Document:

Exhibit 10.37

 

March 25, 2005

 

 

William C. Bousema

1815 Port Tiffin Place

Newport Beach, CA  92660

 

Dear Bill:

We are pleased to offer you the position of Senior
Vice President and Chief Financial Officer with Primal Solutions, Inc., a
Delaware Corporation (“Primal”). 
Additionally, you have agreed to serve as Corporate Secretary.   This is an exempt position based at our
Irvine office, located at 18881 Von Karman Avenue, Suite 500, Irvine, California.  You will report directly to me.  Your
start date is retroactive to February 1, 2005.

Our normal office hours are Monday through Friday,
8:30 am to 5:30 pm.  We maintain a
business casual office environment. 
Client meetings may require more formal business attire.

As a condition of employment, you will be required to
sign our standard Employee Confidentiality & Invention Assignment
Agreement, which is enclosed.  Further,
this offer of employment is contingent on verification of your right to work in
the United States, as required by the Immigration Reform and Control Act of
1986.

Your compensation will include:

	
  Base Salary

  	
  $7,291.66 paid
  semi-monthly based on Primal’s payroll schedule ($175,000 annualized amount
  working full time).

  
	
  Executive Incentive Compensation

  	
  You may be entitled to
  receive, in the form of additional compensation, an amount not less than 35%
  of your base salary upon meeting or exceeding certain Company Performance
  Goals.  The Company Performance Goals
  for Fiscal Year 2005 incentive compensation purposes will include both
  individual and company-wide targets. The Company Performance Goals for Fiscal
  Year 2005 are still under development and are expected to be finalized by
  March 31, 2005.

  
	
  Duties

  	
  In
  addition to those duties and responsibilities set forth on Exhibit A
  hereto, you will have such duties as are assigned or delegated to you by the Chief
  Executive Officer or the Company’s Board of Directors.

  
	
  Stock Options

  	
  Following
  commencement of employment, a recommendation will be made to the Board of
  Directors to grant to you options to purchase 1,081,062 shares of common
  stock under our 2004 Flexible Incentive Plan, which Primal stock options are
  scheduled to vest over a three year period.

  You
  will receive credit for your service as a consultant in calculating your 

   

  

 

 

	
   

  	
  stock option
  vesting.  Additionally, if at any time
  during your employment by Primal, (i) you are terminated without Cause, or
  (ii) you terminate your employment for Good Reason, all outstanding unvested
  stock options granted to you will accelerate and vest.

  
	
  Paid Time-Off

  	
  As an employee
  of Primal, you are eligible for paid vacations, personal holidays, and sick
  leave.  The Employee Handbook describes
  Primal’s current policies regarding these benefits.  As a member of Primal’s  senior management team, you will be
  eligible to accrue up to four (4) weeks annual paid vacation in addition to
  those paid holidays recognized in Primal’s employment policies. 

  
	
  Benefits

  	
  Primal
  provides medical, dental, life, AD&D, short- and long- term disability
  insurance and a 401(k) program. You will be eligible to participate in the
  Primal benefits plan per Primal’s standard benefits policy.  You will receive credit for your 4 months
  of service as a consultant to Primal.

  Primal
  will pay or reimburse you for reasonable expenses incurred and expenditures made
  by you on behalf of or at the request of Primal in the performance of your
  duties as Senior Vice President, Chief Financial Officer and Secretary, in
  accordance with the Primal’s employment policies, including attending
  conventions, seminars, and other business meetings, in appropriate business
  entertainment activities and for promotional expenses. 

  
	
  Termination

  	
  A
  description of benefits you may be entitled to receive in the event of a
  change in control has been separately addressed in that certain Change in
  Control Agreement between you and Primal, of even date herewith.

  The
  following paragraphs of this Termination section (the “Severance Provisions”)
  shall expire on the 1st anniversary of your employment with Primal
  and are applicable to circumstances other than a Change in Control:

  (A)          Other than in the event of a Change
  in Control, if Primal terminates your employment without Cause or if you
  terminate your employment for Good Reason (as those capitalized terms are
  defined in the Change in Control Agreement), Primal will pay you (i) your
  salary for the remainder, if any, of the calendar month in which such
  termination is effective and for an additional 9-month period, (ii) 75% of
  your incentive compensation for the Fiscal Year during which the termination
  is effective and calculated assuming that 100% of the targets under such
  bonus plans are achieved,  (iii)
  accrued vacation through the date of termination, (iv) accrued but unpaid
  incentive compensation from the previous Fiscal Year, if any, (v) executive
  outplacement assistance for a period of 9 months, and (vi) continued coverage
  under Primal’s medical, dental, life and disability plans or under a COBRA
  plan providing similar benefits if continued coverage under Primal’s

   

  

 

2

 

	
   

  	
  benefits
  plans is not permitted, for you and your dependents on the same terms as in
  effect at the time of termination of employment, for the period from the date
  of termination until you obtain replacement coverage through other employment
  or for a period of 9 months after such employment termination, whichever is
  less.  Payments will only be made for
  termination for Good Reason if you terminate within 1 month of the occurrence
  of Good Reason. In no event will payments under (i), (ii), (iv) and (v),
  above extend beyond 2-1/2 months following the close of the calendar year in
  which termination under this paragraph occurs, and payments will be
  accelerated, if necessary, to prevent such 2-1/2 month period to be exceeded.

  (B)           If Primal terminates you for Cause,
  or if you terminate your employment other than for Good Reason or disability,
  Primal will pay you (i) your salary plus accrued vacation through the date
  such termination is effective, and (ii) accrued and unpaid incentive compensation
  from the previous Fiscal Year and for the then-current Fiscal Year (but only
  to the extent such incentive compensation has been earned and appropriate
  Company Performance Goals have been achieved prior to the termination of
  employment), if any.

  (C)           Upon Disability (as defined in the
  Change in Control Agreement) for 120 consecutive days, or 180 days in any
  12-month period, your employment may be terminated by either you or Primal
  and upon such termination you will be entitled to (i) your salary, offset by
  any payments made or benefits received by you in connection with any Company
  disability policy, disability insurance or state disability program, plus
  accrued vacation through the date of such termination, (ii) your
  incentive compensation, if any, for the Fiscal Year in which the Disability
  occurs, prorated through the end of the calendar month in which the
  disability is deemed to have occurred, provided that the Company Performance
  Goals for such Fiscal Year have been met, (iii) accrued and unpaid incentive
  compensation, if any, from the previous Fiscal Year, and (iv) continued
  coverage under Primal’s medical, dental, life and disability plans or under a
  COBRA plan providing similar benefits if continued coverage under Primal’s
  benefits plans is not permitted, for you and your dependents on the same
  terms as in effect at the time of termination of employment, for a period of
  3 months after such employment termination. 
  Payments under  (ii) and (iii),
  above will be made no later than 2-1/2 months following the close of the
  calendar year in which termination under this paragraph occurs.

  (D)          Upon death, your designated
  beneficiary will be entitled to

  (i) your salary plus accrued vacation through the date of such termination,
  (ii) your incentive compensation, if any, for the Fiscal Year in which your
  death occurs, prorated through the end of the calendar month in which such
  death occurs, provided that the Company Performance Goals for such Fiscal
  Year have been met, 

   

  

 

3

 

	
   

  	
  (iii)
  accrued and unpaid incentive compensation, if any, from the previous Fiscal
  Year, and (iv) continued coverage under Primal’s medical, dental, life and
  disability plans or under a COBRA plan providing similar benefits if
  continued coverage under Primal’s benefits plans is not permitted, for your
  dependents on the same terms as in effect at the time of termination of
  employment, for a period of 3 months after such employment termination.

  As
  a condition of and prior to you receiving any unvested pay or benefits
  hereunder, Primal may require you to execute a release of all claims that you
  may have against Primal or its affiliates arising from your employment with
  Primal or its affiliates or the termination thereof, in a form reasonably
  satisfactory to Primal.

  Notwithstanding
  the foregoing, for the 60 day period prior to the expiration of the 1st
  anniversary of your employment with Primal, Primal will commence negotiations
  with you in good faith regarding the new terms of this Termination section
  (the “New Severance Provisions”).  If,
  following such good faith negotiations of the New Severance Provisions, you
  and Primal are unable to reach agreement regarding the New Severance
  Provisions, the Severance Provisions contained herein shall expire on their
  terms.  If Primal does not negotiate in
  good faith, this letter agreement will expire on the one year anniversary of
  your employment, your employment with Primal will be terminated and you will
  be paid the severance benefits provided for in paragraph A of this
  Termination section and all outstanding unvested stock options granted to you
  will accelerate and vest.

  
	
  Non-Interference

  	
  In consideration of the compensation and benefits to
  be paid or provided to you by Primal, you hereby covenant that you will not,
  directly or indirectly during your employment with Primal and for as long as
  you are entitled to severance benefits thereafter (i)  solicit business of the same or similar
  type being carried on by Primal, (ii) solicit as an employee, independent contractor,
  or otherwise, any person who is an employee of Primal or in any manner induce
  or attempt to induce any employee of Primal to terminate his or her
  employment with Primal, or (iii) interfere with Primal’s relationship with
  any person, including any person who at any time during your period of
  employment with Primal was an employee, contractor, supplier, or customer of
  Primal.

  If you breach any of the terms and provisions of
  this Non-Interference section following the termination of your employment, Primal
  may, in addition to any other remedies that Primal may have for any such
  breach, immediately terminate the payment of any severance payments or
  benefits then being paid to you hereunder, other than payments vested prior
  to the date of termination of your employment.

  

 

4

 

	
  Miscellaneous

  	
   

  Arbitration.

  (A)          Arbitration
  shall be the sole and exclusive remedy for any dispute, claim, or controversy
  of any kind or nature (a “Claim”) arising out of, related to, or connected
  with this letter agreement or the termination of the your employment
  relationship with Primal. This mutual agreement to arbitrate includes any
  Claim by you against any parent, subsidiary, or affiliated entity of Primal,
  or any director, officer, general or limited partner, employee or agent of
  Primal or of any such parent, subsidiary or affiliated entity. It also
  includes any claim against you by Primal, or any parent, subsidiary or
  affiliated entity of Primal.

  (B)           This
  section does not apply to any claims by you: (1) for workers’ compensation
  benefits; (2) for unemployment insurance benefits; (3) under a benefit plan
  where the plan specifies a separate arbitration procedure; (4) filed with an
  administrative agency which are not legally subject to arbitration under this
  letter agreement; or (5) which are otherwise expressly prohibited by law from
  being subject to arbitration under this letter agreement.

  (C)           Any
  arbitration proceedings shall be conducted in Orange County, California. Any
  Claim submitted to arbitration shall be decided by a single, neutral
  arbitrator (the “Arbitrator”). The parties to the arbitration shall mutually
  select the Arbitrator not later than 45 days after service of the demand for
  arbitration. If the parties for any reason do not mutually select the
  Arbitrator within the 45 day period, then any party may apply to any court of
  competent jurisdiction to appoint a retired judge as the Arbitrator. The
  parties agree that arbitration shall be conducted in accordance with California
  Code of Civil Procedure sections 1280 et seq., including Code of Civil
  Procedure section 1283.05 regarding discovery, except as modified in
  this Agreement. The Arbitrator shall apply the substantive federal, state, or
  local law and statute of limitations governing any Claim submitted to
  arbitration. In ruling on any Claim submitted to arbitration, the Arbitrator
  shall have the authority to award only such remedies or forms of relief as
  are provided for under the substantive law governing such Claim. The Arbitrator
  shall issue a written decision revealing the essential findings and
  conclusions on which the decision is based. Judgment on the Arbitrator’s
  decision may be entered in any court of competent jurisdiction.

  (D)          Primal
  shall be responsible for paying the fees and costs incurred in the
  arbitration (e.g., filing fees, transcript costs and Arbitrator’s fees). The
  parties shall be responsible for their own attorneys’ fees and costs, except
  that the Arbitrator shall have the authority to award attorneys’ fees and
  costs to the prevailing party in accordance with the applicable 

  

 

5

 

	
   

  	
  law governing the dispute.

  (E)           The
  Arbitrator, and not any federal or state court, shall have the exclusive
  authority to resolve any issue relating to the interpretation, formation or
  enforceability of this letter agreement, or any issue relating to whether a
  Claim is subject to arbitration under this letter agreement, except that any
  party may bring an action in any court of competent jurisdiction to compel
  arbitration in accordance with the terms of this letter agreement.

  Severability.  In the
  event any provision of this letter agreement or the application thereof to
  any circumstance shall be held by a court of competent jurisdiction to be
  invalid, illegal or unenforceable, then such provision shall be deemed to be
  deleted herefrom in any action before that court, and all other provisions of
  this letter agreement shall remain in full force and effect.

  

You acknowledge that this offer letter is not intended
to be construed as an employment agreement for any specific term, and that
Primal is an “at-will” employer. Either you or Primal are free to terminate
your employment relationship at any time, with or without cause and with or without
notice. This is the full and complete agreement between us concerning duration
of employment and termination of employment. The “at-will” nature of your
employment may only be changed in an expressed writing signed by you and the
President of Primal.

If you have any questions concerning the terms of this
offer, please do not hesitate to contact me. 
I feel the position will be a challenging, exciting and rewarding one
for you, and I personally look forward to working with you.  Please acknowledge your acceptance and
understanding of these terms by signing and returning the following endorsement
no later than March   , 2005. 
If possible, please fax a copy of the signed letter and the last page of
the Confidentiality Agreement within the next day to (949) 221-8590.  This offer is valid through March   ,
2005.  The additional copy is for your
records. Congratulations!

 

	
  Sincerely,

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  /s/ Joseph R. Simrell

  	
   

  	
   

  
	
  Joseph R. Simrell

  	
   

  	
   

  
	
  President & Chief Executive Officer

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Attachment:   Employee
  Confidentiality and Invention Assignment Agreement

  	
   

  
	
   

  	
   

  	
   

  
	
  Accepted and Agreed to: 

  	
  /s/ Bill Bousema

  	
  3/25/04

  
	
   

  	
  Signature

  	
  Date

  
	
   

  	
   

  	
   

  
					

 

6

 

Exhibit A

 

 

7Exhibit 10.38

 

CHANGE OF CONTROL AGREEMENT

 

This Change of Control Agreement (this “Agreement”) is
made as of March 25, 2005 by and between Primal Solutions, Inc., a Delaware
corporation (the “Company”), and William C. Bousema (the “Executive”).

 

RECITALS

 

A.            The
Executive has made and is expected to make a major contribution to the
profitability, growth and financial strength of the Company and its affiliates.

 

B.            The Company considers the continued availability of the
Executive’s services, managerial skills and business experience to be in the
best interest of the Company and its stockholders and desires to assure the
continued services of the Executive on behalf of the Company without the
distraction of the Executive occasioned by the possibility of an abrupt change
in control of the Company.

 

C.            The
Executive is willing to remain in the employ of the Company, particularly in
the event of a threat or the occurrence of a change in control of the Company,
upon the understanding that the Company will provide him with income security
and certain other benefits in accordance with the terms and conditions
contained in this Agreement in the event his employment is terminated in
connection with a change in control of the Company.

 

D.            The
Company and the Executive are also concurrently entering into a Letter
Agreement dated as of the date hereof (the “Letter Agreement”), which Letter
Agreement describes certain covenants and conditions of Executive’s employment
by the Company.

 

E.             For
purposes of this Agreement, defined terms in this Agreement shall have the
meaning specified or referred to in Section 3.

 

AGREEMENT

 

In consideration of the foregoing premises and the
mutual covenants herein contained, and for other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
parties agree as follows:

 

1.  EFFECTIVE DATE; TERM

 

1.1           This
Agreement shall become effective on the date hereof and shall continue in
effect until one (1) day after the termination of the Executive’s employment
with the Company for any reason. No termination of this Agreement shall limit,
alter or otherwise affect the Executive’s rights hereunder with respect to a
Change of Control which has occurred prior to, or within three months after,
such employment termination, including without limitation the Executive’s
rights to receive the various benefits hereunder.

 

2.  SEVERANCE PAYMENTS UPON A
CHANGE OF CONTROL

 

2.1           Events
Giving Rise to Severance Payments.

 

The Company shall pay or cause to be paid to the Executive
the Severance Payments specified in Section 2.2 and the other benefits specified in this Agreement if:

 

(i)            there
is a Change of Control, and within 12 months after the Change of Control, (A)
the Company or any successor to the Company terminates the employment of the
Executive for any reason other than Cause, death, Disability or the Executive
reaching the mandatory retirement age established by the Company, if any, or
(b) the Executive voluntarily terminates his employment for Good Reason; or

 

(ii)           the
Executive’s employment by the Company is terminated by the Company within three
months prior to the Change of Control, and such termination arose in connection
with or in anticipation of the Change of Control (for purposes of this
Agreement, meaning that at the time of such termination, the 

 

 

Company had entered into an agreement, the
consummation of which would result in a Change of Control, or the termination
of the Executive’s employment was at the request of a third party who has taken
steps to effect a Change of Control), or the Executive voluntarily terminates
his employment for Good Reason during such three-month period, and in each
case, such Change of Control is consummated, or the Board adopts a resolution
to the effect that a potential Change of Control for purposes of this Agreement
has occurred.

 

2.2           Severance
Payments Upon Termination of Employment.

 

(a)           If
the Executive is entitled to benefits pursuant to Section 2.1, the Company
shall pay or provide to the Executive as a severance payment (the “Severance
Payment”), in lieu of any further compensation or other amounts and in
settlement and complete release of all claims the Executive may have against
the Company, the following:

 

(i)            A
single lump sum payment, payable in cash within ten days of the Termination
Date, or if applicable, the effective date of any release executed by the
Executive in connection with termination of his employment with the Company
(provided that any portion thereof may be paid earlier if required by applicable
law), equal to the sum of:

 

(A)          any
accrued and unpaid portion of the Executive’s Salary and vacation through the
Termination Date and any accrued and unpaid portion of the Executive’s
Incentive Compensation and other bonuses for the prior fiscal year;

 

(B)           an
amount equal to 100% of the Executive’s then current annual Salary; and

 

(C)           an
amount equal to 100% of the amount that would otherwise be payable to the
Executive, if the Executive remained employed by the Company, under the
Incentive Compensation and other bonus plans, if any, in which the Executive is
then participating for the fiscal year in progress, calculated assuming that
100% of the targets under such bonus plans are achieved.

 

(ii)           Continuation,
on the same terms as in effect on the Termination Date, including general
premium increases, of all medical, dental, life and disability Benefits for the
Executive for 12 months commencing on the Termination Date (the “payment period”),
including equivalent coverage for the Executive’s spouse and dependent
children, if such coverage was provided immediately prior to the Termination
Date. In the event that the Executive is ineligible under the terms of such
insurance to continue to be so covered, the Company shall provide the Executive
with a lump sum payment equal to the cost to the Executive of obtaining
substantially similar coverage for the payment period, which lump sum payment
shall be paid no later than 3 months after such Termination Date, but in no
event later than 2-1/2 months following the close of the calendar year in which
termination under this paragraph occurs. If the Executive, prior to the
Termination Date, was receiving any cash-in-lieu payments designed to enable
the Executive to obtain insurance coverage of his choosing, the Company shall,
in addition to any other benefits to be provided under this
Section 2.2(a)(ii), provide the Executive with continued payments of such
in-lieu payments that the Executive would have been entitled to receive over
the payment period. In no event will such in-lieu payments extend beyond 2-1/2
months following the close of the calendar year in which termination under this
paragraph occurs, and payments will be accelerated, if necessary to prevent
such 2-1/2 month period to be exceeded.  The
Company’s obligation hereunder with respect to the foregoing Benefits shall be
limited to the extent that the Executive obtains any such benefits pursuant to
a subsequent employer’s benefit plans, in which case the Company may reduce the
coverage of any Benefits it is required to provide the Executive hereunder so
long as the aggregate coverage and benefits of the combined benefit plans are
no less favorable to the Executive than the Benefits required to be provided
hereunder.

 

(b)           Except
as set forth herein, the Executive’s compensation by the Company and its
affiliates and accrual of, or participation in all benefit, bonus, incentive
and other plans or programs of the Company and its affiliates, will cease on
the Termination Date.

 

2

 

(c)           The
Executive shall not be required to mitigate the amount of any Severance Payment
provided for in this Agreement by seeking other employment or otherwise and no
such payment shall be offset or reduced by the amount of any compensation or
benefits provided to the Executive in any subsequent employment, except as
provided in Section 2.2(a)(ii). Notwithstanding the foregoing, to the
extent permitted by applicable law, the Severance Payment provided for in this
Section 2 shall be reduced by the amount of any other severance or
termination pay to which the Executive may be entitled by operation of any
applicable law or under any agreement with the Company, any of its affiliates
or any successors of such entities.

 

(d)           The
Company may, as a condition to the Executive receiving any Benefits under this
Agreement, require the Executive to execute a release of all claims the
Executive may have against the Company or its affiliates arising from the
Executive’s employment with the Company or its affiliates or any successors,
and the termination thereof, in a form reasonably satisfactory to the Company.

 

(e)           The
obligations of the Company hereunder, including its obligation to pay the
Severance Payment provided for herein, are contingent upon the Executive’s
performance of the Executive’s obligations hereunder, including under
Section 2.6. If the Executive breaches any of the material terms and
provisions of this Agreement, in addition to any other remedies that the
Company may have for any such breach, the Company may immediately terminate
providing any Severance Payment then being made.

 

(f)            Amounts which are vested benefits or which the Executive is
otherwise entitled to receive under any plan or program of the Company shall be
payable in accordance with such plan or program, except as explicitly modified
by this Agreement.

 

2.3           Notice
of Termination.  Any termination of the Executive’s employment by the
Company or by the Executive (other than termination based on the Executive’s
death) following or in connection with a Change of Control shall be
communicated by the terminating party in a Notice of Termination to the other
party hereto.

 

2.4           Withholding
Taxes.  Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law.

 

2.5           Affiliates. 
Nothing contained herein shall prohibit any affiliates of the Company
fulfilling any obligation of the Company to the Executive hereunder and for
such purposes will be deemed the act of the Company.

 

2.6           Covenants
of the Executive. 
Payment of the Severance Payment under this Agreement shall be contingent upon
the Executive complying with the covenants of the Executive set forth in the “Non-Interference”
provision of the Letter Agreement as well as under the Employee Confidentiality
and Invention Assignment Agreement, through the payment period. The parties
acknowledge that the Executive’s agreement to comply with these covenants is an
essential element of this Agreement, and without which the Company would not
have entered into this Agreement.

 

2.7           Indemnification
for Excise Tax.

 

(a)           In
the event that (i) the Executive becomes entitled to the Severance Payments in
accordance with this Section 2, and (ii) such Severance Payment and any
other benefits or payments (including transfers of property) that the Executive
receives, or is to receive, pursuant to this Agreement or any other agreement,
plan or arrangement with the Company in connection with a Change of Control (“Other
Benefits”) shall be subject to the tax imposed pursuant to Section 4999 of
the Internal Revenue Code of 1986, as amended (the “Code”) (or any successor
thereto) or any comparable provision of state law (collectively, the “Excise
Tax”), then the Company or its successor shall pay to the Executive within 30
days after the termination of the Executive’s employment with the Company or
its successor, an additional amount (the “Gross-Up Payment”) determined in
accordance with the following provisions. The Gross-Up Payment shall be equal
to the amount necessary so that the net amount retained by the Executive, after
subtracting the Excise Tax and after also subtracting all federal, state or
local income tax, FICA tax and Excise Tax on the Gross-Up Payment, shall be
equal to the net amount the Executive would have retained if no Excise Tax had
been imposed and no Gross-Up Payment had been made. It is intended that the
Executive shall not suffer any 

 

3

 

loss or expense resulting from the assessment of any
Excise Tax or the Company’s reimbursement of the Executive for any such Excise
Tax.

 

(b)           For
purposes of determining whether any of the Severance Payments or Other Benefits
will be subject to Excise Tax and the amount of such Excise Tax:

 

(i) any payments or benefits received or to be
received by the Executive in connection with a Change of Control (whether
pursuant to the terms of this Agreement or any other plan, arrangement or
agreement with the Company, any Person whose actions result in a Change of
Control or any Person affiliated with the Company or such Person) shall be
treated as “parachute payments” within the meaning of Section 280G(b)(2)
of the Code (or any successor thereto), and all “excess parachute payments”
within the meaning of Section 280G(b)(l) of the Code (or any successor
thereto) shall be treated as subject to Excise Tax, unless in the opinion of
tax counsel selected by the Company’s independent auditors and acceptable to
the Executive, (A) such other payments or benefits (in whole or in part) do not
constitute such parachute payments or (B) such excess parachute payments (in
whole or in part) represent reasonable compensation for services actually
rendered within the meaning of Section 280(G)(b)(4) of the Code (or any
successor thereto),

 

(ii) the amount of the Severance Payments and Other
Benefits which shall be treated as subject to Excise Tax shall be equal to the
lesser of (A) the total amount of the Severance Payments and Other Benefits or
(B) the amount of excess parachute payments within the meaning of Sections
280G(b)(l) and (4) of the Code (or any successor or successors thereto) after
applying clause (i) above, and

 

(iii) the value of any non-cash benefits or any
deferred payment or benefit shall be determined by the Company’s independent
auditors in accordance with the principles of Sections 280(G)(d)(3) and (4) of
the Code (or any successor or successors thereto).

 

(c)           For
purpose of determining the amount of the Gross-Up Payment, the Executive shall
be deemed to pay (i) federal income taxes at the highest marginal rate of
federal income taxation in the calendar year in which the Gross-Up Payment is
to be made, and (ii) state and local income taxes at the highest marginal rates
of taxation in the state and locality of the Executive’s residence on the date
of termination of the Executive’s employment, net of the maximum reduction in
federal income taxes which could be obtained from deduction of such state and
local taxes.

 

(d)           In
the event that the actual amount of Excise Tax (the “Actual Excise Tax”) is
subsequently determined to be less than the amount taken into account hereunder
at the time of the Executive’s termination of employment entitling him to
Severance Payments (the “Pre-determined Excise Tax”), the Executive shall repay
to the Company, at the time that the amount of the Actual Excise Tax is finally
determined, the portion of the Gross-Up Payment attributable to the amount by
which the Pre-determined Excise Tax exceeds the Actual Excise Tax, plus
interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code (or any successor thereto) (the “Applicable
Rate”). In the event that the Actual Excise Tax is determined to exceed the
amount of Pre-determined Excise Tax (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up Payment in respect of
such excess (plus interest, determined at the Applicable Rate, payable with
respect to such excess) at the time that the amount of the Actual Excise tax is
finally determined.

 

2.8           Acceleration
of Vesting of Options.  Notwithstanding anything contained herein to
the contrary, whether or not the Executive’s employment with the Company or its
successor is terminated upon a Change of Control, to the extent permitted under
applicable law, upon the occurrence of a Change of Control all outstanding
unvested stock options and all previously granted unvested restricted stock
awards granted to the Executive by the Company shall accelerate and vest.

 

3.  DEFINITIONS

 

For purposes of this Agreement:

 

4

 

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

 

3.2           “Benefits” shall mean any and all stock
option, restricted stock, pension, profit sharing, bonus, life insurance,
hospitalization, major medical, tuition reimbursement, medical flexible
spending accounts,  independent financial
and tax consulting services and other employee benefit plans provided by the
Company that may be in effect from time to time.

 

3.3           “Beneficial Ownership” shall have the
meaning in Rule 13d-3 promulgated under the Exchange Act.

 

3.4           “Cause” shall mean: (a) an intentional act
which materially injures the Company; (b) an intentional refusal or failure to
follow lawful and reasonable directions of the Board of Directors or an
individual to whom the Executive reports (as appropriate); (c) a willful or
habitual neglect of duties; or (d) the conviction of, or the entering of a
guilty plea or plea of no contest by the Executive with respect to, a felony
involving an act of moral turpitude.

 

3.5           “Change of Control” shall mean, after the
date hereof, any of the following events:

 

(a)           An
acquisition in one or a series of related transactions of any voting securities
of the Company (“Voting Securities”), directly or indirectly by any Person,
other than (1) the Company, (2) any wholly-owned subsidiary of the Company, (3)
any employee benefit plan of the Company or any wholly-owned subsidiary of the
Company (including an employee stock ownership plan), (4) any trustee or other
fiduciary holding securities under any employee benefit plan adopted by the
Company or any subsidiary of the Company, (5) any underwriter in connection
with a firm commitment public offering of the Company’s capital stock,
immediately after which such Person has beneficial ownership of 35% or more of
the combined voting power of the Company’s then outstanding Voting Securities,
or (6) a Person which includes the Executive.

 

(b)           An
acquisition in one or a series of related transactions of any voting securities
of any material subsidiary of the Company (being defined for purposes hereof,
as any subsidiary representing at least 50% of the Company’s combined revenue
or assets), directly or indirectly by any Person, other than (1) the Company,
(2) any wholly-owned subsidiary of the Company, (3) any employee benefit plan
of the Company or any wholly-owned subsidiary of the Company (including an
employee stock ownership plan), (4) any trustee or other fiduciary holding
securities under any employee benefit plan adopted by the Company or any
subsidiary of the Company, or (5) any underwriter in connection with a firm
commitment public offering of such subsidiary’s capital stock, immediately
after which such Person has beneficial ownership of 50% or more of the combined
voting power of such subsidiary’s then outstanding voting securities.

 

(c)           During
any period of 12 consecutive months, the individuals who, as of the beginning
of such period, are members of the Board (the “Incumbent Board”), cease for any
reason to constitute at least a majority of the Board; provided, however, that if the election,
or nomination for election by the Company’s stockholders, of any new director
was approved by a vote of at least two-thirds of the then Incumbent Board
(other than an election or nomination of an individual whose initial assumption
of office is in connection with an actual or threatened election contest
relating to the election of the members of the Board, as such terms are used in
Rule 14A-11 of Regulation 14A promulgated under the Exchange Act), such new
director shall, for purposes of this Agreement, be considered a member of the
Incumbent Board.

 

(d)           Approval
by the Company’s stockholders of a complete liquidation or dissolution of the
Company.

 

(e)           Consummation
of a merger, consolidation or reorganization (or series of related
transactions) involving the Company, unless the stockholders of the Company
having the power to vote in the ordinary election of directors immediately
before such merger, consolidation or reorganization, own, directly or
indirectly, immediately following such merger, consolidation or reorganization,
at least 50% of the combined voting power of the outstanding voting securities
of the corporation resulting from such merger, consolidation or reorganization
in substantially the same proportion as their ownership of the Voting
Securities of the Company immediately before such merger, consolidation or
reorganization (or series of related transactions).

 

5

 

(f)            Consummation
of an agreement for the sale or other disposition of all or substantially all
of the assets of the Company (evaluated on a consolidated basis, without regard
to whether the sale or other disposition is effected via a sale or other
disposition of assets of the Company, the sale or other disposition of the
securities of one or more subsidiaries of the Company or the sale or other
disposition of the assets of one or more subsidiaries of the Company) to any
Person (other than a transfer to a subsidiary of the Company).

 

(g)           The
occurrence of any other event of a nature that would be required to be reported
by the Company in response to Item 5.01 of a Current Report on Form 8-K (or any
successor to such form) promulgated pursuant to the Exchange Act.

 

3.6           “Company” shall mean Primal Solutions,
Inc., a Delaware corporation or any successor of the Company.

 

3.7           “Disability” shall have
occurred, if for physical or mental reasons, the Executive is unable to perform
the essential functions of the Executive’s duties under the Letter Agreement,
with or without reasonable accommodation.

 

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

3.9           “Good Reason” shall mean any of the
following: (a) the Company’s material breach of the Letter Agreement or any
other agreement between Executive and the Company concerning Executive’s
employment with the Company; provided, however, that the Company shall have ten
(10) days to remedy the breach after receipt of written notice from the
Executive that the breach has occurred if the breach is susceptible of cure;
(b) the assignment of the Executive without his express and voluntary written
consent to a title, status, overall position, responsibilities, duties,
reporting relationship, or general working environment of a materially lesser
status or degree of responsibility than his title, status, overall position,
responsibilities, duties, reporting relationship, and general working
environment at the effective date of the Letter Agreement; (c) the requirement
by the Company that the Executive relocate the Executive’s personal residence
outside the metropolitan Orange County, California area; (d) the relocation by
the Company of the Executive’s office more than 50 miles from its location as
of the effective date of the Letter Agreement; (e) any failure by the Company
to obtain the assumption of any material written agreement between the
Executive and the Company concerning Executive’s employment by any successor of
the Company or assignee of substantially all of the business of the Company; or
(f) any material change by the Company in the Benefits or Incentive
Compensation offered to the Executive from those in which the Executive is
participating on the effective date of the Letter Agreement, or the taking of
any action by the Company which would materially and adversely affect the
Executive’s participation in or reduce the Executive’s benefits under any of
the Benefits or Incentive Compensation plans or deprive the Executive of any
fringe benefit then enjoyed by the Executive; provided, however, that nothing
contained in this subparagraph (f) shall be deemed to permit termination by the
Executive for Good Reason if the Company offers a range of benefit plans and
programs to the Executive which, taken as a whole, are at least comparable to
the Benefits and Incentive Compensation in which the Executive is participating
on the effective date of the Letter Agreement.

 

3.10         “Incentive Compensation” shall mean such
additional compensation  for the services
to be rendered by the Executive pursuant to the Letter Agreement, as such
additional compensation relates to and is conditioned up on certain performance
goals of the Company.

 

3.11         “Notice of Termination” shall mean a
written notice of termination of the Executive’s employment delivered by the
Company to the Executive or by the Executive to the Company, as applicable,
upon termination of the Executive’s employment with the Company which (a) sets
forth the specific termination provision in this Agreement relied upon, (b)
sets forth in reasonable detail the facts and circumstances claimed to provide
a basis for termination of the Executive’s employment under the provision so
indicated and (c) sets forth the date the Executive’s employment with the
Company shall terminate.

 

3.12         “Person” shall have the meaning of “person”
as used in Section 13(d) and 14(d) of the Exchange Act, including a “group”
as defined in such sections.

 

6

 

3.13         “Salary” shall mean the annual salary of
the Executive as described in the Letter Agreement.

 

3.14          “Termination Date” shall mean (a) in the
case of the Executive’s death, his date of death, and (b) in all other cases,
the date specified in the Notice of Termination.

 

4.  MISCELLANEOUS

 

4.1.          Successors;
Binding Agreement.

 

(a)           This
Agreement shall be binding upon and shall inure to the benefit of the Company,
its successors (whether by purchase of assets, merger, consolidation or
otherwise) to all or substantially all of the business and/or assets of the
Company and its assigns, and the Company shall require any successors and
assigns to expressly assume and agree to perform this Agreement in the same
manner and to the same extent that the Company would be required to perform it
if no such succession or assignment had taken place (including the obligation
to cause any subsequent successor to also assume the obligations of this
Agreement). Neither this Agreement nor any right or interest hereunder shall be
assignable or transferable by the Executive, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive’s legal personal representative. The duties and covenants of the
Executive under this Agreement, being personal, may not be delegated.

 

(b)           Nothing
in this Section 4.1 is intended to require that a Person referred to in
Section 3.5 as being the beneficial owner of shares of stock of the
Company must assume the obligations under this Agreement as a result of such
stock ownership.

 

4.2           Non-Exclusivity
of Rights; No Guaranteed Employment.

 

(a)           Nothing
in this Agreement shall prevent or limit the Executive’s continuing or future
participation in any benefit, bonus, incentive or other plan or program provided
by the Company and for which the Executive may qualify, nor shall anything
herein limit or reduce such rights as the Executive may have under any other
agreements with the Company, except as expressly stated therein.

 

(b)           The
Executive and the Company acknowledge that, except as may otherwise be provided
under any other written agreement between the Executive and the Company, the
employment of the Executive by the Company is “at will” and may be terminated
by either the Executive or the Company at any time.

 

4.3           Waiver. 
The rights and remedies of the parties to this Agreement are cumulative and not
alternative. Neither the failure nor any delay by either party in exercising
any right, power, or privilege under this Agreement will operate as a waiver of
such right, power, or privilege, and no single or partial exercise of any such
right, power, or privilege will preclude any other or further exercise of such
right, power, or privilege or the exercise of any other right, power, or
privilege. To the maximum extent permitted by applicable law, (a) no claim or
right arising out of this Agreement can be discharged by one party, in whole or
in part, by a waiver or renunciation of the claim or right unless in writing
signed by the other party; (b) no waiver that may be given by a party will be
applicable except in the specific instance for which it is given; and (c) no
notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement.

 

4.4           Notices. 
All notices, consents, waivers, and other communications under this Agreement
must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by facsimile
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, within 24 hours thereafter, or (c)
when received by the addressee, if sent by a nationally recognized overnight
delivery service (receipt requested), in each case to the appropriate address
and facsimile number set forth below (or to such other address and facsimile
number as a party may designate by notice to the other party pursuant to the
terms of this Section 4.4):

 

 

7

 

If to the Executive:

 

William C. Bousema

1815 Port Tiffin Place

Newport Beach, CA 92660

Tel: (949) 759-7585

 

 

If to the Company:

 

Primal Solutions, Inc.

18881 Von Karman Avenue, Suite 500

Irvine, California 92624

Attention: Chairman of the Compensation Committee

Facsimile No. (949) 260-1515

 

4.5           Entire
Agreement; Amendments.  This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and supersedes
all prior agreements and understandings, oral or written, between the parties
hereto with respect to the subject matter hereof. The parties acknowledge that
no agreement or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not expressly set forth in this Agreement. This Agreement may not be amended
orally, but only by an agreement in writing signed by the parties hereto.

 

4.6           Arbitration
of Disputes.

 

(a)           Except
as set forth in Section 4.6(b), arbitration shall be the sole and
exclusive remedy for any dispute, claim, or controversy of any kind or nature
(a “Claim”) arising out of, related to, or connected with this Agreement or the
termination of the Executive’s employment relationship with the Company as a
result of or in connection with a Change of Control. This mutual agreement to
arbitrate includes any Claim by the Executive against any parent, subsidiary,
or affiliated entity of the Company, or any director, officer, general or
limited partner, employee or agent of the Company or of any such parent,
subsidiary or affiliated entity. It also includes any claim against the
Executive by the Company, or any parent, subsidiary or affiliated entity of the
Company.

 

(b)           This
Section 4.6 does not apply to any claims by Executive: (1) for workers’
compensation benefits; (2) for unemployment insurance benefits; (3) under a
benefit plan where the plan specifies a separate arbitration procedure; (4)
filed with an administrative agency which are not legally subject to arbitration
under this Agreement; or (5) which are otherwise expressly prohibited by law
from being subject to arbitration under this Agreement.

 

(c)           Any
arbitration proceedings shall be conducted in Orange County, California. Any
Claim submitted to arbitration shall be decided by a single, neutral arbitrator
(the “Arbitrator”). The parties to the arbitration shall mutually select the
Arbitrator not later than 45 days after service of the demand for arbitration.
If the parties for any reason do not mutually select the Arbitrator within the
45 day period, then any party may apply to any court of competent jurisdiction
to appoint a retired judge as the Arbitrator. The parties agree that
arbitration shall be conducted in accordance with California Code of Civil Procedure
sections 1280 et  seq., including Code of Civil Procedure
section 1283.05 regarding discovery, except as modified in this Agreement.
The Arbitrator shall apply the substantive federal, state, or local law and
statute of limitations governing any Claim submitted to arbitration. In ruling
on any Claim submitted to arbitration, the Arbitrator shall have the authority
to award only such remedies or forms of relief as are provided for under the
substantive law governing such Claim. The Arbitrator shall issue a written
decision revealing the essential findings and conclusions on which the decision
is based. Judgment on the Arbitrator’s decision may be entered in any court of
competent jurisdiction.

 

(d)           The
Company shall be responsible for paying the fees and costs incurred in the
arbitration (e.g., filing fees, transcript costs and Arbitrator’s fees). The
parties shall be responsible for their own attorneys’ fees and costs, except
that the Arbitrator shall have the authority to award attorneys’ fees and costs
to the prevailing party in accordance with the applicable law governing the
dispute.

 

8

 

(e)           The
Arbitrator, and not any federal or state court, shall have the exclusive
authority to resolve any issue relating to the interpretation, formation or
enforceability of this Agreement, or any issue relating to whether a Claim is
subject to arbitration under this Agreement, except that any party may bring an
action in any court of competent jurisdiction to compel arbitration in
accordance with the terms of this Agreement.

 

4.7           ERISA. 
This Agreement is an unfunded compensation arrangement for a member of a select
group of the Company’s management or that of its subsidiaries and any
exemptions under the Employee Retirement Income Security Act of 1974, as
amended, as applicable to such an arrangement shall be applicable to this
Agreement.

 

4.8           Headings;
Construction.  The headings in this Agreement are provided for
convenience only and will not affect its construction or interpretation. All
references to “Section” or “Sections” refer to the corresponding
Section or Sections of this Agreement unless otherwise specified. All
words used in this Agreement will be construed to be of such gender or number
as the circumstances require. Unless otherwise expressly provided, the word “including”
does not limit the preceding words or terms.

 

4.9           Severability. 
If any provision of this Agreement is held invalid or unenforceable by any
Arbitrator or court of competent jurisdiction, to the extent that the rights or
obligations of the parties under this Agreement will not be materially and
adversely effected thereby, the other provisions of this Agreement will remain
in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to
the extent not held invalid or unenforceable.

 

4.10.        Counterparts. 
This Agreement may be executed in counterparts, each of which will be deemed to
be an original copy of this Agreement and all of which, when taken together,
will be deemed to constitute one and the same agreement.

 

4.11.        Governing
Law.  This Agreement shall be governed by and construed in accordance
with the laws of the State of California applicable to contracts entered into
and wholly to be performed within the State of California.

 

4.12.        Further
Assurances.  Each party shall execute such further instruments as the
other party may reasonably request in order to carry out the provisions of this
Agreement.

 

9

 

IN WITNESS WHEREOF, the parties have executed and
delivered this Agreement as of the date above first written above.

 

 

	
   

  	
  THE
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
  /s/
  William C. Bousema

  
	
   

  	
  William
  C. Bousema

  
	
   

  	
   

  
	
   

  	
  THE COMPANY

  
	
   

  	
   

  
	
   

  	
  PRIMAL SOLUTIONS, INC.,

  
	
   

  	
  a Delaware corporation

  
	
   

  	
   

  
	
   

  	
  /s/ Joseph R. Simrell

  
	
   

  	
  President

  
	
   

  	
  Primal Solutions, Inc.

  

 

10

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