Document:

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                                 HEARTPORT, INC.
                          EMPLOYEE STOCK PURCHASE PLAN
                  (Amended and Restated as of February 5, 1999)

         I.       PURPOSE OF THE PLAN

                  This Employee Stock Purchase Plan is intended to promote
the interests of Heartport, Inc. by providing eligible employees with the
opportunity to acquire a proprietary interest in the Corporation through
participation in a payroll-deduction based employee stock purchase plan
designed to qualify under Section 423 of the Code.

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

         II.      ADMINISTRATION OF THE PLAN

                  The Plan Administrator shall have full authority to
interpret and construe any provision of the Plan and to adopt such rules and
regulations for administering the Plan as it may deem necessary in order to
comply with the requirements of Code Section 423. Decisions of the Plan
Administrator shall be final and binding on all parties having an interest in
the Plan.

         III.     STOCK SUBJECT TO PLAN

                  A.  The stock purchasable under the Plan shall be shares of
authorized but unissued or reacquired Common Stock, including shares of
Common Stock purchased on the open market. The maximum number of shares of
Common Stock which may be issued over the term of the Plan shall initially
not exceed Two Hundred Forty Thousand (240,000) shares. In addition, the
number of shares of Common Stock available for purchase under the Plan shall
automatically increase by the lesser of (i) 0.5% of the total number of
shares of Common Stock outstanding on the last day of the preceding calendar
year or (ii) 150,000 shares on January 1 each year beginning January 1, 1999.

                  B.  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 class of securities
issuable under the Plan, (ii) the maximum number and class of securities
purchasable per Participant on any one Purchase Date and (iii) the number and
class of securities and the price per share in effect under each outstanding
Purchase Right in order to prevent the dilution or enlargement of benefits
thereunder.

         IV.      OFFERING PERIODS

                  A.  Shares of Common Stock shall be offered for purchase
under the Plan through a series of successive or overlapping Offering Periods
until such time as (i) the

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maximum number of shares of Common Stock available for issuance under the
Plan shall have been purchased or (ii) the Plan shall have been sooner
terminated.

                  B.  Each Offering Period shall be of such duration (not to
exceed twenty-four (24) months) as determined by the Plan Administrator prior
to the start date. The initial Offering Period shall commence on November 1,
1996 and terminate on the last business day in October 1998. The next
Offering Period shall commence on June 1, 1997, the next Offering Period
shall commence on November 3, 1997 and subsequent Offering Periods shall
commence every six (6) months thereafter on the first business day in May and
November each year unless otherwise designated by the Plan Administrator. The
Plan Administrator shall have complete discretion to change the start date
and the duration of an Offering Period provided Eligible Employees are
notified prior to the start date of any Purchase Period within an Offering
Period for which such change is to be effective and provided, further, that
no Offering Period shall have a duration exceeding twenty-seven (27) months.

                 C.  Each Offering Period shall be comprised of a series of
one or more successive Purchase Periods. Each Purchase Period shall be of
such duration (generally not to exceed six (6) months) as determined by the
Plan Administrator prior to the start date. However, the initial Purchase
Period shall commence on November 1, 1996 and terminate on May 30, 1997. The
next Purchase Period shall commence on June 1, 1997, and subsequent Purchase
Periods shall commence on the first business day of November and May each
calendar year thereafter unless otherwise designated by the Plan
Administrator.

         V.      ELIGIBILITY

                 A.   Each Eligible Employee shall be eligible to participate
in the Plan in accordance with the following provisions:

                 -    An individual who is an Eligible Employee on the start
date of any Offering Period under the Plan shall be eligible to commence
participation in that Offering Period on such start date.

                 -    An individual who first becomes an Eligible Employee
after the start date of any Offering Period under the Plan may enter any
subsequent Offering Period on which he/she remains an Eligible Employee.

                 B.   To participate in the Plan for a particular Offering
Period, the Eligible Employee must complete the enrollment forms prescribed
by the Plan Administrator (including a stock purchase agreement and a payroll
deduction authorization form) and file such forms with the Plan Administrator
(or its designate) on or before the start date.

         VI.     PAYROLL DEDUCTIONS

                 A.   The payroll deduction authorized by the Participant for
purposes of acquiring shares of Common Stock under the Plan may be any
multiple of one percent (1%) of

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the Cash Compensation paid to the Participant during each Purchase Period
within the Offering Period, up to a maximum of fifteen percent (15%).
However, if a Participant is participating in more than one Offering Period
at any one time, the maximum authorized payroll deduction remains fifteen
percent (15%). The deduction rate so authorized shall continue in effect for
the remainder of the Offering Period, except to the extent such rate is
changed in accordance with the following guidelines:

                        (i)  The Participant may, at any time during the Ofering
          Period, reduce his or her rate of payroll deduction to become
          effective as soon as possible after filing the appropriate form with
          the Plan Administrator. The Participant may not, however, effect more
          than one (1) such reduction per Purchase Period.

                        (ii) The Participant may, prior to the commencement of
          any new Purchase Period within the Offering Period, increase the rate
          of his or her payroll deduction by filing the appropriate form with
          the Plan Administrator. The new rate (which may not exceed the fifteen
          percent (15%) maximum) shall become effective as of the start date of
          the Purchase Period following the filing of such form.

                 B.  Payroll deductions shall begin on the first pay day
following the start date for the Offering Period and shall (unless sooner
terminated by the Participant) continue through the pay day ending with or
immediately prior to the last day of that Offering Period. The amounts so
collected shall be credited to the Participant's book account under the Plan,
but no interest shall be paid on the balance from time to time outstanding in
such account. The amounts collected from the Participant shall not be held in
any segregated account or trust fund and may be commingled with the general
assets of the Corporation and used for general corporate purposes.

                 C.  Payroll deductions shall automatically cease upon the
termination of the Participant's Purchase Right in accordance with the
provisions of the Plan.

                 D.  The Participant's acquisition of Common Stock under the
Plan on any Purchase Date shall neither limit nor require the Participant's
acquisition of Common Stock on any subsequent Purchase Date, whether within
the same or a different Offering Period.

         VII.    PURCHASE RIGHTS

                 A.  GRANT OF PURCHASE RIGHT. A Participant shall be granted
a separate Purchase Right for each Offering Period in which he or she
participates. The Purchase Right shall be granted on the start date of the
Offering Period and shall provide the Participant with the right to purchase
shares of Common Stock, in a series of successive installments over the
remainder of such Offering Period, upon the terms set forth below. Each
Participant may participate in more than one (1) Offering Period at any one
time. Accordingly, a Participant may continue to participate in one Offering
Period and also enroll in subsequent Offering Periods. The Purchase Right
shall be granted on the date such individual first joins an Offering Period,
shall continue until the end of the Offering Period, and shall be
automatically exercised in

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successive semi-annual installments on the last business day of the Purchase
Period each year (the last business day of April and October each year or
such other date selected by the Plan Administrator as the ending date for the
Purchase Period) until the Offering Period ends. Accordingly, each Purchase
Right may be exercised up to two (2) times each year it remains outstanding.
The Participant shall execute a stock purchase agreement embodying such terms
and such other provisions (not inconsistent with the Plan) as the Plan
Administrator may deem advisable

                 Under no circumstances shall Purchase Rights be granted
under the Plan to any Eligible Employee if such individual would, immediately
after the grant, own (within the meaning of Code Section 424(d)) or hold
outstanding options or other rights to purchase, stock possessing five
percent (5%) or more of the total combined voting power or value of all
classes of stock of the Corporation or any Corporate Affiliate.

                 B.  EXERCISE OF THE PURCHASE RIGHT. Each Purchase Right
shall be automatically exercised in installments on each successive Purchase
Date within the Offering Period, and shares of Common Stock shall accordingly
be purchased on behalf of each Participant (other than any Participant whose
payroll deductions have previously been refunded in accordance with the
Termination of Purchase Right provisions below) on each such Purchase Date.
The purchase shall be effected by applying the Participant's payroll
deductions for the Purchase Period ending on such Purchase Date (together
with any carryover deductions from the preceding Purchase Period) to the
purchase of whole shares of Common Stock (subject to the limitation on the
maximum number of shares purchasable per Participant on any one Purchase
Date) at the purchase price in effect for the Participant for that Purchase
Date.

                 C.  PURCHASE PRICE. The purchase price per share at which
Common Stock will be purchased on the Participant's behalf on each Purchase
Date within the Offering Period shall be equal to eighty-five percent (85%)
of the LOWER of (i) the Fair Market Value per share of Common Stock on the
start date for the Offering Period or (ii) the Fair Market Value per share of
Common Stock on that Purchase Date.

                 D.  NUMBER OF PURCHASABLE SHARES. The number of shares of
Common Stock purchasable by a Participant on each Purchase Date during the
Offering Period shall be the number of shares obtained by dividing the amount
collected from the Participant through payroll deductions during the Purchase
Period ending with that Purchase Date (plus any carryover deductions from the
preceding Purchase Period) by the purchase price in effect for the
Participant for that Purchase Date. However, the maximum number of shares of
Common Stock purchasable per Participant on any one Purchase Date shall not
exceed ONE THOUSAND (1,000) shares, subject to periodic adjustments in the
event of certain changes in the Corporation's capitalization.

                 E.  EXCESS PAYROLL DEDUCTIONS. Any payroll deductions not
applied to the purchase of shares of Common Stock on any Purchase Date
because they are not sufficient to purchase a whole share of Common Stock
shall be held for the purchase of Common Stock on the next Purchase Date.
However, any payroll deductions not applied to the purchase of

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Common Stock by reason of the limitation on the maximum number of shares
purchasable by the Participant on the Purchase Date shall be promptly
refunded.

                 F.  TERMINATION OF PURCHASE RIGHT. The following provisions
shall govern the termination of outstanding Purchase Rights:

                        (i)  A Participant may, at any time prior to the next
          Purchase Date within the Offering Period, terminate his or her
          outstanding Purchase Right by filing the appropriate form with the
          Plan Administrator (or its designate), and no further payroll
          deductions shall be collected from the Participant with respect to the
          terminated Purchase Right. Any payroll deductions collected during the
          Purchase Period in which such termination occurs shall, at the
          Participant's election, be immediately refunded or held for the
          purchase of shares on the next Purchase Date. If no such election is
          made at the time such Purchase Right is terminated, then the payroll
          deductions collected with respect to the terminated right shall be
          refunded as soon as possible.

                        (ii) The termination of such Purchase Right shall be
          irrevocable, and the Participant may not subsequently rejoin the
          Purchase Period for which the terminated Purchase Right was granted.
          In order to resume participation in any subsequent Offering Period,
          such individual must re-enroll in the Plan (by making a timely filing
          of the prescribed enrollment forms) on or before the start date for
          that Offering Period.

                        (iii) Should the Participant cease to remain an Eligible
          Employee for any reason (including death, disability or change in
          status) while his or her Purchase Right remains outstanding, then that
          Purchase Right shall immediately terminate, and all of the
          Participant's payroll deductions for the Purchase Period in which the
          Purchase Right so terminates (plus any carryover amounts) shall be
          immediately refunded. However, should the Participant cease to remain
          in active service by reason of an approved unpaid leave of absence,
          then the Participant shall have the election, exercisable up until the
          last business day of the Purchase Period in which such leave
          commences, to (a) withdraw all the funds in the Participant's payroll
          account at the time of the commencement of such leave or (b) have such
          funds held for the purchase of shares at the end of such Purchase
          Period. In no event, however, shall any further payroll deductions be
          added to the Participant's account during such leave. Upon the
          Participant's return to active service, his or her payroll deductions
          under the Plan shall automatically resume at the rate in effect at
          the time the leave began, provided the Participant returns to service
          prior to the expiration date of the offering period in which such
          leave began.

                 G.  CORPORATE TRANSACTION. Each outstanding Purchase Right
shall automatically be exercised, immediately prior to the effective date of
any Corporate Transaction, by applying the payroll deductions of each
Participant for the Purchase Period in which such Corporate Transaction
occurs to the purchase of shares of Common Stock at a purchase price per
share equal to eighty-five percent (85%) of the LOWER of (i) the Fair Market
Value per share of Common Stock on the start date for the Offering Period in
which such Corporate Transaction

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occurs or (ii) the Fair Market Value per share of Common Stock immediately
prior to the effective date of such Corporate Transaction. However, the
applicable limitation on the number of shares of Common Stock purchasable per
Participant shall continue to apply to any such purchase.

                 The Corporation shall use its best efforts to provide at
least ten (10)-days prior written notice of the occurrence of any Corporate
Transaction, and Participants shall, following the receipt of such notice,
have the right to terminate their outstanding Purchase Rights prior to the
effective date of the Corporate Transaction.

                 H.  PRORATION OF PURCHASE RIGHTS. Should the total number of
shares of Common Stock which are to be purchased pursuant to outstanding
Purchase Rights on any particular date exceed the number of shares then
available for issuance under the Plan, the Plan Administrator shall make a
pro-rata allocation of the available shares on a uniform and
nondiscriminatory basis, and the payroll deductions of each Participant, to
the extent in excess of the aggregate purchase price payable for the Common
Stock pro-rated to such individual, shall be refunded.

                 I.  ASSIGNABILITY. During the Participant's lifetime, the
Purchase Right shall be exercisable only by the Participant and shall not be
assignable or transferable by the Participant.

                 J.  STOCKHOLDER RIGHTS. A Participant shall have no
stockholder rights with respect to the shares subject to his or her
outstanding Purchase Right until the shares are purchased on the
Participant's behalf in accordance with the provisions of the Plan and the
Participant has become a holder of record of the purchased shares.

         VIII.   ACCRUAL LIMITATIONS

                 A.  No Participant shall be entitled to accrue rights to
acquire Common Stock pursuant to any Purchase Right outstanding under this
Plan if and to the extent such accrual, when aggregated with (i) rights to
purchase Common Stock accrued under any other Purchase Right granted under
this Plan and (ii) similar rights accrued under other employee stock purchase
plans (within the meaning of Code Section 423) of the Corporation or any
Corporate Affiliate, would otherwise permit such Participant to purchase more
than Twenty-Five Thousand Dollars ($25,000) worth of stock of the Corporation
or any Corporate Affiliate (determined on the basis of the Fair Market Value
of such stock on the date or dates such rights are granted) for each calendar
year such rights are at any time outstanding.

                 B.   For purposes of applying such accrual limitations, the
following provision shall be in effect:

                        (i)  No right to acquire Common Stock under any
         outstanding Purchase Right shall accrue to the extent the Participant
         has already accrued in the same calendar year the right to acquire
         Common Stock under one (1) or more other Purchase

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         Rights at a rate equal to Twenty-Five Thousand Dollars ($25,000) worth
         of Common Stock (determined on the basis of the Fair Market Value of
         such stock on the date or dates of grant) for each calendar year such
         rights were at any time outstanding.

                 C.  If by reason of such accrual limitations, any Purchase
Right of a Participant does not accrue for a particular Purchase Period, then
the payroll deductions which the Participant made during that Purchase Period
with respect to such Purchase Right shall be promptly refunded.

                 D.  In the event there is any conflict between the
provisions of this Article and one or more provisions of the Plan or any
instrument issued thereunder, the provisions of this Article shall be
controlling.

         IX.     EFFECTIVE DATE AND TERM OF THE PLAN

                 A.  The Plan was adopted by the Board on February 26, 1996
and approved by the stockholders on April 10, 1996. The Plan was subsequently
amended and restated on October 21, 1996 to increase the maximum deduction
and to permit 24-month Offering Periods to become effective at the November
1, 1996 Offering Period, and the stockholders approved the amendment and
restatement at the 1997 Annual Meeting. The Plan was subsequently amended and
restated on February 5, 1999 to increase the provide for annual automatic
increases to the share reserve and the amendment and the stockholders
approved the amendment and restatement at the 1999 Annual Meeting. No
Purchase Rights shall be exercised and no shares of Common Stock shall be
issued hereunder until the Corporation shall have complied with all
applicable requirements of the 1933 Act (including the registration of the
shares of Common Stock issuable under the Plan on a Form S-8 registration
statement filed with the Securities and Exchange Commission), all applicable
listing requirements of any stock exchange (or the Nasdaq National Market, if
applicable) on which the Common Stock is listed for trading and all other
applicable requirements established by law or regulation.

                 B.  Unless sooner terminated by the Board, the Plan shall
terminate upon the earliest of (i) the last business day in October, 2006,
(ii) the date on which all shares available for issuance under the Plan shall
have been sold pursuant to Purchase Rights exercised under the Plan or (iii)
the date on which all Purchase Rights are exercised in connection with a
Corporate Transaction. No further Purchase Rights shall be granted or
exercised, and no further payroll deductions shall be collected, under the
Plan following its termination.

         X.      AMENDMENT OF THE PLAN

                 The Board may alter, amend, suspend or discontinue the Plan
at any time to become effective immediately following the close of any
Purchase Period. However, the Board may not, without the approval of the
Corporation's stockholders, (i) materially increase the number of shares of
Common Stock issuable under the Plan or the maximum number of shares
purchasable per Participant on any one Purchase Date, except for permissible
adjustments in the event of certain changes in the Corporation's
capitalization, (ii) alter the purchase price formula

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so as to reduce the purchase price payable for the shares of Common Stock
purchasable under the Plan, or (iii) materially increase the benefits
accruing to Participants under the Plan or materially modify the requirements
for eligibility to participate in the Plan.

         XI.     GENERAL PROVISIONS

                 A.   All costs and expenses incurred in the administration
of the Plan shall be paid by the Corporation.

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

                 C.  The provisions of the Plan shall be governed by the laws
of the State of California without resort to that State's conflict-of-laws
rules.

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                                   SCHEDULE A

                     CORPORATIONS PARTICIPATING IN EMPLOYEE
                  STOCK PURCHASE PLAN AS OF THE EFFECTIVE TIME:

                                 HEARTPORT, INC.
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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.  CASH COMPENSATION shall mean the (i) regular base salary paid to
a Participant by one or more Participating Companies during such individual's
period of participation in the Plan, plus (ii) any pre-tax contributions made
by the Participant to any Code Section 401(k) salary deferral plan or any
Code Section 125 cafeteria benefit program now or hereafter established by
the Corporation or any Corporate Affiliate, plus (iii) all of the following
amounts to the extent paid in cash: overtime payments, bonuses, commissions,
profit-sharing distributions and other incentive-type payments. However,
Eligible Earnings shall not include any contributions (other than Code
Section 401(k) or Code Section 125 contributions) made on the Participant's
behalf by the Corporation or any Corporate Affiliate to any deferred
compensation plan or welfare benefit program now or hereafter established.

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

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

         E.  CORPORATE AFFILIATE shall mean any parent or subsidiary
corporation of the Corporation (as determined in accordance with Code Section
424), whether now existing or subsequently established.

         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 assets of the Corporation in complete
         liquidation or dissolution of the Corporation.

         G.  CORPORATION shall mean Heartport, Inc., a Delaware corporation,
and any corporate successor to all or substantially all of the assets or
voting stock of Heartport, Inc. which shall by appropriate action adopt the
Plan.

         H.  EFFECTIVE TIME, for purposes of the initial purchase period,
shall mean the time at which the Underwriting Agreement is executed and
finally priced. Any Corporate Affiliate which becomes a Participating
Corporation after such Effective Time shall designate a

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subsequent Effective Time with respect to its employee-Participants. The
Effective Time for purposes of the restated Plan is November 1, 1996. Any
Corporate Affiliate which becomes a Participating Corporation after the
applicable Effective Time shall designate a subsequent Effective Time with
respect to its employee-Participants.

         I.  ELIGIBLE EMPLOYEE shall mean any person who is engaged, on a
regularlyscheduled basis of more than twenty (20) hours per week for more
than five (5) months per calendar year, in the rendition of personal services
to any Participating Corporation as an employee for earnings considered wages
under Code Section 3401(a).

         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.

                        (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 the initial Purchase Period
         which begins at the Effective Time, the Fair Market Value shall be
         deemed to be equal to the price per share at which the Common Stock is
         sold in the initial public offering pursuant to the Underwriting
         Agreement.

         K.  1933 ACT shall mean the Securities Act of 1933, as amended.

         L.  OFFERING PERIOD means a period of approximately twenty-four (24)
months that commences on the first business day following each semi-annual
Purchase Date, during which a Participant may be granted a Purchase Right.

         M.  PARTICIPANT shall mean any Eligible Employee of a Participating
Corporation who is actively participating in the Plan.

         N.  PARTICIPATING CORPORATION shall mean the Corporation and such
Corporate Affiliate or Affiliates as may be authorized from time to time by
the Board to extend the benefits

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of the Plan to their Eligible Employees. The Participating Corporations in
the Plan as of the Effective Time are listed in attached Schedule A.

         O.  PLAN shall mean the Corporation's Employee Stock Purchase Plan,
as set forth in this document.

         P.  PLAN ADMINISTRATOR shall mean the committee of two (2) or more
Boardmembers appointed by the  Board to administer the Plan.

         Q.  PURCHASE DATE shall mean the last business day of each Purchase
Period. The initial Purchase Date shall be October 31, 1996.

         R.  PURCHASE PERIOD shall mean the approximately six (6) month
period commencing on the first business day after a Purchase Date and ending
with the next Purchase Date, except that the first Purchase Period shall
commence on the Effective Time and end on October 31, 1996.

         S.  PURCHASE RIGHT shall mean the right granted to each Participant
who enrolls on the start date for a Purchase Period and which provides the
Participant with the right to purchase shares of Common Stock on the Purchase
Date for such Purchase Period, upon the terms set forth herein.

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

         U.  UNDERWRITING AGREEMENT shall mean the agreement between the
Corporation and the underwriter or underwriters managing the initial public
offering of the Common Stock.

                                       A-3<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:

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                            (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

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