<PAGE>

                                 EXHIBIT 10.26

                            RED BRICK SYSTEMS, INC.
                         SUPPLEMENTAL STOCK OPTION PLAN
                         ------------------------------

                                  ARTICLE ONE
                               GENERAL PROVISIONS
                               ------------------

I.  PURPOSE OF THE PLAN

          This Supplemental Stock Option Plan is intended to promote the
interests of Red Brick Systems, Inc., a Delaware corporation, by providing
eligible persons with the opportunity to acquire a proprietary interest, or
otherwise increase their proprietary interest, in the Corporation as an
incentive for them to remain in the service of the Corporation.

          Capitalized terms shall have the meanings assigned to such terms in
the attached Appendix.

II.  ADMINISTRATION OF THE PLAN

     A.  Administration of the Plan with respect to all persons eligible to
participate may, at the Board's discretion, be vested in the Board or the
Committee.  The members of the Committee may be Board members who are Employees
eligible to receive option grants or direct stock issuances under the Plan or
any stock option, stock appreciation, stock bonus or other stock plan of the
Corporation (or any Parent or Subsidiary).

     B. Members of the Committee shall serve for such period of time as the
Board may determine and shall be subject to removal by the Board at any time.
The Board may also at any time terminate the functions of the Committee and
reassume all powers and authority previously delegated to such committee.

     C.  The Plan Administrator shall, within the scope of its administrative
functions under the Plan, have full power and authority to establish such rules
and regulations as it may deem appropriate for proper administration of the Plan
and to make such determinations under, and issue such interpretations of, the
Plan and any outstanding options thereunder as it may deem necessary or
advisable.  Decisions of the Plan Administrator within the scope of its
administrative functions under the Plan shall be final and binding on all
parties who have an interest in the Plan under its jurisdiction or any option
thereunder.

     D. Service on the Committee shall constitute service as a Board member,
and members of such committee shall accordingly be entitled to full
indemnification and reimbursement as Board members for their service on such
committee. No member of the Committee shall be liable for any act or omission
made in good faith with respect to the Plan or any option grants made under
the Plan.

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III.  ELIGIBILITY

     A.  The persons eligible to participate in the Plan are as follows:

            (i) Employees who are not officers or directors of the
Corporation; and

            (ii) consultants and other independent advisors who provide
     services to the Corporation (or any Parent or Subsidiary).

     B.  The Plan Administrator shall, within the scope of its administrative
jurisdiction under the Plan, have full authority (subject to the provisions of
the Plan) to determine which eligible persons are to receive option grants, the
time or times when such option grants are to be made, the number of shares to be
covered by each such grant, the time or times at which each option is to become
exercisable and the vesting schedule (if any) applicable to the option shares
and the maximum term for which the option is to remain outstanding.

IV.  STOCK SUBJECT TO THE PLAN

    A. The stock issuable under the Plan shall be shares of authorized but
unissued or reacquired Common Stock, including shares repurchased by the
Corporation on the open market. The maximum number of shares of Common Stock
which may be issued over the term of the Plan shall not exceed 1,100,000
shares/1/.

    B. No one person participating in the Plan may receive options and
separately exercisable stock appreciation rights for more than 100,000 shares of
Common Stock available in the aggregate each calendar year over the term of the
Plan.

    C. Shares of Common Stock subject to outstanding options shall be available
for subsequent issuance under the Plan to the extent (i) the options expire or
terminate for any reason prior to exercise in full or (ii) the options are
canceled in accordance with the cancellation-regrant provisions of Article Two.
All shares issued under the Plan shall reduce on a share-for-share basis the
number of shares of Common Stock available for subsequent issuance under the
Plan.

    D. Should any change be made to the Common Stock by reason of any stock
split, stock dividend, recapitalization, combination of shares, exchange of
shares or other change affecting the outstanding Common Stock as a class without
the Corporation's receipt of consideration, appropriate adjustments shall be
made to (i) the maximum number and/or class of securities issuable under the
Plan, (ii) the number and/or class of securities for which any one person may be
granted options each calendar year over the term of the Plan, and (iii) the
number


-----------
/1/  Includes 600,000 shares initially authorized upon adoption of Plan, and a
500,000-share increase approved by the Board on January 5, 1998.

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and/or class of securities and the exercise price per share in effect under each
outstanding option in order to prevent the dilution or enlargement of benefits
thereunder.  The adjustments determined by the Plan Administrator shall be
final, binding and conclusive.

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                                  ARTICLE TWO
                              OPTION GRANT PROGRAM
                              --------------------

I.  OPTION TERMS

          Each option shall be evidenced by one or more documents in the form
approved by the Plan Administrator; provided, however, that each such document
                                    --------
shall comply with the terms specified below.  No Incentive Options may be
granted under the Plan.

    A.  EXERCISE PRICE.
        --------------

        1. The exercise price per share shall be fixed by the Plan
Administrator but shall not be less than eighty-five percent (85%) of the Fair
Market Value per share of Common Stock on the option grant date.

        2. The exercise price shall become immediately due upon exercise of
the option and shall, subject to the provisions of Section I of Article Three
and the documents evidencing the option, be payable in one or more of the
forms specified below:

                (i)  cash or check made payable to the Corporation,

                (ii) shares of Common Stock held for the requisite period
     necessary to avoid a charge to the Corporation's earnings for financial
     reporting purposes and valued at Fair Market Value on the Exercise Date,
     or

                (iii) to the extent the option is exercised for vested shares,
     through a special sale and remittance procedure pursuant to which the
     Optionee shall concurrently provide irrevocable written instructions to
     (a) a Corporation-designated brokerage firm to effect the immediate sale
     of the purchased shares and remit to the Corporation, out of the sale
     proceeds available on the settlement date, sufficient funds to cover the
     aggregate exercise price payable for the purchased shares plus all
     applicable Federal, state and local income and employment taxes required
     to be withheld by the Corporation by reason of such exercise and (b) the
     Corporation to deliver the certificates for the purchased shares directly
     to such brokerage firm in order to complete the sale.

          Except to the extent such sale and remittance procedure is utilized,
payment of the exercise price for the purchased shares must be made on the
Exercise Date.

     B.  EXERCISE AND TERM OF OPTIONS.  Each option shall be exercisable at
         ----------------------------
such time or times, during such period and for such number of shares as shall
be determined by the Plan Administrator and set forth in the documents
evidencing the option. However, no option shall have a term in excess of ten
(10) years measured from the option grant date.

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     C.  EFFECT OF TERMINATION OF SERVICE.
         --------------------------------

         1. The following provisions shall govern the exercise of any options
held by the Optionee at the time of cessation of Service or death:

                (i) Any option outstanding at the time of the Optionee's
     cessation of Service for any reason shall remain exercisable for such
     period of time thereafter as shall be determined by the Plan
     Administrator and set forth in the documents evidencing the option, but
     no such option shall be exercisable after the expiration of the option
     term.

                (ii) Any option exercisable in whole or in part by the
     Optionee at the time of death may be subsequently exercised by the
     personal representative of the Optionee's estate or by the person or
     persons to whom the option is transferred pursuant to the Optionee's will
     or in accordance with the laws of descent and distribution.

                (iii) During the applicable post-Service exercise period, the
option may not be exercised in the aggregate for more than the number of
vested shares for which the option is exercisable on the date of the
Optionee's cessation of Service. Upon the expiration of the applicable
exercise period or (if earlier) upon the expiration of the option term, the
option shall terminate and cease to be outstanding for any vested shares for
which the option has not been exercised. However, the option shall,
immediately upon the Optionee's cessation of Service, terminate and cease to
be outstanding to the extent it is not exercisable for vested shares on the
date of such cessation of Service.

                (iv) Should the Optionee's Service be terminated for
     Misconduct, then all outstanding options held by the Optionee shall
     terminate immediately and cease to be outstanding.

                (v) In the event of a Corporate Transaction, the provisions of
     Section II of this Article Two shall govern the period for which the
     outstanding options are to remain exercisable following the Optionee's
     cessation of Service and shall supersede any provisions to the contrary
     in this section.

     2. The Plan Administrator shall have the discretion, exercisable either
at the time an option is granted or at any time while the option remains
outstanding, to:

                (i) extend the period of time for which the option is to
     remain exercisable following the Optionee's cessation of Service from the
     period otherwise in effect for that option to such greater period of time
     as the Plan Administrator shall deem appropriate, but in no event beyond
     the expiration of the option term, and/or

                (ii) permit the option to be exercised, during the applicable
     post-Service exercise period, not only with respect to the number of
     vested shares of Common Stock for which such option is exercisable at the
     time of the Optionee's

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     cessation of Service but also with respect to one or more additional
     installments in which the Optionee would have vested under the option had
     the Optionee continued in Service.

     D.  STOCKHOLDER RIGHTS.  The holder of an option shall have no stockholder
         ------------------
rights with respect to the shares subject to the option until such person shall
have exercised the option, paid the exercise price and become a holder of record
of the purchased shares.

     E.  REPURCHASE RIGHTS.  The Plan Administrator shall have the discretion
         -----------------
to grant options which are exercisable for unvested shares of Common Stock.
Should the Optionee cease Service while holding such unvested shares, the
Corporation shall have the right to repurchase, at the exercise price paid per
share, any or all of those unvested shares. The terms upon which such
repurchase right shall be exercisable (including the period and procedure for
exercise and the appropriate vesting schedule for the purchased shares) shall
be established by the Plan Administrator and set forth in the document
evidencing such repurchase right.

     F.  LIMITED TRANSFERABILITY OF OPTIONS.  During the lifetime of the
         ----------------------------------
Optionee, the option shall be exercisable only by the Optionee and shall not
be assignable or transferable other than by will or by the laws of descent and
distribution following the Optionee's death. However, a Non-Statutory Option
may be assigned in accordance with the terms of a Qualified Domestic Relations
Order. The assigned option may only be exercised by the person or persons who
acquire a proprietary interest in the option pursuant to such Qualified
Domestic Relations Order. The terms applicable to the assigned option (or
portion thereof) shall be the same as those in effect for the option
immediately prior to such assignment and shall be set forth in such documents
issued to the assignee as the Plan Administrator may deem appropriate.

II.  CORPORATE TRANSACTION/CHANGE IN CONTROL

     A. In the event of any Corporate Transaction, each outstanding option
shall automatically accelerate so that each such option shall, immediately
prior to the effective date of the Corporate Transaction, become fully
exercisable for all of the shares of Common Stock at the time subject to such
option and may be exercised for any or all of those shares as fully-vested
shares of Common Stock. However, an outstanding option shall NOT so accelerate
if and to the extent: (i) such option is, in connection with the Corporate
Transaction, either to be assumed by the successor corporation (or parent
thereof) or to be replaced with a comparable option to purchase shares of the
capital stock of the successor corporation (or parent thereof), (ii) such
option is to be replaced with a cash incentive program of the successor
corporation which preserves the spread existing on the unvested option shares
at the time of the Corporate Transaction and provides for subsequent payout in
accordance with the same vesting schedule applicable to such option or (iii)
the acceleration of such option is subject to other limitations imposed by the
Plan Administrator at the time of the option grant. The determination of
option comparability under clause (i) above shall be made by the Plan
Administrator, and its determination shall be final, binding and conclusive.

     B. All outstanding repurchase rights shall also terminate automatically,
and the shares of Common Stock subject to those terminated rights shall
immediately vest in full, in the event of any Corporate Transaction, except to
the extent: (i) those repurchase rights are to be

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assigned to the successor corporation (or parent thereof) in connection with
such Corporate Transaction or (ii) such accelerated vesting is precluded by
other limitations imposed by the Plan Administrator at the time the repurchase
right is issued.

     C. The Plan Administrator shall have the discretion, exercisable either
at the time the option is granted or at any time while the option remains
outstanding, to provide for the automatic acceleration of one or more
outstanding options (and the automatic termination of one or more outstanding
repurchase rights with the immediate vesting of the shares of Common Stock
subject to those rights) upon the occurrence of a Corporate Transaction,
whether or not those options are to be assumed or replaced (or those
repurchase rights are to be assigned) in the Corporate Transaction.

     D. Immediately following the consummation of the Corporate Transaction,
all outstanding options shall terminate and cease to be outstanding, except to
the extent assumed by the successor corporation (or parent thereof).

     E. Each option which is assumed in connection with a Corporate
Transaction shall be appropriately adjusted, immediately after such Corporate
Transaction, to apply to the number and class of securities which would have
been issuable to the Optionee in consummation of such Corporate Transaction
had the option been exercised immediately prior to such Corporate Transaction.
Appropriate adjustments shall also be made to (i) the number and class of
securities available for issuance under the Plan on both an aggregate and per
Optionee basis following the consummation of such Corporate Transaction and
(ii) the exercise price payable per share under each outstanding option,
provided the aggregate exercise price payable for such securities shall remain
--------
the same.

     F. Any options which are assumed or replaced in the Corporate Transaction
and do not otherwise accelerate at that time, shall automatically accelerate
(and any of the Corporation's outstanding repurchase rights which do not
otherwise terminate at the time of the Corporate Transaction shall
automatically terminate and the shares of Common Stock subject to those
terminated rights shall immediately vest in full) in the event the Optionee's
Service should subsequently terminate by reason of an Involuntary Termination
within twelve (12) months following the effective date of such Corporate
Transaction. Any options so accelerated shall remain exercisable for fully-
vested shares until the earlier of (i) the expiration of the option term or
                        -------
(ii) the expiration of the one (1)-year period measured from the effective
date of the Involuntary Termination.

     G. The Plan Administrator shall have the discretion, exercisable either
at the time the option is granted or at any time while the option remains
outstanding, to (i) provide for the automatic acceleration of one or more
outstanding options (and the automatic termination of one or more outstanding
repurchase rights with the immediate vesting of the shares of Common Stock
subject to those rights) upon the occurrence of a Change in Control or (ii)
condition any such option acceleration (and the termination of any outstanding
repurchase rights) upon the subsequent Involuntary Termination of the
Optionee's Service within a specified period following the effective date of
such Change in Control. Any options accelerated in connection

                                       7
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with a Change in Control shall remain fully exercisable until the expiration
or sooner termination of the option term.

     H. The grant of options under the Plan shall in no way affect the right
of the Corporation to adjust, reclassify, reorganize or otherwise change its
capital or business structure or to merge, consolidate, dissolve, liquidate or
sell or transfer all or any part of its business or assets.

III.  CANCELLATION AND REGRANT OF OPTIONS

          The Plan Administrator shall have the authority to effect, at any time
and from time to time, with the consent of the affected option holders, the
cancellation of any or all outstanding options under the Plan and to grant in
substitution new options covering the same or different number of shares of
Common Stock but with an exercise price per share based on the Fair Market Value
per share of Common Stock on the new option grant date.

                                       8
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                                ARTICLE THREE
                                MISCELLANEOUS
                                -------------

I.   FINANCING

     A. The Plan Administrator may permit any Optionee to pay the option
exercise price under the Plan by delivering a promissory note payable in one
or more installments. The terms of any such promissory note (including the
interest rate and the terms of repayment) shall be established by the Plan
Administrator in its sole discretion. Promissory notes may be authorized with
or without security or collateral. In all events, the maximum credit available
to the Optionee may not exceed the sum of (i) the aggregate option exercise
price payable for the purchased shares plus (ii) any Federal, state and local
income and employment tax liability incurred by the Optionee in connection
with the option exercise.

     B. The Plan Administrator may, in its discretion, determine that one or
more such promissory notes shall be subject to forgiveness by the Corporation
in whole or in part upon such terms as the Plan Administrator may deem
appropriate.

II.  TAX WITHHOLDING

     A. The Corporation's obligation to deliver shares of Common Stock upon
the exercise of options under the Plan shall be subject to the satisfaction of
all applicable Federal, state and local income and employment tax withholding
requirements.

     B. The Plan Administrator may, in its discretion, provide any or all
holders of Non-Statutory Options under the Plan with the right to use shares
of Common Stock in satisfaction of all or part of the Taxes incurred by such
holders in connection with the exercise of their options. Such right may be
provided to any such holder in either or both of the following formats:

                (i) Stock Withholding: The election to have the Corporation
                    -----------------
     withhold, from the shares of Common Stock otherwise issuable upon the
     exercise of such Non-Statutory Option, a portion of those shares with an
     aggregate Fair Market Value equal to the percentage of the Taxes (not to
     exceed one hundred percent (100%)) designated by the holder.

                (ii) Stock Delivery: The election to deliver to the
                     --------------
     Corporation, at the time the Non-Statutory Option is exercised, one or
     more shares of Common Stock previously acquired by such holder (other
     than in connection with the option exercise triggering the Taxes) with an
     aggregate Fair Market Value equal to the percentage of the Taxes (not to
     exceed one hundred percent (100%)) designated by the holder.

III. EFFECTIVE DATE AND TERM OF THE PLAN

     A. The Plan shall become effective on the Plan Effective Date and options
may be granted under the Plan from and after the Plan Effective Date.

                                       9
<PAGE>

     B. The Plan shall terminate upon the earliest of (i) March 18, 2007, (ii)
the date on which all shares available for issuance under the Plan shall have
been issued pursuant to the exercise of the options under the Plan or (iii)
the termination of all outstanding options in connection with a Corporate
Transaction. Upon such Plan termination, all options outstanding on such date
shall thereafter continue to have force and effect in accordance with the
provisions of the documents evidencing such options.

IV.  AMENDMENT OF THE PLAN

          The Board shall have complete and exclusive power and authority to
amend or modify the Plan in any or all respects.  However, no such amendment or
modification shall adversely affect the rights and obligations with respect to
options at the time outstanding under the Plan unless the Optionee consents to
such amendment or modification.  Notwithstanding the sentence above, the Plan
Administrator may amend an outstanding option to reduce the number of option
shares previously granted to an optionee provided the reduction applies solely
unvested shares or shares which have not yet become exercisable as of the date
of the amendment.

V.  USE OF PROCEEDS

          Any cash proceeds received by the Corporation from the sale of shares
of Common Stock under the Plan shall be used for general corporate purposes.

VI.  REGULATORY APPROVALS

     A. The implementation of the Plan, the granting of any option under the
Plan and the issuance of any shares of Common Stock upon the exercise of any
option shall be subject to the Corporation's procurement of all approvals and
permits required by regulatory authorities having jurisdiction over the Plan,
the options granted under it and the shares of Common Stock issued pursuant to
it.

     B. No shares of Common Stock or other assets shall be issued or delivered
under the Plan unless and until there shall have been compliance with all
applicable requirements of Federal and state securities laws, including the
filing and effectiveness of the Form S-8 registration statement for the shares
of Common Stock issuable under the Plan, and all applicable listing
requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which Common Stock is then listed for trading.

VII.  NO EMPLOYMENT/SERVICE RIGHTS

          Nothing in the Plan shall confer upon the Optionee any right to
continue in Service for any period of specific duration or interfere with or
otherwise restrict in any way the rights of the Corporation (or any Parent or
Subsidiary employing or retaining such person) or of the Optionee, which rights
are hereby expressly reserved by each, to terminate such person's Service at any
time for any reason, with or without cause.

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                                    APPENDIX
                                    --------

         The following definitions shall be in effect under the Plan:

     A.  BOARD shall mean the Corporation's Board of Directors.
         -----

     B.  CHANGE IN CONTROL shall mean a change in ownership or control of the
         -----------------
Corporation effected through either of the following transactions:

                (i) the acquisition, directly or indirectly, by any person or
     related group of persons (other than the Corporation or a person that
     directly or indirectly controls, is controlled by, or is under common
     control with, the Corporation), of beneficial ownership (within the
     meaning of Rule 13d-3 of the 1934 Act) of securities possessing more than
     fifty percent (50%) of the total combined voting power of the
     Corporation's outstanding securities pursuant to a tender or exchange
     offer made directly to the Corporation's stockholders which the Board
     does not recommend such stockholders to accept, or

                (ii) a change in the composition of the Board over a period of
     thirty-six (36) consecutive months or less such that a majority of the
     Board members ceases, by reason of one or more contested elections for
     Board membership, to be comprised of individuals who either (A) have been
     Board members continuously since the beginning of such period or (B) have
     been elected or nominated for election as Board members during such
     period by at least a majority of the Board members described in clause
     (A) who were still in office at the time the Board approved such election
     or nomination.

     C.  CODE shall mean the Internal Revenue Code of 1986, as amended.
         ----

     D.  COMMITTEE shall mean a committee of one (1) or more Board members
         ---------
appointed by the Board to administer the Plan.

     E.  COMMON STOCK shall mean the Corporation's common stock.
         ------------

     F.  CORPORATE TRANSACTION shall mean either of the following stockholder-
         ---------------------
approved transactions to which the Corporation is a party:

                (i) a merger or consolidation in which securities possessing
     more than fifty percent (50%) of the total combined voting power of the
     Corporation's outstanding securities are transferred to a person or
     persons different from the persons holding those securities immediately
     prior to such transaction; or

                (ii) the sale, transfer or other disposition of all or
     substantially all of the Corporation's assets in complete liquidation or
     dissolution of the Corporation .

                (iii)  CORPORATION shall mean Red Brick Systems, Inc., a
                       -----------
Delaware corporation.

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     G.  EMPLOYEE shall mean an individual who is in the employ of the
         --------
Corporation (or any Parent or Subsidiary), subject to the control and
direction of the employer entity as to both the work to be performed and the
manner and method of performance.

     H.  EXERCISE DATE shall mean the date on which the Corporation shall have
         -------------
received written notice of the option exercise.

     I.  FAIR MARKET VALUE per share of Common Stock on any relevant date
         -----------------
shall be determined in accordance with the following provisions:

                (i) If the Common Stock is at the time traded on the Nasdaq
     National Market, then the Fair Market Value shall be the closing selling
     price per share of Common Stock on the date in question, as such price is
     reported by the National Association of Securities Dealers on the Nasdaq
     National Market or any successor system. If there is no closing selling
     price for the Common Stock on the date in question, then the Fair Market
     Value shall be the closing selling price on the last preceding date for
     which such quotation exists.

                (ii) If the Common Stock is at the time listed on any Stock
     Exchange, then the Fair Market Value shall be the closing selling price
     per share of Common Stock on the date in question on the Stock Exchange
     determined by the Plan Administrator to be the primary market for the
     Common Stock, as such price is officially quoted in the composite tape of
     transactions on such exchange. If there is no closing selling price for
     the Common Stock on the date in question, then the Fair Market Value
     shall be the closing selling price on the last preceding date for which
     such quotation exists.

                (iii) For purposes of option grants made on the date the
Underwriting Agreement is executed and the initial public offering price of
the Common Stock is established, the Fair Market Value shall be deemed to be
equal to the established initial offering price per share. For purposes of
option grants made prior to such date, the Fair Market Value shall be
determined by the Plan Administrator after taking into account such factors as
the Plan Administrator shall deem appropriate.

     J.  INCENTIVE OPTION shall mean an option which satisfies the
         ----------------
requirements of Code Section 422.

     K.  INVOLUNTARY TERMINATION shall mean the termination of the Service of
         -----------------------
any individual which occurs by reason of:

                (i) such individual's involuntary dismissal or discharge by
     the Corporation for reasons other than Misconduct, or

                (ii) such individual's voluntary resignation following (A) a
     change in his or her position with the Corporation which materially
     reduces his or her level of responsibility, (B) a reduction in his or her
     level of compensation (including base salary, fringe benefits and
     participation in corporate-performance based bonus or incentive programs)
     by more than fifteen percent (15%) or (C) a relocation of such
     individual's

                                       12
<PAGE>

     place of employment by more than fifty (50) miles, provided and only if
     such change, reduction or relocation is effected by the Corporation
     without the individual's consent.

     L.  MISCONDUCT shall mean the commission of any act of fraud,
         ----------
embezzlement or dishonesty by the Optionee, any unauthorized use or disclosure
by such person of confidential information or trade secrets of the Corporation
(or any Parent or Subsidiary), or any other intentional misconduct by such
person adversely affecting the business or affairs of the Corporation (or any
Parent or Subsidiary) in a material manner. The foregoing definition shall not
be deemed to be inclusive of all the acts or omissions which the Corporation
(or any Parent or Subsidiary) may consider as grounds for the dismissal or
discharge of any Optionee or other person in the Service of the Corporation
(or any Parent or Subsidiary).

     M.  ACT shall mean the Securities Exchange Act of 1934, as amended.
         ---

     N.  NON-STATUTORY OPTION shall mean an option not intended to satisfy  the
         --------------------
requirements of Code Section 422.

     O.  OPTIONEE shall mean any person to whom an option is granted under
         --------
the Plan.

     P.  PARENT shall mean any corporation (other than the Corporation) in an
         ------
unbroken chain of corporations ending with the Corporation, provided each
corporation in the unbroken chain (other than the Corporation) owns, at the time
of the determination, stock possessing fifty percent (50%) or more of the total
combined voting power of all classes of stock in one of the other corporations
in such chain.

     Q.  PERMANENT DISABILITY OR PERMANENTLY DISABLED shall mean the inability
         --------------------------------------------
of the Optionee to engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment expected to result in death
or to be of continuous duration of twelve (12) months or more.

     R.  PLAN shall mean the Corporation's Supplemental Stock Option Plan, as
         ----
set forth in this document.

     S.  PLAN ADMINISTRATOR shall mean the particular entity, whether the
         ------------------
Committee or the Board, which is authorized to administer the Plan with respect
to one or more classes of eligible persons, to the extent such entity is
carrying out its administrative functions under those programs with respect to
the persons under its jurisdiction.

     T.  PLAN EFFECTIVE DATE shall mean March 19, 1997.
         -------------------

     U.  SERVICE shall mean the provision of services to the Corporation (or any
         -------
Parent or Subsidiary) by a person in the capacity of an Employee, a non-employee
member of the board of directors or a consultant or independent advisor, except
to the extent otherwise specifically provided in the documents evidencing the
option grant.

     V.  STOCK EXCHANGE shall mean either the American Stock Exchange or the
         --------------
New York Stock Exchange.

                                       13
<PAGE>

     W.  SUBSIDIARY shall mean any corporation (other than the Corporation)
         ----------
in an unbroken chain of corporations beginning with the Corporation, provided
each corporation (other than the last corporation) in the unbroken chain owns,
at the time of the determination, stock possessing fifty percent (50%) or more
of the total combined voting power of all classes of stock in one of the other
corporations in such chain.

     X.  TAXES shall mean the Federal, state and local income and employment
         -----
tax liabilities incurred by the holder of Non-Statutory Options or unvested
shares of Common Stock in connection with the exercise of those options or the
vesting of those shares.

                                       14