**Exhibit 10.12**

 

**EQUINOXHOLDINGS, INC.**

**1998 STOCKOPTION PLAN**

 

1.                    PURPOSE

 

The purpose of the EQUINOXHOLDING, INC. 1998 STOCK OPTION PLAN (the “Plan”) is (i) to further thegrowth and success of Equinox Holdings, Inc., a Delaware corporation (the “Company”),and its Subsidiaries (as hereinafter defined) by enabling directors, officers,employees, consultants, or advisors of the Company or any of its Subsidiariesto acquire shares of common stock, $.01 par value (the “Common Stock”), of theCompany, thereby increasing their personal interest in such growth and success,and (ii) to provide a means of rewarding outstanding performance by suchpersons to the Company and its Subsidiaries.

 

Options granted under thePlan may be either “incentive stock options” (“ISOs”), intended to qualify assuch under the provisions of Section 422 of the Internal Revenue Code of1986, as amended (the “Code”), or nonqualified stock options (“NSOs”). Forpurposes of the Plan, the term “Subsidiary” shall mean “Subsidiary Corporation”as such term is defined in Section 424(f) of the Code. Unless thecontext otherwise requires, any ISO or NSO shall be referred to as an “Option”.

 

2.                    ADMINISTRATION OF THE PLAN.

 

(a)          Stock Option Committee.

 

The Plan shall beadministered by the Board of Directors of the Company (the “Board”) or anOption Committee (the “Committee”) consisting of two or more persons appointedto such Committee from time to time by the Board; provided, however, that (i) tothe extent necessary in order to permit officers and directors of the Companyto be exempt from the provisions of Section 16(b) of the 1934 Actwith respect to transactions pursuant to the Plan, each of such persons shallbe a “Non-Employee Director” within the meaning of Rule 16b-3 (“Rule 16b-3”)promulgated by the Securities and Exchange Commission under the SecuritiesExchange Act of 1934, as amended (the “1934 Act”) and (ii) if suchqualification is deemed necessary in order for the grant or exercise of awardsmade under the Plan to qualify for any tax or other material benefit toparticipants of the Company under applicable regulations under Section 162(m)of the Code, each of such persons shall be an “outside director” (as defined inapplicable regulations thereunder). The members of the Committee may be removedby the Board at any time either with or without cause. Any vacancy on theCommittee, whether due to action of the Board or any other cause, shall befilled by the Board. The term “Committee” shall, for all purposes of the Planother than this Section 2*,*bedeemed to refer to the Board if the Board is administering the Plan.

 

(b)         Procedures.

 

If the Plan is administeredby a Committee, the Committee shall from time to time select a Chairman fromamong its members and shall adopt such rules and regulations as it shalldeem appropriate concerning the holding of meetings and the administration ofthe Plan. A majority of the entire Committee shall constitute a quorum and theactions of a majority of the

 

----

 

members of the Committee present at a meeting atwhich a quorum is present, or actions approved in writing by all of the membersof the Committee, shall be the actions of the Committee; *provided, however*, that if the Committee consists of only two members, both shallbe required to constitute a quorum and to act at a meeting or to approveactions in writing,

 

(c)          Interpretations.

 

Except as otherwiseexpressly provided in the Plan, the Committee shall have all powers withrespect to the administration of the Plan, including, without limitation, full powerand authority to interpret the provisions of the Plan and any Option Agreement(as defined in Section 5(b), and to resolve all questions arising underthe Plan. All decisions of the Committee shall be conclusive and binding on allparticipants in the Plan.

 

3.                    SHARES OF STOCK, SUBJECT TO THE PLAN.

 

(a)          Number of Shares.

 

Subject to the provisions ofSection 9 (relating to adjustments upon changes in capital structure andother corporate transactions), the number of shares of Common Stock subject atany one time to Options granted under the Plan, plus the number of shares ofCommon Stock theretofore issued and delivered pursuant to the exercise ofOptions granted under the Plan, shall not exceed 1,000,000 shares. If and tothe extent that Options granted under the Plan terminate, expire or arecanceled without having been fully exercised, new Options may be granted underthe Plan with respect to the shares of Common Stock covered by the unexercisedportion of such terminated, expired or canceled Options.

 

(b)         Reservation of Shares

 

The number of shares ofCommon Stock reserved for issuance under the Plan shall at no time be less thanthe maximum number of shares which may be purchased at any time pursuant tooutstanding Options.

 

4.                    ELIGIBILITY.

 

(a)          General.

 

Options may be granted bythe Committee under the Plan only to persons who are (i) directors,officers or employees of the Company or any of its Subsidiaries and (ii) consultantsor advisors providing services to the Company or any of its Subsidiaries.Options granted to employees of the Company or any of its Subsidiaries shallbe, in the discretion of the Committee, either ISOs or NSOs, and all otherOptions shall be NSOs.  Notwithstandingthe foregoing, Options maybe conditionally granted to persons who areprospective directors, officers, or employees of the Company or any of itsSubsidiaries; *provided, however*, that any such conditional grant ofan ISO to a prospective employee shall, by its terms, become effective noearlier than the date on which such person actually becomes an employee.

 

2

----

 

(b)         Exceptions.

 

Notwithstanding anythingcontained in Section 4(a) to the contrary, no ISO may be grantedunder the Plan to an employee who owns, directly or indirectly (within themeaning of Sections 422(b)(6) and 424(d) of the Code), stockpossessing more than 10% of the total combined voting power of all classes ofstock of the Company, unless (A) the Option Price (as defined in Section 6(a))of the shares of Common Stock subject to such ISO is fixed at not less than110% of the Fair Market Value on the date of grant (as determined in accordancewith Section 6(b)) of such shares and (B) such ISO by its terms isnot exercisable after the expiration of five years from the date it is granted.

 

5.                    GRANT OF OPTIONS.

 

(a)          General.

 

Options may be granted underthe Plan at any time and from time to time after the Effective Date (as definedin Section 11) and on or prior to the Expiration Date (as defined in Section 12).

 

Subject to the provisions ofthe Plan, the Committee shall have authority, in its sole discretion, todetermine:

 

(i) the persons (fromamong the class of persons eligible to receive Options under the Plan) to whomOptions shall be granted (the “Optionees”);

 

(ii) the time or timesat which Options shall be granted;

 

(iii) the number ofshares subject to each Option;

 

(iv) the Option Priceof the shares subject to each Option, which price shall be not less than theminimum specified in Section 4(b) or 6(a) (as applicable); and

 

(v) the time or timeswhen each Option shall become exercisable and the duration of the exerciseperiod.

 

(b)         Option Agreements.

 

Each Option granted underthe Plan shall be designated as an ISO or an NSO and shall be subject to theterms and conditions applicable to ISOs or NSOs (as the case may be) set forthin the Plan; *provided, however*, that any Option deemed by theCommittee to be an ISO that for any reason does not qualify as an incentivestock option under Section 422 of the Code shall be treated for allpurposes under the Plan as an NSO. In addition, each Option shall be evidencedby a written agreement (an “Option Agreement”), containing such terms andconditions and in such form, not inconsistent with the Plan, as the Committeeshall, in its discretion, provide. Each Option Agreement shall be executed bythe Company and the Optionee.

 

3

----

 

(c)          No Evidence of Employment.

 

Nothing contained in thePlan or in any Option Agreement shall confer upon any Optionee any right withrespect to the continuation of his or her employment or other relationship withthe Company or any of its Subsidiaries or interfere in any way with the rightof the Company or any such Subsidiary, subject to the terms of any separateagreement to the contrary, at any time to terminate such relationship or toincrease or decrease the compensation of the Optionee from the rate inexistence at the time of the grant of an Option.

 

(d)         Date of Grant.

 

The date of grant of anOption under this Plan shall be the date as of which the Committee approves thegrant; *provided, however*, that in the case of an ISO, thedate of grant shall in no event be earlier than the date as of which theOptionee becomes an employee of the Company or one of its Subsidiaries.

 

6.                    OPTION PRICE.

 

(a)          General.

 

Subject to Section 9,the price (the “Option Price”) at which each share of Common Stock subject toan Option granted under the Plan may be purchased shall be determined by theCommittee at the time the Option is granted; *provided,however*, that (i) inthe case of an ISO and not subject to Section 4(b) and (ii) inthe case of an NSO granted at any time after the initial public offering of theCommon Stock, such Option Price shall in no event be less than 100% of the FairMarket Value (as determined in accordance with Section 6(b)) of such shareof Common Stock.

 

(b)         Determination of Fair Market Value.

 

Subject to the requirementsof Section 422 of the Code, for purposes of the Plan, the “Fair MarketValue” of shares of Common Stock shall be equal to the fair value of suchshares on the date of grant as determined by the Committee after taking intoconsideration all factors which it deems appropriate, including, withoutlimitation, recent sale and offer prices of the Common Stock in privatetransactions negotiated at arms’ length if there is no public trading market.

 

Anything contained in thePlan to the contrary notwithstanding, all such determinations shall be madewithout regard to any restriction other than a restriction which, by its terms,will never lapse.

 

(c)          Repricing of NSOs.

 

Subsequent to the date ofgrant of any NSO, the Committee may, at its discretion and with the consent ofthe Optionee, establish a new Option Price for such NSO so as to increase ordecrease the Option Price of such NSO.

 

4

----

 

7.                    EXERCISE OF OPTIONS.

 

(a)          Committee Determination.

 

Each Option granted underthe Plan shall be exercisable at such time or times, or upon the occurrence ofsuch event or events, and for such number of shares subject to the Option, asshall be determined by the Committee and set forth in the Option Agreement evidencingsuch Option; *provided, however*, that if the Company files aregistration statement under the Securities Act of 1933 (the “Securities Act”)for the initial public offering of its securities, no Option granted under thePlan shall be exercisable during the 180-day period immediately followingthe effective date of such registration statement. Subject to the proviso of theimmediately preceding sentence, if an Option is not at the time of grantimmediately exercisable, the Committee may (i) in the Option Agreementevidencing such Option, provided for the acceleration of the exercise date ordates of the subject Option upon the occurrence of specified events or (ii) atany time prior to the complete termination of such Option, accelerate theexercise date or dates of such Option.

 

(b)         Automatic Termination of Option.

 

Unless otherwise determinedby the Committee at the time of grant or, in the case of an NSO, thereafter,the unexercised portion of any Option granted under the Plan shallautomatically terminate and shall become null and void and be of no furtherforce or effect upon the first to occur of the following:

 

(i) the tenthanniversary of the date on which such Option is granted or, in the case of anyISO granted to a person described in Section 4(b), the fifth anniversaryof the date on which such ISO is granted;

 

(ii) the expiration ofthree months from the effective date of a Termination of Relationship (otherthan as a result of an Involuntary Termination (as defined below) or for “Cause”(as defined below));*provided, however*, that if the Optionee shall dieduring such three-month period, the time of termination of the unexercisedportion of such Option shall be determined in accordance with subparagraph (iii) below;

 

(iii) the expiration of12 months from the date of a Termination of Relationship if such termination isdue to such Optionee’s death or permanent and total disability (within themeaning of Section 22(e)(3) of the Code) (an “Involuntary Termination”);

 

(iv) immediately upon aTermination of Relationship if such Termination of Relationship is for “Cause”;

 

(v)  the expiration ofsuch period of time or the occurrence of such event as the Committee in itsdiscretion may provide in the Option Agreement;

 

(vi) the effective dateof a Corporate Transaction (as defined in Section 9(b)) to which Section 9(b)(ii) (relatingto assumptions and substitutions of Options) does not apply*; provided, however*, that an Optionee’s right to exercise any Option outstandingprior to such effective date shall in all events be suspended during the periodcommencing 5 days prior to the proposed effective date of such CorporateTransaction and ending on either the actual effective date

 

5

----

 

of such CorporateTransaction or upon receipt of notice from the Company that such CorporateTransaction will not in fact occur; and

 

(vii) except to theextent permitted by Section 9(b)(ii), the date on which an Option or anypart thereof or right or privilege relating thereto is transferred (otherwisethan by will or the laws of descent and distribution), assigned, pledged,hypothecated, attached or otherwise disposed of by the Optionee.

 

“Cause” shall have themeaning set forth in any employment or services agreement between the Companyor any Subsidiary thereof and the Optionee, or in the absence of either of suchagreements or definition of Cause contained therein, as defined by theCommittee. Any determinations by the Committee shall be final and conclusiveand binding upon the Optionee.

 

“Termination of Relationship”means the termination of the employment or other relationship between theCompany or any of its Subsidiaries and any Optionee for any reason whatsoever.

 

Anything contained in thePlan to the contrary notwithstanding, unless otherwise provided in an OptionAgreement, no Option granted under the Plan shall be affected by any change ofduties or position of the Optionee (including a transfer to or from the Companyor one of its Subsidiaries), so long as it does not result in a Termination ofRelationship.

 

(c)          Limitations on ISOs.

 

To the extent that, at thetime any portion of an ISO granted under the Plan is to become exercisable, theaggregate Option Price of such portion, when added to the aggregate fair marketvalue of all stock subject to incentive stock options granted by the Company orits Subsidiaries before the date of grant of such ISO to the Optionee that havebecome or will by their terms become exercisable during that same calendaryear, exceeds $100,000, such portion shall be deemed to be an NSO.

 

8.                    PROCEDURE FOR EXERCISE. 

 

(a)          Payment.

 

At the time an Option isgranted under the Plan, the Committee shall, in its discretion, specifyone or more of the following forms of payment which may be used by an Optioneeupon exercise of his Option:

 

(i) cash or personal orcertified check payable to the Company in an amount equal to the aggregateOption Price of the shares with respect to which the Option is being exercised;

 

(ii) a full recoursedemand note, payable by the Optionee to the Company in an amount equal to theaggregate Option Price of the shares with respect to which the Option is beingexercised and bearing a market rate of interest as determined by the Committee;

 

6

----

 

(iii)  stockcertificates (in negotiable form) representing shares of Common Stock having aFair Market Value on the date of exercise (as determined in accordance with Section 6(b) asif the date of exercise were the date of grant) equal to the aggregate OptionPrice of the shares with respect to which the Option is being exercised; or

 

(iv) a combination ofthe methods set forth in clauses (i) and (ii).

 

(b)         Notice.

 

An Optionee (or otherperson, as provided in Section 10(b)) may exercise an Option granted underthe Plan in whole or in part (but for the purchase of whole shares only), asprovided in the Option Agreement evidencing his or her Option, by delivering awritten notice (the “Notice”) to the Secretary of the Company. The Noticeshall:

 

(i) state that theOptionee elects to exercise the Option;

 

(ii) state the numberof shares with respect to which the Option is being exercised (the “OptionedShares”);

 

(iii) state the methodof payment of the Optioned Shares (which method must be available to theOptionee under the terms of his or her Option Agreement);

 

(iv) state the dateupon which the Optionee desires to consummate the purchase (which date must beprior to the termination of such Option and no later than 30 days from thedelivery of such Notice);

 

(v) include anyrepresentations of the Optionee required pursuant to Section 10(a);

 

(vi) if the Option isexercised pursuant to Section 10(b) by any person other than theOptionee, include evidence to the satisfaction of the Committee of the right ofsuch person to exercise the Option; and

 

(vii) include such furtherprovisions consistent with the Plan as the Committee may from time to timerequire.

 

The exercise date of anOption shall be the date on which the Company receives the Notice from theOptionee.

 

Within 30 days of theexercise of the Option, the Optionee shall deliver to the Company a copy of anyelection filed by the Optionee with the Internal Revenue Service under Section 83(b) ofthe Code.

 

7

----

 

(c)          Issuance of Certificates.

 

The Company shall cause theissuance of a stock certificate in the name of the Optionee (or such otherperson exercising the Option in accordance with the provisions of Section 10(b))for the Optioned Shares as soon as practicable after receipt of the Notice andpayment of the aggregate Option Price for such shares. Neither the Optionee norany person exercising an Option in accordance with the provisions of Section 10(b) shallhave any privileges as a stockholder of the Company with respect to any sharesof stock subject to an Option granted under the Plan until the date of issuanceof a stock certificate pursuant to this Section 8(c).

 

9.                    ADJUSTMENTS.

 

(a)          Changes in Capital Structure.

 

Subject to Section 9(b),if the Common Stock is changed by reason of a stock split, reverse stock split,stock dividend or recapitalization, or converted into or exchanged for othersecurities as a result of a merger, consolidation or reorganization, theCommittee shall make such adjustments in the number and class of shares ofstock with respect to which Options may be granted under the Plan as shall beequitable and appropriate in order to make such Options, as nearly as may bepracticable, equivalent to such Options immediately prior to such change. Acorresponding adjustment changing the number and class of shares allocated to,and the Option Price of, each Option or portion thereof outstanding at the timeof such change shall likewise be made. Anything contained in**the Plan to the contrary notwithstanding,in the case of ISOs, no adjustment under this Section 9(a) shall beappropriate if such adjustment (i) would constitute a modification,extension or renewal of such ISOs within the meaning of Sections 422 and 424 ofthe Code, and the regulations promulgated by the Treasury Departmentthereunder, or (ii) would, under Section 422 of the Code and theregulations promulgated by the Treasury Department thereunder, be consideredthe adoption of a new plan requiring stockholder approval.

 

(b)         Corporate Transactions.

 

The following rules shallapply in connection with the dissolution or liquidation of the Company areorganization, merger or consolidation of the Company (other than any suchtransaction resulting in the stockholders of the Company prior to suchtransaction owning a majority of the capital stock of the surviving entityentitled to vote for the election of directors), or any sale of all orsubstantially all assets of the Company (a “Corporate Transaction”):

 

(i) each holder of anOption outstanding at such time shall be given (A) written notice of suchCorporate Transaction at least 20 days prior to its proposed effective date (asspecified in such notice) and (B) an opportunity, during the periodcommencing with delivery of such notice and ending 10 days prior to suchproposed effective date, to exercise the Option to the full extent to whichsuch Option would have been exercisable by the Optionee at the expiration ofsuch 20-day period; *provided, however*, that upon the effective date of aCorporate Transaction, all Options granted under the Plan not so exercisedshall automatically terminate; and

 

(ii) anything containedin the Plan to the contrary notwithstanding, Section 9(b)(i) shallnot be applicable if provision shall be made in connection with such

 

8

----

 

Corporate Transaction forthe assumption of outstanding Options by, or the substitution for such Optionsof new options covering the stock of, the surviving, successor or purchasingcorporation, or a parent or subsidiary thereof, with appropriate adjustments asto the number, kind and option prices of shares subject to such options; *provided, however*, that in the case of ISOs, the Committee shall, to the extentnot inconsistent with the best interests of the Company or its Subsidiaries(such best interests to be determined in good faith by the Committee in itssole discretion), use its best efforts to ensure that any such assumption orsubstitution will not constitute a modification, extension or renewal of theISOs within the meaning of Section 424(h) of the Code and theregulations promulgated by the Treasury Department thereunder.

 

(c)          Special Rules.

 

The following rules shallapply in connection with Section 9(a) and (b) above:

 

(i) no fractionalshares shall be issued as a result of any such adjustment, and any fractionalshares resulting from the computations pursuant to Section 9(a) or (b) shallbe eliminated without consideration from the respective Options;

 

(ii) no adjustmentshall be made for cash dividends or the issuance to stockholders of rights tosubscribe for additional shares of Common Stock or other securities; and

 

(iii) any adjustmentsreferred to in Section 9(a) or (b) shall be made by theCommittee *in*its sole discretionand shall be conclusive and binding on all persons holding Options grantedunder the Plan.

 

10.              RESTRICTIONS ON OPTIONS AND OPTIONED SHARES.

 

(a)          Compliance With Securities Laws.

 

No Options shall be grantedunder the Plan, and no shares of Common Stock shall be issued and deliveredupon the exercise of Options granted under the Plan, unless and until theCompany and the Optionee shall have complied with all applicable Federal orstate registration, listing and qualification requirements and all otherrequirements of law or of any regulatory agencies having jurisdiction.

 

The Committee in itsdiscretion may, as a condition to the exercise of any Option granted under thePlan, require an Optionee (i) to represent in writing that the shares ofCommon Stock received upon exercise of an Option are being acquired for investmentand not with a view to distribution and (ii) to make such otherrepresentations and warranties as are deemed appropriate by the Company. Stockcertificates representing shares of Common Stock acquired upon the exercise ofOptions that have not been registered under the Securities Act shall, ifrequired by the Committee, bear the following legend:

 

“THE SHARES REPRESENTED BYTHIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES

 

9

----

 

ACT OF 1933. THESHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE PLEDGED,HYPOTHECATED, SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATIONSTATEMENT FOR THE SHARES UNDER THE SECURITIES ACT OF 1933 OR AN OPINION OFCOUNSEL TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT.

 

THE SALE,TRANSFER, ASSIGNMENT, PLEDGE OR ENCUMBRANCE OF THE SECURITIES REPRESENTED BYTHIS CERTIFICATE ARE SUBJECT TO THE TERMS AND CONDITIONS OF A STOCKHOLDERS’AGREEMENT DATED AS OF DECEMBER 31, 1998, AMONG EQUINOX HOLDINGS, INC. ANDCERTAIN HOLDERS OF THE OUTSTANDING CAPITAL STOCK OF SUCH CORPORATION. COPIES OFSUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THEHOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY OF SUCH CORPORATION.”

 

(b)         Nonassignability ofOption Rights.

 

No Optiongranted under this Plan shall be assignable or otherwise transferable by theOptionee except by will or by the laws of descent and distribution. An Optionmay be exercised during the lifetime of the Optionee only by the Optionee. Ifan Optionee dies, his or her Option shall thereafter be exercisable, during theperiod specified in Section 7(b)(ii) or (iii) (as the case maybe), by his or her executors or administrators to the full extent to which suchOption was exercisable by the Optionee at the time of his or her death.

 

11.              EFFECTIVE DATE OFPLAN.

 

This Planshall become effective on the date (the “Effective Date”) on which thestockholders of the Company shall have approved the Plan.

 

12.              EXPIRATION ANDTERMINATION OF THE PLAN.

 

Except withrespect to Options then outstanding, the Plan shall expire on the date (the “ExpirationDate”) which is the first to occur of (i) the tenth anniversary of thedate on which the Plan is adopted by the Board, (ii) the tenth anniversaryof the Effective Date, and (iii) the date as of which the Board, in itssole discretion, determines that the Plan shall terminate. Any Optionsoutstanding as of the Expiration Date shall remain in effect until they havebeen exercised or terminated or have expired by their respective terms.

 

13.              AMENDMENT OF PLAN.

 

The Board mayat any time prior to the Expiration Date modify and amend the Plan in anyrespect; *provided, however*, that the approval of the holders ofa majority of the votes

 

10

----

 

that may be cast by all of the holders of shares ofCommon Stock and preferred stock of the Company, if any, entitled to vote(voting as a single class) shall be obtained prior to any such amendmentbecoming effective if and to the extent such approval is required by law or therules of any stock exchange or automated quotation system upon which theCommon Stock is listed or quoted, or to ensure that ISOs will continue toqualify as incentive stock options under Section 422 of the Code or theregulations promulgated by the Treasury Department thereunder.

 

14.              CAPTIONS.

 

The use of captions in thisPlan is for convenience. The captions are not intended to provide substantiverights.

 

15.              DISQUALIFYING DISPOSITIONS.

 

If Optioned Shares acquiredby exercise of an ISO granted under this Plan are disposed of within two yearsfollowing the date of grant of the ISO or one year following the transfer ofthe Optioned Shares to the Optionee (a “Disqualifying Disposition”), the holderof the Optioned Shares shall, immediately prior to such DisqualifyingDisposition, notify the Company in writing of the date and terms of suchDisqualifying Disposition and provide such other information regarding theDisqualifying Disposition as the Company may reasonably require.

 

16.              WITHHOLDING TAXES.

 

Whenever under the Planshares of Common Stock are to be delivered by an Optionee upon exercise of anNSO, the Company shall be entitled to require as a condition of delivery thatthe Optionee remit or, in appropriate cases, agree to remit when due, an amountsufficient to satisfy all current or estimated future Federal, state and localwithholding tax and employment or other tax requirements relating thereto. Atthe time of a Disqualifying Disposition, the Optionee shall remit to theCompany in cash the amount of any applicable Federal, state and localwithholding taxes and employment or other tax requirements relating thereto.

 

17.              OTHER PROVISIONS.

 

Each Option granted underthe Plan may contain such other terms and conditions not inconsistent with thePlan as may be determined by the Committee, in its sole discretion.Notwithstanding the foregoing, each ISO granted under the Plan shall includethose terms and conditions which are necessary to qualify the ISO as an “incentivestock option” within the meaning of Section 422 of the Code and theregulations thereunder and shall not include any terms or conditions which areinconsistent therewith.

 

18.              NUMBER AND GENDER.

 

With respect to words usedin this Plan, the singular form shall include the plural form, the masculinegender shall include the feminine gender, and vice-versa, as the contextrequires.

 

11

----

 

19.              GOVERNING LAW.

 

The validity and constructionof this Plan and the instruments evidencing the Options granted hereunder shallbe governed by the laws of the State of Delaware.

 

This Plan was originallyapproved by the Board and by the stockholders of the Company on December 31,1998.

 

12

----