Exhibit 10.20


 


NEITHER THESE SECURITIES NOR
THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED
WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY
STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND, ACCORDINGLY, MAY NOT BE
OFFERED OR SOLD UNLESS (I) SUCH SECURITIES HAVE BEEN REGISTERED FOR SALE
PURSUANT TO THE SECURITIES ACT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT,
(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.


 


SUBJECT TO THE PROVISIONS OF
SECTION 10 HEREOF, THIS WARRANT SHALL BE VOID AFTER 5:00 P.M. EASTERN TIME
ON JUNE 10, 2009 (the “EXPIRATION DATE”).


 


No.     


 


 


PRIMAL SOLUTIONS, INC.


 


WARRANT TO PURCHASE
                  
SHARES OF


COMMON STOCK, PAR VALUE $0.01 PER SHARE


 


For VALUE
RECEIVED,
                       
(“Warrantholder”), is entitled to purchase, subject to the provisions of this
Warrant, from Primal Solutions, Inc., a Delaware corporation (“Company”), at
any time not later than 5:00 P.M., Eastern time, on the Expiration Date (as
defined above), at an exercise price per share equal to $0.28 (the exercise
price in effect being herein called the “Warrant Price”),
                     
shares (“Warrant Shares”) of the Company’s Common Stock, par value $0.01 per
share (“Common Stock”).  The number of
Warrant Shares purchasable upon exercise of this Warrant and the Warrant Price
shall be subject to adjustment from time to time as described herein.


 


Section 1.               Registration.  The Company shall maintain books for the
transfer and registration of the Warrant. 
Upon the initial issuance of this Warrant, the Company shall issue and
register the Warrant in the name of the Warrantholder.


 


Section 2.               Transfers.  As provided herein, this Warrant may be
transferred only pursuant to a registration statement filed under the
Securities Act of 1933, as amended (the “Securities Act”), or an exemption from
such registration.  Subject to such restrictions,
the Company shall transfer this Warrant from time to time upon the books to be
maintained by the Company for that purpose, upon surrender thereof for transfer
properly endorsed or accompanied by appropriate instructions for transfer and
such other documents as may be


 

















 


reasonably required by the
Company, including, if required by the Company, an opinion of its counsel to
the effect that such transfer is exempt from the registration requirements of
the Securities Act, to establish that such transfer is being made in accordance
with the terms hereof, and a new Warrant shall be issued to the transferee and
the surrendered Warrant shall be canceled by the Company.


 


Section 3.               Exercise of
Warrant.  Subject to the provisions
hereof, the Warrantholder may exercise this Warrant in whole or in part at any
time prior to its expiration upon surrender of the Warrant, together with
delivery of the duly executed Warrant exercise form attached hereto as Appendix
A (the “Exercise Agreement”) and payment by cash, certified check or wire
transfer of funds for the aggregate Warrant Price for that number of Warrant
Shares then being purchased, to the Company during normal business hours on any
business day at the Company’s principal executive offices (or such other office
or agency of the Company as it may designate by notice to the
Warrantholder).  The Warrant Shares so
purchased shall be deemed to be issued to the Warrantholder or the
Warrantholder’s designee, as the record owner of such shares, as of the close
of business on the date on which this Warrant shall have been surrendered (or
evidence of loss, theft or destruction thereof and security or indemnity
satisfactory to the Company), the Warrant Price shall have been paid and the
completed Exercise Agreement shall have been delivered.  Certificates for the Warrant Shares so
purchased, representing the aggregate number of shares specified in the
Exercise Agreement, shall be delivered to the Warrantholder within a reasonable
time, not exceeding five (5) business days, after this Warrant shall have been so
exercised.  The certificates so
delivered shall be in such denominations as may be requested by the
Warrantholder and shall be registered in the name of the Warrantholder or such
other name as shall be designated by the Warrantholder.  If this Warrant shall have been exercised
only in part, then, unless this Warrant has expired, the Company shall, at its
expense, at the time of delivery of such certificates, deliver to the
Warrantholder a new Warrant representing the number of shares with respect to
which this Warrant shall not then have been exercised.  As used herein, “business day” means a day,
other than a Saturday or Sunday, on which banks in New York City are open for
the general transaction of business. 
Each exercise hereof shall constitute the re-affirmation by the
Warrantholder that the representations and warranties contained in
Section 5 of the Purchase Agreement (as defined below) are true and
correct in all material respects with respect to the Warrantholder as of the
time of such exercise.


 


Section 4.               Compliance with
the Securities Act of 1933. Except as provided in the Purchase Agreement
(as defined below), the Company may cause the legend set forth on the first
page of this Warrant to be set forth on each Warrant or similar legend on any
security issued or issuable upon exercise of this Warrant, unless counsel for
the Company is of the opinion as to any such security that such legend is
unnecessary.


 


Section 5.               Payment of Taxes.  The Company will pay any documentary stamp
taxes attributable to the initial issuance of Warrant Shares issuable upon the
exercise of the Warrant; provided, however, that the Company shall not be
required to pay any tax or taxes which may be payable in respect of any
transfer involved in the issuance or delivery of any certificates for Warrant
Shares in a name other than that of the Warrantholder in respect of which such
shares are issued, and in such case, the Company shall not be required to issue
or deliver any certificate for Warrant Shares or any Warrant until the person
requesting the same has paid to the Company


 


2

















 


the amount of such tax or has
established to the Company’s reasonable satisfaction that such tax has been
paid.  The Warrantholder shall be
responsible for income taxes due under federal, state or other law, if any such
tax is due.


 


Section 6.               Mutilated or
Missing Warrants.  In case this
Warrant shall be mutilated, lost, stolen, or destroyed, the Company shall issue
in exchange and substitution of and upon cancellation of the mutilated Warrant,
or in lieu of and substitution for the Warrant lost, stolen or destroyed, a new
Warrant of like tenor and for the purchase of a like number of Warrant Shares,
but only upon receipt of evidence reasonably satisfactory to the Company of
such loss, theft or destruction of the Warrant, and with respect to a lost,
stolen or destroyed Warrant, reasonable indemnity or bond with respect thereto,
if requested by the Company.


 


Section 7.               Reservation of
Common Stock.  The Company hereby
represents and warrants that there have been reserved, and the Company shall at
all applicable times keep reserved until issued (if necessary) as contemplated
by this Section 7, out of the authorized and unissued shares of Common
Stock, sufficient shares to provide for the exercise of the rights of purchase
represented by this Warrant.  The
Company agrees that all Warrant Shares issued upon due exercise of the Warrant
shall be, at the time of delivery of the certificates for such Warrant Shares,
duly authorized, validly issued, fully paid and non-assessable shares of Common
Stock of the Company.


 


Section 8.               Adjustments.  Subject and pursuant to the provisions of
this Section 8, the Warrant Price and number of Warrant Shares subject to
this Warrant shall be subject to adjustment from time to time as set forth
hereinafter.


 


(a)           If the Company shall,
at any time or from time to time while this Warrant 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 number of Warrant Shares purchasable upon
exercise of the Warrant and the Warrant Price in effect immediately prior to
the date upon which such change shall become effective, shall be adjusted by
the Company so that the Warrantholder thereafter exercising the Warrant shall
be entitled to receive the number of shares of Common Stock or other capital
stock which the Warrantholder would have received if the Warrant had been
exercised immediately prior to such event upon payment of a Warrant Price that
has been adjusted to reflect a fair allocation of the economics of such event
to the Warrantholder.  Such adjustments
shall be made successively whenever any event listed above shall occur.


 


(b)           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 each Warrantholder shall thereafter have the
right


 


3

















 


to purchase and receive upon
the basis and upon the terms and conditions herein specified and in lieu of the
Warrant Shares immediately theretofore issuable upon exercise of the Warrant,
such shares of stock, securities or assets as would have been issuable or
payable with respect to or in exchange for a number of Warrant Shares equal to
the number of Warrant Shares immediately theretofore issuable upon exercise of
the Warrant, 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
each Warrantholder to the end that the provisions hereof (including, without
limitation, provision for adjustment of the Warrant 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 exercise
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 Warrantholder, at the last address of the Warrantholder appearing on the
books of the Company, such shares of stock, securities or assets as, in
accordance with the foregoing provisions, the Warrantholder may be entitled to
purchase, and the other obligations under this Warrant.  The provisions of this paragraph (b) shall
similarly apply to successive reorganizations, reclassifications,
consolidations, mergers, sales, transfers or other dispositions.


 


(c)           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 8(a)), or subscription
rights or warrants, the Warrant Price to be in effect after such payment date
shall be determined by multiplying the Warrant 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 (as defined below) per share of Common Stock immediately prior to such
payment date, less the fair market value (as determined by the Company’s Board
of Directors in good faith) of said assets or evidences of indebtedness so
distributed, or of such subscription rights or warrants, and the denominator of
which shall be the total number of shares of Common Stock outstanding
multiplied by such Market Price per share of Common Stock immediately prior to
such payment date.  “Market Price” as of
a particular date (the “Valuation Date”) shall mean the following: (a) if the
Common Stock is then listed on a national stock exchange, the closing sale
price of one share of Common Stock on such exchange on the last trading day
prior to the Valuation Date; (b) if the Common Stock is then quoted on The
Nasdaq Stock Market, Inc. (“Nasdaq”), the National Association of Securities
Dealers, Inc. OTC Bulletin Board (the “Bulletin Board”) or such similar
exchange or association, the closing sale price of one share of Common Stock on
Nasdaq, the Bulletin Board or such other exchange or association 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 asked price quoted thereon
on the last trading day prior to the Valuation Date; or (c) if the Common Stock
is not then listed on a national stock exchange or quoted on Nasdaq, the
Bulletin Board or such other exchange or association, the fair market value of
one share of Common Stock as of the Valuation Date, shall


 


4

















 


be determined in good faith by
the Board of Directors of the Company and the Warrantholder.  If the Common Stock is not then listed on a
national securities exchange, the Bulletin Board or such other exchange or
association, the Board of Directors of the Company shall respond promptly, in
writing, to an inquiry by the Warrantholder prior to the exercise hereunder as
to the fair market value of a share of Common Stock as determined by the Board
of Directors of the Company.  In the
event that the Board of Directors of the Company and the Warrantholder are
unable to agree upon the fair market value in respect of subpart (c) hereof,
the Company and the Warrantholder 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 equally by the Company and the Warrantholder.  Such adjustment shall be made successively
whenever such a payment date is fixed.


 


(d)           An adjustment to the
Warrant 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.


 


(e)           In the event that, as a
result of an adjustment made pursuant to this Section 8, the Warrantholder
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 exercise of this Warrant shall be subject thereafter to
adjustment from time to time in a manner and on terms as nearly equivalent as
practicable to the provisions with respect to the Warrant Shares contained in
this Warrant.


 


(f)            Except as provided in
subsection (g) hereof, if and whenever the Company shall issue or sell, or
is, in accordance with any of subsections (f)(l) through (f)(7) hereof, deemed
to have issued or sold, any shares of Common Stock for no consideration or for
a consideration per share less than the Warrant 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 Warrant Price, shall be reduced, as of the
close of business on the effective date of the Trigger Issuance, to a price
determined as follows:


 


	
  Adjusted Warrant 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 Warrant 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


 


5

















 


“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
Warrant Price after giving effect to such Trigger Issuance be greater than the
Warrant Price in effect prior to such Trigger Issuance..


 


For purposes
of this subsection (f), “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 (f), other than Excluded Issuances (as defined in
subsection (g) hereof).


 


For purposes
of this subsection (f), the following subsections (f)(l) to (f)(7) shall
also be applicable:


 


(f)(1)  Issuance of Rights or
Options.  In case at any time the
Company shall in any manner grant (directly and not by assumption in a merger
or otherwise) any warrants 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 warrants, 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 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
Warrant Price in effect 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 Warrant
Price.  Except as otherwise provided in
subsection 8(f)(3), no adjustment of the Warrant 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.


 


6

















 


(f)(2)  Issuance of Convertible
Securities.  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 Warrant Price in effect
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
Warrant Price, provided that (a) except as otherwise provided in
subsection 8(f)(3), no adjustment of the Warrant 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 Warrant 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 Warrant Price have been made pursuant to the other
provisions of subsection 8(f).


 


(f)(3) Change in Option Price or Conversion Rate.  Upon the happening of any of the following
events, namely, if the purchase price provided for in any Option referred to in
subsection 8(f)(l) hereof, the additional consideration, if any, payable
upon the conversion or exchange of any Convertible Securities referred to in
subsections 8(f)(l) or 8(f)(2), or the rate at which Convertible Securities
referred to in subsections 8(f)(l) or 8(f)(2) 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 Warrant Price in effect at the time of such event shall
forthwith be readjusted to the Warrant 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 8(f) or any right to
convert or exchange Convertible Securities for which any adjustment was made
pursuant to this subsection 8(f) (including without limitation upon the
redemption or purchase for consideration of such Convertible Securities by the
Company), the Warrant Price then in effect hereunder shall forthwith be changed
to the Warrant 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.


 


7

















 


(f)(4) Stock Dividends.  Subject
to the provisions of this Section 8(f), 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, other than a dividend or distribution for which an adjustment has
been made pursuant to Section 8(a), 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.


 


(f)(5) Consideration for Stock. 
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 of Directors of the Company, 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
Warrantholder).  The Board of Directors
of the Company shall respond promptly, in writing, to an inquiry by the
Warrantholder as to the fair market value of the Additional Rights.  In the event that the Board of Directors of
the Company and the Warrantholder are unable to agree upon the fair market
value of the Additional Rights, the Company and the Warrantholder 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 Warrantholder.


 


(f)(6) Record Date.  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


 


8

















 


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.


 


(f)(7) Treasury Shares.  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
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 (f).


 


(g)           Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustment of
the Warrant Price in the case of the issuance of (A) capital
stock, Options or Convertible Securities issued to 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, (B) shares of Common Stock issued upon the
conversion or exercise of Options or Convertible Securities issued prior to the
date hereof or those Options issued contemporaneously with the Closing to the
Company’s investment advisers as compensation related to the Closing as
described in Schedule 4.20 to the Purchase Agreement (as that term is
defined below), (C) securities issued pursuant to that certain Purchase
Agreement dated June 8, 2004, among the Company and the Investors named
therein (the “Purchase Agreement”) and securities issued upon the exercise or
conversion of those securities and securities issued pursuant to
Section 6.1(i) of the Purchase Agreement, or, (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 Warrant Price pursuant to the
other provisions of this Warrant) and (E) capital stock, Options or Convertible
Securities (not to exceed in the aggregate the Market Price of $1,500,000
(calculated on the as-converted basis of such capital stock, Options or
Convertible Securities)) issued in any acquisition by the Company or a
subsidiary of the Company, whether pursuant to a merger, acquisition of assets,
stock purchase, joint venture, or other strategic alliance or to lending
institutions, licensors of tangible or intangible property, landlords or
equipment leasing companies in connection with financing, licensing or leasing
transactions, in all cases approved by the Board of Directors (collectively,
“Excluded Issuances”).


 


(h)                                 Upon
any adjustment to the Warrant Price pursuant to Section 8(f) above, the
number of Warrant Shares purchasable hereunder shall be adjusted by multiplying
such number by a fraction, the numerator of which shall be the Warrant Price in
effect immediately prior to such adjustment and the denominator of which shall
be the Warrant Price in effect immediately thereafter.


 


Section 9.               Fractional
Interest.  The Company shall not be
required to issue fractions of Warrant Shares upon the exercise of this
Warrant.  If any fractional share of
Common Stock would be deliverable upon such exercise, the Company, in lieu of
delivering such fractional share, shall pay to the exercising Warrantholder an
amount in cash equal to the Market Price of such fractional share of Common
Stock on the date of exercise.


 


9

















 


Section 10.             Extension of
Expiration Date.  If the Company
fails to cause any Registration Statement covering Registrable Securities
(unless otherwise defined herein, capitalized terms are as defined in the
Registration Rights Agreement relating to the Warrant Shares (the “Registration
Rights Agreement”)) to be declared effective prior to the applicable dates set
forth therein, or if any of the events specified in Section 2(c)(ii) of
the Registration Rights Agreement occurs, and the Blackout Period (whether
alone, or in combination with any other Blackout Period) continues for more
than 60 days in any 12 month period, or for more than a total of 90 days, then
the Expiration Date of this Warrant shall be extended one day for each day
beyond the 60-day or 90-day limits, as the case may be, that the Blackout
Period continues; Provided, however, that this Section 10
will not apply to the extent, but only to the extent, that a state securities
regulator requires the extension to be inapplicable in connection with an
offering of securities by the Company. 
In any event, this Section 10 will continue to be applicable if and
when the Common Stock constitutes a “covered security” under the National
Securities Markets Improvement Act of 1996.


 


Section 11.             Benefits.  Nothing in this Warrant shall be construed
to give any person, firm or corporation (other than the Company and the
Warrantholder) any legal or equitable right, remedy or claim, it being agreed
that this Warrant shall be for the sole and exclusive benefit of the Company
and the Warrantholder.


 


Section 12.             Notices to
Warrantholder.  Upon the happening
of any event requiring an adjustment of the Warrant Price, the Company shall
promptly give written notice thereof to the Warrantholder at the address
appearing in the records of the Company, stating the adjusted Warrant Price and
the adjusted number of Warrant Shares resulting from such event and setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based.  Failure to
give such notice to the Warrantholder or any defect therein shall not affect
the legality or validity of the subject adjustment.


 


Section 13.             Identity of
Transfer Agent.  The Transfer Agent
for the Common Stock is Liberty Transfer Co. 
Upon the appointment of any subsequent transfer agent for the Common
Stock or other shares of the Company’s capital stock issuable upon the exercise
of the rights of purchase represented by the Warrant, the Company will mail to
the Warrantholder a statement setting forth the name and address of such
transfer agent.


 


Section 14.             Notices.  Unless otherwise provided, any notice
required or permitted under this Warrant shall be given in writing and shall be
deemed effectively given as hereinafter described (i) if given by personal
delivery, then such notice shall be deemed given upon such delivery, (ii) if
given by telex or facsimile, then such notice shall be deemed given upon
receipt of confirmation of complete transmittal, (iii) if given by mail, then
such notice shall be deemed given upon the earlier of (A) receipt of such
notice by the recipient or (B) three days after such notice is deposited in
first class mail, postage prepaid, and (iv) if given by an internationally
recognized overnight air courier, then such notice shall be deemed given one
business day after delivery to such carrier. 
All notices shall be addressed as follows: if to the Warrantholder, at
its address as set forth in the Company’s books and records and, if to the
Company, at the address as


 


10

















 


follows, or at such other
address as the Warrantholder or the Company may designate by ten days’ advance
written notice to the other:


 


If to the
Company:


 


Primal Solutions, Inc.


18881 Von Karman Avenue


Suite 500


Irvine, California 92612


Attention:  Chief Financial Officer


Fax:  (949) 221-8590


 


With a copy
to:


(which shall not constitute
notice)


 


Bryan Cave LLP


2020 Main
Street, Suite 600


Irving,
California 92614


Attention:  Brett J. Souza, Esq.


Fax:  (949) 223-7100


 


Section 15.             Registration
Rights.  The initial Warrantholder
is entitled to the benefit of certain registration rights with respect to the
shares of Common Stock issuable upon the exercise of this Warrant as provided
in the Registration Rights Agreement, and any subsequent Warrantholder may be
entitled to such rights.


 


Section 16.             Successors.  All the covenants and provisions hereof by
or for the benefit of the Warrantholder shall bind and inure to the benefit of
its respective successors and assigns hereunder.


 


Section 17.             Governing Law;
Consent to Jurisdiction; Waiver of Jury Trial.  This Warrant shall be governed by, and construed in accordance
with, the internal laws of the State of New York, without reference to the
choice of law provisions thereof.  The
Company and, by accepting this Warrant, the Warrantholder, 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 Warrant 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 Warrant. 
The Company and, by accepting this Warrant, the Warrantholder, 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 and, by accepting this Warrant,
the Warrantholder, 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.  EACH OF THE COMPANY AND, BY ITS ACCEPTANCE


 


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HEREOF, THE WARRANTHOLDER HEREBY WAIVES ANY
RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS WARRANT
AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED SPECIFICALLY AS TO THIS WAIVER.


 


Section 18.             Call Provision.  Notwithstanding any other provision
contained herein to the contrary, in the event that the closing bid price of a
share of Common Stock as reported on Bloomberg equals or exceeds $0.56
(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) for thirty (30) consecutive trading days commencing
after June 10, 2006 and after the Registration Statement (as defined in
the Registration Rights Agreement) has been declared effective, the Company,
upon thirty (30) days prior written notice (the “Notice Period”) given
to the Warrantholder within one business day immediately following the end of
such thirty (30) trading day period, may call this Warrant, in whole but not in
part, at a redemption price equal to $0.01 per share of Common Stock then
purchasable pursuant to this Warrant; provided that (i) the Company
simultaneously calls all Company Warrants (as defined below) on the same terms
and (ii) all of the shares of Common Stock issuable hereunder either (A) are
registered pursuant to an effective Registration Statement (as defined in the
Registration Rights Agreement) which has not been suspended and for which no
stop order is in effect, and pursuant to which the Warrantholder is able to
sell such shares of Common Stock at all times during the Notice Period or (B)
no longer constitute Registrable Securities (as defined in the Registration
Rights Agreement).  Notwithstanding any
such notice by the Company, the Warrantholder shall have the right to exercise
this Warrant prior to the end of the Notice Period.


 


Section 19.             No Rights as
Stockholder.  Prior to the exercise
of this Warrant, the Warrantholder shall not have or exercise any rights as a
stockholder of the Company by virtue of its ownership of this Warrant.


 


Section 20.             Amendment; Waiver.  This Warrant is one of a series of Warrants
of like tenor issued by the Company pursuant to the Purchase Agreement and
initially covering an aggregate of 6,869,565 shares of Common Stock (collectively,
the “Company Warrants”).  Any
term of this Warrant may be amended or waived (including the adjustment
provisions included in Section 8 of this Warrant) upon the written consent
of the Company and the holders of Company Warrants representing at least 50% of
the number of shares of Common Stock then subject to all outstanding Company
Warrants (the “Majority Holders”); provided, that (x) any such
amendment or waiver must apply to all Company Warrants; and (y) the number of
Warrant Shares subject to this Warrant, the Warrant Price and the Expiration
Date may not be amended, and the right to exercise this Warrant may not be
altered or waived, without the written consent of the Warrantholder.


 


Section 21.             Section Headings.  The section headings in this Warrant
are for the convenience of the Company and the Warrantholder and in no way
alter, modify, amend, limit or restrict the provisions hereof.


 


12

















 


IN WITNESS
WHEREOF, the Company has caused this Warrant to be duly executed, as of the 10th
day of June, 2004.


 


	
   

  	
  PRIMAL SOLUTIONS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Joseph R. Simrell

  
	
   

  	
  Title:

  	
   President and Chief Executive Officer

  
					



 


13

















 


APPENDIX A


PRIMAL
SOLUTIONS, INC.


WARRANT
EXERCISE FORM


 


To Primal
Solutions, Inc.:


 


The
undersigned hereby irrevocably elects to exercise the right of purchase
represented by the within Warrant (“Warrant”) for, and to purchase thereunder
by the payment of the Warrant Price and surrender of the Warrant,
                       
shares of Common Stock (“Warrant Shares”) provided for therein, and requests
that certificates for the Warrant Shares be issued as follows:


 


	
   

  	
   

  
	
  Name

  	
   

  
	
   

  	
   

  
	
  Address

  	
   

  
	
   

  	
   

  
	
  Federal Tax ID or Social Security No.

  	
   

  



 


and delivered by (certified mail to the above address, or
(electronically (provide DWAC
Instructions:                                   ),
or (other (specify):
                                     ).


 


and, if the number of Warrant
Shares shall not be all the Warrant Shares purchasable upon exercise of the
Warrant, that a new Warrant for the balance of the Warrant Shares purchasable
upon exercise of this Warrant be registered in the name of the undersigned
Warrantholder or the undersigned’s Assignee as below indicated and delivered to
the address stated below.


 


	
  Dated:

  	
   

  	
   

  



 


Note:  The signature must correspond with the name
of the Warrantholder as written on the first page of the Warrant in every
particular, without alteration or enlargement or any change whatever, unless
the Warrant has been assigned.


 


	
   

  	
   

  
	
  Name (please print)

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Address

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  Federal Identification or Social Security
  No.

  	
   

  
	
   

  	
   

  
	
  Assignee:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  



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