claims whatsoever.  The undersigned
also agrees and consents to the entry of stop transfer instructions with the
Company’s transfer agent and registrar against the transfer of the
Undersigned’s Shares except in compliance with this Lock-up Agreement.


 


Notwithstanding
the foregoing, subject to the requirements of applicable law and any policies
or procedures regarding the sale of stock by insiders of the Company, the
undersigned shall have the right during the Restricted Period to sell the Undersigned’s
Shares at prevailing market prices for aggregate gross proceeds not to exceed
[$     ]; provided, however that the undersigned shall
first give the Purchaser not less than five business days prior written notice
of any proposed sale and shall sell such shares to the Purchaser at such
prevailing market prices if the Purchaser so elects at any time prior to the
expiration of such five-business day period.


 


The undersigned
understands that the Company and the Purchaser are relying upon this Lock-Up Agreement
in connection with the consummation of the Purchase Agreement.  The undersigned further understands that
this Lock-Up Agreement is irrevocable and shall be binding upon the
undersigned’s heirs, legal representatives, successors and assigns.


 


 


	
   

  	
  Very truly yours,