Document:

Exhibit 10.54

 

REGISTRATION
RIGHTS AGREEMENT

 

This
Registration Rights Agreement (the “Agreement”) is made and entered into as of
this 27th day of April, 2006 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.

 

“Mechler
Investor” shall mean David W. Mechler, Jr.

 

“Prospectus”
shall mean (i) 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, together with (ii) any “free writing
prospectus” as defined in Rule 405 under the 1933 Act.

 

“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 (i) the Shares, (ii) the Warrant Shares
and (iii) 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.

 

“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 April 30, 2006
(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, subject to the Required Investors’ consent), covering
the resale of the Registrable Securities in an amount at least equal to the
Conversion Shares and the Warrant Shares. Subject to any SEC comments, 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. Such Registration
Statement shall not include any shares of Common Stock or other securities for
the account of any other holder without the prior written consent of the
Required Investors. The Registration Statement (and each amendment or
supplement thereto, and each request for acceleration of effectiveness thereof)
shall be provided in accordance with Section 3(c) to the Investors
prior to its filing or other submission. If a Registration Statement covering
the Registrable Securities is not filed with the SEC on or prior to the Filing
Deadline, the Company will make pro rata payments to the Mechler Investor, as
liquidated damages and not as a penalty, in an amount equal to 1.5% of the
aggregate amount invested by the Mechler Investor for each 30-day period or pro
rata for any portion thereof following the Filing Deadline for which no
Registration Statement is filed with respect to the Registrable Securities. Such
payments shall constitute the Mechler Investors’ exclusive monetary remedy for
such events, but shall not affect the right of the Investors to seek injunctive
relief. Such payments shall be made to the Mechler Investor in cash.

 

(ii)                                  Additional
Registrable Securities. Upon the written demand of any Investor and upon
any change in the Warrant Price (as defined in the Warrants) such that
additional shares of Common Stock become issuable upon the due exercise of the
Warrants (the

 

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“Additional Shares”), 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 the Additional Shares, subject to the Required
Investors’ consent) covering the resale of the Additional Shares, but only to
the extent the Additional Shares are not at the time covered by an effective
Registration Statement. Subject to any SEC comments, 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
Additional Shares. Such Registration Statement shall not include any shares of
Common Stock or other securities for the account of any other holder without
the prior written consent of the Required Investors. The Registration Statement
(and each amendment or supplement thereto, and each request for acceleration of
effectiveness thereof) shall be provided in accordance with Section 3(c) to
the Investors prior to its filing or other submission. If a Registration
Statement covering the Additional Shares is required to be filed under this Section 2(a)(ii) and
is not filed with the SEC within five Business Days of the request of any
Investor or upon the occurrence of any of the events specified in this Section 2(a)(ii),
the Company will make pro rata payments to the Mechler Investor, as liquidated
damages and not as a penalty, in an amount equal to 1.5% of the aggregate
amount invested by the Mechler Investor for each 30-day period or pro rata for
any portion thereof following the date by which such Registration Statement
should have been filed for which no Registration Statement is filed with
respect to the Additional Shares. Such payments shall constitute the Mechler
Investor’s exclusive monetary remedy for such events, but shall not affect the
right of the Mechler Investor to seek injunctive relief. Such payments shall be
made to the Mechler Investor in cash.

 

(iii)                               S-3 Qualification.
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 thirty (30) days after the Qualification Date (the “Qualification
Deadline”), the Company shall file a registration statement on Form S-3
covering the Registrable Securities or Additional Shares, as applicable (or a
post-effective amendment on Form S-3 to the registration statement on Form SB-2)
(a “Shelf Registration Statement”) and shall use commercially reasonable
efforts to cause such Shelf Registration Statement to be declared effective as
promptly as practicable thereafter. If a Shelf Registration Statement covering
the Registrable Securities is not filed with the SEC on or prior to the
Qualification Deadline, the Company will make pro rata payments to the Mechler
Investor, as liquidated damages and not as a penalty, in an amount equal to
1.5% of the aggregate purchase price paid by the Mechler Investor pursuant to
the Purchase Agreement attributable to those Registrable Securities that remain
unsold at that time for each 30-day period or pro rata for any portion thereof
following the date by which such Shelf Registration Statement should have been
filed for which no such Shelf Registration Statement is filed with respect to
the Registrable Securities or Additional Shares, as applicable. Such payments
shall constitute the Mechler Investor’s exclusive monetary remedy for such
events, but shall not affect the right of the Mechler Investor to seek
injunctive relief. Such payments shall be made to the Mechler Investor in cash.

 

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(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 fees of
counsel to the Investors, 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 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 is declared effective
and shall simultaneously provide the Investors with copies of any related
Prospectus to be used in connection with the sale or other disposition of the
securities covered thereby. If (A)(x) a Registration Statement covering the
Registrable Securities is not declared effective by the SEC prior to the
earliest of (i) five (5) Business Days after the SEC shall have
informed the Company that no review of the Registration Statement will be made
or that the SEC has no further comments on the Registration Statement, (ii) July 16,
2006 or (iii) the 120th day after the Closing Date if the
Registration Statement is reviewed by the SEC, (y) a Registration Statement
covering Additional Shares is not declared effective by the SEC within ninety
(90) days following the time such Registration Statement was required to be
filed pursuant to Section 2(a)(ii) (120 days if such Registration
Statement is reviewed by the SEC) or (z) a Shelf Registration Statement is not
declared effective by the SEC within ninety (90) days after the Qualification
Deadline (120 days if such Registration Statement is reviewed by the SEC), or (B) after
a Registration Statement has been declared effective by the SEC, sales cannot
be made pursuant to such Registration Statement for any reason (including
without limitation by reason of a stop order, or the Company’s failure to
update the Registration Statement), but excluding the inability of any Investor
to sell the Registrable Securities covered thereby due to (X) market conditions
or its receipt of material nonpublic information at its request in accordance
with Section 4 hereof or (Y) an Allowed Delay (as defined below), then the
Company will make pro rata payments to the Mechler Investor, as liquidated
damages and not as a penalty, in an amount equal to 1.5% of the aggregate
amount invested by the Mechler Investor for each 30- day period or pro rata for
any portion thereof following the date by which such Registration Statement
should have been effective (the “Blackout Period”). Such payments shall
constitute the Mechler Investor’s exclusive monetary remedy for such events,
but shall not affect the right of the Mechler Investor to seek injunctive
relief. The amounts payable as liquidated damages pursuant to this paragraph
shall be paid monthly within three (3) Business Days of the last day of
each month following the commencement of the Blackout Period until the
termination of the Blackout Period. Such payments shall be made to the Mechler
Investor in cash.

 

(ii)                                  For not more than
twenty (20) consecutive days or for a total of not more than forty-five (45)
days in any twelve (12) month period, the Company may delay the disclosure
of material non-public information concerning the Company, by suspending the
use of any Prospectus included in any registration contemplated by this Section containing
such information, the disclosure of which at the time is not, in the good faith
opinion of the Company,

 

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in the best interests of the
Company (an “Allowed Delay”); provided, that (i) the Company shall
promptly (a) notify the Investors in writing of the existence of (but in
no event, without the prior written consent of the Mechler Investor, shall the
Company disclose to the Mechler Investor any of the facts or circumstances
regarding) material non-public information giving rise to an Allowed Delay, (b) advise
the Investors in writing to cease all sales 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 and (ii) 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 for not more than ten (10) days to
the extent, but in any such case only to the extent, necessary to allow any
post-effective amendment to the Registration Statement or supplement to the
Prospectus to be prepared and filed with the SEC and, if necessary, declared
effective (and such suspension shall be deemed to be an Allowed Delay without
regard to the time periods mentioned above) for the period (not to exceed ten (10) days)
commencing at the time that the Company disseminates a press release announcing
its preliminary financial results for any fiscal period or announcing a
material development and ending on the second Business Day after the earlier of
(A) the date that the related report on Form 10-KSB, 10-QSB or 8-K,
as applicable, is filed with the SEC and (B) the date on which such report
is required to be filed under the 1934 Act (without regard to Rule 12b-25
promulgated thereunder).

 

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 Effectiveness Period and to comply with the
provisions of the 1933 Act and the 1934 Act with respect to the distribution of
the Registrable Securities covered thereby;

 

(c)                                provide copies to and
permit 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 Investor
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 (but not later than two (2)

 

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Business Days after the filing
date, receipt date or sending date, as the case may be) one (1) copy
of any Registration Statement and any amendment thereto, each preliminary
prospectus and Prospectus and each amendment or supplement thereto, and each
letter written by or on behalf of the Company to the SEC or the staff of the
SEC, and each item of correspondence from the SEC or the staff of the SEC, in
each case relating to such Registration Statement (other than any portion of
any thereof which contains information for which the Company has sought
confidential treatment), and (ii) such number of copies of a Prospectus,
including a preliminary prospectus, and all amendments and supplements thereto
and such other documents as each Investor may reasonably request in order
to facilitate the disposition of the Registrable Securities owned by such
Investor that are covered by the related Registration Statement;

 

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

 

(f)                                  prior to any public
offering of Registrable Securities, use commercially reasonable efforts to
register or qualify or cooperate with the Investors 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 requested by the
Investors (other than California) 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)                               immediately notify the
Investors, at any time prior to the end of the Effectiveness Period, upon
discovery that, or upon the happening of any event as a result of which, the
Prospectus 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 promptly prepare, file with the SEC and furnish to such holder a supplement
to or an amendment of such Prospectus as may be necessary so that 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, file any final Prospectus,
including any supplement or amendment thereof, with the SEC pursuant to Rule 424
under the 1933 Act, promptly inform the Investors in writing if, at any
time during the Effectiveness Period, the Company does not satisfy the
conditions specified in Rule 172 and, as

 

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

 

(j)                                     With a view to making
available to the Investors the benefits of Rule 144 (or its successor
rule) and any other rule or regulation of the SEC that may at any
time permit the Investors to sell shares of Common Stock to the public without
registration, the Company covenants and agrees to:  (i) make and keep public information
available, as those terms are understood and defined in Rule 144, until
the earlier of (A) six months after such date as all of the Registrable
Securities may be resold pursuant to Rule 144(k) or any other rule of
similar effect or (B) such date as all of the Registrable Securities shall
have been resold; (ii) file with the SEC in a timely manner all reports
and other documents required of the Company under the 1934 Act; and (iii) furnish
to each Investor upon request, as long as such Investor owns any Registrable
Securities, (A) a written statement by the Company that it has complied
with the reporting requirements of the 1934 Act, (B) a copy of the Company’s
most recent Annual Report on Form 10-KSB or Quarterly Report on Form 10-QSB,
and (C) such other information as may be reasonably requested in
order to avail such Investor of any rule or regulation of the SEC that
permits the selling of any such Registrable Securities without registration.

 

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

 

The Company shall not disclose material nonpublic information to the
Mechler Investor, or to advisors to or representatives of the Mechler Investor,
unless prior to disclosure of such information the Company identifies such
information as being material nonpublic information and provides the Mechler
Investor, such advisors and representatives with the

 

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opportunity to
accept or refuse to accept such material nonpublic information for review and
the Mechler Investor enters into an appropriate confidentiality agreement with
the Company with respect thereto.

 

5.               Obligations of
the Investors.

 

(a)                                Each Investor shall
furnish in writing to the Company such information regarding itself, the
Company securities beneficially owned by it, the Registrable Securities held by
it and the intended method of disposition of the Registrable Securities held by
it, as shall be reasonably requested by the Company to effect the registration
of such Registrable Securities and shall execute such documents in connection
with such registration as the Company may reasonably request. At least
five (5) Business Days prior to the first anticipated filing date of any
Registration Statement, the Company shall notify each Investor of the
information the Company requests from such Investor. An Investor shall provide
such information to the Company at least two (2) Business Days prior to
the first anticipated filing date of such Registration Statement. Notwithstanding
anything herein to the contrary, the Company shall not be required to pay any
liquidated or other damages otherwise be liable to any Investor who fails to
comply with this Section 5(a) to the extent such damages result from
such failure by the Investor.

 

(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 is advised by the Company in writing that such dispositions may again
be made.

 

(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, if the
Company does not meet the conditions of Rule 163, any prospectus delivery
requirement applicable to such sales or dispositions upon written notice from
the Company that the Company has failed to satisfy the conditions of Rule 163
and that delivery of a prospectus is required as a result thereof.

 

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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, 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 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.

 

(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

 

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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 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.

 

10

 

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 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

 

11

 

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 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.

 

12

 

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:

  	
  /s/ Joseph R. Simrell

  	
   

  
	
   

  	
  Name:  Joseph R. Simrell

  
	
   

  	
  Title:  Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
  The Investors:

  	
  /s/ David W. Mechler, Jr.

  	
   

  
	
   

  	
  Name:  David W. Mechler, Jr.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Revocable Trust of May 16, 1986,

  
	
   

  	
  as December 27, 1994

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ John E. Rehfeld

  	
   

  
	
   

  	
  Name:  John E. Rehfeld, Trustee

  
							

 

13Exhibit 10.55

 

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.

 

SUBJECT TO THE PROVISIONS OF SECTION 10
HEREOF, THIS WARRANT SHALL BE VOID AFTER 5:00 P.M. EASTERN TIME ON MARCH 31,
2011 (THE “EXPIRATION DATE”).

 

No.                       

 

PRIMAL
SOLUTIONS, INC.

 

WARRANT TO
PURCHASE          SHARES OF

COMMON
STOCK, PAR VALUE $0.01 PER SHARE

 

For VALUE RECEIVED,                                                
(“Warrantholder”), is entitled to purchase, subject to the provisions of this
Warrant, from Primal Solutions, Inc., a Delaware corporation (“Company”),
at any time not later than 5:00 P.M., Eastern time, on the Expiration Date
(as defined above), at an exercise price per share equal to $0.15 (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 hereof 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 a duly executed Warrant
exercise form, in the form attached hereto as Appendix A (the “Exercise
Agreement”) and payment by cash, certified check or wire transfer of funds (or,
in certain circumstances, by cashless exercise as provided below) of 

 

 

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 the date evidence of loss, theft or destruction
thereof and security or indemnity satisfactory to the Company has been provided
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 shall be delivered to the Warrantholder within a reasonable
time, not exceeding three (3) 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, as specified in the Exercise Agreement. 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 right to purchase
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, and a
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 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
surrender and 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.

 

2

 

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 (i) the Warrant Price in
effect immediately prior to the date on which such change shall become
effective shall be adjusted by multiplying such Warrant Price by a fraction,
the numerator of which shall be the number of shares of Common Stock
outstanding immediately prior to such change and the denominator of which shall
be the number of shares of Common Stock outstanding immediately after giving
effect to such change and (ii) the number of Warrant Shares purchasable
upon exercise of this Warrant shall be adjusted by multiplying the number of
Warrant Shares purchasable upon exercise of this Warrant immediately prior to
the date on which such change shall become effective by a fraction, the
numerator of which is shall be the Warrant Price in effect immediately prior to
the date on which such change shall become effective and the denominator of
which shall be the Warrant Price in effect immediately after giving effect to
such change, calculated in accordance with clause (i) above. 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 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 

 

3

 

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 quotation system or association, the
closing sale price of one share of Common Stock on Nasdaq, the Bulletin Board
or such other quotation system 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 quotation system or association, the fair market value of one share of
Common Stock as of the Valuation Date, as determined in good faith by the Board
of Directors of the Company and the Warrantholder. If the Common Stock is not
then listed on a national securities exchange, Nasdaq, the Bulletin Board or
such other quotation system 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) of
this paragraph, 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.

 

4

 

(d)           An
adjustment to the Warrant Price shall become effective immediately after the
payment date in the case of each dividend or distribution and immediately after
the effective date of each other event which requires an adjustment.

 

(e)           In
the event that, as a result of an adjustment made pursuant to this Section 8,
the Warrantholder shall become entitled to receive any shares of capital stock
of the Company other than shares of Common Stock, the number of such other
shares so receivable upon exercise of this Warrant shall be subject thereafter
to adjustment from time to time in a manner and on terms as nearly equivalent
as practicable to the provisions with respect to the Warrant Shares contained
in this Warrant.

 

(f)            Except
as provided in subsection (g) hereof, if and whenever the Company
shall issue or sell, or is, in accordance with any of subsections (f)(l)
through (f)(7) hereof, deemed to have issued or sold, any Additional
Shares of Common Stock for no consideration or for a consideration per share
less than the Warrant Price in effect immediately prior to the time of such
issue or sale, then and in each such case (a “Trigger Issuance”) the
then-existing Warrant Price, shall be reduced, as of the close of business on
the effective date of the Trigger Issuance, to (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 30,
2006 (the “Full-Ratchet Date”) or (ii) if the Trigger Issuance
occurs prior to the Full-Ratchet Date, a price determined as follows:

 

	
  Adjusted Warrant Price =

  	
  (A x B) + D

  	
   

  
	
   

  	
  A+C

  	
   

  

 

where

 

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

 

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

 

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

 

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

 

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

 

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

 

5

 

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

 

(f)(1) 
Issuance of Rights or Options. In case at any time the Company shall in any
manner grant (directly and not by assumption in a merger or otherwise) any
warrants or other rights to subscribe for or to purchase, or any options for
the purchase of, Common Stock or any stock or security convertible into or
exchangeable for Common Stock (such warrants, rights or options being called “Options”
and such convertible or exchangeable stock or securities being called “Convertible
Securities”) whether or not such Options or the right to convert or exchange
any such Convertible Securities are immediately exercisable, and the price per
share for which Common Stock is issuable upon the exercise of such Options or
upon the conversion or exchange of such Convertible Securities (determined by
dividing (i) the sum (which sum shall constitute the applicable
consideration) of (x) the total amount, if any, received or receivable by the
Company as consideration for the granting of such Options, plus (y) the
aggregate amount of additional consideration payable to the Company upon the
exercise of all such Options, plus (z), in the case of such Options which
relate to Convertible Securities, the aggregate amount of additional
consideration, if any, payable upon the issue or sale of such Convertible
Securities and upon the conversion or exchange thereof, by (ii) the total
maximum number of shares of Common Stock issuable upon the exercise of such
Options or upon the conversion or exchange of all such Convertible Securities
issuable upon the exercise of such Options) shall be less than the Warrant
Price in effect immediately prior to the time of the granting of such Options,
then the total number of shares of Common Stock issuable upon the exercise of
such Options or upon conversion or exchange of the total amount of such Convertible
Securities issuable upon the exercise of such Options shall be deemed to have
been issued for such price per share as of the date of granting of such Options
or the issuance of such Convertible Securities and thereafter shall be deemed
to be outstanding for purposes of adjusting the Warrant Price. Except as
otherwise provided in subsection 8(f)(3), no adjustment of the Warrant
Price shall be made upon the actual issue of such Common Stock or of such
Convertible Securities upon exercise of such Options or upon the actual issue
of such Common Stock upon conversion or exchange of such Convertible
Securities.

 

(f)(2) 
Issuance of Convertible Securities. In case the Company shall in any manner
issue (directly and not by assumption in a merger or otherwise) or sell any
Convertible Securities, whether or not the rights to exchange or convert any
such Convertible Securities are immediately exercisable, and the price per
share for which Common Stock is issuable upon such conversion or exchange
(determined by dividing (i) the sum (which sum shall constitute the
applicable consideration) of (x) the total amount received or receivable by the
Company as consideration for the issue or sale of such Convertible Securities,
plus (y) the aggregate amount of additional consideration, if any, payable to
the Company upon the conversion or exchange thereof, by (ii) the total
number of shares of Common Stock issuable upon the conversion or exchange of
all such Convertible Securities) shall be less than the Warrant Price in effect
immediately prior to the 

 

6

 

time of such issue or sale, then the total
maximum number of shares of Common Stock issuable upon conversion or exchange
of all such Convertible Securities shall be deemed to have been issued for such
price per share as of the date of the issue or sale of such Convertible
Securities and thereafter shall be deemed to be outstanding for purposes of
adjusting the Warrant Price, provided that (a) except as otherwise
provided in subsection 8(f)(3), no adjustment of the Warrant Price shall
be made upon the actual issuance of such Common Stock upon conversion or
exchange of such Convertible Securities and (b) no further adjustment of
the Warrant Price shall be made by reason of the issue or sale of Convertible
Securities upon exercise of any Options to purchase any such Convertible
Securities for which adjustments of the Warrant Price have been made pursuant
to the other provisions of subsection 8(f).

 

(f)(3) Change
in Option Price or Conversion Rate. Upon the happening of any of the following
events, namely, if the purchase price provided for in any Option referred to in
subsection 8(f)(l) hereof, the additional consideration, if any, payable
upon the conversion or exchange of any Convertible Securities referred to in
subsections 8(f)(l) or 8(f)(2), or the rate at which Convertible Securities
referred to in subsections 8(f)(l) or 8(f)(2) are convertible into or
exchangeable for Common Stock shall change at any time (including, but not
limited to, changes under or by reason of provisions designed to protect
against dilution), the Warrant Price in effect at the time of such event shall
forthwith be readjusted to the Warrant Price which would have been in effect at
such time had such Options or Convertible Securities still outstanding provided
for such changed purchase price, additional consideration or conversion rate,
as the case may be, at the time initially granted, issued or sold. On the
termination of any Option for which any adjustment was made pursuant to this
subsection 8(f) or any right to convert or exchange Convertible
Securities for which any adjustment was made pursuant to this subsection 8(f) (including
without limitation upon the redemption or purchase for consideration of such
Convertible Securities by the Company), the Warrant Price then in effect
hereunder shall forthwith be changed to the Warrant Price which would have been
in effect at the time of such termination had such Option or Convertible
Securities, to the extent outstanding immediately prior to such termination,
never been issued.

 

(f)(4) Stock
Dividends. Subject to the provisions of this Section 8(f), in case the
Company shall declare or pay a dividend or make any other distribution upon any
stock of the Company (other than the Common Stock) payable in Common Stock,
Options or Convertible Securities (other than a dividend or distribution for
which an adjustment has been made pursuant to Section 8(a)), then any
Common Stock, Options or Convertible Securities, as the case may be,
issuable in payment of such dividend or distribution shall be deemed to have
been issued or sold without consideration.

 

(f)(5) Consideration
for Stock. In case any shares of Common Stock, Options or Convertible
Securities shall be issued or sold for cash, the consideration received
therefor shall be deemed to be the net amount received by the Company therefor,
after deduction therefrom of any expenses incurred or any 

 

7

 

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

 

(f)(6) Record
Date. In case the Company shall take a record of the holders of its Common
Stock for the purpose of entitling them (i) to receive a dividend or other
distribution payable in Common Stock, Options or Convertible Securities or (ii) to
subscribe for or purchase Common Stock, Options or Convertible Securities, then
such record date shall be deemed to be the date of the issue or sale of the
shares of Common Stock deemed to have been issued or sold upon the declaration
of such dividend or the making of such other distribution or the date of the
granting of such right of subscription or purchase, as the case may be.

 

(f)(7) Treasury
Shares. The number of shares of Common Stock outstanding at any given time
shall not include shares owned or held by or for the account of the Company or
any of its wholly-owned subsidiaries, and the disposition of any such shares
(other than the cancellation or retirement thereof) shall be considered an
issue or sale of Common Stock for the purpose of this subsection (f).

 

(g)           Anything
herein to the contrary notwithstanding, the Company shall not be required to
make any adjustment of the Warrant Price in the case of the issuance of (A) capital
stock, Options or Convertible Securities issued to (i) directors,
officers, employees, advisers or consultants of the Company in connection with
their service as directors of the Company, their employment by the Company or
their retention as advisers or consultants by the Company 

 

8

 

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 to increase the number of shares of Common Stock issuable
thereunder or to lower the exercise or conversion price thereof, (C) securities
issued pursuant to that certain Purchase Agreement dated April    ,
2006, among the Company, and the Investors named therein (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 Warrant Price pursuant to the other provisions of this
Warrant) (collectively, “Excluded Issuances”).

 

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

 

(i)            To
the extent permitted by applicable law and the listing requirements of any
stock market or exchange on which the Common Stock is then listed, the Company
from time to time may decrease the Warrant 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 Warrant Price is decreased
pursuant to the preceding sentence, the Company shall provide written notice
thereof to the Warrantholder at least five (5) days prior to the date the
decreased Warrant Price takes effect, and such notice shall state the decreased
Warrant Price and the period during which it will be in effect.

 

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, except for the provisions of the first sentence of this Section 9,
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.         Extension
of Expiration Date. If the Company fails to cause any Registration
Statement covering Registrable Securities (unless otherwise defined herein,
capitalized terms are as defined in the Registration Rights Agreement relating
to the Warrant Shares (the “Registration Rights Agreement”)) to be declared
effective prior to the applicable dates set forth therein, or if any of the
events specified in Section 2(c)(ii) of the Registration Rights
Agreement occurs, and the Blackout Period (whether alone, or in combination
with any other Blackout Period) continues for more than 60 days in any 12 month
period, or for more than a total of 90 days, then the Expiration Date of this
Warrant shall be extended one day for each day beyond the 60-day or 90-day
limits, as the case may be, that the Blackout Period continues.

 

9

 

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

 

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

 

Section 13.         Identity
of Transfer Agent. The Transfer Agent for the Common Stock is Liberty Transfer.
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:  Joseph R. Simrell

Fax: 
(949) 221-8594

 

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

 

10

 

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

 

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

 

Section 17.         Governing
Law; Consent to Jurisdiction; Waiver of Jury Trial. This Warrant shall be
governed by, and construed in accordance with, the internal laws of the State
of New York, without reference to the choice of law provisions thereof. The
Company and, by accepting this Warrant, the Warrantholder, each irrevocably
submits to the exclusive jurisdiction of the courts of the State of New York
located in New York County and the United States District Court for the
Southern District of New York for the purpose of any suit, action, proceeding
or judgment relating to or arising out of this Warrant and the transactions
contemplated hereby. Service of process in connection with any such suit,
action or proceeding may be served on each party hereto anywhere in the
world by the same methods as are specified for the giving of notices under this
Warrant. The Company and, by accepting this Warrant, the Warrantholder, each
irrevocably consents to the jurisdiction of any such court in any such suit,
action or proceeding and to the laying of venue in such court. The Company and,
by accepting this Warrant, the Warrantholder, each irrevocably waives any
objection to the laying of venue of any such suit, action or proceeding brought
in such courts and irrevocably waives any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
EACH OF THE COMPANY AND, BY ITS ACCEPTANCE 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. (a)  Subject to the provisions of clauses (b) and (c) below,
in the event that the closing bid price per share of Common Stock as reported
by the Bulletin Board (or such other exchange or stock market on which the
Common Stock may then be listed or quoted) equals or exceeds $0.3375
(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 at least twenty (20) consecutive trading days commencing
on the later of September 30, 2006 and the date on which the Registration
Statement (as defined in the Registration Rights Agreement) is initially
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 twenty (20) trading day period, may demand
that the Warrantholder exercise its cash exercise rights hereunder, and the
Warrantholder must exercise its rights hereunder prior to the end of the Notice
Period; provided that (i) the Company simultaneously gives a similar notice
to all holders of Company Warrants (as defined below), (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 

 

11

 

or (B) no longer constitute Registrable Securities (as defined in
the Registration Rights Agreement) (this clause (ii) being hereinafter
referred to as the “Trading Condition”) and (iii) this Warrant is fully
exercisable for the full amount of Warrant Shares covered hereby. If, in
violation of this Section 18(a), such exercise is not made or if only a
partial exercise is made, any and all rights to further exercise the Warrant
shall cease upon the expiration of the Notice Period without prejudice to any
rights the Company may have at law or in equity.

 

(b)           In
any 90-day period, no more than the lesser of (i) 25% of the aggregate
amount of Warrants initially issued to a Warrantholder or (ii) the number
of Warrants held by the Warrantholder, may be called by the Company and
the Company may not call additional Warrants in any subsequent three-month
period unless all the conditions specified in Section 18(a) are again
met (including without limitation, the Trading Condition) at the time that any
subsequent call notice is given.

 

(c)           In
connection with any transfer or exchange of less than all of this Warrant, the
transferring Warrantholder shall deliver to the Company an agreement or
instrument executed by the transferring Warrantholder and the new Warrantholder
allocating between them on whatever basis they may determine in their sole
discretion any subsequent call of this Warrant by the Company, such that after
giving effect to such transfer the Company shall have the right to call the
same number of Warrants that it would have had if the transfer or exchange had
not occurred.

 

Section 19.         Cashless
Exercise. Notwithstanding any other provision contained herein to the
contrary, from and after the first anniversary of the Closing Date (as defined
in the Purchase Agreement) upon the occurrence and during the continuance of
any breach by the Company of its obligations under the Registration Rights
Agreement, the Warrantholder may elect to receive, without the payment by
the Warrantholder of the aggregate Warrant Price in respect of the shares of
Common Stock to be acquired, shares of Common Stock of equal value to the value
of this Warrant, or any specified portion hereof, by the surrender of this
Warrant (or such portion of this Warrant being so exercised) together with a
Net Issue Election Notice, in the form annexed hereto as Appendix B, duly
executed, to the Company. Thereupon, the Company shall issue to the
Warrantholder such number of fully paid, validly issued and nonassessable
shares of Common Stock as is computed using the following formula:

 

	
  X =

  	
  Y (A - B)

  
	
   

  	
  A

  

 

where

 

X =          the
number of shares of Common Stock to which the Warrantholder is entitled upon
such cashless exercise;

 

Y =          the
total number of shares of Common Stock covered by this Warrant for which the
Warrantholder has surrendered purchase rights at such time for cashless
exercise (including both shares to be issued to the Warrantholder and shares as
to which the purchase rights are to be canceled as payment therefor);

 

12

 

A =         the
“Market Price” of one share of Common Stock as at the date the net issue
election is made; and

 

B =          the
Warrant Price in effect under this Warrant at the time the net issue election
is made.

 

Section 20.         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 21.         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                      
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 23.             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.

 

13

 

IN WITNESS WHEREOF, the Company has caused
this Warrant to be duly executed, as of the 27th day of April, 2006.

 

	
   

  	
  PRIMAL SOLUTIONS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
  Name:  Joseph R. Simrell

  
	
   

  	
  Title:  Chief Executive Officer

  

 

14

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