Document:

Exhibit 10.22

 

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.

 

“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.

 

“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 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 other shares of Common Stock or other securities of
the Company.  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 Registration Statement (and each
amendment or supplement thereto) shall be provided in accordance with
Section 3(c) to the Investors prior to its filing or other submission.

 

(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 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”)) 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
other shares of Common Stock or other securities of the Company.  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

 

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additional shares of Common Stock resulting
from stock splits, stock dividends or similar transactions with respect to the
Additional Shares.  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 prior to its filing or other submission.

 

(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 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.

 

(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, and
listing fees, 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, upon request, shall 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.

 

(ii)                                  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,
further, 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) 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

 

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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 material non-public
information giving rise to an Allowed Delay, (b) advise the Investors in
writing to cease all sales 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 the Investors 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 (i) promptly after the same is prepared and publicly
distributed, filed with the SEC, or received by the Company one (1) copy of any
Registration Statement and any amendment thereto, each preliminary prospectus
and Prospectus and each amendment or supplement thereto (other than any portion
of any thereof which

 

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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)                                  use
commercially reasonable efforts to register or qualify or cooperate with the
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 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

 

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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 shall use commercially reasonable efforts 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; and (ii)
file with the SEC in a timely manner all reports and other documents required
of the Company under the 1934 Act.

 

4.               Reserved.

 

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.

 

(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

 

6

 

(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.

 

(f)                                  Each
Investor (i) acknowledges (A) its current status as an officer and/or director
of the Company, and (B) that it potentially may be classified as an “affiliate”
of or a person that may exert control over the Company, and (ii) agrees that
such status or classification may significantly reduce the Company’s ability to
register or qualify or cooperate with the Investors in connection with the
registration or qualification of such Registrable Securities for offer and sale
under the securities or blue sky laws under Section 3(f) herein.

 

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 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)

 

7

 

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 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

 

8

 

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 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

 

9

 

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 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

 

10

 

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.

 

11

 

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:

  	
  Chief Executive Officer

  and President

  	
   

  

 

 

[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE
PAGES FOR INVESTORS FOLLOW]

 

12

 

[INVESTOR’S SIGNATURE PAGE]

 

13

 

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

 

14

 

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 

 

15

 

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.

 

16

 

Exhibit B

 

[Form of Questionnaire]

 

17

 

Schedule 3(f)

 

Blue Sky Jurisdictions

 

New York

New Jersey

Connecticut

Massachusetts

Pennsylvania

Texas

California

Nevada

 

18Exhibit 10.23

 

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.

 

THIS WARRANT SHALL BE VOID
AFTER 5:00 P.M. EASTERN TIME ON JUNE 15, 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
             
(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 the amount of such
tax or has established to the Company’s reasonable satisfaction that such tax

 

2

 

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 to purchase and receive upon the basis and upon the
terms and conditions herein specified and in

 

3

 

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 be determined in good
faith by the Board of Directors of the Company and the Warrantholder.  If

 

4

 

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)                                    Reserved.

 

(g)                                 Reserved.

 

(h)                                 Reserved.

 

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.

 

Section 10.                                      Reserved.

 

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

 

5

 

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 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.

 

6

 

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
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 15, 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.

 

7

 

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 272,827 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.

 

8

 

IN WITNESS WHEREOF, the Company
has caused this Warrant to be duly executed, as of the 15th day of June, 2004.

 

	
   

  	
  PRIMAL SOLUTIONS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
  Joseph R.
  Simrell

  	
   

  
	
   

  	
  Title:

  	
  Chief
  Executive Officer and
President

  	
   

  

 

9

 

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

  	
  Signature:

  	
   

  	
   

  
	
  the name of the Warrantholder as written

  	
   

  
	
  on the first page of the Warrant in every

  	
   

  	
   

  	
   

  
	
  particular, without alteration or
  enlargement

  	
   

  	
  Name (please print)

  	
   

  
	
  or any change whatever, unless the Warrant

  	
   

  	
   

  	
   

  
	
  has been assigned.

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Address

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Federal Identification or

  	
   

  
	
   

  	
   

  	
  Social Security No.

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Assignee:

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