Exhibit 10.1


PRIMAL SOLUTIONS,
INC.


2006 STOCK OPTION PLAN


PRIMAL SOLUTIONS, INC., a Delaware
corporation (the “Company”), hereby establishes and adopts the following 2006
Stock Option Plan (the “Plan”).


RECITALS


WHEREAS, the Company desires to encourage high levels
of performance by those individuals who are key to the success of the Company
or any subsidiary of the Company, to attract new individuals who are highly
motivated and who will contribute to the success of the Company and to
encourage such individuals to remain as officers and/or employees of the
Company and its subsidiary by increasing their proprietary interest in the
Company’s growth and success.


WHEREAS, to attain these ends, the Company has
formulated the Plan embodied herein to authorize the granting of options to
purchase shares of the Company’s common stock (“Options”) to those persons
(each such person a “Participant”) whose judgment, initiative and efforts are,
have been, or are expected to be responsible for the success of the Company or
any subsidiary of the Company.


NOW, THEREFORE, the
Company hereby constitutes, establishes and adopts the following Plan and
agrees to the following provisions:


ARTICLE 1.


PURPOSE OF THE PLAN


1.1.  Purpose.  The purpose of the Plan is to assist the
Company in attracting and retaining selected individuals to serve as officers and
employees of the Company who will contribute to the Company’s success and to
achieve objectives which will inure to the benefit of the stockholders of the
Company through the additional incentive inherent in the ownership of the
Company’s common stock, par value $.01 per share (the “Shares”).  Options granted under the Plan will be “nonqualified
stock options.”


ARTICLE 2.


SHARES SUBJECT TO OPTIONS


2.1.  Number of Shares.  Subject to the adjustment provisions of
Section 5.5 hereof, the aggregate number of Shares which may be issued under Options










 



under the Plan shall not exceed eight million
(8,000,000) Shares.  No Options to
purchase fractional Shares shall be granted and no fractional shares shall be
issued under the Plan.


2.2.  Shares
Subject to Terminated Options.  The
Shares covered by any unexercised portions of terminated, canceled or expired Options,
Shares forfeited and Shares subject to any Options which are otherwise surrendered
by the Participant without receiving any payment or other benefit with respect
thereto (including, without limitation, for satisfaction of applicable
tax-withholding obligations) may again be subject to new Options under the
Plan.  In the event the purchase price of
an Option is paid in whole or in part through the delivery of Shares, the
number of Shares issuable in connection with the exercise of the Option shall
not again be available for the grant of Options under the Plan.


2.3.  Character
of Shares.  Shares delivered under
the Plan may be authorized and unissued Shares or Shares acquired by the
Company, or both.


ARTICLE 3.


ELIGIBILITY AND
ADMINISTRATION


3.1.  Participants.  Participants eligible
to receive Options (“Optionees”) shall consist of such key officers or
employees of the Company as the Committee (hereinafter defined) shall select
from time to time.  The Committee’s
designation of an Optionee or Participant in any year shall not require the
Committee to designate such person to receive Options in any other year.


3.2.  Administration.  (a)  The
Plan shall be administered by a committee (the “Committee”) consisting of not
fewer than two directors of the Company, as designated by the Board of
Directors.  The Board of Directors may
remove from, add members to, or fill vacancies in the Committee.  Unless otherwise determined by the Board of Directors,
each member of the Committee is intended to be a “Non-Employee Director” within
the meaning of Rule 16b-3 (or any successor rule) of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”) and an “outside director” within
the meaning of Section 162(m)(4)(C)(i) of the Internal Revenue Code of 1986, as
amended (the “Code”) and the regulations thereunder.  If no Committee shall be established by the
Board of Directors, the term “Committee” shall refer to the Board of Directors.


(b)           The
Committee is authorized, subject to the provisions of the Plan, to establish
such rules and regulations as it may deem appropriate for the conduct of meetings
and proper administration of the Plan. 
All actions of the Committee shall be taken by majority vote of its
members.  The Committee is also
authorized, subject to the provisions of the Plan, to make provisions in
various Options pertaining to a “change of control” of the Company and to amend
or modify existing Options.


(c)           Subject
to the provisions of the Plan, the Committee shall have authority, in its sole
discretion, to interpret the provisions of the Plan and any



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Option thereunder and, subject to the requirements of applicable law,
including Rule 16b-3 of the Exchange Act, to prescribe, amend, and rescind
rules and regulations relating to the Plan or any Option thereunder as it may
deem necessary or advisable.  All
decisions made by the Committee pursuant to the provisions of the Plan shall be
final, conclusive and binding on all persons, including the Company, its
shareholders, directors and employees, and Participants and their beneficiaries.


ARTICLE 4.


OPTIONS


4.1.  Grant of Options.  The Committee shall determine, within the
limitations of the Plan, those key officers and employees of the Company to
whom Options are to be granted under the Plan, the number of Shares that may be
purchased under each such Option, the option price and other terms of each such
Option.  All Options shall be authorized
by the Committee and shall be evidenced in writing by option agreements (“Option
Agreements”) in such form and containing such terms and conditions as the
Committee shall determine that are not inconsistent with the provisions of the
Plan.  The granting of an Option pursuant
to the Plan shall impose no obligation on the recipient to exercise such
Option.  Any individual may hold more
than one Option granted pursuant hereto at the same time.


4.2.  Option
Price.   The option exercise
price per each Share purchasable under any Option granted under the Plan shall be
determined from time to time by the Committee, and need not be uniform for all
Participants or all Options.


4.3.  Option
Period.  The period for which an
Option is exercisable shall be set by the Committee and shall not exceed ten
years from the date such Option is granted. 
After the Option is granted, the option period may not be reduced,
subject to expiration due to termination of employment.


4.4.  Exercise
of Options.  Vested Options granted
under the Plan shall be exercised, if at all, by the Optionee thereof (or by
his or her executors, administrators, guardian or legal representative) as to
all or part of the Shares covered thereby, by the giving of written notice of
exercise to the Company, specifying the number of Shares to be purchased,
accompanied by payment of the full purchase price for the Shares being
purchased.  Full payment of such purchase
price shall be made at the time of exercise and shall be made (i) in cash or by
certified check or bank check or wire transfer of immediately available funds,
or (ii) by other consideration deemed acceptable by the Committee or the Board
in its sole discretion. The notice of exercise, accompanied by such payment,
shall be delivered to the Company at its principal business office or such
other office as the Committee may from time to time direct, and shall be in
such form, containing such further provisions consistent with the provisions of
the Plan, as the Committee may from time to time prescribe.  In no event may any Option granted hereunder
be exercised for a fraction of a Share. 
The Company shall effect the transfer of Shares purchased pursuant to an
Option as soon as practicable, and, within a reasonable 



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time thereafter, such transfer shall be evidenced on the books of the
Company.  No person exercising an Option
shall have any of the rights of a holder of Shares subject to an Option until
certificates for such Shares shall have been issued following the exercise of
such Option.  No adjustment shall be made
for cash dividends or other rights for which the record date is prior to the
date of such issuance.


4.5.  Non-Transferability.  Except as determined by the Committee and
expressly set forth in an Option Agreement, no Option shall be transferable by
the Participant otherwise than by will or by the laws of descent and
distribution and all Options shall be exercisable, during the Participant’s
lifetime, only by the Participant.  Any
attempt to transfer any Option, except as specifically provided herein, shall
be void, and no such Option shall in any manner be subject to the debts,
contracts, liabilities, engagements or torts of any person who shall be
entitled to such Option, nor shall it be subject to attachment or legal process
for or against such person.


4.6.  Fair
Market Value.  The “Fair Market Value”
of a Share as of a specified date shall mean the price established by the
Committee in good faith from time to time.


ARTICLE 5.


GENERALLY
APPLICABLE PROVISIONS


5.1.  Termination
of Employment.  Unless the Committee
otherwise determines, in the event of the termination of employment with the
Company or any subsidiary of the Company of an Optionee for any reason (other
than death or disability as provided below), any Option(s) granted to such
Optionee under this Plan and not previously exercised or expired, to the extent
vested on the date of such termination or separation, shall be exercisable as
of such termination for a period not to exceed three months after the date of
such termination or separation, provided, however, that in no instance may the
term of the Option, as so extended, exceed ten years from the date of grant.


5.2.  Death.  In the event an Optionee dies while employed
by the Company, any Option(s) held by such Optionee and not previously expired
or exercised shall, to the extent exercisable on the date of death, be
exercisable by the estate of such Optionee or by any person who acquired such
Option by bequest or inheritance, at any time within one year after the death
of the Optionee, unless the Option is earlier terminated pursuant to its terms,
provided, however, that in no instance may the term of the Option, as so
extended, exceed ten years from the date grant.


5.3.  Disability.  In the event of the termination of employment
with the Company due to total disability, the Optionee, or his guardian or
legal representative, shall have the unqualified right to exercise any Option
that has not expired or been previously exercised and that the Optionee was
eligible to exercise as of the first date of total disability (as determined by
the Committee), at any time within one year 



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after such termination or separation, unless earlier terminated
pursuant to its terms, provided, however, that in no instance may the term of
the Option, as so extended, exceed ten years from the date of grant.  The term “total disability” shall, for
purposes of this Plan, be defined in the same manner as the term “disability” is
defined in Section 22(e)(3) of the Code.


5.4.  Terms
of Grant.  Notwithstanding anything
in this Plan to the contrary, the Committee may grant an Option under such
terms and conditions as may be provided in the Option Agreement given to the
Optionee and the Committee has the discretion to modify the terms and
conditions of an Option after grant as long as no rights of the Participant are
impaired, provided, however, that
in no instance may the term of the Option, as so extended, exceed ten years
from the date of grant.


5.5.  Adjustments.  In the event that the Committee shall
determine that any dividend or other distribution (whether in the form of cash,
Shares, other securities, or other property), recapitalization, stock split,
reverse stock split, reorganization, merger, consolidation, split-up, spin-off,
combination, repurchase, or exchange of Shares or other securities, the
issuance of warrants or other rights to purchase Shares or other securities, or
other similar corporate transaction or event affects the Shares with respect to
which Options have been or may be issued under the Plan, such that an
adjustment is determined in good faith by the Committee to be appropriate in
order to prevent dilution or enlargement of the benefits or potential benefits
intended to be made available under the Plan, then the Committee shall, in such
manner as the Committee may deem equitable, adjust any or all of (i) the number
and type of Shares that thereafter may be made the subject of Options, (ii) the
number and type of Shares subject to outstanding Options, and (iii) the grant
or exercise price with respect to any Option, or, if deemed appropriate, make
provision for a cash payment to the holder of any outstanding Option; provided,
in each case, that no such adjustment shall be authorized to the extent that such
adjustment would cause such Options to become subject to Section 409A of the
Code, or any successor provisions; and provided further, that the number of
Shares subject to any Option denominated in Shares shall always be a whole
number.  In the event of any
reorganization, merger, consolidation, split-up, spin-off, or other business
combination involving the Company (each, a “Reorganization”), the Committee may
cause any Option outstanding as of the effective date of the Reorganization to
be canceled in consideration of a cash payment made to or an alternate award (whether
from the Company or another entity that is a party to the Reorganization), or a
combination thereof, the holder of such canceled Award substantially equivalent
in value to the fair market value of such canceled Option.  The determination of fair market value for
this purpose shall be made by the Committee in its sole discretion.


5.6.  Amendment
and Modification of the Plan.  The
Committee may, from time to time, alter, amend, suspend or terminate the Plan
as it shall deem advisable, subject to any requirement for shareholder approval
imposed by applicable law.  In addition,
no amendments to, or termination of, the Plan shall in any way impair the rights
of an Optionee or a Participant under any Option previously granted, without
such Optionee’s or Participant’s consent.



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5.7.  Validity
of Options.  The validity of any
grant of Options made pursuant to this Plan shall remain in full force and
effect and shall not be affected by the compliance or noncompliance with
Section 162(m) of the Code or Rule 16b-3 of the Exchange Act.  It is intended that no Option granted under
the Plan shall be subject to any interest or additional tax under Section 409A
of the Code.  In the event that Section
409A is amended after the date hereof, or guidance is promulgated that would
make an Option under the Plan subject to such interest or additional tax under
Section 409A, then the terms and conditions of the Plan shall be interpreted
and applied, and if necessary, amended, to avoid the imposition of such
interest or additional tax.


ARTICLE 6.


MISCELLANEOUS


6.1.  Tax Withholding.  The Company shall have the right to make all
payments or distributions made pursuant to the Plan to an Optionee or
Participant net of any applicable federal, state and local taxes required to be
paid as a result of the grant of any Option, the exercise of any Option or any
other event occurring pursuant to this Plan. 
The Company shall have the right to withhold from wages or other payments
otherwise payable to such Optionee or Participant such withholding taxes as may
be required by law, or to otherwise require the Optionee or Participant to pay
such withholding taxes.  If the Optionee
or Participant shall fail to make such tax payments as are required, the
Company shall, to the extent permitted by law, have the right to deduct any
such taxes from any payment of any kind otherwise due to such Optionee or
Participant or to take such other action as may be necessary to satisfy such
withholding obligations.  In satisfaction
of the requirement to pay required withholding taxes, the Optionee or
Participant may make a written election, which may be accepted or rejected in
the discretion of the Committee, to have withheld a portion of the Shares then
issuable to the Optionee pursuant to the Plan, having an aggregate fair market value
equal to the required withholding taxes, as determined by the Committee in good
faith.


6.2.  Right
of Discharge Reserved.  Nothing in
the Plan nor the grant of an Option hereunder shall confer upon any employee or
other individual the right to continue in the employment of the Company or
affect any right that the Company may have to terminate the employment of (or
to demote or to exclude from future Option grants under the Plan) any such
employee or other individual at any time for any reason.  Except as specifically provided by the
Committee, the Company shall not be liable for the loss of existing or
potential profit with respect to an Option in the event of termination of an
employment or other relationship even if the termination is in violation of an
obligation of the Company to the Optionee or Participant.


6.3.  Unfunded
Plan.  Unless otherwise determined by
the Committee, the Plan shall be unfunded and shall not create (or be construed
to create) a trust or a separate fund or funds. 
The Plan shall not establish any fiduciary relationship between the
Company and any Optionee, Participant or other person.  To the extent any Optionee or Participant
holds any rights by virtue of any grant made under the Plan, such 



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rights shall constitute general unsecured liabilities of the Company
and shall not confer upon any participant any right, title, or interest in any
assets of the Company.


6.4.  Legend.  All certificates for Shares delivered under
this Plan shall be subject to such stock transfer orders and other restrictions
as the Committee may deem advisable under the rules, regulations and other
requirements of the Securities and Exchange Commission, any applicable Federal
or state securities law, and any applicable corporate law, and the Committee
may cause a legend or legends to be put on any such certificates to make
appropriate reference to such restrictions.


6.5.  Other
Conditions.  If at any time counsel
to the Company shall be of the opinion that any sale or delivery of Shares
pursuant to any option is or may in the circumstances be unlawful or result in
the imposition of excise taxes on the Company under the statutes, rules or
regulations of any applicable jurisdiction, the Company shall have no
obligation to make such sale or delivery, and the right to any Option shall be
suspended until, in the opinion of said counsel, such sale or delivery shall be
lawful or will not result in the imposition of excise taxes on the Company.  Upon termination of any such period of
suspension, any Option affected by such suspension which shall not then have
expired or terminated shall be reinstated as to all Shares available before
such suspension and as to Shares which would otherwise have become available
during the period of such suspension, but no such suspension shall extend the
term of any Option.


6.6.  Dissolution
or Liquidation.  In the event of the dissolution
or liquidation of the Company, the Committee shall notify each Optionee and
Participant as soon as practicable prior to the effective date of such proposed
transaction.  The Committee in its sole
discretion may permit an Optionee to exercise an Option until ten days prior to
such transaction with respect to all vested and exercisable Shares covered
thereby and with respect to such number of unvested Shares as the Committee
shall determine.  To the extent an Option
has not been previously exercised, the Option shall terminate automatically
immediately prior to the consummation of the proposed action.


6.7.  Severability.  If any provision of the Plan shall be held
unlawful or otherwise invalid or unenforceable in whole or in part, such
unlawfulness, invalidity or unenforceability shall not affect any other
provision of the Plan or part thereof, each of which shall remain in full force
and effect.  If the making of any payment
or the provision of any other benefit required under the Plan shall be held
unlawful or otherwise invalid or unenforceable, such unlawfulness, invalidity or
unenforceability shall not prevent any other payment or benefit from being made
or provided under the Plan, and if the making of any payment in full or the
provision of any other benefit required under the Plan in full would be
unlawful or otherwise invalid or unenforceable, then such unlawfulness,
invalidity or unenforceability shall not prevent such payment or benefit from
being made or provided in part, to the extent that it would not be unlawful,
invalid or unenforceable, and the maximum payment or benefit that would not be
unlawful, invalid or unenforceable shall be made or provided under the Plan.



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6.8.  Effective
Date of Plan; Termination of Plan. 
The Plan shall be effective on the date of the adoption of the Plan by
the Board of Directors.  Awards may be
granted under the Plan at any time and from time to time after the effective
date of the Plan and on or prior to July 28, 2016, on which date the Plan will
expire.  With respect to Options then
outstanding under the Plan, such outstanding Options shall remain in effect
until they have been exercised or terminated, or have otherwise expired.


6.9.  Nature
of Payments.  All Options made
pursuant to the Plan are in consideration of services performed for the
Company.  Any income or gain realized
pursuant to Options under the Plan constitutes a special incentive payment to
the Optionee and shall not be taken into account, to the extent permissible
under applicable law, as compensation for purposes of any of the employee
benefit plans of the Company, except as may be determined by the Committee or
by the Board of Directors of the Company.


6.10.  Captions.  The captions in this Plan are for convenience
of reference only, and are not intended to narrow, limit or affect the
substance or interpretation of the provisions contained herein.


6.11.  Successors
and Assigns.  This Plan shall be
binding upon and inure to the benefit of the respective successors and
permitted assigns of the Company and the Participants.


6.12.  Governing
Law.  The Plan and all determinations
made and actions taken thereunder, to the extent not otherwise governed by the
Code or the laws of the United States, shall be governed by the laws of the
State of Delaware (without regard to the principles of conflicts of laws which
might otherwise apply) and shall be construed accordingly.



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