Document:

Exhibit 10.2

 

SSA
Global Technologies, Inc.

 

Management
Lock-Up Agreement

 

March 28, 2006

 

SSA Global Technologies, Inc.

500 W. Madison

Suite 1600

Chicago, Illinois 60661

 

Re:  SSA Global Technologies, Inc. —
Management Lock-Up Agreement

 

Dear Sirs:

 

The
undersigned agrees that, commencing on the date of this letter (the “Effective
Date”), and during the period specified below (the “Lock-Up Period”), the
undersigned will not offer, sell, contract to sell, pledge, grant any option to
purchase, make any short sale or otherwise dispose of any shares of Common
Stock of the Company, owned directly by the undersigned (including holding as a
custodian) or with respect to which the undersigned has beneficial ownership
within the rules and regulations of the SEC (collectively the “Undersigned’s
Shares”). This Lock-Up Agreement shall not apply to any shares of Common Stock
of the Company acquired by the undersigned on the open market after the
Effective Date.

 

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

 

The Lock-Up Period will
commence on the Effective Date and continue until May 26, 2008 (being the
third anniversary of the effective date of the Company’s initial public
offering) or until the earlier (i) death of the undersigned, (ii) termination
by the Company of the undersigned’s employment with the Company without Cause
(as defined below) or on account of the undersigned’s Disability (as defined
below), or (iii) termination by the undersigned of his or her employment
with the Company for Good Reason (as defined below). To the extent that, during
the Lock-Up Period, Cerberus Capital Management, L.P., General Altantic
Partners LLC or any of their respective affiliates (each a “Shareholder”) sells
shares of Common Stock of the Company either as a result of the release of the
Shareholder from any lock-up agreement entered into with J.P. Morgan Securities
Inc. and Citigroup Global Markets Inc. as the representatives of the
underwriters in connection with the offering contemplated in the Registration
Statement or following the expiration thereof, then the undersigned shall be
permitted to sell a number of shares that is equal to (a) the number of
its shares subject to this Lock-Up Agreement on the Effective Date multiplied
by (b) a fraction, of which the numerator is the number of shares
of Common Stock to be sold by the Shareholder and the denominator is the total
number of shares held by all of the Shareholders on the Effective Date. In
addition, the undersigned shall be permitted to sell that number of shares as may be
approved by the Compensation Committee of the

 

 

Board of Directors of the
Company from time to time. The remaining of the Undersigned’s Shares shall
continue to be subject to the terms and conditions set forth herein.

 

Notwithstanding the
foregoing, the undersigned may transfer the Undersigned’s Shares (i) as
a bona fide gift or gifts, provided that
the donee or donees thereof agree to be bound in writing by the restrictions
set forth herein, or (ii) to any trust for the direct or indirect benefit
of the undersigned or the immediate family of the undersigned, provided that
the trustee of the trust agrees to be bound in writing by the restrictions set
forth herein, and provided further that any such transfer shall not involve a
disposition for value. For purposes of this Lock-Up Agreement, “immediate
family” shall mean any relationship by blood, marriage or adoption, not more
remote than first cousin. The undersigned now has, and, except as contemplated
by clauses (i) and (ii) above, for the duration of this Lock-Up
Agreement will have, good and marketable title to the Undersigned’s Shares,
free and clear of all liens, encumbrances, and claims whatsoever. The
undersigned also agrees and consents to the entry of stop transfer instructions
with the Company’s transfer agent and registrar against the transfer of the
Undersigned’s Shares except in compliance with the foregoing restrictions.

 

For purposes of this
Lock-Up Agreement, the following terms have the meanings set forth below:

 

“Cause” means any
of the following reasons: (i) embezzlement, dishonesty, or fraud; (ii) conviction
(or plea of nolo contendere) for a felony or conviction (or plea of nolo
contendere) of any crime involving moral turpitude or that impairs undersigned’s
ability to perform his duties; (iii) improper and material disclosure
or use of the Company’s or any of its subsidiary’s confidential or proprietary
information; or (iv) the undersigned’s willful failure or refusal to
follow the lawful and good faith direction of the Company or any subsidiary
thereof to perform his material duties which, if curable, remains uncured
following thirty (30) days’ written notice to the undersigned from the Company
or any subsidiary thereof describing such failure or refusal.

 

“Disability” means
a determination by the Company in accordance with applicable law that, as a
result of a physical or mental illness, the undersigned is unable and has been
unable to perform the essential functions of his or her job with or
without reasonable accommodation for a period of (i) 90 consecutive days
or (ii) 180 days in any one (1) year period.

 

“Good Reason”
means a decrease in undersigned’s base salary (not consented to in advance by
undersigned or ratified subsequently by undersigned) or a Change of Control (as
defined below).

 

“Change of Control”
means (i) the approval by the shareholders of the Company of a plan of
complete liquidation or dissolution of the Company, (ii) the consummation
of a sale of all or substantially all of the assets of the Company; (iii) the
consummation of any transaction as a result of which any individual or entity
(other than Cerberus Capital Management, L.P., General Atlantic Partners 76,
L.P. or any of their related entities or affiliates) becomes the “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing more than fifty percent (50%)
of the total voting power of all voting securities of the Company then issued
and outstanding; or (iv) the consummation of a merger, consolidation,
reorganization, or business combination, other than a merger, consolidation,
reorganization or business combination which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than fifty percent (50%) of the
combined voting securities of

 

 

the Company or the
surviving entity immediately after such merger, consolidation, reorganization
of business combination.

 

The undersigned
understands and agrees that this Lock-Up Agreement is irrevocable and shall be
binding upon the undersigned’s heirs, legal representatives, successors, and
assigns.

 

The undersigned has
received a copy of the Company’s Statement of Policy: Securities Trades by SSA
Global Employees, and the undersigned agrees to be bound by, and to comply
with, the foregoing policy, as it may be amended from time to time.

 

This Lock-Up Agreement may be
executed in two counterparts, each of which shall be deemed an original but
both of which shall be considered one and the same instrument.

 

This Lock-Up Agreement
will be governed by and construed in accordance with the laws of the State of
New York, without giving effect to any choice of law or conflicting provision
or rule (whether of the State of New York or any other jurisdiction) that
would cause the laws of any jurisdiction other than the State of New York to be
applied. In furtherance of the foregoing, the internal laws of the State of New
York will control the interpretation and construction of this Lock-Up
Agreement, even if under such jurisdiction’s choice of law or conflict of law
analysis, the substantive law of some other jurisdiction would ordinarily
apply.

 

 

	
   

  	
  Very truly yours,

  
	
   

  	
   

  
	
   

  	
  /s/ Kirk J. Isaacson

  	
   

  
	
   

  	
  Exact Name of
  Shareholder

  
	
   

  	
   

  
	
   

  	
  /s/ Kirk J. Isaacson

  	
   

  
	
   

  	
  Authorized Signature

  
	
   

  	
   

  
	
   

  	
  Executive Vice
  President & General Counsel

  	
   

  
	
   

  	
  Title

  
	
   

  	
   

  
	
   

  	
   

  
	
  Agreed to and
  Acknowledged:

  	
   

  
	
   

  	
   

  
	
  SSA Global Technologies, Inc.

  	
   

  
	
   

  	
   

  
	
  By: 

  	
  /s/ Stephen P. Earhart

  	
   

  	
   

  
	
   

  	
  Name: Stephen P.
  Earhart

  	
   

  
	
   

  	
  Title: Executive Vice President

  & Chief Financial OfficerExhibit 4.1

 

THE
SECURITIES REPRESENTED HEREBY MAY NOT BE TRANSFERRED UNLESS (I) SUCH
SECURITIES HAVE BEEN REGISTERED FOR SALE PURSUANT TO THE SECURITIES ACT OF
1933, AS AMENDED, (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.

 

 

5% SENIOR SECURED CONVERTIBLE NOTE

 

 

	
  $                             

  	
  March 31, 2006

  

 

FOR VALUE RECEIVED,
Primal Solutions, Inc., a Delaware corporation (the “Company”), and
Wireless Billing Systems, a California corporation (“WBS”) hereby
jointly and severally unconditionally promise to pay to the order of                         
(the “Holder”), having an address at 527 Madison Avenue, 26th
Floor, New York, NY 10022, at such address or at such other place as may be
designated in writing by the Holder, or its assigns, the aggregate principal sum
of                           
United States Dollars ($                            ),
together with interest from the date set forth above on the unpaid principal
balance of this Note outstanding at a rate equal to five percent (5.0%)
(computed on the basis of the actual number of days elapsed in a 360-day year)
per annum and continuing on the outstanding principal until this 5% Senior
Secured Convertible Note (the “Note”) is converted into Common Stock as
provided herein or indefeasibly and irrevocably paid in full by the Company
and/or WBS. Interest on this Note shall accrue semi-annually and shall be
payable semi-annually on the last day of June and December of each
year (each, an “Interest Payment Date”), commencing on June 30,
2006, to the Holder of record on the immediately preceding June 15 or December 15,
as applicable (each, an “Interest Record Date”). Subject to the other
provisions of this Note, the principal of this Note and all accrued and unpaid
interest hereon shall mature and become due and payable on March 31, 2008
(the “Stated Maturity Date”). Except as provided herein, all payments of
principal and interest by the Company under this Note shall be made in United
States dollars in immediately available funds to an account specified by the Holder.

 

In the event that any
amount due hereunder is not paid when due, such overdue amount shall bear
interest at an annual rate of twelve percent (12%) until paid in full. In no
event shall any interest charged, collected or reserved under this Note exceed
the maximum rate then permitted by applicable law and if any such payment is
paid by the Company, then such excess sum shall be credited by the Holder as a
payment of principal.

 

This Note is one of a series of
Notes (the “Company Notes”) of like tenor in an aggregate principal
amount of One Million Five Hundred Thousand United States Dollars ($1,500,000)
issued by the Company and WBS pursuant to the terms of the Purchase Agreement
(as defined below).

 

 

1.                                       Definitions. Capitalized terms used herein shall have
the respective meanings ascribed thereto in the Purchase Agreement unless
otherwise defined herein. Unless the context otherwise requires, when used
herein the following terms shall have the meaning indicated:

 

“Additional Rights”
has the meaning set forth in Section 4 hereof.

 

“Affiliate” shall
mean, with respect to any Person, any other Person which directly or indirectly
through one or more intermediaries Controls, is controlled by, or is under
common control with, such Person.

 

“Board” shall mean the Board of Directors of Company.

 

“Business 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 Common Stock, par value
$0.01 per share, of the Company or any securities into which shares of
Common Stock may be reclassified after the date hereof.

 

“Company” has the meaning set forth in the first
paragraph hereof.

 

“Company Notes” has the meaning set forth in the third
paragraph hereof.

 

“Control” (including
the terms “controlling”, “controlled by” or “under common control with”) means
the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of a Person, whether through the
ownership of voting securities, by contract or otherwise.

 

“Conversion Price”
shall mean initially $0.10 per share, subject to adjustment as provided in Section 4.

 

“Convertible
Securities” has the meaning set forth in Section 4 hereof.

 

“Event of Default” has the meaning set forth in
Section 6 hereof.

 

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

 

“Excluded Issuances” has the meaning set forth
in Section 4(j) hereof.

 

“First Regional”  means First Regional Bank, a California
banking corporation, its successors and assigns.

 

“First Regional Note”
means the Change in Terms Agreement among the Company, its Subsidiary and First
Regional, dated February 14, 2006 (amending and restating the Promissory
Note, dated February 14, 2005, in the original principal amount of
$100,000.

 

“Hedging Agreement”
means any interest rate swap, collar, cap, floor or forward rate agreement or
other agreement regarding the hedging of interest rate risk exposure executed
in connection with hedging the interest rate exposure of any Person and any
confirming letter executed pursuant to such agreement, all as amended,
supplemented, restated or otherwise modified from time to time.

 

“Holder” has the meaning set forth in the first
paragraph hereof.

 

“Indebtedness” means any liability or obligation (i) for
borrowed money, other than trade payables incurred in the ordinary course of
business, (ii) evidenced by bonds,

 

2

 

debentures,
notes, or other similar instruments, (iii) in respect of letters of credit
or other similar instruments (or reimbursement obligations with respect
thereto), except letters of credit or other similar instruments issued to
secure payment of trade payables or obligations in respect of workers’
compensation, unemployment insurance and other social security laws or
regulation, all arising in the ordinary course of business consistent with past
practices, (iv) to pay the deferred purchase price of property or
services, except trade payables arising in the ordinary course of business
consistent with past practices, (v) as lessee under capitalized leases, (vi) secured
by a Lien on any asset of the Company or a Subsidiary, whether or not such
obligation is assumed by the Company or such Subsidiary.

 

“Interest Payment Date” has the meaning set forth in
the first paragraph hereof.

 

“Interest Record Date” has the meaning set forth in
the first paragraph hereof.

 

“Investment”
means, for any Person: (a) the acquisition (whether for cash, property,
services or securities or otherwise) of capital stock, bonds, notes,
debentures, partnership or other ownership interests or other securities of any
other Person or any agreement to make any such acquisition (including, without
limitation, any “short sale” or any sale of any securities at a time when such
securities are not owned by the Person entering into such sale); (b) the
making of any deposit with, or advance, loan or other extension of credit to,
any other Person (including the purchase of property from another Person
subject to an understanding or agreement, contingent or otherwise, to resell
such property to such Person), but excluding any such advance, loan or
extension of credit having a term not exceeding 90 days arising in connection
with the sale of inventory or supplies by such Person in the ordinary course of
business; (c) the entering into of any guarantee of, or other contingent
obligation with respect to, Indebtedness or other liability of any other Person
and (without duplication) any amount committed to be advanced, lent or extended
to such Person; or (d) the entering into of any Hedging Agreement.

 

“Investors” has
the meaning set forth in the Purchase Agreement.

 

“Lien” means any
lien, mortgage, deed of trust, pledge, security interest, charge or encumbrance
of any kind (including any conditional sale or other title retention agreement,
any lease in the nature thereof and any agreement to give any of the
foregoing).

 

“Lightbridge”
means Lightbridge, Inc., its successors and assigns.

 

“Lightbridge Note”
means WBS’s 2006 Amended and Restated Secured Promissory Note, dated March 31,
2006, in the original principal amount of $982,243.40.

 

“Majority Holders”
has the meaning set forth in Section 8 hereof.

 

“Market Price”, as
of a particular date (the “Valuation Date”), shall mean the following
with respect to any class of securities: (A) if such security is then
listed on a national stock exchange, the Market Price shall be the closing bid
price of one share of such security on such exchange on the last Trading Day
prior to the Valuation Date, provided that if such security has not traded in
the prior ten (10) trading sessions, the Market Price shall be the average
closing bid price of such security in the most recent ten (10) trading
sessions during which such security has traded; (B) if such security is
then included in The Nasdaq Stock Market, Inc., including the Nasdaq
Capital Market (“Nasdaq”), the Market Price shall be the closing bid
price of one share of such security on Nasdaq 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 ask price quoted on

 

3

 

Nasdaq as of the end of the last Trading Day prior to
the Valuation Date, provided that if such security has not traded in the prior
ten (10) trading sessions, the Market Price shall be the average closing
price of one share of such security in the most recent ten (10) trading
sessions during which such security has traded; (C) if such security is
then included in the Over-the-Counter Bulletin Board, the Market Price shall be
the closing sale price of one share of such security on the Over-the-Counter
Bulletin Board 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
ask price quoted on the Over-the-Counter Bulletin Board as of the end of the
last Trading Day prior to the Valuation Date, provided that if such stock has
not traded in the prior ten (10) trading sessions, the Market Price shall
be the average closing price of one share of such security in the most recent
ten (10) trading sessions during which such security has traded; or (D) if
such security is then included in the “pink sheets,” the Market Price shall be
the closing sale price of one share of such security on the “pink sheets” 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 ask price quoted on
the “pink sheets” as of the end of the last Trading Day prior to the Valuation
Date, provided that if such stock has not traded in the prior ten (10) trading
sessions, the Market Price shall be the average closing price of one share of
such security in the most recent ten (10) trading sessions during which
such security has traded.

 

“Note” has the meaning set forth in the first
paragraph hereof.

 

“Options” has the meaning set forth in Section 4
hereof.

 

“Permitted Indebtedness” means:

 

(a)                                  Indebtedness existing on the Closing
Date and refinancings, renewals and extensions of any such Indebtedness if (i) the
average life to maturity thereof is greater than or equal to that of the
Indebtedness being refinanced or extended (ii) if the principal amount
thereof or interest payable thereon is not increased, (iii) no additional
Liens are granted and (iv) the terms thereof are not less favorable to the
Company or the Subsidiary incurring such Indebtedness than the Indebtedness
being refinanced, renewed or extended;

 

(b)                                 Guaranties by any Subsidiary of
any “Permitted Indebtedness” of the Company or another Subsidiary;

 

(c)                                  Indebtedness
representing the deferred purchase price of property and capital lease obligations which
collectively does not exceed $1,500,000 in aggregate principal amount; and

 

(d)                                 Indebtedness of the Company to
any wholly owned Subsidiary and Indebtedness of any wholly owned Subsidiary to
the Company or another wholly owned Subsidiary which constitutes “Permitted
Indebtedness.”

 

“Permitted
Investments” means:

 

(a)                                   direct
obligations of the United States of America, or of any agency thereof, or
obligations guaranteed as to principal and interest by the United States of
America, or of any agency thereof, in either case maturing not more than 90
days from the date of acquisition thereof;

 

(b)                                  certificates
of deposit issued by any bank or trust company organized under the laws of the
United States of America or any State thereof and having capital, surplus and
undivided profits of at least $500,000,000, maturing not more than 90 days from
the date of acquisition thereof; and

 

4

 

(c)                                   commercial
paper rated A-1 or better or P-1 by Standard & Poor’s Ratings Services
or Moody’s Investors Services, Inc., respectively, maturing not more than
90 days from the date of acquisition thereof; in each case so long as the same
(x) provide for the payment of principal and interest (and not principal alone
or interest alone) and (y) are not subject to any contingency regarding the
payment of principal or interest.

 

“Permitted Liens” means:

 

(a)                                  restrictions on transfers of
securities imposed by applicable securities laws;

 

(b)                                 Liens on the property of a
Person existing at the time such Person became a Subsidiary or such property
was acquired from such Person in a transaction permitted hereunder securing
Indebtedness permitted hereby; provided, however, that any such Lien may not
extend to any other property (other than accessions to and proceeds thereof)
provided, further, that any such Lien was not created in anticipation of or in
connection with the transaction or series of transactions pursuant to
which such Person became a Subsidiary or such property was acquired from such
Person;

 

(c)                                  assignments of insurance or
condemnation proceeds provided to landlords (or their mortgagees) pursuant to
the terms of any lease and Liens or rights reserved in any lease for rent or
for compliance with the terms of such lease;

 

(d)                                 Liens imposed by law for taxes
that are not yet due or are being contested in good faith and for which
adequate reserves have been established on the Company’s books and records in
accordance with U.S. generally accepted accounting principles, consistently
applied;

 

(e)                                  carriers’, warehousemen’s,
mechanics’, materialmen’s, repairmen’s and other like Liens imposed by law,
arising in the ordinary course of business and securing obligations that are
not overdue by more than 30 days or that are being contested in good faith and
by appropriate proceedings;

 

(f)                                    pledges and deposits made in the
ordinary course of business in compliance with workers’ compensation,
unemployment insurance and other social security laws or regulations;

 

(g)                                 deposits to secure the
performance of bids, trade contracts, leases, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature, in each
case in the ordinary course of business;

 

(h)                                 easements, zoning restrictions,
rights-of-way and similar encumbrances on real property imposed by law or
arising in the ordinary course of business that do not secure any monetary
obligations and do not materially detract from the value of the affected
property or interfere with the ordinary conduct of business of the Company or
any of its Subsidiaries;

 

(i)                                     Liens granted to secure the
obligations of the Company or any Subsidiary under any Indebtedness permitted
under clause (c) of the definition of “Permitted Indebtedness” provided
the Lien is limited to the property acquired or so financed (and any accessions
thereto and proceeds thereof);

 

5

 

(j)                                     Liens granted to secure the
Lightbridge Note provided such Liens are subordinated to the Notes pursuant to
the terms of the Subordination Agreement; and

 

(k)                                  Liens granted to secure the First
Regional Note provided such Liens are limited to the Company’s right, title and
interest in the $100,000 savings account currently on deposit with First
Regional.

 

“Person” means an
individual, corporation, partnership, limited liability company, trust, business
trust, association, joint stock company, joint venture, sole proprietorship,
unincorporated organization, governmental authority or any other form of
entity not specifically listed herein.

 

“Purchase Agreement”
shall mean the Purchase Agreement, dated as of March     ,
2006, and as that agreement may be amended from time to time, by and among
the Company, WBS and the Investors.

 

“Registration Rights
Agreement” shall mean the Registration Rights Agreement, dated as of March     ,
2006, and as that agreement may be amended from time to time, by and among
the Company and the Investors.

 

“Restricted Payment”
has the meaning set forth
in Section 5(b)(iv) hereof.

 

“Security Agreement” has the meaning set forth in the
Purchase Agreement.

 

“Security Documents” means the collective reference to
(i) the Security Agreement and each other agreement or writing pursuant to
which the Company and/or WBS purports to pledge or grant a security interest in
any property or assets securing the Company’s and/or WBS’s obligations or any
such Person purports to guaranty the payment and/or performance of the Company’s
and/or WBS’s obligations and (ii) the Subordination Agreement, in each
case, as amended, restated, supplemented or otherwise modified from time to
time.

 

“Stated Maturity Date” has the meaning set forth in
the first paragraph hereof.

 

“Subordination Agreement” has the meaning set forth in
the Purchase Agreement.

 

“Subsidiary” of
any Person means another Person, an amount of the voting securities, other
voting ownership or voting partnership interests of which is sufficient to
elect at least a majority of its Board of Directors or other governing body
(or, if there are no such voting interests, 50% or more of the equity interests
of which) is owned directly or indirectly by such first Person.

 

“Trading Day”
means (i) if the relevant stock or security is listed or admitted for
trading on The New York Stock Exchange, Inc. or any other national
securities exchange, a day on which such exchange is open for business; (ii) if
the relevant stock or security is quoted on Nasdaq or any other system of
automated dissemination of quotations of securities prices, a day on which
trades may be effected through such system; or (iii) if the relevant
stock or security is not listed or admitted for trading on any national
securities exchange or quoted on Nasdaq or any other system of automated
dissemination of quotation of securities prices, a day on which the relevant
stock or security is traded in a regular way in the over-the-counter market and
for which a closing bid and a closing asked price for such stock or security
are available, shall mean a day, other than a Saturday or Sunday, on which The
New York Stock Exchange, Inc. is open for trading.

 

6

 

“Trigger Issuance”
has the meaning set forth in Section 4(i) hereof.

 

“WBS” has the meaning set forth in the first paragraph
hereof.

 

2.                                       Purchase Agreement. This Note is one of the several 5%
Senior Secured Convertible Notes of the Company and WBS issued pursuant to the
Purchase Agreement. This Note is subject to the terms and conditions of, and
entitled to the benefit of, the provisions of the Purchase Agreement. This Note
is transferable and assignable to any Person to whom such transfer is
permissible under the Purchase Agreement and applicable law. The Company and
WBS agree to issue from time to time a replacement Note in the form hereof
to facilitate such transfers and assignments. In addition, after delivery of an
indemnity in form and substance reasonably satisfactory to the Company,
the Company and WBS also agree to promptly issue a replacement Note if this
Note is lost, stolen, mutilated or destroyed.

 

3.                                       No Right of Prepayment or Redemption. This Note shall not be prepayable or
redeemable by the Company or WBS prior to the Stated Maturity Date.

 

4.                                       Conversion Rights.

 

(a)                                  Subject to and upon compliance with the
provisions of this Note, prior to the Stated Maturity Date, the Holder shall
have the right, at its option at any time, to convert some or all of the Note
into such number of fully paid and nonassessable shares of Common Stock as is
obtained by: (i) adding (A) the principal amount of this Note to be
converted and (B) the amount of any accrued but unpaid interest with
respect to such portion of this Note to be converted; and (ii) dividing
the result obtained pursuant to clause (i) above by the Conversion Price
then in effect. The rights of conversion set forth in this Section 4 shall
be exercised by the Holder by giving written notice to the Company that the
Holder elects to convert a stated amount of this Note into Common Stock and by
surrender of this Note (or, in lieu thereof, by delivery of an appropriate lost
security affidavit in the event this Note shall have been lost or destroyed) to
the Company at its principal office (or such other office or agency of the
Company as the Company may designate by notice in writing to the Holder)
at any time on the date set forth in such notice (which date shall not be
earlier than the Company’s receipt of such notice), together with a statement
of the name or names (with address) in which the certificate or certificates
for shares of Common Stock shall be issued.

 

(b)                                 Promptly after receipt of the written
notice referred to in Section 4(a) above and surrender of this Note
(or, in lieu thereof, by delivery of an appropriate lost security affidavit in
the event this Note shall have been lost or destroyed), but in no event more
than three (3) Business Days thereafter, the Company shall issue and
deliver, or cause to be issued and delivered, to the Holder, registered in such
name or names as the Holder may direct in writing, a certificate or
certificates for the number of whole shares of Common Stock issuable upon the
conversion of such portion of this Note. To the extent permitted by law, such
conversion shall be deemed to have been effected, and the Conversion Price
shall be determined, as of the close of business on the date on which such
written notice shall have been received by the Company and this Note shall have
been surrendered as aforesaid (or, in lieu thereof, an appropriate lost
security affidavit has been delivered to the Company), and at such time, the
rights of the Holder shall cease with respect to the principal amount of the
Notes being converted, and the Person or Persons in whose name or names any
certificate or certificates for shares of Common Stock shall be issuable upon
such conversion shall be deemed to have become the holder or holders of record
of the shares represented thereby.

 

7

 

(c)                                  No fractional shares shall be issued upon
any conversion of this Note into Common Stock. If any fractional share of
Common Stock would, except for the provisions of the first sentence of this Section 4(c),
be delivered upon such conversion, the Company, in lieu of delivering such
fractional share, shall pay to the Holder an amount in cash equal to the Market
Price of such fractional share of Common Stock. In case the principal amount of
this Note exceeds the principal amount being converted, the Company shall, upon
such conversion, execute and deliver to the Holder, at the expense of the
Company, a new Note for the principal amount of this Note surrendered which is
not to be converted.

 

(d)                                 If the Company shall, at any time or from
time to time while this Note 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 Conversion Price in effect immediately prior to the date upon which
such change shall become effective, shall be adjusted by the Company so that
the Holder thereafter converting this Note shall be entitled to receive the
number of shares of Common Stock or other capital stock which the Holder would
have received if the Note had been converted immediately prior to such event
upon payment of a Conversion Price that has been adjusted to reflect a fair
allocation of the economics of such event to the Holder, without regard to any
conversion limitation specified in this Section 4. Such adjustments shall
be made successively whenever any event listed above shall occur.

 

(e)                                  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 the Holder shall thereafter have the right to purchase and receive
upon the basis and upon the terms and conditions herein specified and in lieu
of the shares of Common Stock immediately theretofore issuable upon conversion
of this Note such shares of stock, securities or assets as would have been
issuable or payable with respect to or in exchange for a number of shares of
Common Stock equal to the number of shares of Common Stock immediately
theretofore issuable upon conversion of this Note, 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 the Holder to the end that the
provisions hereof (including, without limitation, provision for adjustment of
the Conversion 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 conversion 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

 

8

 

other appropriate corporation or entity shall assume the obligation to
deliver to the Holder, at the last address of the Holder appearing on the books
of the Company, such shares of stock, securities or assets as, in accordance
with the foregoing provisions, the Holder may be entitled to purchase,
without regard to any conversion limitation specified in Section 4, and
the other obligations under this Note. The provisions of this paragraph (e) shall
similarly apply to successive reorganizations, reclassifications,
consolidations, mergers, sales, transfers or other dispositions.

 

(f)                                    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 4(d)), or subscription rights or Notes, the Conversion Price
to be in effect after such payment date shall be determined by multiplying the
Conversion 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 of Common Stock immediately
prior to such payment date, less the fair market value (as determined by the
Board in good faith) of said assets or evidences of indebtedness so
distributed, or of such subscription rights or Notes, and the denominator of
which shall be the total number of shares of Common Stock outstanding
multiplied by such Market Price immediately prior to such payment date. Such
adjustment shall be made successively whenever such a payment date is fixed.

 

(g)                                 An adjustment to the Conversion 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.

 

(h)                                 In the event that, as a result of an
adjustment made pursuant to this Section 4, the Holder 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
conversion of this Note shall be subject thereafter to adjustment from time to
time in a manner and on terms as nearly equivalent as practicable to the
provisions contained in this Note.

 

(i)                                     Except as provided in Section 4(j)
hereof, if and whenever the Company shall issue or sell, or is, in accordance
with any of Sections 4(i)(i) through 4(i)(viii) hereof, deemed to
have issued or sold, any shares of Common Stock for no consideration or for a
consideration per share less than the Conversion Price in effect immediately
prior to the time of such issue or sale, then and in each such case (a “Trigger
Issuance”) the then-existing Conversion Price, shall be reduced, as of the
close of business on the effective date of the Trigger Issuance, to (i) the
lowest price per share at which any share of Common Stock was issued or sold or
deemed to be issued or sold if the Trigger Issuance occurs on or after September       ,
2006 (the “Full-Ratchet Date”) or (ii) if the Trigger Issuance
occurs prior to the Full-Ratchet Date, a price determined as follows:

 

9

 

Adjusted
Conversion Price = (A x B) + D

A+C

 

where

 

“A”
equals the number of shares of Common Stock outstanding, including Additional
Shares of Common Stock (as defined below) deemed to be issued hereunder,
immediately preceding such Trigger Issuance;

 

“B”
equals the Conversion Price in effect immediately preceding such Trigger
Issuance;

 

“C”
equals the number of Additional Shares of Common Stock issued or deemed issued
hereunder as a result of the Trigger Issuance; and

 

“D”
equals the aggregate consideration, if any, received or deemed to be received
by the Company upon such Trigger Issuance;

 

provided, however, that
in no event shall the Conversion Price after giving effect to such Trigger
Issuance be greater than the Conversion Price in effect prior to such Trigger
Issuance.

 

For
purposes of this subsection (i), “Additional Shares of Common Stock” shall
mean all shares of Common Stock issued by the Company or deemed to be issued
pursuant to this subsection (i), other than Excluded Issuances (as defined
in subsection (j) hereof).

 

For
purposes of this Section 4(i), the following subsections (i)(i) to
(i)(vii) shall also be applicable (subject, in each such case, to the
provisions of Section 4(j) hereof):

 

(i)                                     In case at any time the Company shall in
any manner grant (directly and not by assumption in a merger or otherwise) any
Notes or other rights to subscribe for or to purchase, or any options for the
purchase of, Common Stock or any stock or security convertible into or
exchangeable for Common Stock (such Notes, rights or options being called “Options”
and such convertible or exchangeable stock or securities being called “Convertible
Securities”) whether or not such Options or the right to convert or
exchange any such Convertible Securities are immediately exercisable, and the
price per share for which Common Stock is issuable upon the exercise of such
Options or upon the conversion or exchange of such Convertible Securities
(determined by dividing (i) the sum (which sum shall constitute the
applicable consideration) of (x) the total amount, if any, received or
receivable by the Company as consideration for the granting of such Options,
plus (y) the aggregate amount of additional consideration payable to the
Company upon the exercise of all such Options, plus (z), in the case of such
Options which relate to Convertible Securities, the aggregate amount of
additional consideration, if any, payable upon the issue or sale of such
Convertible Securities and upon the conversion or exchange thereof, by (ii) the
total maximum number of shares of Common Stock issuable upon the exercise of
such Options or upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such Options) shall be less than the
Market Price of the Common Stock immediately prior to the time of the granting
of such Options, then the total number of shares of Common Stock issuable upon
the exercise of such Options or upon conversion or exchange of the total amount
of such Convertible Securities issuable upon the exercise of such

 

10

 

Options shall be deemed to have been issued for such price per share as
of the date of granting of such Options or the issuance of such Convertible
Securities and thereafter shall be deemed to be outstanding for purposes of
adjusting the Conversion Price. Except as otherwise provided in subsection 4(i)(iii),
no adjustment of the Conversion Price shall be made upon the actual issue of
such Common Stock or of such Convertible Securities upon exercise of such
Options or upon the actual issue of such Common Stock upon conversion or
exchange of such Convertible Securities.

 

(ii)                                  In case the Company shall in any manner
issue (directly and not by assumption in a merger or otherwise) or sell any
Convertible Securities, whether or not the rights to exchange or convert any
such Convertible Securities are immediately exercisable, and the price per
share for which Common Stock is issuable upon such conversion or exchange
(determined by dividing (i) the sum (which sum shall constitute the
applicable consideration) of (x) the total amount received or receivable by the
Company as consideration for the issue or sale of such Convertible Securities,
plus (y) the aggregate amount of additional consideration, if any, payable to
the Company upon the conversion or exchange thereof, by (ii) the total
number of shares of Common Stock issuable upon the conversion or exchange of
all such Convertible Securities) shall be less than the Market Price of the
Common Stock immediately prior to the time of such issue or sale, then the
total maximum number of shares of Common Stock issuable upon conversion or
exchange of all such Convertible Securities shall be deemed to have been issued
for such price per share as of the date of the issue or sale of such
Convertible Securities and thereafter shall be deemed to be outstanding for
purposes of adjusting the Conversion Price, provided that (a) except as
otherwise provided in subsection 4(i)(iii), no adjustment of the
Conversion Price shall be made upon the actual issuance of such Common Stock
upon conversion or exchange of such Convertible Securities and (b) no
further adjustment of the Conversion Price shall be made by reason of the issue
or sale of Convertible Securities upon exercise of any Options to purchase any
such Convertible Securities for which adjustments of the Conversion Price have
been made pursuant to the other provisions of subsection 6(i).

 

(iii)                               Upon the happening of any of the following events,
namely, if the purchase price provided for in any Option referred to in subsection 4(i)(i) hereof,
the additional consideration, if any, payable upon the conversion or exchange
of any Convertible Securities referred to in subsections 4(i)(i) or
4(i)(ii), or the rate at which Convertible Securities referred to in subsections
4(i)(i) or 4(i)(ii) are convertible into or exchangeable for Common
Stock shall change at any time (including, but not limited to, changes under or
by reason of provisions designed to protect against dilution), the Conversion
Price in effect at the time of such event shall forthwith be readjusted to the
Conversion Price which would have been in effect at such time had such Options
or Convertible Securities still outstanding provided for such changed purchase
price, additional consideration or conversion rate, as the case may be, at
the time initially granted, issued or sold. On the termination of any Option
for which any adjustment was made pursuant to this subsection 4(i) or
any right to convert or exchange Convertible Securities for which any
adjustment was made pursuant to this subsection 4(i) (including
without limitation upon the redemption or purchase for consideration of such
Convertible Securities by the Company), the Conversion Price then in effect
hereunder shall forthwith be changed to the Conversion Price which would have
been in effect at the time of such termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such termination,
never been issued.

 

11

 

(iv)                              Subject to the provisions of this Section 4(i),
in case the Company shall declare a dividend or make any other distribution
upon any stock of the Company (other than the Common Stock) payable in Common
Stock, Options or Convertible Securities, then any Common Stock, Options or
Convertible Securities, as the case may be, issuable in payment of such
dividend or distribution shall be deemed to have been issued or sold without
consideration.

 

(v)                                 In case any shares of Common Stock,
Options or Convertible Securities shall be issued or sold for cash, the
consideration received therefor shall be deemed to be the net amount received
by the Company therefor, after deduction therefrom of any expenses incurred or
any underwriting commissions or concessions paid or allowed by the Company in
connection therewith. In case any shares of Common Stock, Options or
Convertible Securities shall be issued or sold for a consideration other than
cash, the amount of the consideration other than cash received by the Company
shall be deemed to be the fair value of such consideration as determined in
good faith by the Board, after deduction of any expenses incurred or any
underwriting commissions or concessions paid or allowed by the Company in
connection therewith. In case any Options shall be issued in connection with
the issue and sale of other securities of the Company, together comprising one
integral transaction in which no specific consideration is allocated to such
Options by the parties thereto, such Options shall be deemed to have been
issued for such consideration as determined in good faith by the Board of
Directors of the Company. If Common Stock, Options or Convertible Securities
shall be issued or sold by the Company and, in connection therewith, other
Options or Convertible Securities (the “Additional Rights”) are issued,
then the consideration received or deemed to be received by the Company shall
be reduced by the fair market value of the Additional Rights (as determined
using the Black-Scholes option pricing model or another method mutually agreed
to by the Company and the Holder). The Board shall respond promptly, in
writing, to an inquiry by the Holder as to the fair market value of the
Additional Rights. In the event that the Board and the Holder are unable to agree
upon the fair market value of the Additional Rights, the Company and the Holder
shall jointly select an appraiser, who is experienced in such matters. The
decision of such appraiser shall be final and conclusive, and the cost of such
appraiser shall be borne evenly by the Company and the Holder.

 

(vi)                              In case the Company shall take a record
of the holders of its Common Stock for the purpose of entitling them (i) to
receive a dividend or other distribution payable in Common Stock, Options or
Convertible Securities or (ii) to subscribe for or purchase Common Stock,
Options or Convertible Securities, then such record date shall be deemed to be
the date of the issue or sale of the shares of Common Stock deemed to have been
issued or sold upon the declaration of such dividend or the making of such
other distribution or the date of the granting of such right of subscription or
purchase, as the case may be.

 

(vii)                           The number of shares of Common Stock outstanding at
any given time shall not include shares owned or held by or for the account of
the Company or any of its wholly-owned subsidiaries, and the disposition of any
such shares (other than the cancellation or retirement thereof) shall be
considered an issue or sale of Common Stock for the purpose of this subsection (i).

 

12

 

(j)                                     Anything herein to the contrary
notwithstanding, the Company shall not be required to make any adjustment of
the Conversion Price in the case of the issuance of (A) capital stock,
Options or Convertible Securities issued to (i) directors, officers,
employees or consultants of the Company in connection with their service as
directors of the Company, their employment by the Company or their retention as
consultants by the Company pursuant to an equity compensation program approved
by the Board of Directors of the Company or the compensation committee of the
Board of Directors of the Company or (ii) landlords and/or commercial
lenders; provided, that in the case of any issuance pursuant to this clause
(A), the exercise or conversion price of any such Options or Convertible
Securities shall be at least equal to the Market Price on the date of grant, (B) shares
of Common Stock issued upon the conversion or exercise of Options or
Convertible Securities issued prior to the date hereof, provided such
securities are not amended after the date hereof, (C) securities issued
pursuant to the Purchase Agreement and securities issued upon the exercise or
conversion of those securities, and (D) shares of Common Stock issued or
issuable by reason of a dividend, stock split or other distribution on shares
of Common Stock (but only to the extent that such a dividend, split or
distribution results in an adjustment in the Conversion Price pursuant to the
other provisions of this Note) (collectively, “Excluded Issuances”).

 

(k)                                  In case at any time:

 

(i)                                     the Company shall declare any dividend
upon its Common Stock or any other class or series of capital stock
of the Company payable in cash or stock or make any other distribution to the
holders of its Common Stock or any such other class or series of
capital stock;

 

(ii)                                  the Company shall offer for subscription pro
rata to the holders of its Common Stock or any other class or series of
capital stock of the Company any additional shares of stock of any class or
other rights; or

 

(iii)                               there shall be any capital reorganization
or reclassification of the capital stock of the Company, any acquisition or a
liquidation, dissolution or winding up of the Company;

 

then, in any one or more
of said cases, the Company shall give, by delivery in person or by certified or
registered mail, return receipt requested, addressed to the Holder at the
address of such Holder as shown on the books of the Company, (a) at least
20 Business Days’ prior written notice of the date on which the books of the
Company shall close or a record shall be taken for such dividend, distribution
or subscription rights or for determining rights to vote in respect of any
event set forth in clause (iii) of this Section 4(k) and (b) in
the case of any event set forth in clause (iii) of this Section 4(k),
at least 20 Business Days’ prior written notice of the date when the same shall
take place. Such notice in accordance with the foregoing clause (a) shall
also specify, in the case of any such dividend, distribution or subscription
rights, the date on which the holders of Common Stock or such other class or
series of capital stock shall be entitled thereto and such notice in
accordance with the foregoing clause (b) shall also specify the date on
which the holders of Common Stock and such other series or class of
capital stock shall be entitled to exchange their Common Stock and other stock
for securities or other property deliverable upon consummation of the applicable
event set forth in clause (iii) of this Section 4(k).

 

13

 

(l)                                     Upon any adjustment of the Conversion
Price, then and in each such case the Company shall give prompt written notice
thereof, by delivery in person or by certified or registered mail, return
receipt requested, addressed to the Holder at the address of such Holder as
shown on the books of the Company, which notice shall state the Conversion
Price resulting from such adjustment and setting forth in reasonable detail the
method upon which such calculation is based.

 

(m)                               The Company shall at all times reserve
and keep available out of its authorized Common Stock, solely for the purpose
of issuance upon conversion of this Note as herein provided, such number of
shares of Common Stock as shall then be issuable upon the conversion of this
Note. The Company covenants that all shares of Common Stock which shall be so
issued shall be duly and validly issued and fully paid and nonassessable, and
free from all taxes, liens and charges with respect to the issue thereof, and,
without limiting the generality of the foregoing, and that the Company will
from time to time take all such action as may be requisite to assure that
the par value per share of the Common Stock is at all times equal to or less
than the Conversion Price in effect at the time. The Company shall take all
such action as may be necessary to assure that all such shares of Common
Stock may be so issued without violation of any applicable law or regulation,
or of any requirement of any national securities exchange or trading market
upon which the Common Stock may be listed. The Company shall not take any
action which results in any adjustment of the Conversion Price if the total
number of shares of Common Stock issued and issuable after such action upon
conversion of this Note would exceed the total number of shares of Common Stock
then authorized by the Company’s Certificate of Incorporation.

 

(n)                                 The issuance of certificates for shares
of Common Stock upon conversion of this Note shall be made without charge to
the holders thereof for any issuance tax in respect thereof, provided that the
Company shall not be required to pay any tax which may be payable in
respect of any transfer involved in the issuance and delivery of any
certificate in a name other than that of the Holder.

 

(o)                                 The Company will not at any time close
its transfer books against the transfer, as applicable, of this Note or of any
shares of Common Stock issued or issuable upon the conversion of this Note in
any manner which interferes with the timely conversion of this Note, except as may otherwise
be required to comply with applicable securities laws.

 

(p)                                 To the extent permitted by applicable law
and the listing requirements of any stock exchange or trading market on which
the Common Stock is then listed, the Company from time to time may decrease
the Conversion Price by any amount for any period of time if the period is at
least twenty (20) days, the decrease is irrevocable during the period and the
Board shall have made a determination that such decrease would be in the best
interests of the Company, which determination shall be conclusive. Whenever the
Conversion Price is decreased pursuant to the preceding sentence, the Company
shall provide written notice thereof to the Holder at least fifteen (15) days
prior to the date the decreased Conversion Price takes effect, and such notice
shall state the decreased Conversion Price and the period during which it will
be in effect.

 

14

 

5.                                       Covenants.

 

(a)                                  So long as any amount due under this Note
is outstanding and until indefeasible payment in full of all amounts payable by
the Company and WBS hereunder:

 

(i)                                     The Company shall and shall cause each of
its Subsidiaries to (A) carry on and conduct its business in substantially
the same manner and in substantially the same fields of enterprise as it is
presently conducting, (B) do all things necessary to remain duly
organized, validly existing, and in good standing as a domestic corporation
under the laws of its state of incorporation and (C) maintain all
requisite authority to conduct its business in those jurisdictions in which its
business is conducted.

 

(ii)                                  The Company shall promptly notify the Holder
in writing of (A) any change in the business or the operations the Company
or any Subsidiary which could reasonably be expected to have a Material Adverse
Effect, and (B) any information which indicates that any financial
statements which are the subject of any representation contained in the
Transaction Documents, or which are furnished to the Holder pursuant to the
Transaction Documents, fail, in any material respect, to present fairly, as of
the date thereof and for the period covered thereby, the financial condition
and results of operations purported to be presented therein, disclosing the
nature thereof.

 

(iii)                               The Company shall promptly notify the Holder of the
occurrence of any Event of Default or any event which, with the giving of
notice, the lapse of time or both would constitute an Event of Default, which
notice shall include a written statement as to such occurrence, specifying the
nature thereof and the action (if any) which is proposed to be taken with
respect thereto.

 

(iv)                              The Company shall promptly notify the
Holder of any action, suit or proceeding at law or in equity or by or before
any governmental instrumentality or other agency against the Company or any
Subsidiary or to which the Company or any Subsidiary may be subject which
alleges damages in excess of One Hundred Thousand United States Dollars
($100,000).

 

(v)                                 The Company shall promptly notify the
Holder of any default in the performance, observance or fulfillment of any of
the obligations, covenants or conditions contained in any agreement or
instrument to which the Company or any Subsidiary is a party which default
could reasonably be expected to have a Material Adverse Effect.

 

(vi)                              The Company shall and shall cause each
Subisidiary to promptly take any and all actions necessary to execute any
definitive documentation (which documentation shall include customary
representations, warranties, covenants, conditions and agreements, and any UCC
financing statements) reasonably requested by the Holder, for obtaining the
benefits of the Security Agreement, subject to the terms and conditions stated
therein.

 

(vii)                           The Company shall and shall cause each Subsidiary to
pay when due all taxes, assessments and governmental charges and levies upon it
or its income, profits or property, except those that are being contested in
good faith by appropriate proceedings and with respect to which adequate
reserves have been set aside.

 

15

 

(viii)                        The Company shall and shall cause each Subsidiary to
all times maintain with financially sound and reputable insurance companies
insurance covering its assets and its businesses in such amounts and covering
such risks (including, without limitation, hazard, business interruption and
public liability) as is consistent with sound business practice and as may be
obtained at commercially reasonable rates. The insurance policies will comply
with the provisions of Section 11 of the Security Agreement.

 

(ix)                                The Company shall and shall cause each
Subsidiary to comply with all laws, rules, regulations, orders, writs,
judgments, injunctions, decrees or awards to which they may be subject
except where the failure to so comply could not reasonably be expected to have
a Material Adverse Effect.

 

(x)                                   The Company shall and shall cause each
Subsidiary to use commercially reasonable efforts to do all things necessary to
maintain, preserve, protect and keep its properties in good repair, working
order and condition and use commercially reasonable efforts to make all
necessary and proper repairs, renewals and replacements so that its business
carried on in connection therewith may be properly conducted.

 

(xi)                                The Company shall deliver to the Holder
as soon as reasonably practicable but in any event within three (3) Business
Days, upon receipt or delivery, copies of any and all material notices and
other material communications from and to any federal or state regulatory body
with jurisdiction over the products, business and/or processes of the Company
or any Subsidiary (i) with respect to products or practices and (ii) with
respect to any Intellectual Property with counsel to the Company or any
Subsidiary (including any non-infringement opinions of counsel or advisors to
the Company or any Subsidiary or any other Person), the United States Patent &
Trademark Office and any other Person. The Company shall and shall cause each
Subsidiary to as soon as reasonably practicable, notify the Holder of any
infringement or threatened infringement of its Intellectual Property may at
any time come to its notice.

 

(xii)                             At its own expense, the Company shall and shall cause
each Subsidiary to make, execute, endorse, acknowledge file and/or deliver any
documents and take all commercially reasonable actions necessary or required to
maintain its ownership rights in its Intellectual Property, including, without
limitation, (i) any action reasonably required to protect the Intellectual
Property in connection with any infringement, suspected infringement, passing
off, act of unfair competition or other unlawful interference with the rights
of the Company or any Subsidiary in and to such Intellectual Property, and (ii) any
registrations with the United States Patent & Trademark Office and any
corresponding foreign patent and/or trademark office required for the Company
or any Subsidiary to carry on its business as presently conducted and as
presently proposed to be conducted. Except for non-exclusive licenses granted
in the ordinary course of business, the Company shall not and shall cause each
Subsidiary not to transfer, assign or otherwise convey the Intellectual
Property, any registrations or applications thereof and all goodwill associated
therewith, to any person or entity.

 

(xiii)                          Promptly after the occurrence thereof, the Company
shall and shall cause each Subsidiary to inform the Holder of the
following material developments: (i) entering into material agreements
outside the ordinary course of business consistent with past practice, (ii) any
issuance of debt securities by the Company or any Subsidiary, (iii) the
incurrence of any

 

16

 

Indebtedness by the Company or any Subsidiary, (iv) a change in
the number of the Board of Directors of the Company, (v) a sale, lease or
transfer of any material portion of the assets of the Company or any Subisdiary
and (vi) any change in ownership of any Subsidiary (specifying the details
of any such change, including the identity and ownership amount of any new
owner).

 

(b)                                 So long as any amount due under this Note
is outstanding and until indefeasible payment in full of all amounts payable by
the Company hereunder, without the prior written consent of the holders of at
least a majority of the outstanding principal amount of the Company Notes then
outstanding (for purposes of this Section 5(b), any Company Notes held by
any employee, director or officer of the Company or any Subsidiary shall not be
deemed to be outstanding):

 

(i)                                     The Company shall not and shall cause
each Subsidiary not to create, incur, guarantee, issue, assume or in any manner
become liable in respect of any Indebtedness, other than Permitted
Indebtedness.

 

(ii)                                  The Company shall not and shall cause
each Subsidiary not to create, incur, assume or suffer to exist any Lien upon
any of its property, whether now owned or hereafter acquired other than (i) Liens
created pursuant to the Security Agreement and (ii) Permitted Liens. The
Company shall not, and shall cause each Subsidiary not to, be bound by any
agreement which limits the ability of the Company or any Subsidiary to grant
Liens.

 

(iii)                               The Company shall not and shall cause each Subsidiary
not to, directly or indirectly, enter into or permit to exist any transaction
or series of related transactions (including, without limitation, the
purchase, sale, lease or exchange of any property or the rendering of any
service) with, or for the benefit of, any of its Affiliates other than a wholly
owned Subsidiary, except for consulting arrangements with directors approved by
the Board.

 

(iv)                              The Company shall not, and shall cause
each of its Subsidiaries not to, directly or indirectly, declare or pay any
dividends on account of any shares of any class or series of its
capital stock now or hereafter outstanding, or set aside or otherwise deposit
or invest any sums for such purpose, or redeem, retire, defease, purchase or
otherwise acquire any shares of any class of its capital stock (or set
aside or otherwise deposit or invest any sums for such purpose) for any
consideration or apply or set apart any sum, or make any other distribution
(by reduction of capital or otherwise) in respect of any such shares or pay any
interest, premium if any, or principal of any Indebtedness or redeem, retire,
defease, repurchase or otherwise acquire any Indebtedness (or set aside or
otherwise deposit or invest any sums for such purpose) for any consideration or
apply or set apart any sum, or make any other payment in respect thereof
or agree to do any of the foregoing (each of the foregoing is herein called a “Restricted
Payment”); provided, that (i) the Company may make payments of
interest, premium if any, and principal of the Notes in accordance with the
terms hereof, (ii) provided that no Event of Default or event which, with
the giving of notice, the lapse of time or both would constitute an Event of
Default has occurred and is continuing, the Company and its Subsidiaries may make
regularly scheduled payments of interest and principal of any Permitted
Indebtedness, (iii) any Subsidiary directly or indirectly wholly owned by
the Company may pay dividends on its capital stock and (iv) the
Company may repurchase capital stock from a former employee in connection
with the termination or other departure of such employee, strictly in
accordance with the terms of any

 

17

 

agreement entered into with such employee and in effect on the Closing
Date (as defined in the Purchase Agreement), provided that (A) such
repurchase is approved by a majority of the Board, (B) payments permitted
under this clause (iv) shall not exceed $1,000,000 in the aggregate, and (C) no
such payment may be made if an Event of Default or an event which, with
the giving of notice, the lapse of time or both would constitute an Event of
Default has occurred and is continuing or would result from such payment.

 

(v)                                 The Company shall not and shall cause
each Subsidiary not to, directly or indirectly, engage in any business other
than the business of providing Internet protocol transaction platforms, billing
and related services to communications providers.

 

(vi)                              The Company shall not and shall cause
each Subsidiary not to make or own any Investment in any Person, including
without limitation any joint venture, other than (A) Permitted
Investments, (B) operating deposit accounts with banks, (C) Hedging
Agreements entered into in the ordinary course of the Company’s financial
planning and not for speculative purposes and (D) investments by the
Company in the capital stock of any wholly owned Subsidiary.

 

(vii)                           The Company shall not and shall cause each Subsidiary
not to, directly or indirectly, become or remain liable as lessee or as a
guarantor or other surety with respect to any lease of any property (whether
real, personal or mixed), whether now owned or hereafter acquired, which the
Company or any Subsidiary (a) has sold or transferred or is to sell or to
transfer to any other Person, or (b) intends to use for substantially the
same purpose as any other property which has been or is to be sold or
transferred by the Company or any Subsidiary to any Person in connection with
such lease.

 

(viii)                        The Company shall not and shall cause each Subsidiary
not to settle, or agree to indemnify or defend third parties against, any
material lawsuit, except as may be required by judicial or regulatory order
or by agreements entered into prior to the date hereof on a basis consistent
with past practice. A material lawsuit shall be any lawsuit in which the amount
in controversy exceeds $100,000.

 

(ix)                                The Company shall not and shall cause
each Subsidiary not to amend its bylaws, certificate of incorporation or other
charter document in a manner adverse to the Holder.

 

6.                                       Event of Default. The occurrence of any of following
events shall constitute an “Event of Default” hereunder:

 

(a)                                  the failure of the Company or WBS to make
any payment of principal on this Note when due, whether at maturity, upon
acceleration or otherwise;

 

(b)                                 the failure of the Company or WBS to make
any payment of interest on this Note, or any other amounts due under the other
Transaction Documents (as defined under the Purchase Agreement) when due,
whether at maturity, upon acceleration or otherwise, and such failure continues
for more than five (5) days;

 

18

 

(c)                                  the Company and/or its Subsidiaries fail
to make a required payment or payments on Indebtedness of One Hundred Thousand
United States Dollars ($100,000) or more in aggregate principal amount and such
failure continues for more than ten (10) days;

 

(d)                                 there shall have occurred an acceleration
of the stated maturity of any Indebtedness of the Company or its Subsidiaries
of One Hundred Thousand United States Dollars ($100,000) or more in aggregate
principal amount (which acceleration is not rescinded, annulled or otherwise
cured within ten (10) days of receipt by the Company or a Subsidiary of
notice of such acceleration);

 

(e)                                  the Company or WBS makes an assignment
for the benefit of creditors or admits in writing its inability to pay its
debts generally as they become due; or an order, judgment or decree is entered
adjudicating the Company or WBS as bankrupt or insolvent; or any order for
relief with respect to the Company or WBS is entered under the Federal
Bankruptcy Code or any other bankruptcy or insolvency law; or the Company or WBS
petitions or applies to any tribunal for the appointment of a custodian,
trustee, receiver or liquidator of the Company or WBS or of any substantial part of
the assets of the Company or WBS, or commences any proceeding relating to it
under any bankruptcy, reorganization, arrangement, insolvency, readjustment of
debt, dissolution or liquidation law of any jurisdiction; or any such petition
or application is filed, or any such proceeding is commenced, against the
Company or WBS and either (i) the Company or WBS by any act indicates its
approval thereof, consents thereto or acquiescence therein or (ii) such
petition application or proceeding is not dismissed within sixty (60) days;

 

(f)                                    a final, non-appealable judgment which,
in the aggregate with other outstanding final judgments against the Company and
its Subsidiaries, exceeds One Hundred Thousand United States Dollars ($100,000)
shall be rendered against the Company or a Subsidiary and within sixty (60)
days after entry thereof, such judgment is not discharged or execution thereof
stayed pending appeal, or within sixty (60) days after the expiration of such
stay, such judgment is not discharged; provided, however, that a judgment that
provides for the payment of royalties subsequent to the date of the judgment
shall be deemed to be discharged so long as the Company or the Subsidiary
affected thereby is in compliance with the terms of such judgment;

 

(g)                                 the Company or WBS is in breach of the
requirements of Section 5(b) hereof;

 

(h)                                 if any representation or statement of
fact made in any Transaction Document or furnished to the Holder at any time by
or on behalf of the Company or WBS proves to have been false in any material
respect when made or furnished;

 

(i)                                     any Liens created by the Security
Documents shall at any time not constitute a valid and perfected first priority
Lien on the collateral intended to be covered thereby (to the extent perfection
by filing, registration, recordation or possession is required herein or
therein) in favor of the Holders, free and clear of all other Liens (other than
Permitted Liens), or any of the security interests granted pursuant to the
Security Documents shall be determined to be void, voidable, invalid or
unperfected, are subordinated or are ineffective to provide the

 

19

 

Holder with a perfected, first priority security interest in the
collateral covered by the Security Documents, free and clear of all other Liens
(other than Permitted Liens) or, except for expiration or termination in
accordance with their terms, the Security Agreement shall for whatever reason
be terminated or cease to be in full force and effect, or the enforceability
thereof or any other Transaction Documents shall be contested by the Company or
WBS; or

 

(j)                                     if the Company or WBS fails to observe or
perform in any material respect any of its covenants contained in the
Transaction Documents (other than any failure which is covered by Section 5(a),
(b) or (g)), and such failure continues for thirty (30) days after receipt
by the Company of notice thereof.

 

Upon the occurrence of any such Event of Default all unpaid
principal and accrued interest under this Note shall become immediately due and
payable (A) upon election of the Holder, with respect to (a) through (d) and
(f) through (j), and (B) automatically, with respect to (e). Upon the
occurrence of any Event of Default, the Holder may, in addition to declaring
all amounts due hereunder to be immediately due and payable, pursue any
available remedy, whether at law or in equity, including, without limitation,
exercising its rights under the other Transaction Documents. If an Event of
Default occurs, the Company and WBS shall jointly and severally pay to the
Holder the reasonable attorneys’ fees and disbursements and all other
reasonable out-of-pocket costs incurred by the Holder in order to collect
amounts due and owing under this Note or otherwise to enforce the Holder’s
rights and remedies hereunder and under the other Transaction Documents.

 

7.                                       No Waiver. No delay or omission on the part of the Holder
in exercising any right under this Note shall operate as a waiver of such right
or of any other right of the Holder, nor shall any delay, omission or waiver on
any one occasion be deemed a bar to or waiver of the same or any other right on
any future occasion.

 

8.                                       Amendments in Writing. Any term of this Note may be
amended or waived upon the written consent of the Company, WBS and the holders
of Company Notes representing at least 50% of the principal amount of Company
Notes then outstanding (the “Majority Holders”); provided, that
(x) any such amendment or waiver must apply to all outstanding Company Notes;
and (y) without the consent of the Holder hereof, no amendment or waiver shall (i) change
the Stated Maturity Date of this Note, (ii) reduce the principal amount of
this Note or the interest rate due hereon, (iii) change the Conversion
Price or (iv) change the place of payment of this Note. No such waiver or
consent on any one instance shall be construed to be a continuing waiver or a
waiver in any other instance unless it expressly so provides.

 

9.                                       Waivers. The Company and WBS hereby forever waive
presentment, demand, presentment for payment, protest, notice of protest,
notice of dishonor of this Note and all other demands and notices in connection
with the delivery, acceptance, performance and enforcement of this Note.

 

10.                                 Waiver of Jury Trial. EACH
OF THE COMPANY AND WBS HEREBY WAIVES ITS RIGHT TO A JURY TRIAL OF ANY CLAIM OR
CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS NOTE OR ANY CONTEMPLATED
TRANSACTION, INCLUDING CONTRACT, TORT, BREACH OF DUTY AND ALL OTHER CLAIMS. EACH
OF THE COMPANY AND WBS HAS REVIEWED THIS WAIVER WITH ITS COUNSEL.

 

20

 

11.                                 Secured Obligation. This Note is one of the Notes referred
to in the Security Agreement and is secured by the collateral described therein.
The Security Agreement grants the Holder certain rights with respect to such
collateral upon an Event of Default.

 

12.                                 Governing Law; Consent to Jurisdiction. This Note shall be governed by and
construed under the law of the State of New York, without giving effect to the
conflicts of law principles thereof. The Company, WBS and, by accepting this
Note, the Holder, 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
Note 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 Note. The Company, WBS and, by accepting this
Note, the Holder, 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, WBS and, by accepting this Note, the Holder, 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.

 

13.                                 Costs. If action is instituted to collect on this Note, the
Company and WBS jointly and severally promise to pay all reasonable costs and
expenses, including reasonable attorney’s fees, incurred in connection with such
action.

 

14.                                 Notices. All notices hereunder shall be given in writing and
shall be deemed delivered when received by the other party hereto at the
address set forth in the Purchase Agreement or at such other address as may be
specified by such party from time to time in accordance with the Purchase
Agreement.

 

15.                                 Successors and Assigns. This Note shall be binding upon the
successors or assigns of the Company and WBS and shall inure to the benefit of
the successors and assigns of the Holder.

 

[Remainder of Page Intentionally
Left Blank]

 

21

 

IN
WITNESS WHEREOF, the Company and WBS have caused this 5% Senior Secured
Convertible Note to be signed in their names effective as of the date first
above written.

 

 

	
   

  	
  PRIMAL SOLUTIONS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Joseph
  R. Simrell

  
	
   

  	
   

  	
  Title:

  	
  Chief
  Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
  WIRELESS BILLING
  SYSTEMS

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Joseph
  R. Simrell

  
	
   

  	
   

  	
  Title:

  	
  Chief
  Executive Officer

  
					

 

22

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