<PAGE>

                                 HEARTPORT, INC.
                       1999 SUPPLEMENTAL STOCK OPTION PLAN



                                  ARTICLE ONE
                               GENERAL PROVISIONS



                  I.     PURPOSE OF THE PLAN

                  This 1999 Supplemental Stock Option Plan is intended to
promote the interests of Heartport, Inc., a Delaware corporation, by providing
eligible persons who are not officers or directors of the Corporation 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. The Committee shall have authority to administer
the Plan. In addition, the Board may retain the power to administer the Plan
with respect to all persons.

                         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 any 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 provisions of such program 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 each 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.

                  III.   ELIGIBILITY

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

<PAGE>

                            (i)   Employees, excluding officers of the
Corporation;

                            (ii)  non-employee members of the board of
directors of any Parent or Subsidiary, and

                            (iii) consultants and other independent advisors
who provide services to the Corporation (or any 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, with respect to the option
grants under the Plan, 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 1,500,000 shares.

                         B. 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, whether or not those shares are subsequently repurchased by the
Corporation pursuant to its repurchase rights 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. In addition, should the exercise price of
an option under the Plan be paid with shares of Common Stock or should shares
of Common Stock otherwise issuable under the Plan be withheld by the
Corporation in satisfaction of the withholding taxes incurred in connection
with the exercise of an option under the Plan, then the number of shares of
Common Stock available for issuance under the Plan shall be reduced by the
net number of shares of Common Stock issued to the holder of such option.

                         C. 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 and (ii) the number 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.

                                       2

<PAGE>

                                   ARTICLE TWO
                                 OPTION 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.

                         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.

                         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:

                                       3

<PAGE>

                              (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 III 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 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

                                       4
<PAGE>

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 (i) to a member of the immediate family
of the optionee or to a trust established for the benefit of one or more
members of the immediate family of the optionee, provided that the assignment
shall not be effective until written notice of the assignment is received by
the Plan Administrator, or (ii) in accordance with terms approved in advance
by the Plan Administrator. 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
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.


                                       5
<PAGE>

                           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 vest) 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 (and any of the Corporation's outstanding repurchase
rights so terminated) shall vest, as if the Optionee's Service continued for an
additional twelve (12) months following the Involuntary Termination and shall
remain exercisable for all of the shares which are then exercisable and/or
vested 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 with a Change
in Control shall remain fully exercisable until the expiration or sooner
termination of the option term.


                                       6

<PAGE>

                           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.


                                       7

<PAGE>

                                   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.    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.

                  III.   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

                                       8
<PAGE>

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.

                  IV.    EFFECTIVE DATE AND TERM OF THE PLAN

                         A. The Plan shall become effective on July 29, 1999,
the Plan Effective Date and options may be granted under the Plan from and after
the Plan Effective Date.

                         B. The Plan shall terminate upon the EARLIEST of (i)
July 28, 2009, (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.

                  V.     AMENDMENT OF THE PLAN

                         A. 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 foregoing clause, 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 to unvested shares or
shares which have not yet become exercisable as of the date of the amendment.

                         B. Options to purchase shares of Common Stock may be
granted under the Plan that are in excess of the number of shares then
available for issuance under the Plan.

                  VI.    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.

                  VII.   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

                                       9

<PAGE>

applicable listing requirements of any stock exchange (or the Nasdaq National
Market or Nasdaq Small Cap Market, if applicable) on which Common Stock is
then listed for trading.

                  VIII.  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.


                                  10

<PAGE>

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

                  E. COMMITTEE shall mean a committee of one (1) or more
Board members appointed by the Board or Compensation Committee to administer
the Plan with respect to eligible persons.

                  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.

                  G. CORPORATION shall mean Heartport, Inc., a Delaware
corporation.


                                       A-1
<PAGE>

                  H. 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.

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

                  J. 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. If the Common Stock is at the time traded on
the Nasdaq Small Cap 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. 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.

                  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
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.


                                       A-2

<PAGE>

                  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. 1934 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 1999 Supplemental
Stock Option Plan, as set forth in this document.

                  S. PLAN ADMINISTRATOR shall mean the particular entity,
whether the Board or the Committee, which is authorized to administer the
Plan 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 July 29, 1999.

                  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.

                                       A-3
<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.

                  AA. 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.

                  BB. STOCKHOLDER shall mean the owner of stock (as
determined under Code Section 424(d)) possessing more than ten percent (10%)
of the total combined voting power of all classes of stock of the Corporation
(or any Parent or Subsidiary).

                                       A-4