Exhibit 10.19


 


REGISTRATION
RIGHTS AGREEMENT


 


This Registration Rights Agreement (the “Agreement”) is made and
entered into as of this 8th day of June, 2004 by and among Primal Solutions,
Inc., a Delaware corporation (the “Company”), and the “Investors” named in that
certain Purchase Agreement by and among the Company and the Investors (the
“Purchase Agreement”).


 


The parties hereby agree as follows:


 


1.   Certain Definitions.


 


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


 


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


 


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


 


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


 


“Existing Holders” shall mean, collectively, John Faltys, David
Haynes, Joe Simrell and Mark Neilsen.


 


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


 


“Other Investors” shall mean the purchasers party to the Other
Agreements (as defined in the Purchase Agreement) other than the Existing
Holders.


 


“Prospectus” shall mean the prospectus included in any
Registration Statement, as amended or supplemented by any prospectus
supplement, with respect to the terms of the offering of any portion of the
Registrable Securities covered by such Registration Statement and by all other
amendments and supplements to the prospectus, including post-effective amendments
and all material incorporated by reference in such prospectus.


 


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


 


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


 


“Registration Statement” shall mean any registration statement
of the Company filed under the 1933 Act that covers the resale of any of the
Registrable Securities pursuant to the


 

















 


provisions of this Agreement, amendments and supplements to such
Registration Statement, including post-effective amendments, all exhibits and
all material incorporated by reference in such Registration Statement.


 


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


 


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


 


“Shares” means the shares of Common Stock issued pursuant to the
Purchase Agreement.


 


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


 


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


 


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


 


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


 


2.   Registration.


 


(a)                                  Registration
Statements.


 


(i)                                     Promptly
following the closing of the purchase and sale of the securities contemplated
by the Purchase Agreement (the “Closing Date”) but no later than forty-five
(45) days after the Closing Date (the “Filing Deadline”), the Company shall
prepare and file with the SEC one Registration Statement on Form SB-2 (or, if
Form SB-2 is not then available to the Company, on such form of registration
statement as is then available to effect a registration for resale of the
Registrable Securities), covering the resale of the Registrable Securities in
an amount at least equal to the number of Shares plus the number of shares of
Common Stock necessary to permit the exercise in full of the Warrants.  Such Registration Statement may also include
shares of Common Stock (i) held by the Existing Holders or purchased by the
Existing Holders in the offering as contemplated by Section 6.1(i) of the
Purchase Agreement, (ii) purchased by the Other Holders in the offering as
contemplated by Section 6.1(i) of the Purchase Agreement and (iii) shares
of Common Stock issuable upon the exercise of warrants 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 (collectively,
the “Other Shares”).  Such Registration
Statement shall include the plan of distribution attached hereto as Exhibit
A.  Such Registration Statement also
shall cover, to the extent allowable under the 1933 Act and the rules
promulgated thereunder (including Rule 416), such indeterminate number of
additional shares of Common Stock resulting from stock splits, stock dividends
or similar transactions with respect to the Registrable Securities.  The Company shall use its reasonable best
efforts to obtain from each person who now has piggyback registration rights,
other than the Existing Holders, a waiver of those rights with respect to the
Registration Statement, except with respect to the Other Shares.  The Registration Statement (and each
amendment or supplement thereto) shall be provided in accordance with
Section 3(c) to the


 


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Investors and their counsel prior to its
filing or other submission.  If a
Registration Statement covering the Registrable Securities is not filed with
the SEC on or prior to the Filing Deadline, the Company will make pro rata
payments to each Investor, as liquidated damages and not as a penalty, in an
amount equal to 1.5% of the aggregate amount invested by such Investor for each
30-day period or pro rata for any portion thereof following the date by which
such Registration Statement should have been filed for which no Registration
Statement is filed with respect to the Registrable Securities.  Such payments shall be in partial
compensation to the Investors, and shall not constitute the Investors’
exclusive remedy for such events.  Such
payments shall be made to each Investor in cash.


 


(ii)                                  Additional
Registrable Securities.  Upon the
written demand of any Investor and upon any change in the Warrant Price (as
defined in the Warrant) such that additional shares of Common Stock become
issuable upon the exercise of the Warrants, the Company shall prepare and file
with the SEC one or more Registration Statements on Form SB-2 or amend the
Registration Statement filed pursuant to clause (i) above, if such Registration
Statement has not previously been declared effective (or, if Form SB-2 is not
then available to the Company, on such form of registration statement as is
then available to effect a registration for resale of such additional shares of
Common Stock (the “Additional Shares”), subject to the Required Investors’
consent) covering the resale of the Additional Shares, but only to the extent
the Additional Shares are not at the time covered by an effective Registration
Statement.  Such Registration Statement
may also include Additional Shares issuable to the Existing Holders and the
Other Investors pursuant to a change in the warrant price applicable to
warrants purchased by them in the offering as contemplated by Section 6(i)
of the Purchase Agreement. Such Registration Statement also shall cover, to the
extent allowable under the 1933 Act and the rules promulgated thereunder
(including Rule 416), such indeterminate number of additional shares of Common
Stock resulting from stock splits, stock dividends or similar transactions with
respect to the Additional Shares.  The
Company shall use its reasonable best efforts to obtain from each person who
now has piggyback registration rights a waiver of those rights with respect to
such Registration Statement, except with respect to the Additional Shares
issuable to the Existing Holders and the Other Investors.  The Registration Statement (and each amendment
or supplement thereto, and each request for acceleration of effectiveness
thereof) shall be provided in accordance with Section 3(c) to the
Investors and their counsel prior to its filing or other submission.  If a Registration Statement covering the
Additional Shares is required to be filed under this Section 2(a)(ii) and
is not filed with the SEC within five Business Days of the request of any
Investor or upon the occurrence of any of the events specified in this
Section 2(a)(ii), the Company will make pro rata payments to each Investor,
as liquidated damages and not as a penalty, in an amount equal to 1.5% of the
aggregate amount invested by such Investor for each 30-day period or pro rata
for any portion thereof following the date by which such Registration Statement
should have been filed for which no Registration Statement is filed with
respect to the Additional Shares.  Such
payments shall be in partial compensation to the Investors, and shall not
constitute the Investors’ exclusive remedy for such events.  Such payments shall be made to each Investor
in cash.


 


(iii)                               Promptly
following the date (the “Qualification Date”) upon which the Company becomes
eligible to use a registration statement on Form S-3 to register the
Registrable Securities or Additional Shares, as applicable, for resale, but in
no event more than


 


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ten (10) days after the Qualification Date (the “Qualification
Deadline”), the Company shall file a registration statement on Form S-3
covering the Registrable Securities or Additional Shares, as applicable (or a
post-effective amendment on Form S-3 to the registration statement on Form
SB-2) (a “Shelf Registration Statement”) and shall use commercially reasonable
efforts to cause such Shelf Registration Statement to be declared effective as
promptly as practicable thereafter.  If
a Shelf Registration Statement covering the Registrable Securities is not filed
with the SEC on or prior to the Qualification Deadline, the Company will make
pro rata payments to each Investor, as liquidated damages and not as a penalty,
in an amount equal to 1.5% of the aggregate amount invested by such Investor
for each 30-day period or pro rata for any portion thereof following the date
by which such Shelf Registration Statement should have been filed for which no
such Shelf Registration Statement is filed with respect to the Registrable
Securities or Additional Shares, as applicable.  Such payments shall be in partial compensation to the Investors,
and shall not constitute the Investors’ exclusive remedy for such events.  Such payments shall be made to each Investor
in cash.


 


(b)                                 Expenses.  The Company will pay all expenses associated
with each registration, including filing and printing fees, the Company’s
counsel and accounting fees and expenses, costs associated with clearing the
Registrable Securities for sale under applicable state securities laws, listing
fees, fees and expenses of one counsel to the Investors, subject to the overall $30,000 limit in the related
Purchase Agreement, and the Investors’ reasonable expenses in
connection with the registration, but excluding discounts, commissions, fees of
underwriters, selling brokers, dealer managers or similar securities industry
professionals with respect to the Registrable Securities being sold.


 


(c)                                  Effectiveness.


 


(i)                                     The
Company shall use commercially reasonable efforts to have the Registration
Statement, any post effective amendment thereto and any Shelf Registration
Statement declared effective as soon as practicable.  The Company shall notify the Investors by facsimile or e-mail as
promptly as practicable, and in any event, within twenty-four (24) hours, after
any Registration Statement or post effective amendment is declared effective
and shall simultaneously provide the Investors with copies of any related
Prospectus to be used in connection with the sale or other disposition of the
securities covered thereby.  If (A)(x) a
Registration Statement covering the Registrable Securities is not declared effective
by the SEC within ninety (90) days after the Closing Date (120 days if the SEC
reviews the Registration Statement) (the “Effectiveness Deadline”), or (y) a
Registration Statement covering Additional Shares is not declared effective by
the SEC within ninety (90) days following the time such Registration Statement
was required to be filed pursuant to Section 2(a)(ii) (120 days if the SEC
reviews the Registration Statement), or (z) a Shelf Registration Statement is
not declared effective by the SEC within 90 days after the Qualification Deadline
(120 days if the SEC reviews the Shelf Registration Statement), or (B) after a Registration Statement has been declared effective by the
SEC, sales cannot be made pursuant to such Registration Statement for any
reason (including without limitation by reason of a stop order, or the
Company’s failure to update the Registration Statement), but excluding the
inability of any Investor to sell the Registrable Securities covered thereby
due to market conditions, its demand and receipt of material, non-public
information pursuant to Section 4 herein, and except as excused pursuant
to subparagraph (ii) below, then the Company will make pro
rata payments to each Investor, as


 


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liquidated damages and not as a penalty, in
an amount equal to 1.5% of the aggregate amount invested by such Investor for
each 30-day period or pro rata for any portion thereof following the date by
which such Registration Statement should have been effective (the “Blackout
Period”).  Such payments shall be in
partial compensation to the Investors, and shall not constitute the Investors’
exclusive remedy for such events.  The
amounts payable as liquidated damages pursuant to this paragraph shall be paid
monthly within three (3) Business Days of the last day of each month following
the commencement of the Blackout Period until the termination of the Blackout
Period.  Such payments shall be made to
each Investor in cash.


 


(ii)                                  For
not more than twenty (20) consecutive days or for a total of not more than
forty-five (45) days in any twelve (12) month period, the Company may delay the
disclosure of material non-public information concerning the Company, by
suspending the use of any Prospectus included in any registration contemplated
by this Section containing such information, the disclosure of which at
the time is not, in the good faith opinion of the Company, in the best
interests of the Company (an “Allowed Delay”); provided, however, that so long
as the Registration Statement is on Form SB-2 or on any other form that does
not allow for incorporation by reference of reports and other materials filed
by the Company pursuant to Section 13(a) or 15(d) of the 1934 Act, the
Company may upon written notice to the Investors suspend sales under the Registration
Statement to the extent, but in any such case only to the extent, necessary to
allow any post-effective amendment to the Registration Statement or supplement
to the Prospectus to be prepared and filed with the SEC and, if necessary,
declared effective (and such suspension shall be deemed to be an Allowed Delay
without regard to the time periods mentioned above) for the period commencing
at the time that the Company disseminates a press release announcing its
preliminary financial results for any fiscal period or announcing a material
development and ending on the second Business Day after the earlier of (A) the
date that the related report on Form 10-KSB, 10-QSB or 8-K, as applicable, is
filed with the SEC and (B) the date on which such report is required to be
filed under the 1934 Act (without regard to Rule 12b-25 promulgated
thereunder); provided, further, that in the event the Company determines in
good faith, based on the advice of counsel, that the matters disclosed in such
press release require the filing of a post-effective amendment to the
Registration Statement, the Company shall file such post-effective amendment
promptly and in no event later than ten (10) Business Days after the date such
matters are first disclosed to the public and shall use commercially reasonable
efforts to have such post-effective amendment to the Registration Statement
declared effective as promptly as practicable and the period for which the
Company may suspend the use of the Registration Statement shall be extended to
the earliest to occur of (W) the date the post-effective amendment to the
Registration Statement is withdrawn by the Company, (X) the date such
post-effective amendment to the Registration Statement is declared effective by
the SEC, (Y) the second Business Day after the SEC has notified the Company
that either (I) it has elected not to review the post-effective amendment to
the Registration Statement or (II) it has no further comments on the
post-effective amendment to the Registration Statement or (Z) 45 days after the
initial filing of the post-effective amendment to the Registration Statement
with the SEC.


 


(iii) The Company shall promptly (a) notify the Investors in writing of
the existence of (but in no event, without the prior written consent of an
Investor, shall the Company disclose to such Investor any of the facts or
circumstances regarding) material non-public information giving rise to an
Allowed Delay, (b) advise the Investors in writing to cease all sales


 


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under the Registration Statement until the
end of the Allowed Delay and (c) use commercially reasonable efforts to
terminate an Allowed Delay as promptly as practicable.


 


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


 


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


 


(b)                                 prepare and file with
the SEC such amendments and post-effective amendments to the Registration
Statement and the Prospectus as may be necessary to keep the Registration
Statement effective for the period specified in Section 3(a);


 


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


 


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


 


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


 


(f)                                    prior to any public
offering of Registrable Securities, use commercially reasonable efforts to
register or qualify or cooperate with the Investors and counsel to the SSF
Investors in connection with the registration or qualification of such
Registrable Securities for offer and sale under the securities or blue sky laws
of such


 


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jurisdictions listed on
Schedule 3(f) hereto and do any and all other commercially reasonable acts
or things necessary or advisable to enable the distribution in such
jurisdictions of the Registrable Securities covered by the Registration
Statement; provided, however, that the Company shall not be required in connection
therewith or as a condition thereto to (i) qualify to do business in any
jurisdiction where it would not otherwise be required to qualify but for this
Section 3(f), (ii) subject itself to general taxation in any jurisdiction
where it would not otherwise be so subject but for this Section 3(f), or
(iii) file a general consent to service of process in any such jurisdiction;


 


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


 


(h)                                 promptly notify the
Investors, at any time when a Prospectus relating to Registrable Securities is
required to be delivered under the 1933 Act, upon discovery that, or upon the
happening of any event as a result of which, the Prospectus included in a
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated therein
or necessary to make the statements therein not misleading in light of the
circumstances then existing, and at the request of any such holder, promptly
prepare and furnish to such holder a reasonable number of copies of a
supplement to or an amendment of such Prospectus as may be necessary so that,
as thereafter delivered to the purchasers of such Registrable Securities, such
Prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then existing;
and


 


(i)                                     otherwise use
commercially reasonable efforts to comply with all applicable rules and
regulations of the SEC under the 1933 Act and the 1934 Act, take such other
actions as may be reasonably necessary to facilitate the registration of the
Registrable Securities hereunder; and make available to its security holders,
as soon as reasonably practicable, but not later than the Availability Date (as
defined below), an earnings statement covering a period of at least twelve (12)
months, beginning after the effective date of each Registration Statement,
which earnings statement shall satisfy the provisions of Section 11(a) of
the 1933 Act, including Rule 158 promulgated thereunder (for the purpose of
this subsection 3(i), “Availability Date” means the 45th day following the
end of the fourth fiscal quarter that includes the effective date of such
Registration Statement, except that, if such fourth fiscal quarter is the last
quarter of the Company’s fiscal year, “Availability Date” means the 90th day
after the end of such fourth fiscal quarter).


 


(j)                                     With
a view to making available to the Investors the benefits of Rule 144 (or its
successor rule) and any other rule or regulation of the SEC that may at any
time permit the Investors to sell shares of Common Stock to the public without
registration, the Company covenants and agrees to:  (i) make and keep public information available, as those terms
are understood and defined in Rule 144, until the earlier of (A) six months
after such date as all of the Registrable Securities may be resold pursuant to
Rule 144(k) or any other rule of similar effect or (B) such date as all of the
Registrable Securities shall have been resold; (ii) file with the SEC in a
timely manner all reports and other documents required of the Company under


 


7

















 


the 1934 Act; and (iii) furnish to each Investor upon request, as long
as such Investor owns any Registrable Securities, (A) a written statement by
the Company that it has complied with the reporting requirements of the 1934
Act, (B) a copy of the Company’s most recent Annual Report on Form 10-KSB or
Quarterly Report on Form 10-QSB, and (C) such other information as may be
reasonably requested in order to avail such Investor of any rule or regulation
of the SEC that permits the selling of any such Registrable Securities without
registration.


 


4.   Due Diligence Review; Information.  The Company shall make available, during
normal business hours, for inspection and review by the SSF Investors, advisors
to and representatives of the SSF Investors (who may or may not be affiliated
with the Investors and who are reasonably acceptable to the Company), all
financial and other records, all SEC Filings (as defined in the Purchase
Agreement) and other filings with the SEC, and all other corporate documents
and properties of the Company as may be reasonably necessary for the purpose of
such review, and cause the Company’s officers, directors and employees, within
a reasonable time period, to supply all such information reasonably requested
by the SSF Investors or any such representative, advisor or underwriter in
connection with such Registration Statement (including, without limitation, in
response to all questions and other inquiries reasonably made or submitted by
any of them), prior to and from time to time after the filing and effectiveness
of the Registration Statement for the sole purpose of enabling the SSF
Investors and such representatives, advisors and underwriters and their
respective accountants and attorneys to conduct initial and ongoing due
diligence with respect to the Company and the accuracy of such Registration
Statement.


 


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


 


5.   Obligations of the Investors.


 


(a)                                  Each Investor shall
furnish to the Company upon request a completed Questionnaire in the form
attached to this Agreement as Exhibit B (a “Selling Holder
Questionnaire”).  The Company shall
advise the Investors in writing of the proposed first anticipated filing date
of any Registration Statement (the “Filing Date”) at least four (4) Business
Days prior to such Filing Date which notice shall request that the Investors
complete and return the Selling Holder Questionnaires not later than one (1)
Business Day prior to the Filing Date (the “Information Deadline Date”).  Notwithstanding any provision herein to the
contrary, the Company shall not be required to include the Registrable
Securities of an Investor in a Registration Statement if such Investor fails to
furnish to the Company a fully completed Selling Holder Questionnaire in
writing to the Company on or prior to the close of business on the Information
Deadline Date and shall not be required to pay any liquidated or other damages
under Section 2 hereof to any such Investor resulting solely from the
failure of such Investor to provide a completed Selling Holder Questionnaire to
the Company on or prior to the Information Deadline Date.


 


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


 


(c)                                  Each Investor agrees
that, upon receipt of any notice from the Company of either (i) the
commencement of an Allowed Delay pursuant to Section 2(c)(ii) or (ii) the
happening of an event pursuant to Section 3(h) hereof, such Investor will
immediately discontinue disposition of Registrable Securities pursuant to the
Registration Statement covering such Registrable Securities, until the
Investor’s receipt of the copies of the supplemented or amended prospectus filed
with the SEC and until any related post-effective amendment is declared
effective and, if so directed by the Company, the Investor shall deliver to the
Company (at the expense of the Company) or destroy (and deliver to the Company
a certificate of destruction) all copies in the Investor’s possession of the
Prospectus covering the Registrable Securities current at the time of receipt
of such notice.


 


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


 


(e)                                  Each Investor agrees
that in effecting sales or other dispositions of Registrable Securities, it
will comply with all applicable requirements of the 1933 Act, including any
prospectus delivery requirement applicable to such sales or dispositions.


 


6.   Indemnification.


 


(a)                                  Indemnification by
the Company.  The Company will
indemnify and hold harmless each Investor and its officers, directors, members,
employees and agents, successors and assigns, and each other person, if any,
who controls such Investor within the meaning of the 1933 Act, against any
losses, claims, damages or liabilities, joint or several, to which they may
become subject under the 1933 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon: (i) any untrue statement or alleged untrue statement of any
material fact contained in any Registration Statement, any preliminary
prospectus or final prospectus contained therein, or any amendment or
supplement thereof; (ii) any blue sky application or other document executed by
the Company specifically for that purpose or based upon written information
furnished by the Company filed in any state or other jurisdiction in order to
qualify any or all of the Registrable Securities under the securities laws
thereof (any such application, document or information herein called a “Blue
Sky Application”); (iii) the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading; (iv) any violation by the Company or its agents of any
rule or regulation promulgated under the 1933 Act applicable to the Company or
its agents and relating to action or inaction required of the Company in
connection with such registration; or (v) any failure to register or qualify
the Registrable Securities included in any such Registration in any state where
the Company or its


 


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agents has affirmatively
undertaken or agreed in writing that the Company will undertake such
registration or qualification on an Investor’s behalf and will reimburse such
Investor, and each such officer, director or member and each such controlling
person for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company will not
be liable in any such case if and to the extent that any such loss, claim,
damage or liability arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission (i) so made in
conformity with information furnished by such Investor or any such controlling
person in writing specifically for use in such Registration Statement or
Prospectus or (ii) in any Prospectus that is corrected in any subsequent
Prospectus that was delivered to such Investor a reasonable period of time
before the pertinent sale or sales by such Investor; Provided further,
that in no event shall the liability of the Company exceed the greater of the
Purchase Price (as defined in the Purchase Agreement) or the fair market value
of the Securities (as defined in the Purchase Agreement) then held by such
Investor at the time of such loss, claim, damage or liability.


 


(b)                                 Indemnification by
the Investors.  Each Investor
agrees, severally but not jointly, to indemnify and hold harmless, to the
fullest extent permitted by law, the Company, its directors, officers,
employees, stockholders and each person who controls the Company (within the
meaning of the 1933 Act) against any losses, claims, damages, liabilities and
expense (including reasonable attorney fees) resulting from (i) any untrue
statement of a material fact or any omission of a material fact required to be
stated in the Registration Statement or Prospectus or preliminary prospectus or
amendment or supplement thereto or necessary to make the statements therein not
misleading, to the extent, but only to the extent that such untrue statement or
omission is contained in any information furnished in writing by such Investor
to the Company specifically for inclusion in such Registration Statement or
Prospectus or amendment or supplement thereto or (ii) any failure of such
Investor to comply with the covenants and agreements contained in this
Agreement respecting resale of the Registrable Securities and such Investor
will reimburse the Company, each of its directors, officers, agents and
employees, and any controlling persons for any reasonable legal and other
expense incurred by the Company, its directors, officers, agents and employees,
and any controlling persons, in connection with investigating, defending,
settling, compromising or paying any such loss, claim, damage, liability,
expense or action.  In no event shall
the liability of an Investor be greater in amount than the dollar amount of the
proceeds (net of all expense paid by such Investor in connection with any claim
relating to this Section 6 and the amount of any damages such Investor has
otherwise been required to pay by reason of such untrue statement or omission)
received by such Investor upon the sale of the Registrable Securities included
in the Registration Statement giving rise to such indemnification obligation.


 


(c)                                  Conduct of
Indemnification Proceedings.  Any
person entitled to indemnification hereunder shall (i) give prompt notice to
the indemnifying party of any claim with respect to which it seeks
indemnification and (ii) permit such indemnifying party to assume the defense
of such claim with counsel reasonably satisfactory to the indemnified party; provided
that any person entitled to indemnification hereunder shall have the right to
employ separate counsel and to participate in the defense of such claim, but
the fees and expenses of such counsel shall be at the expense of such person
unless (a) the indemnifying party has agreed to pay such fees or expenses, or
(b) the indemnifying party shall have failed to assume the


 


10

















 


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


 


(d)                                 Contribution.  If for any reason the indemnification
provided for in the preceding paragraphs (a) and (b) is unavailable to an
indemnified party or insufficient to hold it harmless, other than as expressly
specified therein, then the indemnifying party shall contribute to the amount
paid or payable by the indemnified party as a result of such loss, claim,
damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnified party and the indemnifying party, as well as
any other relevant equitable considerations. 
No person guilty of fraudulent misrepresentation within the meaning of
Section 11(f) of the 1933 Act shall be entitled to contribution from any
person not guilty of such fraudulent misrepresentation.  In no event shall the contribution
obligation of a holder of Registrable Securities be greater in amount than the
dollar amount of the proceeds (net of all expenses paid by such holder in
connection with any claim relating to this Section 6 and the amount of any
damages such holder has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission) received by it
upon the sale of the Registrable Securities giving rise to such contribution
obligation.


 


7.   Miscellaneous.


 


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


 


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


 


(c)                                  Assignments and
Transfers by Investors.  The
provisions of this Agreement shall be binding upon and inure to the benefit of
the Investors and their respective successors and assigns.  An Investor may transfer or assign, in whole
or from time to time in part, to one or more persons its rights hereunder in
connection with the transfer of Registrable


 


11

















 


Securities by such Investor to
such person, provided that such Investor complies with all laws applicable
thereto and provides written notice of assignment to the Company promptly after
such assignment is effected.


 


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


 


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


 


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


 


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


 


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


 


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


 


(j)                                     Entire
Agreement.  This Agreement is
intended by the parties as a final expression of their agreement and intended
to be a complete and exclusive statement of the agreement and understanding of
the parties hereto in respect of the subject matter contained


 


12

















 


herein.  This Agreement supersedes all prior
agreements and understandings between the parties with respect to such subject
matter.


 


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


 


13

















 


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


 


	
  The Company:

  	
  PRIMAL SOLUTIONS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Joseph R. Simrell

  
	
   

  	
  Title:

  	
   President and Chief Executive Officer

  
					



 


14

















 


[INVESTORS’ SIGNATURE PAGE]


 


15

















 


Exhibit A


 


Plan of Distribution


 


The selling stockholders, which as used herein includes donees,
pledgees, transferees or other successors-in-interest selling shares of common
stock or interests in shares of common stock received after the date of this
prospectus from a selling stockholder as a gift, pledge, partnership
distribution or other transfer, may, from time to time, sell, transfer or otherwise
dispose of any or all of their shares of common stock or interests in shares of
common stock on any stock exchange, market or trading facility on which the
shares are traded or in private transactions. 
These dispositions may be at fixed prices, at prevailing market prices
at the time of sale, at prices related to the prevailing market price, at
varying prices determined at the time of sale, or at negotiated prices.


 


The selling stockholders may use any one or more of the following
methods when disposing of shares or interests therein:


 


• ordinary
brokerage transactions and transactions in which the broker-dealer solicits
purchasers;


 


• block
trades in which the broker-dealer will attempt to sell the shares as agent, but
may position and resell a portion of the block as principal to facilitate the
transaction;


 


• purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;


 


• an
exchange distribution in accordance with the rules of the applicable exchange;


 


• privately
negotiated transactions;


 


• short
sales effected after the date of this Prospectus;


 


• through
the writing or settlement of options or other hedging transactions, whether
through an options exchange or otherwise;


 


• broker-dealers
may agree with the selling stockholders to sell a specified number of such
shares at a stipulated price per share;


 


• a
combination of any such methods of sale; and


 


• any
other method permitted pursuant to applicable law.


 


The selling stockholders may, from time to time, pledge or grant a
security interest in some or all of the shares of common stock owned by them
and, if they default in the performance of their secured obligations, the
pledgees or secured parties may offer and sell the shares of common stock, from
time to time, under this prospectus, or under an amendment to this prospectus
under Rule 424(b)(3) or other applicable provision of the Securities Act
amending the


 

















 


list of selling stockholders to include the pledgee, transferee or
other successors in interest as selling stockholders under this
prospectus.  The selling stockholders
also may transfer the shares of common stock in other circumstances, in which
case the transferees, pledgees or other successors in interest will be the
selling beneficial owners for purposes of this prospectus.


 


In connection with the sale of our common stock or interests therein,
the selling stockholders may enter into hedging transactions with
broker-dealers or other financial institutions, which may in turn engage in
short sales of the common stock in the course of hedging the positions they
assume.  The selling stockholders may
also sell shares of our common stock short and deliver these securities to
close out their short positions, or loan or pledge the common stock to
broker-dealers that in turn may sell these securities.  The selling stockholders may also enter into
option or other transactions with broker-dealers or other financial
institutions or the creation of one or more derivative securities which require
the delivery to such broker-dealer or other financial institution of shares
offered by this prospectus, which shares such broker-dealer or other financial
institution may resell pursuant to this prospectus (as supplemented or amended
to reflect such transaction).


 


The
aggregate proceeds to the selling stockholders from the sale of the common
stock offered by them will be the purchase price of the common stock less
discounts or commissions, if any.  Each
of the selling stockholders reserves the right to accept and, together with their
agents from time to time, to reject, in whole or in part, any proposed purchase
of common stock to be made directly or through agents.  We will not receive any of the proceeds from
this offering. Upon any exercise of the warrants by payment of cash, however,
we will receive the exercise price of the warrants.


 


The selling stockholders also may resell all or a portion of the shares
in open market transactions in reliance upon Rule 144 under the Securities Act
of 1933, provided that they meet the criteria and conform to the requirements
of that rule.


 


The selling stockholders and any underwriters, broker-dealers or
agents that participate in the sale of the common stock or interests therein
may be “underwriters” within the meaning of Section 2(11) of the Securities
Act.  Any discounts, commissions,
concessions or profit they earn on any resale of the shares may be underwriting
discounts and commissions under the Securities Act.  Selling stockholders who are “underwriters” within the meaning of
Section 2(11) of the Securities Act will be subject to the prospectus
delivery requirements of the Securities Act.


 


To the extent required, the shares of our common stock to be sold, the
names of the selling stockholders, the respective purchase prices and public
offering prices, the names of any agents, dealer or underwriter, any applicable
commissions or discounts with respect to a particular offer will be set forth
in an accompanying prospectus supplement or, if appropriate, a post-effective
amendment to the registration statement that includes this prospectus.


 


In
order to comply with the securities laws of some states, if applicable, the
common stock may be sold in these jurisdictions only through registered or
licensed brokers or dealers.  In
addition, in some states the common stock may not be sold unless it has been
registered or


 


17

















 


qualified
for sale or an exemption from registration or qualification requirements is
available and is complied with.


 


We
have advised the selling stockholders that the anti-manipulation rules of
Regulation M under the Exchange Act may apply to sales of shares in the market
and to the activities of the selling stockholders and their affiliates.  In addition, we will make copies of this
prospectus (as it may be supplemented or amended from time to time) available
to the selling stockholders for the purpose of satisfying the prospectus
delivery requirements of the Securities Act. 
The selling stockholders may indemnify any broker-dealer that
participates in transactions involving the sale of the shares against certain
liabilities, including liabilities arising under the Securities Act.


 


We
have agreed to indemnify the selling stockholders against liabilities,
including liabilities under the Securities Act and state securities laws,
relating to the registration of the shares offered by this prospectus.


 


We
have agreed with the selling stockholders to keep the registration statement of
which this prospectus constitutes a part effective until the earlier of (1)
such time as all of the shares covered by this prospectus have been disposed of
pursuant to and in accordance with the registration statement or (2) the date
on which the shares may be sold pursuant to Rule 144(k) of the Securities Act.


 


Each selling stockholder has represented and warranted to us that, at
the time it acquired the securities subject to the registration statement, it
did not have any agreement or understanding, directly or indirectly, with any
person to distribute any of such securities. 
We have advised each selling stockholder that it may not use shares
registered on the registration statement to cover short sales of our common
stock made prior to the date on which the registration statement was declared
effective by the Securities and Exchange Commission.


 


18

















 


Exhibit B


 


[Form of Questionnaire]


 


19

















 


Schedule 3(f)


 


Blue Sky Jurisdictions


 


New York


New Jersey


Connecticut


Massachusetts


Pennsylvania


Texas


California


Nevada


 


20