<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
</TABLE>
Altera Corporation
- - --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Altera Corporation
- - --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
[ALTERA LOGO]
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
APRIL 26, 1995
10:00 A.M.
To The Shareholders:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Altera
Corporation will be held at the Company's offices at 2610 Orchard Parkway, San
Jose, California, on Wednesday, April 26, 1995, at 10:00 a.m. local time, for
the following purposes:
1. To elect directors to serve for the ensuing year and until their
successors are elected.
2. To approve an amendment to the 1988 Director Stock Option Plan to
increase from 150,000 to 200,000 the number of shares reserved for issuance
thereunder.
3. To approve amendments to the 1987 Stock Option Plan (i) to increase
from 3,400,000 to 4,050,000 the number of shares reserved for issuance
thereunder, and (ii) to limit the number of options that may be granted to
participants under such Plan in any fiscal year.
4. To approve an amendment to the 1987 Employee Stock Purchase Plan to
increase from 600,000 to 700,000 the number of shares reserved for issuance
thereunder.
5. To ratify the appointment of Price Waterhouse LLP as independent
accountants for the Company for the fiscal year ending December 31, 1995.
6. To transact such other business as may properly come before the
meeting or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice.
Only shareholders of record at the close of business on February 28, 1995
will be entitled to notice of and to vote at the Annual Meeting or any
adjournment thereof.
For the Board of Directors
ALTERA CORPORATION
MARTIN R. BAKER
Secretary
San Jose, California
March 16, 1995
- - --------------------------------------------------------------------------------
IMPORTANT: ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE ANNUAL MEETING
IN PERSON. HOWEVER, TO ENSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE URGED
TO MARK, SIGN, DATE, AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE
IN THE POSTAGE-PREPAID ENVELOPE ENCLOSED FOR THAT PURPOSE. ANY SHAREHOLDER
ATTENDING THE MEETING MAY VOTE IN PERSON EVEN IF SUCH SHAREHOLDER RETURNED A
PROXY CARD.
- - -------------------------------------------------------------------------------
<PAGE> 3
ALTERA CORPORATION
------------------------
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
APRIL 26, 1995
The enclosed proxy is solicited on behalf of the Board of Directors of
Altera Corporation, a California corporation ("Altera" or the "Company"), for
use at Altera's Annual Meeting of Shareholders ("Annual Meeting") to be held on
April 26, 1995, or at any adjournment(s) or postponement(s) thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting of
Shareholders.
Altera's principal executive offices are located at 2610 Orchard Parkway,
San Jose, California 95134. The telephone number at that address is (408)
894-7000.
These proxy solicitation materials were mailed on or about March 16, 1995
to all shareholders entitled to vote at the Annual Meeting.
INFORMATION CONCERNING SOLICITATION AND VOTING
RECORD DATE AND SHARES OUTSTANDING
Shareholders of record at the close of business on February 28, 1995 (the
"Record Date") are entitled to notice of, and to vote at, the Annual Meeting. At
the Record Date, the Company had issued and outstanding 21,591,475 shares of
Common Stock.
REVOCABILITY OF PROXIES
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before its use by delivering to the Company a written
notice of revocation or a duly executed proxy bearing a later date or by
attending the meeting and voting in person.
VOTING
Each share of Common Stock outstanding on the Record Date is entitled to
one vote. No shareholder shall be entitled to cumulate votes. An automated
system administered by the Company's transfer agent tabulates the votes. Votes
against a particular proposal are counted for purposes of determining the
presence or absence of a quorum and are also counted as having been "voted" with
respect to the proposal for purposes of determining whether the requisite
majority of voting shares has been obtained. While there is no definitive
statutory or case law authority in California as to the proper treatment of
abstentions and broker non-votes, the Company believes that both abstentions and
broker non-votes should be counted for purposes of determining whether a quorum
is present at the Annual Meeting. The required quorum is a majority of the
shares issued and outstanding on the Record Date. The Company further believes
that neither abstentions nor broker non-votes should be counted as having been
"voted" with respect to the election of directors or the other proposals set
forth herein for purposes of determining whether the requisite majority of the
shares has been obtained. In the absence of controlling precedent to the
contrary, the Company intends to treat abstentions and broker non-votes with
respect to the election of directors and the proposals set forth herein in this
manner.
SOLICITATION OF PROXIES
The cost of this solicitation will be borne by the Company. The Company has
retained the services of Skinner & Co. to aid in the solicitation of proxies
from brokers, bank nominees, and other institutional owners. The Company
estimates that it will pay Skinner & Co. a fee not to exceed $4,000 for its
services and will reimburse it for certain out-of-pocket expenses estimated to
be $3,500. The Company may reimburse brokerage firms and other persons
representing beneficial owners of shares for their expenses in forwarding
<PAGE> 4
soliciting materials to such beneficial owners. Proxies may also be solicited by
certain of the Company's directors, officers, and regular employees, without
additional compensation, personally or by telephone or telegram.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
Proposals of shareholders of the Company intended to be presented by such
shareholders at the Company's 1996 Annual Meeting of Shareholders must be
received by the Company no later than November 16, 1995 in order that they may
be included in the proxy statement and form of proxy related to that meeting.
PROPOSAL ONE -- ELECTION OF DIRECTORS
NOMINEES
A board of five directors is to be elected at the Annual Meeting. The Board
of Directors of Altera has authorized the nomination at the Annual Meeting of
the persons named below as candidates. Unless otherwise directed, the proxy
holders will vote the proxies received by them for the five nominees named
below. All five nominees were elected at the previous annual meeting of
shareholders held on November 16, 1994. In the event that any of the five
nominees is unable or declines to serve as a director at the time of the Annual
Meeting, the proxies will be voted for any nominee who shall be designated by
the present Board of Directors to fill the vacancy. It is not expected that any
nominee will be unable or will decline to serve as a director. The directors
elected will hold office until the next annual meeting of shareholders and until
their successors are elected.
The names of the nominees and certain information about them are set forth
below.
<TABLE>
<CAPTION>
DIRECTOR
NAME OF NOMINEE AGE POSITION(S) WITH THE COMPANY SINCE
- - -------------------------------------- --- --------------------------------------------- --------
<S> <C> <C> <C>
Rodney Smith.......................... 54 Chairman of the Board of Directors, 1983
President, and Chief Executive Officer
Michael A. Ellison.................... 49 Director 1984
Paul Newhagen......................... 45 Vice President -- Administration and Director 1987
Robert W. Reed........................ 48 Director 1994
William E. Terry...................... 61 Director 1994
</TABLE>
There is no family relationship between any director or executive officer
of the Company.
RODNEY SMITH has served as Chairman of the Board of Directors, President,
and Chief Executive Officer since joining the Company in November 1983. Prior to
that time, he held various management positions with Fairchild Semiconductor
Corporation, a semiconductor manufacturer.
MICHAEL A. ELLISON has served as a director of the Company since April
1984. Mr. Ellison is a venture capital investor and since October 1994 has been
the Chief Executive Officer of Steller, Inc., a distributor of electronic parts.
From September 1982 to December 1992, he was a General Partner of Cable & Howse
Ventures, a venture capital investment firm. Mr. Ellison also serves as a
director of Wall Data Incorporated.
PAUL NEWHAGEN, a co-founder of the Company, has served as a director of the
Company since July 1987 and as Vice President -- Administration since December
1994. Mr. Newhagen served as Vice President of the Company from November 1992 to
February 1993, Secretary from July 1987 to January 1993, and Vice President of
Finance and Administration from June 1983 to October 1992 and Chief Financial
Officer from June 1983 to February 1993. From June 1993 to November 1994, Mr.
Newhagen served as a consultant to the Company.
ROBERT W. REED has served as a director of the Company since October 1994.
Since 1991, Mr. Reed has been a Senior Vice President of Intel Corporation, a
semiconductor manufacturer, and General Manager
2
<PAGE> 5
of its Semiconductor Products Group, which includes Flash Memory Products,
Intel's Military and Special Products Division, and Intel's embedded
microcontrollers and microprocessors. From 1983 to 1991, Mr. Reed was Intel's
Chief Financial Officer.
WILLIAM E. TERRY has served as a director of the Company since August 1994.
Mr. Terry is a former director and Executive Vice President of the
Hewlett-Packard Company, a diversified electronics manufacturing company. In 36
years at Hewlett-Packard, he held a number of senior management positions,
including general manager of Hewlett-Packard's Data Products and Instrument
Groups, and subsequently had overall responsibility for the Measurement Systems
Sector. He retired from Hewlett-Packard in November 1993. Mr. Terry also serves
as a director of Key Tronic Corporation.
VOTE REQUIRED
The five nominees receiving the highest number of affirmative votes of the
shares entitled to be voted shall be elected as directors of the Company. Votes
withheld from any director are counted for purposes of determining the presence
or absence of a quorum but have no other legal effect under California law.
BOARD AND COMMITTEE MEETINGS
The Board of Directors held ten meetings during the fiscal year ended
December 31, 1994 ("fiscal 1994"). The Board of Directors of Altera has standing
audit, compensation, and nominating committees.
As of December 7, 1994, the members of the Audit Committee were Michael A.
Ellison, Paul Newhagen, and Robert W. Reed. From January 1, 1994 until December
7, 1994, Mr. Ellison and Mr. Newhagen comprised the Audit Committee. Mr.
Newhagen became an employee of Altera in December 1994. The Audit Committee held
five meetings during fiscal 1994. The purposes of the Audit Committee are to
review with Altera's management and independent accountants such matters as
internal accounting controls and procedures, the plan and results of the annual
audit, and suggestions of the accountants for improvements in accounting
procedures; to nominate independent accountants; and to provide such additional
information as the committee may deem necessary to make the Board of Directors
aware of significant financial matters which require the Board's attention.
As of December 7, 1994, William E. Terry and Michael A. Ellison were
members of the Compensation Committee. From March 1994 until December 7, 1994,
the Compensation Committee was comprised of Mr. Ellison and Paul Newhagen. John
B. Goodrich served on the Compensation Committee from January 1994 until March
1994, when he resigned from the Company's Board of Directors. The Compensation
Committee held four meetings during fiscal 1994. The purposes of the
Compensation Committee are to review and make recommendations to the Board of
Directors with respect to the compensation to be paid or provided to Altera's
executive officers, the aggregate compensation of all employees of Altera, and
the terms of compensation plans of all types.
The Nominating Committee was established in January 1994 with Rodney Smith,
Michael A. Ellison, John B. Goodrich, and Paul Newhagen as members. Mr. Goodrich
resigned from the Board of Directors in March 1994. Beginning in December 1994,
the Nominating Committee consisted of Robert W. Reed, Michael A. Ellison, Paul
Newhagen, and William E. Terry. The Nominating Committee held no meetings in
fiscal 1994. The purpose of the Nominating Committee is to seek qualified
candidates for nomination and appointment to the Board of Directors. The
Nominating Committee intends to select such candidates by evaluating potential
candidates' decision-making ability, business experience, technological
background, personal integrity, reputation, and other factors. In addition, as
reflected in the Nominating Committee's charter, the Nominating Committee
recognizes the benefits of a Board of Directors that reflects the diversity of
the Company's shareholders, employees, customers, and the community in which it
operates, and will accordingly actively seek qualified candidates for nomination
and election to the Board of Directors in order to reflect such diversity. The
Nominating Committee intends to conduct its evaluation of potential candidates
independently and confidentially; therefore, it does not intend to accept
shareholder recommendations of
3
<PAGE> 6
candidates. The Nominating Committee met in January 1995 and nominated the
candidates identified in this proxy for election to the Company's Board of
Directors.
Each director attended 100% of the fiscal 1994 meetings of the Board of
Directors and each of its committees on which he served that was held during his
tenure as a member of the Board of Directors or such committee.
CERTAIN BUSINESS RELATIONSHIPS
In October 1994, the Company completed the acquisition of Intel
Corporation's programmable logic device ("PLD") product line, including
associated capital equipment, inventory, and certain intellectual property.
Immediately after the closing of the acquisition, the Company named Robert W.
Reed, Senior Vice President and General Manager of Intel's Semiconductor
Products Group, to its Board of Directors. Mr. Reed is currently a director of
the Company and is a nominee for director. See "PROPOSAL ONE -- ELECTION OF
DIRECTORS -- Nominees".
As part of the acquisition and by separate agreements, Intel agreed to
supply the Company with up to certain specified amounts of associated PLD wafers
for three years and to license the Company to make PLDs under certain Intel
patents, and the Company agreed to supply Intel for the same three-year period
with the finished programmable logic devices Intel had previously manufactured.
The Company also agreed to license back to Intel on a limited basis certain
intellectual property which the Company acquired from Intel. In addition, the
Company periodically purchases finished goods from Intel on a purchase order
basis in order to meet current demand. Although the Company cannot predict the
total amount of business to be done with Intel during the Company's 1995 fiscal
year, the Company currently believes that its purchases of PLD wafers and
finished goods from Intel during this period will exceed 5% of the Company's
consolidated gross revenues for its 1994 fiscal year of approximately $199
million.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From January 1994 until March 1994, Michael A. Ellison, John B. Goodrich,
and Paul Newhagen served on the Compensation Committee. Mr. Goodrich resigned
from the Board of Directors and from the Compensation Committee in March 1994.
Mr. Newhagen resigned from the Compensation Committee in December 1994 when he
became Vice President -- Administration for the Company. Since December 1994,
Mr. Ellison and William E. Terry have served on the Compensation Committee.
Other than Mr. Newhagen, no member of the Compensation Committee is or has been
an employee or officer of the Company. Mr. Goodrich is a member of the law firm
Wilson, Sonsini, Goodrich & Rosati, P.C., which the Company retained during the
past fiscal year and the current fiscal year to provide legal services to the
Company.
COMPENSATION COMMITTEE REPORT
The Compensation Committee of the Board of Directors (the "Committee")
establishes the general compensation policies of the Company and the
compensation plans and specific compensation levels for executive officers,
including the Company's Chief Executive Officer, Rodney Smith (the "CEO").
General Compensation Philosophy
Because Altera competes against aggressive companies in a dynamic
high-growth industry, the Company believes that finding, motivating, and
retaining quality employees, particularly senior managers and technical
contributors, is a key factor to the Company's future success. Accordingly, the
Committee seeks to develop and implement a compensation philosophy that aligns
management interests with shareholder interests by tying cash compensation and
long-term incentive programs to the Company's financial performance, including
increased returns to shareholders. The Committee also seeks to maintain
executives' aggregate compensation, including salary, bonus, and long-term
equity incentives, at a level competitive with comparable high-growth companies.
4
<PAGE> 7
Cash compensation for the Company's executive officers consists of a fixed
salary and an annual bonus based on the Company's recent financial performance.
In keeping with its philosophy that executive officers should be rewarded for
producing positive financial results, the Committee determined, beginning in
fiscal year 1995, to place greater emphasis on the variable incentive bonus
component of executive compensation rather than fixed base salaries. For
example, executive bonus compensation will be determined based on the Company's
performance relative to an annual plan and should represent at least 30-50% of
total cash compensation for the Company's 30 most senior managers if the Company
meets the goals established in the annual plan.
In setting annual plan goals, the Committee will consider various factors,
including the anticipated introduction of new products, general economic
conditions, and the Company's position relative to its competitors. The
Committee intends that the plan and its internal targets be aggressive,
emphasizing strong revenue growth coupled with improved or consistent after tax
profits. Aggregate annual compensation targets will also be a component of the
plan and will be determined using broad industry comparative survey data as well
as specific comparisons to comparable semiconductor companies. In order to
achieve the purpose of the plan, the financial goals set out in the plan and the
corresponding bonus targets will be communicated to managers early in the annual
planning cycle.
Long-term equity incentives, including stock options and stock purchase
rights granted pursuant to the Company's 1987 Stock Option Plan and 1987
Employee Stock Purchase Plan, directly align the economic interests of the
Company's management and employees to those of its shareholders. Stock options
are a particularly strong incentive because they are valuable to employees only
if the fair market value of the Company's Common Stock increases above the
exercise price, which is set at the fair market value on the date the option is
granted. In addition, employees must remain employed with the Company for a
fixed period of time in order for the options to vest fully. Options are granted
to employees and executives following a yearly review of individual performance
and consideration of the individual's long-term value to the Company.
CEO Compensation
Historically, the Committee set the CEO's base salary in July of each year
in part by comparing the Company's recent financial performance with the
performance of approximately 20 publicly-traded, high-technology companies that
the Committee believed to be "peer companies," which are comparable in industry
or growth rate or both. In 1994, the group of companies was reduced to a set of
eight "peer companies," which are all in the semiconductor industry and have
annual revenues between approximately $100 million and $700 million. The
Committee derived comparative financial data concerning both sets of these peer
companies from independent consultants and from publicly available data such as
proxy statements. The primary performance criteria used to compare the Company's
financial performance with that of the peer companies were revenue growth and
growth in earnings-per-share ("EPS"). If the Company's performance relative to
peer companies improved in the prior twelve month period, the Committee
increased the CEO's base salary. Applying such criteria, the Committee set the
CEO's base salary at $325,000 for the period July 1994 to July 1995, compared to
$300,000 for the period July 1993 to July 1994.
Beginning in fiscal 1995, however, the Committee will determine the CEO's
base salary on a calendar year basis. The Committee has determined to maintain
the CEO's salary at $325,000 through the end of 1995. Maintaining this salary
level reflects the Committee's determination to emphasize annual cash bonuses
based on the prior year's financial performance over fixed salaries in setting
compensation levels for the Company's most senior executive officers. The CEO's
salary for fiscal 1994 was somewhat below the median of the range of base
salaries paid by peer companies. Because the Committee has determined to
emphasize the CEO's incentive bonus compensation, the fixed salary component of
the CEO's compensation may fall further below the median in the future. The
Committee may raise the CEO's base salary if it believes that such base salary
has fallen too far below comparable CEO salaries at peer companies.
For a number of years, the CEO's annual cash bonus has been a direct
function of growth in the Company's sales revenue and EPS during the most recent
fiscal year. The amount of the CEO's bonus is based on the Company's actual
financial results compared to its internal plan, subject to a performance floor
5
<PAGE> 8
below which no bonus is paid. In fiscal 1994, before considering the write-off
for research and development in process associated with the acquisition of Intel
Corporation's programmable logic device product line, the Company achieved
after-tax profits of $34,802,000 and exceeded internal projections for revenue,
profitability, and EPS. The CEO's bonus was increased from $180,000 in 1993 to
$375,237 in 1994 as a function of the improved results. The CEO's annual cash
bonus for fiscal 1994 was above the median of the range of annual cash bonuses
paid by peer companies to their chief executive officers, which is consistent
with the Company's fiscal 1994 performance being above the median of that of the
peer companies, based on their publicly reported financial results as evaluated
by the Committee.
The Company grants stock options to the CEO based primarily on the
Committee's evaluation of his ability to influence the Company's long-term
growth and profitability. The Committee's determination of the size of the
option grant is made in its discretion based principally on the Committee's
estimation of the equity incentive value of the CEO's unvested option position.
No options were granted to the CEO in fiscal 1991 or fiscal 1992, for example,
because a previously granted option remained substantially unvested. In fiscal
1993, the Company granted the CEO an option to purchase 50,000 shares of the
Company's Common Stock. That option vests ratably over five years beginning on
the full vesting of all previously granted options, which will occur in June
1996. An option to purchase 10,000 shares of Common Stock, which was granted in
July 1994, vests monthly over a one-year period commencing four years from its
date of grant.
Other Executive Compensation
The Committee has adopted compensation policies for its senior executive
officers similar to those established for the CEO. Using salary data supplied by
outside consultants and other publicly available data, such as proxy data from
peer companies, the CEO recommends to the Committee base salaries for executive
officers that are within the range of salaries for persons holding similar
positions at peer companies. In setting executive salaries, the CEO and the
Committee also consider factors such as the Company's performance relative to
the peer companies and the individual executive's past performance and future
potential. In accordance with the Company's compensation goals and the Company's
above-average performance during fiscal 1994, the executive officers' salaries
for fiscal 1994 were generally at or above the median of the range of
peer-company base salary data obtained by the Committee.
Cash bonuses for all executive officers for fiscal 1994 were calculated
based on the Company's actual revenues and after tax-profits compared to the
Company's internal projections, according to a formula similar to that used to
determine the CEO's bonus. The executive officers' annual cash bonuses for
fiscal 1994 were above the median of the range of annual bonus data for peer
companies, which is consistent with the fact that the Company's fiscal 1994
performance was above the peer-company median.
As with the CEO, the size of the stock option grant to each executive
officer is determined by the Committee's evaluation of that officer's ability to
influence the Company's long-term growth and profitability. In addition, the
Committee considers the incentive effect of additional option grants given the
stock options then held by such executives and the amount of those options that
are not yet vested.
Other Compensation Considerations
The Committee has studied Section 162(m) of the Internal Revenue Code and
related regulations of the Internal Revenue Service, which restrict the
deductibility of executive compensation paid to any of the Company's five most
highly-paid executive officers at the end of any fiscal year to the extent that
such compensation exceeds $1 million in any year and does not qualify for an
exemption under the statute or related regulations. In January 1995, the Board
of Directors concluded that it would be advisable to establish certain
restrictions on the grant of options under the 1987 Option Plan to assist in the
exemption of compensation realized in connection with the future exercise of
such options. See "PROPOSAL THREE -- APPROVAL OF AMENDMENTS TO 1987 STOCK OPTION
PLAN." The Committee does not believe that the other components of the Company's
compensation will be likely in the aggregate to exceed $1 million for any
executive officer in any year in the foreseeable future and therefore concluded
that no action with respect to
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<PAGE> 9
qualifying such compensation for deductibility was necessary at this time. The
Committee will continue to evaluate the advisability of qualifying the
deductibility of such compensation in the future.
COMPENSATION COMMITTEE
William E. Terry, Chairman
Michael A. Ellison, Member
DIRECTOR COMPENSATION
Currently, the Company's non-employee directors receive $2,000 for each
meeting of the Board of Directors or a committee of the Board of Directors
(unless held in conjunction with a meeting of the Board as a whole) attended in
person, and $1,000 for each meeting attended by telephone. The Company
reimburses each non-employee member of the Board of Directors and its committees
for expenses incurred by such member in connection with the attendance of such
meetings. The Company's non-employee directors are also paid an annual retainer
in the amount of $12,000, paid in advance on the date of the Annual Meeting of
Shareholders in each year but prorated for any partial year. The Company's
non-employee directors also receive options under its 1988 Director Stock Option
Plan. See "PROPOSAL TWO -- APPROVAL OF AMENDMENT TO 1988 DIRECTOR STOCK OPTION
PLAN -- Automatic Grant of Director Options."
Each non-employee director is eligible to include the annual retainer and
meeting fees, but not expense reimbursements, in the Company's Deferred
Compensation Plan. The Company incurs incidental expenses for administration of
the Deferred Compensation Plan, and the Company's tax benefit for payments to
such directors is delayed until funds (including earnings on the amounts
invested pursuant to such Plan) are eventually distributed from such Plan. The
Company does not pay any additional compensation to its non-employee directors
as a result of the Deferred Compensation Plan.
Each non-employee director is also eligible to receive medical, dental, and
vision insurance benefits at the same level available to the Company's employees
in general.
The Company's directors who are also officers of the Company do not receive
any compensation for their services as members of the Board of Directors,
although Mr. Newhagen did receive $113,085 in fiscal 1994 for consulting
services rendered to the Company prior to becoming an officer in December 1994.
7
<PAGE> 10
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the shares of Common Stock beneficially
owned as of the Record Date by persons known by the Company to beneficially own
greater than 5% of the Company's outstanding stock, by each director of the
Company, by the Chief Executive Officer and the four other most highly paid
officers of the Company, and by all directors and executive officers of the
Company as a group.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
BENEFICIALLY OWNED
-----------------------
FIVE-PERCENT SHAREHOLDERS, DIRECTORS, EXECUTIVE OFFICERS NUMBER PERCENT
--------------------------------------------------------------- --------- -------
<S> <C> <C>
FIVE-PERCENT SHAREHOLDERS:
FMR Corp. (Fidelity Management and Research)(1)................ 2,741,200 12.7%
82 Devonshire Street
Boston, MA 02109
AIM Management Group, Inc.(2).................................. 1,110,100 5.1%
11 Greenway Plaza
Suite 1919
Houston, TX 77046
Fred Alger Management, Inc.(3)................................. 1,081,500 5.0%
75 Maiden Lane
New York, NY 10038
DIRECTORS AND EXECUTIVE OFFICERS(4):
Rodney Smith(5)................................................ 477,167 2.2%
Paul Newhagen(6)............................................... 270,711 1.3%
Michael A. Ellison(7).......................................... 26,737 *
Robert W. Reed(8).............................................. 0 *
William E. Terry(9)............................................ 1,000 *
Peter Smyth(10)................................................ 25,500 *
Denis Berlan(11)............................................... 18,333 *
Clive McCarthy(12)............................................. 70,167 *
Thomas J. Nicoletti(13)........................................ 2,500 *
All Directors and Officers as a Group (12 persons)(14)......... 1,008,840 4.6%
</TABLE>
- - ---------------
* Less than 1%.
(1) Based on a filing with the Securities and Exchange Commission dated
February 13, 1995.
(2) Based on a filing with the Securities and Exchange Commission dated
February 3, 1995.
(3) Based on a filing with the Securities and Exchange Commission dated
February 7, 1995.
(4) The persons named in the table above have sole voting and investment power
with respect to all shares of Common Stock shown as beneficially owned by
them, subject to community property laws where applicable and to the
information contained in the footnotes to this table. Unless otherwise
indicated, the business address of each of the beneficial owners listed in
this table is 2610 Orchard Parkway, San Jose, California 95134.
(5) Includes 53,667 shares which Mr. Smith has the right to acquire within 60
days of the Record Date through exercise of options.
(6) Includes 8,682 shares which Mr. Newhagen has the right to acquire within 60
days of the Record Date through exercise of options.
(7) Includes 9,667 shares which Mr. Ellison has the right to acquire within 60
days of the Record Date through exercise of options.
(8) Excludes shares held by Intel Corporation, of which Mr. Reed is a Senior
Vice President. In addition, Mr. Reed has determined not to accept options
that would have been granted to him as a director under the 1988 Director
Stock Option Plan.
8
<PAGE> 11
(9) Excludes 25,000 option shares, none of which will be exercisable within 60
days of the Record Date.
(10) Includes 25,500 shares which Mr. Smyth has the right to acquire within 60
days of the Record Date through exercise of options.
(11) Includes 10,333 shares which Mr. Berlan has the right to acquire within 60
days of the Record Date through exercise of options.
(12) Includes 10,107 shares which Mr. McCarthy has the right to acquire within
60 days of the Record Date through exercise of options.
(13) Includes 2,500 shares which Mr. Nicoletti has the right to acquire within
60 days of the Record Date through exercise of options.
(14) Includes 178,166 shares in the aggregate which executive officers and
directors have the right to acquire within 60 days of the Record Date
through exercise of options.
EXECUTIVE COMPENSATION
Summary of Officer Compensation
The following table summarizes the total compensation of the Chief
Executive Officer and the four other most highly compensated executive officers
of the Company in fiscal 1994 as well as the total compensation paid to each
such individual for the Company's two previous fiscal years.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION ------------
---------------------- SECURITIES ALL OTHER
SALARY BONUS UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR ($) ($) OPTIONS (#) ($)
- - ------------------------------------- ----- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Rodney Smith......................... 1994 312,500 375,237 10,000 13,948(1)
Chief Executive Officer 1993 287,500 180,000 50,000 9,474(1)
1992 270,769 1,000 -0- 2,442(1)
Peter Smyth.......................... 1994 177,500 213,596 4,500 10,748(2)
Vice President -- Sales 1993 160,000 102,000 30,000 6,158(2)
1992 150,000 15,086 -0- 2,169(2)
Denis Berlan......................... 1994 172,500 207,831 42,000 6,569(3)
Vice President -- Operations 1993 152,500 96,000 -0- 3,868(3)
and Product Engineering 1992 135,269 1,000 -0- 1,982(3)
Clive McCarthy....................... 1994 167,500 202,051 -0- 7,411(4)
Vice President -- 1993 155,000 96,000 30,000 4,351(4)
Development Engineering 1992 150,000 1,000 -0- 2,022(4)
Thomas J. Nicoletti.................. 1994 159,096 190,505 10,000 4,592(6)
Chief Financial Officer(5) 1993 153,500 94,200 -0- 3,339(6)
1992 31,250 -0- 50,000 1,022(6)
</TABLE>
- - ---------------
(1) Represents $12,488, $8,474, and $1,442 of disability insurance premiums and
medical examination costs paid by the Company in fiscal 1994, fiscal 1993,
and fiscal 1992, respectively, and a $1,000 contribution by the Company
under its 401(k) plan in 1992 and 1993 and $1,500 in 1994.
(2) Represents $9,248, $5,158, and $1,169 of disability insurance premiums and
medical examination costs paid by the Company in fiscal 1994, fiscal 1993,
and fiscal 1992, respectively, and a $1,000 contribution by the Company
under its 401(k) plan in 1992 and 1993 and $1,500 in 1994.
(3) Represents $5,069, $2,868, and $982 of disability insurance premiums and
medical examination costs paid by the Company in fiscal 1994, fiscal 1993,
and fiscal 1992, respectively, and a $1,000 contribution by the Company
under its 401(k) plan in 1992 and 1993 and $1,500 in 1994.
9
<PAGE> 12
(4) Represents $5,911, $3,351, and $1,022 of disability insurance premiums and
medical examination costs paid by the Company in fiscal 1994, fiscal 1993,
and fiscal 1992, respectively, and a $1,000 contribution by the Company
under its 401(k) plan in 1992 and 1993 and $1,500 in 1994.
(5) Mr. Nicoletti joined the Company as Vice President of Finance in October
1992. In February 1993, Mr. Nicoletti was appointed Chief Financial Officer
of the Company. His salary in fiscal 1992 was at the rate of $150,000 per
year.
(6) Represents $4,592, $3,339, and $1,022 of disability insurance premiums and
medical examination costs paid by the Company in fiscal 1994, fiscal 1993,
and fiscal 1992, respectively.
Options Granted During Fiscal 1994
The following table summarizes the grants of options to purchase the
Company's Common Stock made to the persons named in the Summary Compensation
Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------------------------------------------- ANNUAL RATES OF
NUMBER OF % OF TOTAL STOCK PRICE
SECURITIES OPTIONS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OPTION TERM(2)
OPTIONS EMPLOYEES IN PRICE EXPIRATION --------------------
NAME GRANTED (#)(1) FISCAL YEAR ($/SHARE) DATE 5% ($) 10% ($)
- - ------------------------- --------------- ------------ --------- ---------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
Rodney Smith(3).......... 10,000 1.6% 28.375 7-01-04 178,449 452,224
Peter Smyth(4)........... 4,500 0.7% 28.375 7-01-04 80,302 203,501
Denis Berlan(5).......... 7,000 1.1% 28.375 7-01-04 124,914 316,557
35,000 5.7% 27.875 10-10-04 613,565 1,554,895
Clive McCarthy(6)........ -- -- -- -- -- --
Thomas J. Nicoletti(7)... 10,000 1.6% 28.375 7-01-04 178,449 452,224
</TABLE>
- - ---------------
(1) The options shown in the table are nonstatutory stock options that were
granted at fair market value under the Company's 1987 Stock Option Plan, as
amended (the "1987 Option Plan"), and that become exercisable with respect
to 8.34% of the shares for each month beginning after each previously
granted option under the 1987 Option Plan has become fully exercisable, for
so long as employment continues. These options will expire ten years from
the date of grant, subject to earlier termination upon termination of
employment.
(2) The 5% and 10% assumed compound rates of annual stock price appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of future Common Stock
prices.
(3) All options previously granted to Mr. Smith under the 1987 Option Plan
become fully exercisable on June 7, 2001.
(4) All options previously granted to Mr. Smyth under the 1987 Option Plan
become fully exercisable on May 14, 1999.
(5) All options previously granted to Mr. Berlan under the 1987 Option Plan
become fully exercisable on December 18, 1998.
(6) All options previously granted to Mr. McCarthy under the 1987 Option Plan
become fully exercisable on June 18, 2003.
(7) All options previously granted to Mr. Nicoletti under the 1987 Option Plan
become fully exercisable on October 12, 1997.
10
<PAGE> 13
Option Exercises and Fiscal 1994 Year-End Values
The following table provides the specified information concerning exercises
of options to purchase the Company's Common Stock and the fiscal year-end value
of unexercised options held by each of the above-mentioned officers of the
Company.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - --------------------------- ------------ ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Rodney Smith............... -- -- 49,000 81,000 1,586,375 1,989,875
Peter Smyth................ 15,000 426,250 23,500 31,000 744,625 796,125
Denis Berlan............... 30,997 799,283 8,166 68,834 242,949 1,474,676
Clive McCarthy............. 28,060 730,595 8,357 58,583 274,680 1,630,375
Thomas J. Nicoletti........ -- -- 14,167 45,833 458,657 1,295,093
</TABLE>
- - ---------------
(1) Amounts reflecting gains on outstanding stock options are based on the
closing price of the Company's Common Stock on December 30, 1994 of $41.875.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934, as amended (the "1934
Act"), requires the Company's officers and directors and persons who own more
than 10% of a registered class of the Company's equity securities to file
reports of ownership on Form 3 and changes in ownership on Form 4 or 5 with the
Securities and Exchange Commission (the "SEC"). Such officers, directors, and
10% shareholders are also required by SEC rules to furnish the Company with
copies of all Section 16(a) reports they file.
Based solely on its review of the copies of such forms received by it or
written representations from certain reporting persons that no Forms 5 were
required for such persons, the Company believes that, during the fiscal year
ended December 31, 1994, all Section 16(a) filing requirements applicable to its
officers, directors, and 10% shareholders were complied with, except as
previously reported. In making these statements, the Company has relied upon the
written representations of its officers and directors.
CHANGES TO BENEFIT PLANS
The Company has proposed amendments to increase the share reserves under
the 1988 Director Stock Option Plan (the "Director Plan"), the 1987 Stock Option
Plan (the "1987 Option Plan") and the 1987 Employee Stock Purchase Plan (the
"1987 Purchase Plan"). The following table sets forth grants of stock options
received under the Director Plan, the 1987 Option Plan and the 1987 Purchase
Plan during the fiscal year ended December 31, 1994 by (1) the Chief Executive
Officer of the Company and the four other most highly compensated executive
officers of the Company as of December 31, 1994; (2) all current executive
officers as a group; (3) all current directors who are not executive officers as
a group; and (4) all employees, including all officers who are not executive
officers, as a group.
11
<PAGE> 14
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
1988 DIRECTOR STOCK 1987 STOCK OPTION 1987 EMPLOYEE STOCK
OPTION PLAN(1) PLAN(2) PURCHASE PLAN(3)
-------------------- --------------------- --------------------
EXERCISE EXERCISE EXERCISE
PRICE NUMBER PRICE NUMBER PRICE NUMBER
($ PER OF ($ PER OF ($ PER OF
NAME AND POSITION SHARE)(4) SHARES SHARE)(4) SHARES SHARE)(4) SHARES
- - ------------------------------- --------- ------ --------- ------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
Rodney Smith................... -- -- 28.375 10,000 -- --
Chairman of the Board of
Directors, President and
Chief Executive Officer
Peter Smyth.................... -- -- 28.375 4,500 -- --
Vice President -- Sales
Denis Berlan................... -- -- 27.958 42,000 -- --
Vice President -- Operations
and Product Engineering
Clive McCarthy................. -- -- -- -- -- --
Vice President -- Development
Engineering
Thomas J. Nicoletti............ -- -- 28.375 10,000 -- --
Chief Financial Officer
Executive Officer Group
(9 persons).................. 39.250 5,000 28.750 87,083 23.321 1,177
Non-Executive Officer Director
Group (3 persons)............ 32.750 30,000 -- -- -- --
Non-Executive Officer Employee
Group........................ -- -- 29.761 517,933 23.301 75,412
</TABLE>
- - ---------------
(1) Only non-employee directors of the Company are eligible to participate in
the Director Plan. Mr. Newhagen was eligible to participate in the Director
Plan prior to becoming employed by the Company in December 1994.
(2) Only employees (including officers and directors) and consultants of the
Company or any parent or subsidiary are eligible to participate in the 1987
Option Plan.
(3) Only employees (including officers and directors) of the Company are
eligible to participate in the 1987 Purchase Plan.
(4) Future exercise prices of options are unknown, as they are based upon fair
market value at the date of grant. Exercise prices are shown on a
weighted-average basis.
12
<PAGE> 15
COMPANY PERFORMANCE
The following graph shows a comparison, since December 31, 1989, of
cumulative total return for the Company, the Standard and Poor's 500 Index, and
the Standard & Poor's Semiconductor Index.
COMPARISON OF CUMULATIVE TOTAL RETURN*
<TABLE>
<CAPTION>
Altera S&P S&P Semiconductor
Date Corporation 500 Index Index
- - -------- ----------- --------- -----------------
<S> <C> <C> <C>
12/31/89 $100 $100 $100
12/31/90 $156 $ 97 $ 99
12/31/91 $411 $126 $123
12/31/92 $187 $136 $202
12/31/93 $476 $150 $311
12/31/94 $609 $152 $363
</TABLE>
Assumes $100 invested on December 31, 1989 in Altera common stock,
Standard & Poor's 500 Index, and Standard & Poor's Semiconductor Index.
* Total return assumes reinvestment of dividends for the Standard &
Poor's 500 Index and Standard & Poor's Semiconductor Index. The
Company has never paid dividends on its common stock and has no
present plans to do so.
13
<PAGE> 16
PROPOSAL TWO -- APPROVAL OF AMENDMENT TO
1988 DIRECTOR STOCK OPTION PLAN
The Board of Directors of the Company adopted the 1988 Director Stock
Option Plan (the "Director Plan") in August 1988 for the purposes of attracting
and retaining the best available personnel for service as non-employee directors
of the Company ("Outside Directors"), providing additional incentive to the
Outside Directors, and encouraging their continued service on the Board of
Directors. The shareholders of the Company approved the Director Plan in April
1989 and amendments to the Director Plan in April 1993 and November 1994. In
January 1995, the Board of Directors approved an amendment to the Director Plan,
subject to shareholder approval, to increase the number of shares reserved for
issuance thereunder by 50,000, thereby increasing the total number of shares
issuable thereunder from 150,000 to 200,000.
The essential features of the Director Plan are outlined below:
GENERAL
The Director Plan provides for the granting of nonstatutory stock options
to Outside Directors as reflected in the terms of a written option agreement.
The Director Plan is not a qualified deferred compensation plan under Section
401(a) of the Internal Revenue Code of 1986, as amended (the "Code"), and is not
subject to the provisions of the Employee Retirement Income Security Act of
1974, as amended ("ERISA").
ADMINISTRATION
The Director Plan is administered by the Company's Board of Directors.
Members of the Board of Directors who are eligible to be granted options under
the Director Plan ("Director Options") may vote on matters affecting the
administration of the Director Plan. The interpretation and construction of any
provision of the Director Plan shall be within the sole discretion of the Board
of Directors, whose determination shall be final and conclusive. Members of the
Board of Directors receive no additional compensation for their services in
connection with the administration of the Director Plan.
ELIGIBILITY
The Director Plan provides that Director Options may be granted only to
Outside Directors. Non-employee directors who were previously employed by the
Company are eligible for participation in the Director Plan. All grants are
automatic and are not subject to the discretion of any person, except that a
director may decline to accept Director Options. As of the Record Date, three
Outside Directors were eligible to participate in the Director Plan.
AUTOMATIC GRANT OF DIRECTOR OPTIONS
Each Outside Director who was serving as such on August 31, 1988, the date
of adoption of the Director Plan by the Board of Directors, was automatically
granted a Director Option to purchase 16,000 shares (the "First Director
Option"). On June 2, 1994, the Board of Directors authorized an amendment to the
Director Plan to increase from 16,000 to 20,000 the number of shares in the
First Director Option. The Company's shareholders approved this amendment to the
Director Plan at the Company's Annual Meeting of Shareholders held in November
1994. Each First Director Option is exercisable in installments cumulatively
with respect to 25% of the shares on the first day of the first year after the
date of the grant of such First Director Option and with respect to 2.083% of
the shares for each month after such anniversary.
Each Outside Director who becomes a director subsequent to the date of
adoption of the Director Plan receives an automatic grant, on the date of his
appointment or election to the Board of Directors, of a First Director Option
having the same terms as described above. An Outside Director who was previously
employed by the Company receives a First Director Option upon becoming an
Outside Director.
After receiving a First Director Option, an Outside Director is
automatically granted an additional Director Option to purchase 5,000 shares
under the Director Plan (the "Subsequent Director Option") on the day of each
annual shareholders' meeting at which such Outside Director is re-elected to an
additional term,
14
<PAGE> 17
occurring after the grant date of such Outside Director's First Director Option;
provided, however, that in no event will an Outside Director be granted Director
Options to purchase more than 50,000 shares in the aggregate. Prior to June
1994, the number of shares subject to each Subsequent Director Option was 4,000.
On June 2, 1994, the Board of Directors authorized an amendment to the Director
Plan to increase from 4,000 to 5,000 the number of Subsequent Director Options
granted annually and the Company's shareholders approved this amendment at the
Company's November 1994 Annual Meeting of Shareholders.
Prior to January 1992, each Subsequent Director Option became exercisable
in installments cumulatively and with respect to 25% of the shares on the first
anniversary of the date of grant of such Subsequent Director Option and with
respect to 2.083% of the shares for each month after such anniversary. In
January 1992, the Board of Directors authorized an amendment to the Director
Plan to modify the vesting of new Subsequent Director Options. Pursuant to the
amendment, Subsequent Director Options granted on or after the date of approval
of the amendment will become exercisable ("vest") in installments cumulatively
with respect to 8.34% of the shares for each month beginning after the First
Director Option is fully vested or in the event the First Director Option is
fully vested at the time a Subsequent Director Option is granted, the complete
vesting of any Subsequent Director Options previously granted. The effect of the
amendment is to postpone the vesting of Subsequent Director Options to later
months than would have been the case under the prior vesting limitation.
TERMS OF DIRECTOR OPTIONS
The terms of Director Options granted under the Director Plan are set forth
in the Director Plan. Director Options granted under the Director Plan have a
term of 10 years from the date of grant. Options granted under the Director Plan
on or prior to January 14, 1992, have a term of five years from the date of
grant.
Each Director Option is evidenced by a written stock option agreement
between the Company and the Outside Director to whom such Director Option was
granted (the "Optionee") and is subject to the following additional terms and
conditions.
(a) Exercise of Director Options. The Director Options become
exercisable as described above under "Automatic Grant of Director Options".
A Director Option is exercised by giving written notice of exercise to the
Company and tendering full payment of the exercise price to the Company.
Payment for shares issued upon exercise of a Director Option may consist
entirely of cash, check, or other shares of Common Stock having a fair
market value on the date of surrender equal to the aggregate exercise price
of the shares as to which said Director Option shall be exercised, or any
combination of such methods of payment.
(b) Exercise Price. The per share exercise price of Director Options
is 100% of the fair market value of the Company's Common Stock on the date
the Director Option was granted. The Director Plan provides that, because
the Company's Common Stock is currently traded on the Nasdaq National
Market, the fair market value per share shall be the closing price on the
Nasdaq National Market, on the date of grant of the Director Option, as
reported in The Wall Street Journal.
(c) Termination of Status as a Director. The Director Plan provides
that in the event of the termination of the Outside Director's continuous
status as a director (other than as a result of death or disability), he or
she may, but only within 30 days after the date of such termination (but in
no event later than the date of expiration of the term of the Director
Option), exercise his or her Director Option to the extent to which he or
she was entitled to exercise the Director Option at the time of
termination.
(d) Death. If an Outside Director who shall have been in continuous
status as a director since the date of grant of the Director Option should
die while still in office as a director of the Company, the Director Option
may be exercised at any time within six months after death (but in no event
later than the date of expiration of the term of the Director Option), but
only to the extent the Director Option would have been exercisable had the
Optionee continued living and terminated his or her directorship six months
after the date of death. If an Outside Director who shall have been in
continuous status as a director since the date of grant of the Director
Option should die within 30 days after ceasing to serve as a
15
<PAGE> 18
director, the Director Option may be exercised within six months after
death (but in no event later than the date of expiration of the term of the
Director Option) to the extent the Director Option was exercisable on the
date of termination.
(e) Permanent Disability. If an Optionee should become unable to
continue his or her service as a director of the Company as a result of his
or her total and permanent disability while still in office as a director
of the Company, the Director Option may be exercised at any time within
three months from the date of termination (but in no event later than the
date of expiration of the term of the Director Option), but only to the
extent the Director Option was exercisable at the date of such termination.
(f) Nontransferability of Director Options. A Director Option is not
transferable by the Optionee in any manner, other than by will or the laws
of descent or distribution or pursuant to a qualified domestic relations
order as defined by the Code or Title I of ERISA, or the rules thereunder.
In the event of the Optionee's death, Director Options may be exercised by
a person who acquires the right to exercise the Director Options by bequest
or inheritance. A Director Option may be exercised, during the lifetime of
the Optionee, only by the Optionee or a permitted transferee.
(g) Suspension or Termination of Director Option. If the President or
his or her designee reasonably believes that an Optionee has committed an
act of misconduct, the President may suspend the Optionee's right to
exercise any Director Option pending a determination by the Board of
Directors (excluding the Outside Director accused of such misconduct). If
the Board of Directors (excluding the Outside Director accused of such
misconduct) determines an Optionee has committed an act of embezzlement,
fraud, dishonesty, nonpayment of an obligation owed to the Company, breach
of fiduciary duty or deliberate disregard of the Company rules resulting in
loss, damage or injury to the Company, or if an Optionee makes an
unauthorized disclosure of any Company trade secret or confidential
information, engages in any conduct constituting unfair competition,
induces any Company customer to breach a contract with the Company, or
induces any principal for whom the Company acts as agent to terminate such
agency relationship, neither the Optionee nor his or her estate shall be
entitled to exercise any Director Option whatsoever.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER
Subject to any required action by the shareholders of the Company, the
number of shares of Common Stock covered by each outstanding Director Option,
and the number of shares of Common Stock which have been authorized for issuance
under the Director Plan (but as to which no Director Options have yet been
granted or which have been returned to the Director Plan upon cancellation or
expiration or a Director Option), as well as the price per share of Common Stock
covered by each such outstanding Director Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration". Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided in the Director Plan, no issuance by the Company of
shares of stock of any class, or securities convertible into shares of stock of
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number of or price of shares of Common Stock subject to a
Director Option.
In the event of the proposed dissolution or liquidation of the Company, all
Director Options will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board of Directors. The Board
of Directors may, in the exercise of its sole discretion in such instances,
declare that any Director Option shall terminate as of a date fixed by the Board
of Directors and may give each Optionee the right to exercise his or her
Director Options as to all or any part of the shares subject to the Director
Option, including shares as to which the Director Options would not otherwise be
exercisable. In the event of a proposed sale of all or substantially all of the
assets of the Company, or the merger of the Company
16
<PAGE> 19
with or into another corporation, all Director Options shall be assumed by such
successor corporation, or the Board of Directors may, in the exercise of its
sole discretion in such instances, and in lieu of such assumption, give Outside
Directors the right to exercise their Director Options as to all of the shares
subject to Director Options, including shares as to which the Director Options
would not otherwise be exercisable. In the event that the Board of Directors
fully accelerates the vesting of the Director Options, the Board of Directors
will notify each Optionee that his or her Director Options will be fully
exercisable for a period of 30 days from the date of such notice. Upon the
expiration of such period the Director Options will terminate.
AMENDMENT AND TERMINATION
The Board of Directors may amend or terminate the Director Plan at any time
or from time to time without approval of the shareholders of the Company;
provided, however, that shareholder approval is required for any amendment which
increases the number of shares subject to the Director Plan (other than in
connection with an adjustment described in "Adjustments Upon Changes in
Capitalization or Merger" above), modifies the designation of the class of
persons eligible to be granted Director Options, materially increases the
benefits accruing to participants under the Director Plan, or changes the number
of shares subject to the Director Options granted and to be granted under the
Director Plan or the terms thereof. Notwithstanding the foregoing, the
provisions of the Director Plan described in "Automatic Grant of Director
Options", above (and any other provisions of the Director Plan that affect the
formula award terms required to be specified in the Director Plan by Rule 16b-3
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"))
shall not be amended more than once every six months other than to comply with
changes in the Code, ERISA, or the rules thereunder. However, no such action by
the Company's Board of Directors or shareholders may alter or impair any
Director Option previously granted under the Director Plan without the consent
of the Optionee. In any event, the Director Plan will expire by its terms in
August 1998, unless sooner terminated pursuant to its terms.
TAX INFORMATION
The Director Options granted under the Director Plan are deemed
nonstatutory options under the Code. An Optionee will not recognize any taxable
income at the time he or she is granted a nonstatutory option. Upon exercise of
the Director Option, the Optionee will generally recognize compensation income
for federal tax purposes measured by the excess, if any, of the then fair market
value of the shares over the exercise price.
Upon a resale of such shares issued upon the exercise of a nonstatutory
option, any difference between the sales price and the fair market value of the
shares on the date of exercise of the nonstatutory option will be treated as
capital gain or loss. Currently, the tax rate on net capital gain (net long-term
capital gain minus net short-term capital loss) is capped at 28%. Capital losses
are allowed in full against capital gains plus $3,000 of other income.
The Company will be entitled to a tax deduction in the amount and at the
time that the Optionee recognizes ordinary income with respect to shares
acquired upon exercise of a nonstatutory option.
The foregoing summary of the effect of federal income taxation upon the
Optionee and the Company with respect to the grant of Director Options and
purchase of shares under the Director Plan does not purport to be complete.
Reference should be made to the applicable provisions of the Code. In addition,
this summary does not discuss the tax implications of an Optionee's death or the
provisions of the income tax laws of any municipality, state, or foreign country
in which the Optionee may reside.
PROPOSED AMENDMENT
At the Annual Meeting, the shareholders are being asked to approve the
amendment of the Director Plan to increase from 150,000 to 200,000 the number of
shares reserved for issuance thereunder.
17
<PAGE> 20
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present or represented and voting at the Annual Meeting
will be required to approve the amendment to the Director Plan. THE BOARD OF
DIRECTORS HAS APPROVED THE PROPOSED AMENDMENT AND UNANIMOUSLY RECOMMENDS THAT
SHAREHOLDERS VOTE FOR SUCH AMENDMENT.
PROPOSAL THREE -- APPROVAL OF AMENDMENTS TO
1987 STOCK OPTION PLAN
The 1987 Stock Option Plan (the "1987 Option Plan") was adopted by the
Board of Directors in August 1987 and approved by the shareholders in September
1987. Since then, the Board of Directors has authorized amendments to the 1987
Option Plan to increase the shares reserved for issuance thereunder to
3,400,000, which increases were approved by the shareholders.
In January 1995, the Board of Directors approved amendments to the 1987
Option Plan, subject to shareholder approval, to (i) increase the number of
shares reserved for issuance thereunder by 650,000, thereby increasing the total
number of shares issuable thereunder from 3,400,000 to 4,050,000, and (ii)
impose a limitation on grants to any Optionee, as defined below, in any fiscal
year so that the aggregate grants in any one year to any Optionee may not exceed
250,000 shares per fiscal year; provided, however, that new hires may receive
additional grants for no more than 250,000 shares in the year they are hired.
GENERAL
The 1987 Option Plan provides for the granting to employees and consultants
of the Company or any parent or subsidiary thereof stock options ("Options"),
which may be within the meaning of Section 422 of the Code, as it defines
incentive stock options ("Incentive Stock Options"), or nonstatutory stock
options ("Nonstatutory Options"), at the discretion of the Board of Directors of
the Company and as reflected in the terms of the written Option agreement.
The 1987 Option Plan is not a qualified deferred compensation plan under
Section 401(a) of the Code, and is not subject to the provisions of ERISA.
PURPOSES
The purposes of the 1987 Option Plan are to attract and retain the best
available personnel for positions of substantial responsibility, to provide
additional incentive to employees and consultants of the Company, and to promote
the success of the Company's business.
ADMINISTRATION
The 1987 Option Plan may be administered by the Board of Directors of the
Company or by a committee designated by the Board, which committee can have
non-director employee members. Once appointed, the committee members shall
continue to serve until otherwise directed by the Board. The administration,
interpretation or application of the 1987 Option Plan by the Board of Directors
or its committee shall be final, conclusive and binding upon all participants.
Currently, the Board of Directors administers the 1987 Option Plan, subject to
the authority delegated to the Stock Option Plan Committee to grant Options (not
to exceed 30,000 shares per Option) to employees other than officers and
directors, and to the authority delegated to its Compensation Committee to
administer the 1987 Option Plan in connection with grants and other matters
regarding officers, directors and 10% shareholders of the Company as defined
under Section 16 of the Exchange Act. Currently, the Stock Option Plan Committee
consists of Rodney Smith and Thomas J. Nicoletti and the Compensation Committee
consists of William E. Terry and Michael A. Ellison. Members of the Board and
those committees receive no additional compensation for their services in
connection with the administration of the 1987 Option Plan. Copies of the 1987
Option Plan will be made available upon request at the Company's principal
executive offices.
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ELIGIBILITY
The 1987 Option Plan provides for the grant of Options to employees
(including officers and directors) and consultants of the Company or any parent
or subsidiary. Incentive Stock Options may only be granted to employees. The
Board of Directors or the committees select the persons to whom options are
granted under the 1987 Option Plan ("Optionees") and determine the number of
shares to be subject to each Option. As of the Record Date, 695 employees
(including officers and directors) were eligible to participate in the 1987
Option Plan.
In accordance with Section 162(m) of the Code, in January 1995 the Board
amended the 1987 Option Plan, subject to shareholder approval, to impose a
limitation on grants to any Optionee in any fiscal year so that the aggregate
grants in any one year to any Optionee may not exceed 250,000 shares per fiscal
year; provided, however, that new hires may receive additional Option grants for
no more than 250,000 shares in the year they are hired. In addition, there is a
limit of $100,000 on the aggregate fair market value of shares subject to all
Incentive Stock Options which are exercisable for the first time in any calendar
year by an employee.
TERMS OF OPTIONS
Each Option granted pursuant to the 1987 Option Plan is evidenced by a
written stock option agreement between the Company and the Optionee and is
subject to the following terms and conditions:
(a) Exercise of the Option. The Board of Directors or the committees
determine on the date of grant when Options may be exercisable under the
1987 Option Plan.
The current standard form of Option agreement for use under the 1987
Option Plan for new employees provides that an Option will be exercisable
cumulatively for 10% of the Option shares at the end of the first year,
1.25% of such shares for each of the following 13th through the 24th full
months, 1.6667% of such shares for each of the following 25th through 36th
full months, 2.0833% of such shares for each of the following 37th through
48th full months, and 2.5% of such shares for each of the 49th through the
60th full months that have elapsed from the vesting commencement date, all
for so long as employment continues. Other vesting schedules may be used
for new employees in some circumstances. Additional Options granted to
existing employees will typically vest monthly over a one-year period
ending five years from the date of grant.
An Option is exercised by giving written notice of exercise to the
Company, specifying the number of full shares of Common Stock to be
purchased and tendering payment of the purchase price to the Company. An
Option may not be exercised for a fraction of a share.
Payment for shares issued upon exercise of an Option may consist of
cash, check, promissory note, an exchange of shares of the Company's Common
Stock, any combination of such methods of payment, or such other
consideration as determined by the Board of Directors or the committees and
as permitted under the California Corporations Code.
(b) Exercise Price. The exercise price of Options granted under the
1987 Option Plan is determined by the Board of Directors or the committees,
but the exercise price of Incentive Stock Options and Nonstatutory Options
may not be less than 100% and 85%, respectively, of the fair market value
of the Common Stock on the date the Option is granted. The 1987 Option Plan
provides that, because the Company's Common Stock is currently traded on
the Nasdaq National Market, the fair market value per share shall be the
closing price on the Nasdaq National Market, on the date of grant of the
Option, as reported in The Wall Street Journal.
(c) Termination of Employment. If the Optionee's employment with the
Company is terminated for any reason (other than death or total and
permanent disability), a vested Option may be exercised within 30 days (or
such other period of time not exceeding three months in the case of
Incentive Stock Options or six months in the case of Nonstatutory Options
as is determined by the Board or the committees at the time of grant of
such Option), after such termination (but in no event later than the
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date of expiration of the term of such Option) as to all or part of the
shares as to which the Optionee was entitled to exercise at the date of
such termination. An Optionee may be exempt from this rule if the Optionee
is on an approved leave of absence, or if transferred to a subsidiary or
parent of the Company.
(d) Death or Disability. If an Optionee is unable to continue his or
her employment with the Company as a result of death, his or her Options
may be exercised at any time within six months from the date of death (but
in no event later than the date of expiration of the term of such Option)
to the extent such Options would have been exercisable on the date six
months after the date of the Optionee's death. If an Optionee should die
within 30 days after termination, Options may be exercised at any time
within six months after death (but in no event later than the date of
expiration of the term of such Option) but only to the extent the Options
were exercisable on the date of termination. If an Optionee is unable to
continue his or her employment with the Company as a result of total and
permanent disability, his or her Options may be exercised at any time
within three months after termination (but in no event later than the date
of expiration of the term of such Option) to the extent the Option was
exercisable on the date of termination.
(e) Term and Termination of Options. Options granted under the 1987
Option Plan must expire ten years from the date of grant, unless a shorter
period is provided in the Option agreement. The current form of Option
agreement provides for a ten-year term. No Option may be exercised by any
person after the expiration of its term.
(f) Nontransferability of Options. An Option is not transferable by
the Optionee, other than by will or the laws of descent and distribution or
pursuant to a qualified domestic relations order as defined by the Code or
Title I of ERISA, or the rules thereunder. In the event of the Optionee's
death, Options may be exercised by a person who acquires the right to
exercise the Option by bequest or inheritance.
(g) Other Provisions. The Option agreement may contain such other
terms, provisions and conditions not inconsistent with the 1987 Option Plan
as may be determined by the Board of Directors or the committees.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER
In the event any change, such as a stock split or payment of a stock
dividend, is made in the Company's capitalization which results in an increase
or decrease in the number of outstanding shares of Common Stock without receipt
of additional consideration by the Company, an appropriate adjustment shall be
made by the Board of Directors in the Option exercise price and in the number of
shares subject to each Option. In the event of a proposed dissolution or
liquidation of the Company, all Options will terminate immediately prior to the
consummation of such proposed action, unless otherwise provided by the Board of
Directors. The Board of Directors or the committees may in their discretion make
provisions for accelerating the exercisability of outstanding Options in such
event. In the event of a proposed sale of the assets of the Company, or the
merger of the Company with or into another corporation, all Options will be
assumed or an equivalent option will be substituted by the successor
corporation. If the successor corporation refuses to fully assume all Options,
the Board of Directors or the committees will fully accelerate the
exercisability of all shares subject to each outstanding Option.
AMENDMENT AND TERMINATION
The Board of Directors may amend or terminate the 1987 Option Plan from
time to time without approval of the shareholders; provided, however, that
shareholder approval is required for any amendment to the 1987 Option Plan which
increases the number of shares which may be issued under the 1987 Option Plan
(other than as a result of an adjustment described in "Adjustments Upon Changes
in Capitalization or Merger"), modifies the designation of the class of persons
eligible to be granted Options, or materially increases the benefits which may
accrue to participants under the 1987 Option Plan. However, no action by the
Board of Directors or shareholders may alter or impair any Option previously
granted under the 1987 Option Plan. The 1987 Option Plan shall terminate in
August 1997, provided that any Options then outstanding shall remain outstanding
until they expire by their terms.
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TAX INFORMATION
Incentive Stock Options
The Code provides to Optionees favorable federal income tax treatment of
Options which qualify as Incentive Stock Options. Even if designated as
incentive stock options in the Option agreement, any Options in excess of the
$100,000 limit on exercisability in any calendar year will not be deemed to be
Incentive Stock Options. If an Option granted under the 1987 Option Plan is
treated as an Incentive Stock Option, the Optionee will recognize no income upon
grant of the Option, and will recognize no income upon exercise of the Option
unless the alternative minimum tax rules apply. The Company will not be allowed
a deduction for federal tax purposes in connection with the exercise of an
Incentive Stock Option.
Upon the sale of the shares issued upon exercise of an Incentive Stock
Option at least two years after the grant of the Option and one year after
exercise of the Option (the "statutory holding periods"), any gain will be taxed
to the Optionee as long-term capital gain. Under current law, the federal tax
rate on net capital gain (net long-term capital gain minus net short-term
capital loss) is capped at 28%. If the statutory holding periods are not
satisfied (i.e., the Optionee makes a "disqualifying disposition"), the Optionee
will recognize compensation income equal to the difference between the exercise
price and the lower of (i) the fair market value of the stock at the date of the
Option exercise, or (ii) the sale price of the stock, and the Company will be
entitled to a deduction in the same amount. Any gain or loss recognized on a
disqualifying disposition of the shares in excess of the amount treated as
compensation income will be characterized as capital gain or loss.
Different rules may apply if shares are purchased by an Optionee who is
subject to Section 16(b) of the Exchange Act, and the Optionee subsequently
disposes of such shares prior to the expiration of the statutory holding
periods.
Nonstatutory Options
Nonstatutory Options granted under the 1987 Option Plan will not qualify
for any special tax benefits to the Optionee. Even if designated as Incentive
Stock Options in the Option agreement, any Options in excess of the $100,000
limit on exercisability in any calendar year will be deemed to be Nonstatutory
Options.
An Optionee will not recognize any taxable income at the time he or she is
granted a Nonstatutory Option. Upon exercise of the Option, the Optionee will
generally recognize compensation income for federal tax purposes measured by the
excess, if any, of the then fair market value of the shares over the exercise
price. However, if shares subject to a repurchase option of the Company (i.e.,
unvested shares) are purchased upon exercise of a Nonstatutory Option, no tax
will be imposed at the time of exercise with respect to such unvested shares
(and the Optionee's long-term capital gain holding period will not begin at such
time) unless the Optionee files an election with the Internal Revenue Service
pursuant to Section 83(b) of the Code within 30 days after the date of exercise.
In the absence of such election, the Optionee is taxed (and the long-term
capital gain holding period begins) at the time at which the shares vest (i.e.,
the time at which the repurchase option lapses with respect to such shares), and
the Optionee recognizes compensation income in the amount of the difference
between the value of the shares at that time and the Option exercise price. If a
Section 83(b) election is timely filed, the unvested shares will be treated for
federal income tax purposes as if they had been vested at the time of exercise.
Taxation upon exercise of the option may also be deferred (unless a Section
83(b) election is filed) when other shares were previously purchased by an
Optionee who is subject to Section 16(b) of the Exchange Act.
The compensation income recognized by the Optionee who is also an employee
will be treated as wages and will be subject to tax withholding by the Company
out of the current compensation paid to the Optionee. If such current
compensation is insufficient to pay the withholding tax, the Optionee will be
required to make direct payment to the Company for the tax liability.
Upon a resale of the shares issued upon exercise of a Nonstatutory Option,
any difference between the sales price and the fair market value of the shares
on the date of exercise of the Nonstatutory Option (or the fair market value of
the shares on the date they become vested, if a Section 83(b) election has not
been timely
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filed) will be treated as capital gain or loss. Under current law, the federal
tax rate on net capital gain is capped at 28%. Capital losses are allowed in
full against capital gains plus $3,000 of other income.
The Company will be entitled to a corresponding tax deduction in the amount
and at the time that the Optionee recognizes ordinary income with respect to
shares acquired upon exercise of a Nonstatutory Option.
Alternative Minimum Tax
The exercise of an Incentive Stock Option may subject the Optionee to the
alternative minimum tax ("AMT") under Section 55 of the Code. The AMT is
calculated by applying a tax rate of 26% to alternative minimum taxable income
("AMTI") up to $175,000, and 28% to AMTI above $175,000. AMTI is equal to (i)
taxable income adjusted for certain items, plus (ii) items of tax preference,
less (iii) an exclusion of $45,000 for joint returns and $33,750 for individual
returns. However, these exclusion amounts are reduced by an amount equal to 25%
of the amount by which the taxpayer's AMTI exceeds $150,000 and $112,500,
respectively.
Tax Summary
The foregoing summary of the effect of federal income taxation upon the
Optionee and the Company with respect to the grant of Options and purchase of
shares under the 1987 Option Plan does not purport to be complete. Reference
should be made to the applicable provisions of the Code. In addition, this
summary does not discuss the tax implications of an Optionee's death or the
provisions of the income tax laws of any municipality, state, or foreign country
in which the Optionee may reside.
PROPOSED AMENDMENTS
At the Annual Meeting, the shareholders are being requested to approve
amendments of the 1987 Option Plan (i) to increase from 3,400,000 to 4,050,000
the number of shares of the Company's Common Stock reserved for issuance
thereunder, and (ii) to impose a limitation on grants to any Optionee in any
fiscal year so that the aggregate grants in any one year to any Optionee may not
exceed 250,000 shares per fiscal year; provided, however, that new hires may
receive additional Option grants for no more than 250,000 shares in the year
they are hired.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present or represented and voting at the Annual Meeting
will be required to approve the amendment to the 1987 Option Plan. THE COMPANY'S
BOARD OF DIRECTORS HAS APPROVED THE PROPOSED AMENDMENTS AND UNANIMOUSLY
RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR SUCH PROPOSED AMENDMENTS.
PROPOSAL FOUR -- APPROVAL OF AMENDMENT TO
1987 EMPLOYEE STOCK PURCHASE PLAN
The 1987 Employee Stock Purchase Plan (the "1987 Purchase Plan") was
adopted by the Board of Directors in August 1987 and approved by the
shareholders in September 1987. Since then, the Board of Directors has
authorized amendments to the 1987 Purchase Plan to increase the shares reserved
for issuance thereunder to 600,000, which increases were approved by the
shareholders. In January 1995, the Board of Directors approved an amendment to
the 1987 Purchase Plan, subject to shareholder approval, to increase the number
of shares reserved for issuance thereunder by 100,000, thereby increasing the
total number of shares issuable thereunder from 600,000 to 700,000.
GENERAL
The 1987 Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify as an "Employee Stock Purchase Plan" under
the provisions of Sections 421 and 423 of the Code. The
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provisions of the 1987 Purchase Plan shall, accordingly, be construed so as to
extend and limit participation in a manner consistent with the requirements of
those sections of the Code.
The 1987 Purchase Plan is not a qualified deferred compensation plan under
Section 401(a) of the Code, and is not subject to the provisions of ERISA.
PURPOSE
The purpose of the 1987 Purchase Plan is to provide employees of the
Company (and any of its subsidiaries which is designated by the Board of
Directors) with an opportunity to purchase Common Stock of the Company through
accumulated payroll deductions.
ADMINISTRATION
The 1987 Purchase Plan may be administered by the Board of the Company or a
committee of members of the Board appointed by the Board. Once appointed, the
members of the committee shall continue to serve until otherwise directed by the
Board. The administration, interpretation or application of the 1987 Purchase
Plan by the Board of Directors or its committee shall be final, conclusive and
binding upon all participants. Members of the Board who are eligible employees
are permitted to participate in the 1987 Purchase Plan, provided that such
members may not vote on any matter affecting the administration of the 1987
Purchase Plan or the grant of any Option pursuant to the 1987 Purchase Plan,
and, if a committee is established to administer the 1987 Purchase Plan, no
member of the Board who is eligible to participate in the 1987 Purchase Plan may
be a member of the committee.
No charges for administrative or other costs may be made against the
payroll deductions of a participant in the 1987 Purchase Plan. Members of the
Board receive no additional compensation for their services in connection with
the administration of the 1987 Purchase Plan.
ELIGIBILITY
Any person, including an officer, who is customarily employed for at least
20 hours per week and more than five months in a calendar year by the Company
(or any of its subsidiaries which is designated from time to time by the Board)
as of the first day of a given offering period shall be eligible to participate
in the 1987 Purchase Plan. Notwithstanding the foregoing, no participant shall
be granted an Option under the 1987 Purchase Plan which would permit the
participant's rights to purchase stock under all employee stock purchase plans
of the Company and its subsidiaries to accrue at a rate which exceeds $25,000 of
fair market value of such stock (determined at the time such Option is granted)
for each calendar year in which such Option is outstanding at any time.
Furthermore, if the number of shares which would otherwise be subject to Options
under the 1987 Purchase Plan at the beginning of an offering period exceeds the
number of shares then available for grant, a pro rata allocation of the
available shares shall be made in as uniform a manner as is practicable and as
the Company shall determine to be equitable. As of the Record Date, 684
employees were eligible to participate in the 1987 Purchase Plan.
OFFERING PERIODS
The 1987 Purchase Plan is implemented by one offering during each six-month
period of the plan. The offering periods commence on or about February 16 and
August 16 of each year. The Board of Directors of the Company may alter the
duration of the offering periods with respect to future offerings without
shareholder approval if such change is announced at least 15 days prior to the
scheduled beginning of the first offering period to be affected.
PARTICIPATION IN THE PLAN
Eligible employees become participants in the 1987 Purchase Plan by filing
with the Company's payroll office a completed subscription agreement authorizing
payroll deductions prior to the applicable offering date, unless a later time
for filing the subscription agreement has been set by the Board for all eligible
employees
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with respect to a given offering. A person who becomes employed after the
commencement of an offering may not participate in the 1987 Purchase Plan until
the commencement of the next offering.
PURCHASE PRICE
The purchase price per share at which shares are sold under the 1987
Purchase Plan is the lower of: (i) 85% of the fair market value of a share of
the Common Stock of the Company on the first day of the offering period; or (ii)
85% of the fair market value of a share of the Common Stock of the Company on
the last day of the offering period. The 1987 Purchase Plan provides that,
because the Company's Common Stock is currently traded on the Nasdaq National
Market, the fair market value of a share of the Common Stock on a given date
shall be the closing price on the Nasdaq National Market, on such date, as
reported in The Wall Street Journal.
PAYMENT OF PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions
during the offering period. The deductions may not exceed 10% of a participant's
eligible compensation received on each payday. The aggregate of such payroll
deductions during the offering period cannot exceed 10% of his or her aggregate
compensation during such offering period. Partial share dollar amounts carried
over into the following offering period will reduce the withholding if it would
exceed 10% of a participant's eligible compensation. Compensation is defined as
all regular straight time gross earnings, plus sales commissions and sales
incentives earned during the entire offering period, but exclusive of payments
for overtime, shift premium, other incentive compensation, other incentive
payments, bonuses, or other compensation. Payroll deductions shall commence on
the first payday following the first day of the offering period and shall
continue at the same percentage rate until the end of the offering period unless
sooner terminated. No interest shall accrue on the payroll deductions of a
participant in the 1987 Purchase Plan. At any time during the offering period, a
participant may discontinue payroll deductions under the 1987 Purchase Plan
without withdrawing amounts contributed through prior payroll deductions. All
payroll deductions received or held by the Company under the 1987 Purchase Plan
may be used by the Company for any corporate purpose, and the Company is not
obligated to segregate such payroll deductions.
PURCHASE OF STOCK; GRANT OF OPTIONS
On the first day of each offering period, each eligible employee
participating in the 1987 Purchase Plan shall be granted an option (an "Option")
to purchase (at the per-share option price) up to a number of shares determined
by dividing such employee's payroll deductions accumulated during such offering
period (not to exceed an amount equal to 10% of his or her compensation during
such offering period) by the Option purchase price determined as described under
"Purchase Price", above, subject to the limitations set forth in the 1987
Purchase Plan.
EXERCISE OF OPTIONS
Unless the participant's participation is discontinued, each participant's
Option for the purchase of the maximum number of full shares will be exercised
automatically at the end of the offering period at the applicable price.
WITHDRAWAL
A participant may withdraw all, but no less than all, the payroll
deductions credited to his or her account under the 1987 Purchase Plan at any
time prior to the last day of the offering period by giving written notice to
the Company. All of the participant's payroll deductions credited to his or her
account will be paid to him or her promptly after receipt of his or her notice
of withdrawal, and his or her option for the current period will be
automatically terminated, and no further payroll deductions for the purchase of
shares will be made during the offering period.
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In the event that a participant fails to remain in the continuous employ of
the Company for at least 20 hours per week during the offering period, such
participant will be deemed to have elected to withdraw from the 1987 Purchase
Plan and the payroll deductions credited to such participant's account will be
returned to such participant and his or her Option will be automatically
terminated.
A participant's withdrawal from an offering does not have any effect upon
such participant's eligibility to participate in subsequent offerings under the
1987 Purchase Plan or in any similar plan which may be adopted by the Company.
TERMINATION OR INTERRUPTION OF EMPLOYMENT
Upon termination or interruption of a participant's employment for any
reason, including retirement or death, prior to the last day of the offering
period, the payroll deductions credited to the participant's account will be
returned to such participant, or, in the case of the participant's death, to the
person or persons entitled thereto as specified in the participant's
subscription agreement, and his or her Option will be automatically terminated.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER
In the event any change, such as a stock split or payment of a stock
dividend, is made in the Company's capitalization which results in an increase
or decrease in the number of outstanding shares of Common Stock without receipt
of additional consideration by the Company, an appropriate adjustment will be
made in the shares subject to purchase and in the purchase price per share,
subject to any required action by the shareholders.
In the event of the proposed dissolution or liquidation of the Company, the
offering period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, each Option shall be
assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation, unless the
Board determines, in the exercise of its sole discretion and in lieu of such
assumption or substitution, that the participant shall have the right to
exercise the Option as to all of the optioned stock, including shares as to
which the Option would not otherwise be exercisable. If the Board makes an
Option fully exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify the participant that the Option
shall be fully exercisable for a period of 15 days from the date of such notice,
and the Option will terminate upon the expiration of such period.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the number of shares available for grant, as
well as the price per share of Common Stock covered by each outstanding Option,
in the event that the Company effects one or more reorganizations,
recapitalizations, rights offerings or other increases or reductions of shares
of its outstanding Common Stock, and in the event of the Company being
consolidated with or merged into any other corporation.
NONASSIGNABILITY
Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an Option or to receive shares under the
1987 Purchase Plan may be assigned, transferred, pledged, or otherwise disposed
of in any way (other than by will, the laws of descent, and distribution or as
provided in the 1987 Purchase Plan) by the participant. Any such attempt at
assignment, transfer, pledge, or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw from the
1987 Purchase Plan.
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors of the Company may at any time or from time to time
amend or terminate the 1987 Purchase Plan, except that such termination shall
not affect Options previously granted nor may any
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amendment make any change in an Option granted prior thereto which adversely
affects the rights of any participant. No amendment may be made to the 1987
Purchase Plan without prior approval of the shareholders of the Company if such
amendment would increase the number of shares reserved for issuance under the
1987 Purchase Plan, permit payroll deductions at a rate in excess of 10% of the
participant's compensation as defined in the 1987 Purchase Plan, modify the
designation of the employees (or class of employees) eligible to participate in
the plan, or materially increase the benefits which may accrue to participants
under the 1987 Purchase Plan. The 1987 Purchase Plan shall continue in effect
until August 2007, unless sooner terminated as described above.
TAX INFORMATION
The 1987 Purchase Plan and the right of participants to make purchases
thereunder is intended to qualify under the provisions of Sections 421 and 423
of the Code. Under these provisions, no income will be taxable to a participant
at the time of grant of the Option or the purchase of shares. A participant may
become liable for tax upon disposition of the shares acquired, as follows.
If the shares are sold or disposed of (including by way of gift) at least
two years after the offering date (the first day of the offering period during
which shares were purchased) and more than one year after the date on which
shares were transferred to the employee, then the lesser of (a) the excess of
the fair market value of the shares at the time of such disposition over the
purchase price of the shares subject to the Option (the "Option Price") or (b)
15% of the fair market value of the shares on the offering date, will be treated
as ordinary income to the participant. Any further gain or loss upon such
disposition will be treated as long-term capital gain or loss. If the shares are
sold and the sales price is less than the Option Price, there is no ordinary
income and the participant has a capital loss for the difference.
If the shares are sold or disposed of (including by way of gift or by
exchange in connection with the exercise of an incentive stock option) before
the expiration of the holding periods described above, then the excess of the
fair market value of the shares on the date of Option exercise over the Option
Price will be treated as ordinary income to the participant. This excess will
constitute ordinary income in the year of sale or other disposition even if no
gain is realized on the sale or a gratuitous transfer of the shares is made. The
balance of any gain will be treated as capital gain and will be treated as
long-term capital gain if the shares have been held more than one year. Even if
the shares are sold for less than their fair market value on the date of Option
exercise, the same amount of ordinary income is attributed to a participant and
a capital loss is recognized equal to the difference between the sales price and
the value of the shares on such date of Option exercise.
If shares are sold before the expiration of the statutory holding periods,
the Company is entitled to a tax deduction in the amount of the difference
between the price paid by the participant and the market value on the date of
the purchase (the last day of the offering period in which the shares were
purchased).
The foregoing summary of the effect of federal income taxation upon the
participant and the Company with respect to the shares purchased under the 1987
Purchase Plan does not purport to be complete. Reference should be made to the
applicable provisions of the Code. In addition, the summary does not discuss the
tax implications of a participant's death or the provisions of the income tax
laws of any municipality, state or foreign country in which the participant may
reside.
PROPOSED AMENDMENT
At the Annual Meeting, the shareholders are being requested to approve the
amendment of the 1987 Purchase Plan to increase from 600,000 to 700,000 the
number of shares reserved for issuance thereunder.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present or represented and voting at the Annual Meeting
will be required to approve the amendment to the 1987
26
<PAGE> 29
Purchase Plan. THE COMPANY'S BOARD OF DIRECTORS HAS APPROVED THE PROPOSED
AMENDMENT AND UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR SUCH
PROPOSED AMENDMENT.
PROPOSAL FIVE -- RATIFICATION OF APPOINTMENT OF
INDEPENDENT ACCOUNTANTS
The Board of Directors of Altera Corporation has selected Price Waterhouse
LLP, independent accountants, to audit the financial statements of Altera for
the current fiscal year ending December 31, 1995. It is expected that a
representative of Price Waterhouse LLP will be present at the Annual Meeting,
will have the opportunity to make a statement if he or she desires to do so, and
will be available to answer any appropriate questions.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative votes of the holders of a majority of the shares of Company
stock present or represented and voting at the Annual Meeting will be required
to approve this proposal. THE COMPANY'S BOARD OF DIRECTORS HAS APPROVED THIS
PROPOSAL AND RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE RATIFICATION OF THE
SELECTION OF PRICE WATERHOUSE LLP.
OTHER MATTERS
The Company knows of no other matters to be submitted at the meeting. If
any other matters properly come before the meeting, it is the intention of the
persons named in the enclosed proxy card to vote the shares they represent as
the Board of Directors may recommend.
It is important that your shares be represented at the meeting, regardless
of the number of shares which you hold. You are, therefore, urged to mark, sign,
date, and return the accompanying proxy card as promptly as possible in the
postage-prepaid envelope enclosed for that purpose.
For the Board of Directors
ALTERA CORPORATION
MARTIN R. BAKER
Secretary
Dated: March 16, 1995
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<PAGE> 30
ALTERA CORPORATION
1988 DIRECTOR STOCK OPTION PLAN
(As amended effective January 18, 1995)
1. Purposes of the Plan. The purposes of this Director Stock Option Plan
are to attract and retain the best available personnel for service as Directors
of the Company, to provide additional incentive to the Outside Directors of the
Company to serve as Directors, and to encourage their continued service on the
Board.
All options granted hereunder shall be "non-statutory stock options".
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Common Stock" shall mean the Common Stock of the Company.
(c) "Company" shall mean Altera Corporation, a California corporation.
(d) "Continuous Status as a Director" shall mean the absence of any
interruption or termination of service as a Director.
(e) "Director" shall mean a member of the Board.
(f) "Employee" shall mean any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of the
Company. The payment of a director's fee by the Company shall not be
sufficient in and of itself to constitute "employment" by the Company.
(g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.
(h) "Option" shall mean a stock option granted pursuant to the Plan.
(i) "Optioned Stock" shall mean the Common Stock subject to an Option.
(j) "Optionee" shall mean an Outside Director who receives an Option.
(k) "Outside Director" shall mean a Director who is not an Employee.
(l) "Parent" shall mean a "parent corporation", whether now or
hereafter existing, as defined in Section 425(e) of the Internal Revenue
Code of 1986, as amended.
<PAGE> 31
(m) "Plan" shall mean this 1988 Director Stock Option Plan, as
amended.
(n) "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(o) "Subsidiary" shall mean a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 425(f) of the Internal Revenue
Code of 1986, as amended.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 200,000 Shares (the "Pool") of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan.
4. Administration of and Grants of Options under the Plan.
(a) Administrator. Except as otherwise required herein, the Plan
shall be administered by the Board.
(b) Procedure for Grants. All grants of Options hereunder shall be
automatic and non-discretionary and shall be made strictly in accordance
with the following provisions:
(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares
to be covered by Options granted to Outside Directors.
(ii) Each Outside Director shall be automatically granted an Option
to purchase 20,000 Shares (the "First Option") upon the later to occur
of (A) the effective date of this Plan, as determined in accordance with
Section 6 hereof, or (B) the date on which such person first becomes an
Outside Director, whether through election by the shareholders of the
Company, appointment by the Board of Directors to fill a vacancy, or
(for an employee director) by ceasing to be employed by the Company.
(iii) After the First Option has been granted to an Outside
Director, such Outside Director shall thereafter be automatically
granted an Option to purchase 5,000 Shares (a "Subsequent Option") on
the day of each annual shareholders meeting, at which such Outside
Director is reelected to an additional term, occurring after the grant
date of such Outside Director's First Option; provided, however, that in
no event shall an Outside Director be granted Options to purchase in the
aggregate more than 50,000 shares.
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<PAGE> 32
(iv) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, in the event that a grant would cause the number of Shares
subject to outstanding Options plus the number of Shares previously
purchased upon exercise of Options to exceed the Pool, then each such
automatic grant shall be for that number of Shares determined by
dividing the total number of Shares remaining available for grant by the
number of Outside Directors on the automatic grant date. Any further
grants shall then be deferred until such time, if any, as additional
Shares become available for grant under the Plan through action to
increase the number of Shares which may be issued under the Plan or
through cancellation or expiration of Options previously granted
hereunder.
(v) The terms of an Option granted hereunder shall be consistent
with the requirements set forth elsewhere in this plan and shall
additionally include the following:
(A) the Option shall be exercisable only while the Outside
Director remains a Director of the Company, except as set forth in
Section 9 hereof.
(B) Subsequent Options granted prior to January 14, 1992 and all
First Options shall become exercisable in installments cumulatively
with respect to 25% of the Shares on the first day of the first year
after the date of grant of such First Option and with respect to
2.083% of the Shares for each month after such anniversary.
Subsequent Options granted on or after January 14, 1992 shall become
exercisable in installments cumulatively with respect to 8.34% of the
shares for each month beginning after the First Option and all other
Subsequent Options, if any, are fully vested. However, in no event
shall any Option be exercisable prior to obtaining shareholder
approval of the Plan in accordance with Section 17 hereof.
(c) Powers of the Board. Subject to the provisions and restrictions
of the Plan, the Board shall have the authority, in its discretion: (i) to
determine, upon review of relevant information and in accordance with
Section 8(b) of the Plan, the fair market value of the Common Stock; (ii)
to determine the exercise price per share of Options to be granted, which
exercise price shall be determined in accordance with Section 8(a) of the
Plan; (iii) to interpret the Plan; (iv) to prescribe, amend and rescind
rules and regulations relating to the Plan; (v) to authorize any person to
execute on behalf of the Company any instrument required to effectuate the
grant of an Option previously granted hereunder; and (vi) to make all other
determinations deemed necessary or advisable for the administration of the
Plan.
(d) Effect of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees
and any other holders of any Options granted under the Plan.
(e) Suspension or Termination of Option. If the President or his
designee reasonably believes that an Optionee has committed an act of
misconduct, the President may suspend the Optionee's right to exercise any
option pending a determination by the Board of Directors (excluding the
Outside Director accused of such misconduct). If the Board of Directors
(excluding the Outside Director accused of such misconduct) determines an
Optionee has committed an act of
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<PAGE> 33
embezzlement, fraud, dishonesty, nonpayment of an obligation owed to the
Company, breach of fiduciary duty or deliberate disregard of the Company
rules resulting in loss, damage or injury to the Company, or if an Optionee
makes an unauthorized disclosure of any Company trade secret or
confidential information, engages in any conduct constituting unfair
competition, induces any Company customer to breach a contract with the
Company or induces any principal for whom the Company acts as agent to
terminate such agency relationship, neither the Optionee nor his estate
shall be entitled to exercise any option whatsoever. In making such
determination, the Board of Directors (excluding the Outside Director
accused of such misconduct) shall act fairly and shall give the Optionee an
opportunity to appear and present evidence on Optionee's behalf at a
hearing before a committee of the Board.
5. Eligibility. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4(b) hereof. An Outside Director who has been granted an Option may, if
he is otherwise eligible, be granted an additional Option or Options in
accordance with such provisions.
The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his directorship at any time.
6. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the shareholders of
the Company as described in Section 17 of the Plan. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 13 of the
Plan.
7. Term of Option. The term of each Option shall be ten (10) years from
the date of grant thereof.
8. Exercise Price and Consideration.
(a) Exercise Price. The per Share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be 100% of the fair market
value per Share on the date of grant of the Option.
(b) Fair Market Value. The fair market value shall be determined by
the Board in its discretion; provided, however, that where there is a
public market for the Common Stock, the fair market value per Share shall
be the mean of the bid and asked prices of the Common Stock in the
over-the-counter market on the date of grant, as reported in the Wall
Street Journal (or, if not so reported, as otherwise reported by the
National Association of Securities Dealers Automated Quotation ("NASDAQ")
System) or, in the event the Common Stock is traded on the NASDAQ National
Market System or listed on a stock exchange, the fair market value per
Share shall be the closing price on such system or exchange on the date of
grant of the Option, as reported in the Wall Street Journal.
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<PAGE> 34
(c) Form of Consideration. The consideration to be paid for the
Shares to be issued upon exercise of an Option shall consist entirely of
cash, check, other Shares of Common Stock having a fair market value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, or any combination of such methods of
payment.
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times as are set forth in
Section 4(b) hereof; provided, however, that no Options shall be
exercisable until shareholder approval of the Plan in accordance with
Section 17 hereof has been obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received
by the Company. Full payment may consist of any consideration and method of
payment allowable under Section 8(c) of the Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. A share certificate for the
number of Shares so acquired shall be issued to the Optionee as soon as
practicable after exercise of the Option. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which
the Option is exercised.
(b) Termination of Status as a Director. In the event of the
termination of the Outside Director's Continuous Status as a Director, he
may, but only within thirty (30) days after the date of such termination,
exercise his Option to the extent that he was entitled to exercise it at
the date of such termination. To the extent that he was not entitled to
exercise an Option at the date of such termination, or if he does not
exercise such Option (which he was entitled to exercise) within the time
specified herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of Section
9(b) above, in the event a Director is unable to continue his service as a
Director with the Company as a result of his total and permanent disability
(as defined in Section 22(e)(3) of the Internal Revenue Code), he may, but
only within three (3) months from the date of termination, exercise his
Option to the
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<PAGE> 35
extent he was entitled to exercise it at the date of such termination. To
the extent that he was not entitled to exercise the Option at the date of
termination, or if he does not exercise such Option (which he was entitled
to exercise) within the time specified herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee:
(i) during the term of the Option who is at the time of his death a
Director of the Company and who shall have been in Continuous Status as
a Director since the date of grant of the Option, the Option may be
exercised, at any time within six (6) months following the date of
death, by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of
the right to exercise that would have accrued had the Optionee continued
living and remained in Continuous Status a Director for six (6) months
after the date of death.
(ii) within thirty (30) days after the termination of Continuous
Status as a Director, the Option may be exercised, at any time within
six (6) months following the date of death, by the Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that had
accrued at the date of termination.
10. Non-Transferability of Options. Options may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act, or the rules thereunder. The designation of a
beneficiary by an Optionee does not constitute a transfer. An Option may be
exercised, during the lifetime of the Optionee, only by the Optionee or a
transferee permitted by this Section 10.
11. Adjustments Upon Changes in Capitalization or Merger. Subject to any
required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
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<PAGE> 36
In the event of the proposed dissolution or liquidation of the Company, the
Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may, in the exercise
of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right to
exercise his Option as to all or any part of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable. In the event
of a proposed sale of all or substantially all of the assets of the Company, or
the merger of the Company with or into another corporation, the Option shall be
assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation. If however
such successor corporation does not agree to fully assume such options, the
Board shall act to fully accelerate the vesting of all of the shares subject to
each outstanding option such that the Optionee shall have the right to exercise
the Option as to all of the Optioned Stock, including Shares as to which the
Option would not otherwise be exercisable. If the Board makes an Option fully
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Board shall notify the Optionee that the Option shall be
fully exercisable for a period of thirty (30) days from the date of such notice,
and the Option will terminate upon the expiration of such period.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable;
provided that, the following revisions or amendments shall require approval
of the shareholders of the Company in the manner described in Section 17 of
the Plan:
(i) any increase in the number of Shares subject to the Plan, other
than in connection with an adjustment under Section 11 of the Plan; or
(ii) any change in the designation of the class of persons eligible
to be granted Options; or
(iii) any material increase in the benefits accruing to
participants under the Plan; or
(iv) any change in the number of shares subject to Options to be
granted hereunder or in the terms thereof as set forth in Section 4(b)
hereof.
Notwithstanding the foregoing, the provisions set forth in Section
4(b) of this Plan (and any other Sections of this Plan that affect the
formula award terms required to be specified in this Plan
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<PAGE> 37
by Rule 16b-3) shall not be amended more that once every six months, other
than to comport with changes in the Code, the Employee Retirement Income
Security Act, or the rules thereunder.
(b) Shareholder Approval. Shareholder approval of any amendment
requiring shareholder approval under Section 13(a) of the Plan shall be
solicited as described in Section 17 of the Plan.
(c) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the
Optionee and the Board, which agreement must be in writing and signed by
the Optionee and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares, if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
15. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
16. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
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<PAGE> 38
17. Shareholder Approval.
(a) Continuance of the Plan shall be subject to approval by the
shareholders of the Company at or prior to the first annual meeting of
shareholders held subsequent to the granting of an Option hereunder. If
such shareholder approval is obtained at a duly held shareholders' meeting,
it may be obtained by the affirmative vote of the holders of a majority of
the outstanding shares of the Company present or represented and entitled
to vote thereon. If such shareholder approval is obtained by written
consent, it may be obtained by the written consent of the holders of a
majority of the outstanding shares of the Company.
(b) Any required approval of the shareholders of the Company shall be
solicited substantially in accordance with Section 14(a) of the Exchange
Act and the rules and regulations promulgated thereunder.
18. Information to Optionees. The Company shall provide to each Optionee,
during the period for which such Optionee has one or more Options outstanding,
copies of all annual reports to shareholders, proxy statements and other
information provided to all shareholders of the Company.
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<PAGE> 39
ALTERA CORPORATION
1987 STOCK OPTION PLAN
(As amended effective January 18, 1995)
1. Purposes of the Plan. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and Consultants
of the Company and to promote the success of the Company's business.
Options granted hereunder may be either Incentive Stock Options or
Nonstatutory Stock Options, at the discretion of the Board and as reflected in
the terms of the written option agreement.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Board" shall mean the Committee, if one has been appointed, or
the Board of Directors of the Company, if no Committee is appointed.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan, if one
is appointed.
(d) "Common Stock" shall mean the Common Stock of the Company.
(e) "Company" shall mean Altera Corporation, a California corporation.
(f) "Consultant" shall mean any person who is engaged by the Company
or any Parent or Subsidiary to render consulting services and is
compensated for such consulting services, and any Director of the Company
whether compensated for such services or not; provided that if and in the
event the Company registers any class of any equity security pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the term Consultant shall thereafter not include Directors
who are not compensated for their services or are paid only a Director's
fee by the Company.
(g) "Continuous Status as an Employee or Consultant" shall mean the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any
other leave of absence approved by the Board (or the Committee or any other
committee of the Board); provided that, for purposes of Incentive Stock
Options, such leave is for a period of not more than 90 days or
reemployment upon the expiration of such leave is guaranteed by contract
(including certain Company policies) or statute.
(h) "Director" means a member of the Board.
<PAGE> 40
(i) "Employee" shall mean any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the
Company. The payment of a director's fee by the Company shall not be
sufficient to constitute "employment" by the Company.
(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(k) "Incentive Stock Option" shall mean an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.
(l) "Nonstatutory Stock Option" shall mean an Option not intended to
qualify as an Incentive Stock Option.
(m) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(n) "Option" shall mean a stock option granted pursuant to the Plan.
(o) "Optioned Stock" shall mean the Common Stock subject to an Option.
(p) "Optionee" shall mean an Employee or Consultant who receives an
Option.
(q) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.
(r) "Plan" shall mean this 1987 Stock Option Plan.
(s) "Rule 16b-3" means Rule 16b-3 of the Exchange Act, or any
successor to Rule 16b-3, as in effect when discretion is being exercised
with respect to the Plan.
(t) "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.
(u) "Subsidiary" shall mean a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 4,050,000 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have
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<PAGE> 41
been terminated, become available for future grant under the Plan.
Notwithstanding any other provision of the Plan, shares issued under the Plan
and later repurchased by the Company shall not become available for future grant
or sale under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. If permitted by Rule 16b-3,
the Plan may be administered by a Committee appointed by the Board,
which may consist of members of the Board of Directors and/or employees
of the Company, provided that any such Committee containing non-
Directors shall only be authorized to grant options and take other
actions with respect to persons who are not directors or officers of the
Company subject to Section 16 of the Exchange Act.
(ii) Administration With Respect to Directors and Officers Subject
to Section 16(b). With respect to Option grants made to Employees who
are also Officers or Directors subject to Section 16(b) of the Exchange
Act, the Plan shall be administered by (A) the Board, if the Board may
administer the Plan in compliance with the rules governing a plan
intended to qualify as a discretionary plan under Rule 16b-3, or (B) a
Committee designated by the Board to administer the Plan, which
Committee shall be constituted to comply with the rules governing a plan
intended to qualify as a discretionary plan under Rule 16b-3. Once
appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the
Board may increase the size of the Committee and appoint additional
members, remove members (with or without cause) and substitute new
members, fill vacancies (however caused), and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by the rules governing a plan intended to qualify as a
discretionary plan under Rule 16b-3.
(iii) Administration With Respect to Other Persons. With respect
to Option grants made to Employees or Consultants who are neither
Directors nor Officers of the Company, the Plan shall be administered by
(A) the Board or (B) a Committee designated by the Board, which
Committee shall be constituted to satisfy applicable laws. Once
appointed, such Committee shall serve in its designated capacity until
otherwise directed by the Board. The Board may increase the size of the
Committee and appoint additional members, remove members (with or
without cause) and substitute new members, fill vacancies (however
caused), and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by applicable laws.
(b) Powers of the Board. Subject to the provisions of the Plan, the
Board shall have the authority, in its discretion: (i) to grant Incentive
Stock Options or Nonstatutory Stock Options; (ii) to determine, upon review
of relevant information and in accordance with Section 8(b) of the Plan,
the fair market value of the Common Stock; (iii) to determine the exercise
price per share of Options to be granted, which exercise price shall be
determined in accordance with Section 8(a) of the Plan; (iv) to determine
the Employees or Consultants to whom, and the time or times at which,
Options shall be
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<PAGE> 42
granted and the number of shares to be represented by each Option; (v) to
interpret the Plan; (vi) to prescribe, amend and rescind rules and
regulations relating to the Plan; (vii) to determine the terms and
provisions of each Option granted (which need not be identical) and, with
the consent of the holder thereof, modify or amend each Option; (viii) to
accelerate or defer (with the consent of the Optionee) the exercise date of
any Option, consistent with the provisions of Section 5 of the Plan; (ix)
to authorize any person to execute on behalf of the Company any instrument
required to effectuate the grant of an Option previously granted by the
Board; and (x) to make all other determinations deemed necessary or
advisable for the administration of the Plan.
(c) Effect of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees
and any other holders of any Options granted under the Plan.
5. Eligibility.
(a) Nonstatutory Stock Options may be granted only to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he is
otherwise eligible, be granted an additional Option or Options.
(b) No Incentive Stock Option may be granted to an Employee which,
when aggregated with all other incentive stock options granted to such
Employee by the Company or any Parent or Subsidiary, would result in Shares
having an aggregate fair market value (determined for each Share as of the
date of grant of the Option covering such Share) in excess of $100,000
becoming first available for purchase upon exercise of one or more
incentive stock options during any calendar year.
(c) Section 5(b) of the Plan shall apply only to an Incentive Stock
Option evidenced by an "Incentive Stock Option Agreement" which sets forth
the intention of the Company and the Optionee that such Option shall
qualify as an incentive stock option. Section 5(b) of the Plan shall not
apply to any Option evidenced by a "Nonstatutory Stock Option Agreement"
which sets forth the intention of the Company and the Optionee that such
Option shall be a Nonstatutory Stock Option.
(d) The Plan shall not confer upon any Optionee any right with respect
to continuation of employment or consulting relationship with the Company,
nor shall it interfere in any way with his right or the Company's right to
terminate his employment or consulting relationship at any time.
(e) The following limitations shall apply to grants of Options to
Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than 250,000 shares.
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<PAGE> 43
(ii) In connection with his or her initial employment, an Employee
may be granted Options to purchase up to an additional 250,000 Shares
which shall not count against the limit set forth in subsection (i)
above.
(iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as
described in Section 11.
(iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a
transaction described in Section 11), the cancelled Option will be
counted against the limit set forth in Section 5(e)(i). For this
purpose, if the exercise price of an Option is reduced, the transaction
will be treated as a cancellation of the Option and the grant of a new
Option.
6. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the shareholders of
the Company as described in Section 17 of the Plan. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 13 of the
Plan.
7. Term of Option. The term of each Option shall be ten (10) years from
the date of grant thereof or such shorter term as may be provided in the Option
Agreement. However, in the case of an Incentive Stock Option granted to an
Optionee who, at the time the Option is granted, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option shall be five (5)
years from the date of grant thereof or such shorter term as may be provided in
the Incentive Stock Option Agreement.
8. Exercise Price and Consideration.
(a) The per Share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board,
but shall be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary, the per Share exercise price shall be no
less than 110% of the fair market value per Share on the date of
grant.
(B) granted to any Employee, the per Share exercise price shall
be no less than 100% of the fair market value per Share on the date
of grant.
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(ii) In the case of a Nonstatutory Stock Option
(A) granted to a person who, at the time of the grant of such
Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110%
of the fair market value per Share on the date of the grant.
(B) granted to any person, the per Share exercise price shall be
no less than 85% of the fair market value per Share on the date of
grant.
(iii) In the case of an Option granted on or after the effective
date of registration of any class of equity security of the Company
pursuant to Section 12 of the Exchange Act and prior to six months after
the termination of such registration, the per Share exercise price shall
be no less than 100% of the fair market value per Share on the date of
grant.
(b) The fair market value shall be determined by the Board in its
discretion; provided, however, that where there is a public market for the
Common Stock, the fair market value per Share shall be the mean of the bid
and asked prices (or the closing price per share if the Common Stock is
listed on the National Association of Securities Dealers Automated
Quotation ("NASDAQ") National Market System) of the Common Stock for the
date of grant, as reported in the Wall Street Journal (or, if not so
reported, as otherwise reported by the NASDAQ System) or, in the event the
Common Stock is listed on a stock exchange, the fair market value per Share
shall be the closing price on such exchange on the date of grant of the
Option, as reported in the Wall Street Journal.
(c) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined
by the Board and may consist entirely of cash, check, promissory note,
other Shares of Common Stock having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which
said Option shall be exercised, or any combination of such methods of
payment, or such other consideration and method of payment for the issuance
of Shares to the extent permitted under Sections 408 and 409 of the
California General Corporation Law. In making its determination as to the
type of consideration to accept, the Board shall consider if acceptance of
such consideration may be reasonably expected to benefit the Company
(Section 315(b) of the California General Corporation Law).
9. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times and under such
conditions as determined by the Board, including performance criteria with
respect to the Company and/or the Optionee, and as shall be permissible
under the terms of the Plan; provided, however, that an Incentive Stock
Option granted prior to January 1, 1987 (the "Sequential Option") shall not
be exercisable while there is outstanding any Incentive Stock Option which
was granted, before the granting of the Sequential Option, to the same
Optionee to purchase stock
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<PAGE> 45
of the Company, any Parent or Subsidiary, or any predecessor corporation of
such corporations. For purposes of this provision, an Incentive Stock
Option shall be treated as outstanding until such option is exercised in
full or expires by reason of lapse of time.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received
by the Company. Full payment may, as authorized by the Board, consist of
any consideration and method of payment allowable under Section 8(c) of the
Plan. Until the issuance (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company)
of the stock certificate evidencing such Shares, no right to vote or
receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such stock certificate
promptly upon exercise of the Option. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 11 of the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which
the Option is exercised.
(b) Termination of Status as an Employee or Consultant. In the event
of termination of an Optionee's Continuous Status as an Employee or
Consultant (as the case may be), such Optionee may, but only within thirty
(30) days (or such other period of time, not exceeding three (3) months in
the case of an Incentive Stock Option or six (6) months in the case of a
Nonstatutory Stock Option, as is determined by the Board, with such
determination in the case of an Incentive Stock Option being made at the
time of grant of the Option) after the date of such termination (but in no
event later than the date of expiration of the term of such Option as set
forth in the Option Agreement), exercise his Option to the extent that he
was entitled to exercise it at the date of such termination. To the extent
that he was not entitled to exercise the Option at the date of such
termination, or if he does not exercise such Option (which he was entitled
to exercise) within the time specified herein, the Option shall terminate.
(c) Disability of Optionee. Notwithstanding the provisions of Section
9(b) above, in the event of termination of an Optionee's Continuous Status
as an Employee or Consultant as a result of his total and permanent
disability (as defined in Section 22(e)(3) of the Code), he may, but only
within three (3) months (or such other period of time not exceeding twelve
(12) months as is determined by the Board, with such determination in the
case of an Incentive Stock Option being made at the time of grant of the
Option) from the date of such termination (but in no event later than the
date of expiration of the term of such Option as set forth in the Option
Agreement), exercise his Option to the extent he was entitled to exercise
it at the date of such termination. To the extent that he was not entitled
to
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<PAGE> 46
exercise the Option at the date of termination, or if he does not exercise
such Option (which he was entitled to exercise) within the time specified
herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee:
(i) during the term of the Option who is at the time of his death
an Employee or Consultant of the Company and who shall have been in
Continuous Status as an Employee or Consultant since the date of grant
of the Option, the Option may be exercised, at any time within six (6)
months following the date of death (but in no event later than the date
of expiration of the term of such Option as set forth in the Option
Agreement), by the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the
extent of the right to exercise that would have accrued had the Optionee
continued living and remained in Continuous Status as an Employee or
Consultant six (6) months after the date of death, subject to the
limitation set forth in Section 5(b); or
(ii) within thirty (30) days (or such other period of time not
exceeding three (3) months as is determined by the Board, with such
determination in the case of an Incentive Stock Option being made at the
time of grant of the Option) after the termination of Continuous Status
as an Employee or Consultant, the Option may be exercised, at any time
within six (6) months following the date of death (but in no event later
than the date of expiration of the term of such Option as set forth in
the Option Agreement), by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but
only to the extent of the right to exercise that had accrued at the date
of termination.
10. Non-Transferability of Options. Options may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act, or the rules thereunder. The designation of a
beneficiary by an Optionee does not constitute a transfer. An Option may be
exercised, during the lifetime of the Optionee, only by the Optionee or a
transferee permitted by this Section 10.
11. Adjustments Upon Changes in Capitalization or Merger. Subject to any
required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
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<PAGE> 47
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.
In the event of the proposed dissolution or liquidation of the Company, the
Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may, in the exercise
of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right to
exercise his Option as to all or any part of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable. In the event
of a proposed sale of all or substantially all of the assets of the Company, or
the merger of the Company with or into another corporation, the Option shall be
assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation. If,
however, such successor corporation does not agree to fully assume such options,
the Board shall act to fully accelerate the vesting of all of the shares subject
to each outstanding Option such that the Optionee shall have the right to
exercise the Option as to all of the Optioned Stock, including Shares as to
which the Option would not otherwise be exercisable. If the Board makes an
Option fully exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and the Option will terminate upon the expiration of such period.
12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Board makes the determination granting
such Option. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.
13. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable;
provided that, the following revisions or amendments shall require approval
of the shareholders of the Company in the manner described in Section 17 of
the Plan:
(i) any increase in the number of Shares subject to the Plan, other
than in connection with an adjustment under Section 11 of the Plan;
(ii) any change in the designation of the class of persons eligible
to be granted Options; or
(iii) if the Company has a class of equity securities registered
under Section 12 of the Exchange Act at the time of such revision or
amendment, any material increase in the benefits accruing to
participants under the Plan.
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<PAGE> 48
(b) Shareholder Approval. If any amendment requiring shareholder
approval under Section 13(a) of the Plan is made subsequent to the first
registration of any class of equity securities by the Company under Section
12 of the Exchange Act, such shareholder approval shall be solicited as
described in Section 17 of the Plan.
(c) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the
Optionee and the Board, which agreement must be in writing and signed by
the Optionee and the Company.
14. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
15. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
16. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
17. Shareholder Approval.
(a) Continuance of the Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months before or after the
date the Plan is adopted. If such shareholder approval is obtained at a
duly held shareholders' meeting, it must be obtained by the affirmative
vote of the holders of a majority of the outstanding shares of the Company,
or if such shareholder approval is
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<PAGE> 49
obtained by written consent, it must be obtained by the unanimous written
consent of all shareholders of the Company; provided, however, that
approval at a meeting or by written consent may be obtained by a lesser
degree of shareholder approval if the Board determines, in its discretion
after consultation with the Company's legal counsel, that such a lesser
degree of shareholder approval will comply with all applicable laws and
will not adversely affect the qualification of the Plan under Section 422A
of the Code.
(b) If and in the event that the Company registers any class of equity
securities pursuant to Section 12 of the Exchange Act, any required
approval of the shareholders of the Company obtained after such
registration shall be solicited substantially in accordance with Section
14(a) of the Exchange Act and the rules and regulations promulgated
thereunder.
(c) If any required approval by the shareholders of the Plan itself or
of any amendment thereto is solicited at any time otherwise than in the
manner described in Section 17(b) hereof, then the Company shall, at or
prior to the first annual meeting of shareholders held subsequent to the
later of (1) the first registration of any class of equity securities of
the Company under Section 12 of the Exchange Act or (2) the granting of an
Option hereunder to an officer or director after such registration, do the
following:
(i) furnish in writing to the holders entitled to vote for the Plan
substantially the same information which would be required (if proxies
to be voted with respect to approval or disapproval of the Plan or
amendment were then being solicited) by the rules and regulations in
effect under Section 14(a) of the Exchange Act at the time such
information is furnished; and
(ii) file with, or mail for filing to, the Securities and Exchange
Commission four copies of the written information referred to in
subsection (i) hereof not later than the date on which such information
is first sent or given to shareholders.
18. Information to Optionees. The Company shall provide to each Optionee,
during the period for which such Optionee has one or more Options outstanding,
copies of all annual reports and other information which are provided to all
shareholders of the Company. The Company shall not be required to provide such
information if the issuance of Options under the Plan is limited to key
employees whose duties in connection with the Company assure their access to
equivalent information.
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<PAGE> 50
ALTERA CORPORATION
1987 EMPLOYEE STOCK PURCHASE PLAN
(As amended effective January 18, 1995)
The following constitute the provisions of the 1987 Employee Stock Purchase
Plan of Altera Corporation.
1. Purpose. The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of
the Plan shall, accordingly, be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock, no par value, of the
Company.
(d) "Company" shall mean Altera Corporation, a California corporation.
(e) "Compensation" shall mean all regular straight-time gross
earnings, plus sales commissions and sales incentives, but exclusive of
payments for overtime, shift premium, other incentive compensation, other
incentive payments, bonuses, or other compensation.
(f) "Continuous Status as an Employee" shall mean the absence of any
interruption or termination of service as an Employee. Continuous Status as
an Employee shall not be considered interrupted in the case of a leave of
absence agreed to in writing by the Company, provided that such leave is
for a period of not more than ninety (90) days or reemployment upon the
expiration of such leave is guaranteed by contract or statute.
(g) "Designated Subsidiaries" shall mean the Subsidiaries which have
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
<PAGE> 51
(h) "Employee" shall mean any person, including an officer, who is
customarily employed for at least twenty (20) hours per week and more than
five (5) months in a calendar year by the Company or one of its Designated
Subsidiaries.
(i) "Exercise Date" shall mean the last day of each offering period of
the Plan.
(j) "Offering Date" shall mean the first day of each offering period
of the Plan.
(k) "Plan" shall mean this Employee Stock Purchase Plan.
(l) "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than fifty percent (50%) of the voting shares are held by
the Company or a Subsidiary, whether or not such corporation now exists or
is hereafter organized or acquired by the Company or a Subsidiary.
3. Eligibility.
(a) Any person who is an Employee as of the Offering Date of a given
offering period shall be eligible to participate in such offering period
under the Plan, subject to the requirements of paragraph 5(a) and the
limitations imposed by Section 423(b) of the Code.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately
after the grant, such Employee (or any other person whose stock would be
attributed to such Employee pursuant to Section 425(d) of the Code) would
own stock and/or hold outstanding options to purchase stock possessing five
percent (5%) or more of the total combined voting power or value of all
classes of stock of the Company or of any subsidiary of the Company; or
(ii) which permits his rights to purchase stock under all employee stock
purchase plans (described in Section 423 of the Code) of the Company and
its subsidiaries to accrue at a rate which exceeds Twenty-five Thousand
Dollars ($25,000) of fair market value of such stock (determined at the
time such option is granted) for each calendar year in which such option is
outstanding at any time.
4. Offering Periods. The Plan shall be implemented by one offering during
each six- (6) month period of the Plan, commencing on or about August 16, 1988,
and continuing thereafter until terminated in accordance with paragraph 19
hereof. The Board shall have the power to change the duration of offering
periods with respect to future offerings without shareholder approval if such
change is announced at least fifteen (15) days prior to the scheduled beginning
of the first offering period to be affected.
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<PAGE> 52
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deduction, on the
form provided by the Company, and filing it with the Company's payroll
office prior to the applicable Offering Date, unless a later time for
filing the subscription agreement is set by the Board for all eligible
Employees with respect to a given offering.
(b) Payroll deductions for a participant shall commence on the first
payroll following the Offering Date and shall end on the Exercise Date of
the offering to which such authorization is applicable, unless sooner
terminated by the participant as provided in paragraph 6(c) or 10.
6. Payroll Deductions.
(a) At the time a participant files his subscription agreement, he
shall elect to have payroll deductions made on each payday during the
offering period in an amount not exceeding ten percent (10%) of the
Compensation which he receives on such payday, and the aggregate of such
payroll deductions during the offering period shall not exceed ten percent
(10%) of his aggregate Compensation during said offering period.
(b) All payroll deductions made by a participant shall be credited to
his account under the Plan. A participant may not make any additional
payments into such account.
(c) A participant may discontinue his participation in the Plan as
provided in paragraph 10. A participant may also lower to zero, but not
thereafter increase, the rate of his payroll deductions during the offering
period by notifying the Company in writing. The decrease shall be effective
fifteen (15) days following the Company's receipt of the notification.
Should an eligible Employee decided to again participate in the Plan for
future offering periods, he must complete and file with the Company a new
authorization for payroll deduction.
7. Grant of Option.
(a) On the Offering Date of each offering period, each eligible
Employee participating in the Plan shall be granted an option to purchase
(at the per-share option price) up to a number of shares of the Company's
Common Stock determined by dividing such Employee's payroll deductions
accumulated during such offering period (not to exceed an amount equal to
ten percent (10%) of his Compensation during the applicable offering
period) by the option price as defined in Section 7(b) herein, subject to
the limitations set forth in Sections 3(b) and 12 hereof, and provided,
however, that in no event shall such option be exercisable for a number of
shares in excess of Twelve Thousand Five Hundred Dollars ($12,500) divided
by eighty-five percent (85%)
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<PAGE> 53
of the fair market value of a share of the Company's Common Stock on the
Offering Date. Fair market value of a share of the Company's Common Stock
shall be determined as provided in Section 7(b) herein.
(b) The option price per share of the shares offered in a given
offering period shall be the lower of: (i) eighty-five percent (85%) of the
fair market value of a share of the Common Stock of the Company on the
Offering Date; or (ii) eighty-five percent (85%) of the fair market value
of a share of the Common Stock of the Company on the Exercise Date. The
fair market value of the Company's Common Stock on a given date shall be
determined by the Board in its discretion; provided, however, that where
there is a public market for the Common Stock, the fair market value per
share shall be the mean of the bid and asked prices of the Common Stock for
such date, as reported in The Wall Street Journal (or, if not so reported,
as otherwise reported by the National Association of Securities Dealers
Automated Quotation (NASDAQ) System) or, in the event the Common Stock is
listed on a stock exchange, the fair market value per share shall be the
closing price on such exchange on such date, as reported in The Wall Street
Journal.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in paragraph 10, his option for the purchase of shares will be
exercised automatically on the Exercise Date of the offering period, and the
maximum number of full shares subject to option will be purchased for him at the
applicable option price with the accumulated payroll deductions in his account.
The shares purchased upon exercise of an option hereunder shall be deemed to be
transferred to the participant on the Exercise Date. During his lifetime, a
participant's option to purchase shares hereunder is exercisable only by him.
9. Delivery. As promptly as practicable after the Exercise Date of each
offering period, the Company shall arrange the delivery to each participant, as
appropriate, of a certificate representing the shares purchased upon exercise of
his option. Any cash remaining to the credit of a participant's account under
the Plan at the termination of each offering period which is insufficient to
purchase a full share of Common Stock of the Company shall be credited to the
participant's account for the next offering period, thereby reducing the maximum
amount which may be withheld from Compensation during such next offering period
if it would otherwise exceed the limits set forth in paragraphs 3(b) or 6(a),
or, if requested by the participant or if the participant has elected not to
participate for such following period, shall be returned to said participant.
10. Withdrawal; Termination of Employment.
(a) A participant may withdraw all, but not less than all, the payroll
deductions credited to his account under the Plan at any time prior to the
Exercise Date of the offering period by giving written notice to the
Company. All of the participant's payroll deductions credited to his
account will be paid to him promptly after receipt of his notice of
withdrawal, and his option for the current period will be automatically
terminated, and no further payroll deductions for the purchase of shares
will be made during the offering period.
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<PAGE> 54
(b) Upon termination of the participant's Continuous Status as an
Employee prior to the Exercise Date of the offering period for any reason,
including retirement or death, the payroll deductions credited to his
account will be returned to him or, in the case of his death, to the person
or persons entitled thereto under paragraph 14, and his option will be
automatically terminated.
(c) In the event an Employee fails to remain in Continuous Status as
an Employee of the Company for at least twenty (20) hours per week during
the offering period in which the employee is a participant, he will be
deemed to have elected to withdraw from the Plan, and the payroll
deductions credited to his account will be returned to him and his option
terminated.
(d) A participant's withdrawal from an offering will not have any
effect upon his eligibility to participate in a succeeding offering or in
any similar plan which may hereafter be adopted by the Company.
11. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
12. Stock.
(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be seven hundred
thousand (700,000) shares, subject to adjustment upon changes in
capitalization of the Company as provided in paragraph 18. If the total
number of shares which would otherwise be subject to options granted
pursuant to Section 7(a) hereof on the Offering Date of an offering period
exceeds the number of shares then available under the Plan (after deduction
of all shares for which options have been exercised or are then
outstanding), the Company shall make a pro rata allocation of the shares
remaining available for option grant in as uniform a manner as shall be
practicable and as it shall determine to be equitable. In such event, the
Company shall give written notice of such reduction of the number of shares
subject to the option to each Employee affected thereby, and shall
similarly reduce the rate of payroll deductions, if necessary.
(b) The participant will have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant
and his spouse.
13. Administration. The Plan shall be administered by the Board of the
Company or a committee of members of the Board appointed by the Board. The
administration, interpretation or application of the Plan by the Board or its
committee shall be final, conclusive and binding upon all participants. Members
of the Board who are eligible Employees are permitted to participate in the
Plan, provided that:
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<PAGE> 55
(a) Members of the Board who are eligible to participate in the Plan
may not vote on any matter affecting the administration of the Plan or the
grant of any option pursuant to the Plan.
(b) If a committee is established to administer the Plan, no member of
the Board who is eligible to participate in the Plan may be a member of the
committee.
14. Designation of Beneficiary.
(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to the
end of the offering period but prior to delivery to him of such shares and
cash. In addition, a participant may file a written designation of a
beneficiary who is to receive any cash from the participant's account under
the Plan in the event of such participant's death prior to the Exercise
Date of the offering period.
(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant,
and in the absence of a beneficiary validly designated under the Plan who
is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the
estate of the participant; or, if no such executor or administrator has
been appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such shares and/or cash to the spouse or to any one
or more dependents or relatives of the participant; or, if no spouse,
dependent or relative is known to the Company, then to such other person as
the Company may designate.
15. Transferability. Neither payroll deductions credited to a
participant's account nor any rights, with regard to the exercise of an option
or to receive shares under the Plan, may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in paragraph 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds in accordance with paragraph 10.
16. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each participant
in the Plan. Statements of account will be given to participating Employees
promptly following the Exercise Date, which statements will set forth the
amounts of payroll deductions, the per share purchase price, the number of
shares purchased and the remaining cash balance, if any.
18. Adjustments Upon Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the number of shares of Common Stock
covered by each option under
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<PAGE> 56
the Plan which has not yet been exercised and the number of shares of Common
Stock which have been authorized for issuance under the Plan but have not yet
been placed under option (collectively, the "Reserves"), as well as the price
per share of Common Stock covered by each option under the Plan which has not
yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no issue
by the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Common Stock
subject to an option.
In the event of the proposed dissolution or liquidation of the Company, the
offering period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, each option under the
Plan shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the Board determines, in the exercise of its sole discretion and in lieu
of such assumption or substitution, that the participant shall have the right to
exercise the option as to all of the optioned stock, including shares as to
which the option would not otherwise be exercisable. If the Board makes an
option fully exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify the participant that the option
shall be fully exercisable for a period of fifteen (15) days from the date of
such notice, and the option will terminate upon the expiration of such period.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per share
of Common Stock covered by each outstanding option, in the event that the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of shares of its outstanding Common Stock, and
in the event of the Company being consolidated with or merged into any other
corporation.
19. Amendment or Termination. The Board may at any time terminate or amend
the Plan. Except as provided in paragraph 18, no such termination can affect
options previously granted, nor may an amendment make any change in any option
theretofore granted which adversely affects the rights of any participant, nor
may an amendment be made without prior approval of the shareholders of the
Company (obtained in the manner described in paragraph 21) if such amendment
would:
(a) Increase the number of shares that may be issued under the Plan;
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<PAGE> 57
(b) Permit payroll deductions at a rate in excess of ten percent (10%)
of the participant's Compensation;
(c) Change the designation of the employees (or class of employees)
eligible for participation in the Plan; or
(d) If the Company has a class of equity securities registered under
Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") at the time of such amendment, materially increase the
benefits which may accrue to participants under the Plan.
If any amendment requiring shareholder approval under this paragraph 19 of
the Plan is made subsequent to the first registration of any class of equity
securities by the Company under Section 12 of the Exchange Act, such shareholder
approval shall be solicited as described in paragraph 21 of the Plan.
20. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. Shareholder Approval.
(a) Continuance of the Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months before or after the
date the Plan is adopted. If such shareholder approval is obtained at a
duly held shareholders' meeting, it must be obtained by the affirmative
vote of the holders of a majority of the outstanding shares of the Company,
or if such shareholder approval is obtained by written consent, it must be
obtained by the unanimous written consent of all shareholders of the
Company; provided, however, that approval at a meeting or by written
consent may be obtained by a lesser degree of shareholder approval if the
Board determines, in its discretion after consultation with the Company's
legal counsel, that such a lesser degree of shareholder approval will
comply with all applicable laws and will not adversely affect the
qualification of the Plan under Section 423 of the Code.
(b) If and in the event that the Company registers any class of equity
securities pursuant to Section 12 of the Exchange Act, any required
approval of the shareholders of the Company obtained after such
registration shall be solicited substantially in accordance with Section
14(a) of the Exchange Act and the rules and regulations promulgated
thereunder.
(c) If any required approval by the shareholders of the Plan itself or
of any amendment thereto is solicited at any time otherwise than in the
manner described in paragraph 21(b) hereof, then the Company shall, at or
prior to the first annual meeting of shareholders held subsequent to the
later of (i) the first registration of any class of equity securities of
the Company under
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<PAGE> 58
Section 12 of the Exchange Act; or (ii) the granting of an option hereunder
to an officer or director after such registration, do the following:
(1) furnish in writing to the holders entitled to vote for the Plan
substantially the same information which would be required (if proxies to
be voted with respect to approval or disapproval of the Plan or amendment
were then being solicited) by the rules and regulations in effect under
Section 14(a) of the Exchange Act at the time such information is
furnished; and
(2) file with, or mail for filing to, the Securities and Exchange
Commission four (4) copies of the written information referred to in
subsection (1) hereof not later than the date on which such information is
first sent or given to shareholders.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in paragraph 21. It shall continue in effect for a term of
twenty (20) years unless sooner terminated under paragraph 19.
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<PAGE> 59
ALTERA CORPORATION
PROXY FOR 1995 ANNUAL MEETING OF SHAREHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned shareholder of ALTERA CORPORATION, a California corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Shareholders and
Proxy Statement, each dated March 16, 1995, and hereby appoints Rodney Smith and
Thomas J. Nicoletti and each of them, proxies and attorneys-in-fact, with full
power to each of substitution, on behalf and in the name of the undersigned, to
represent the undersigned at the 1995 Annual Meeting of Shareholders of ALTERA
CORPORATION, to be held on Wednesday, April 26, 1995 at 10:00 a.m., local time
at 2610 Orchard Parkway, San Jose, California, and any adjournment(s) thereof,
and to vote all shares of Common Stock which the undersigned would be entitled
to vote if then and there personally present, on the matters set forth below.
1. Election of directors:
<TABLE>
<S> <C>
/ / FOR all nominees listed below / / WITHHOLD AUTHORITY to vote for
(except as indicated) all nominees listed below
</TABLE>
INSTRUCTION: If you wish to withhold authority to vote for any individual
nominee, strike a line through that nominee's name in the list below:
Rodney Smith; Michael A. Ellison; Paul Newhagen; Robert W. Reed; William E.
Terry
2. Proposal to approve an amendment to the 1988 Director Stock Option Plan to
increase from 150,000 to 200,000 the number of shares reserved for issuance
thereunder.
/ / FOR / / AGAINST / / ABSTAIN
3. Proposal to approve amendments to the 1987 Stock Option Plan to (i) increase
from 3,400,000 to 4,050,000 the number of shares reserved for issuance
thereunder, and (ii) limit the number of option shares that may be granted to
participants under the Plan in any fiscal year.
/ / FOR / / AGAINST / / ABSTAIN
4. Proposal to approve an amendment to the 1987 Employee Stock Purchase Plan to
increase from 600,000 to 700,000 the number of shares reserved for issuance
thereunder
/ / FOR / / AGAINST / / ABSTAIN
5. Proposal to ratify the appointment of Price Waterhouse LLP as independent
accountants for the fiscal year ending December 31, 1995.
/ / FOR / / AGAINST / / ABSTAIN
In their discretion, the proxies are authorized to vote upon such other
matter(s) which may properly come before the meeting and at any adjournment(s)
thereof.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED, WILL
BE VOTED FOR THE LISTED NOMINEES IN THE ELECTION OF DIRECTORS, FOR THE AMENDMENT
TO THE 1988 DIRECTOR STOCK OPTION PLAN, FOR THE AMENDMENTS TO THE 1987 STOCK
OPTION PLAN, FOR THE AMENDMENT TO THE 1987 EMPLOYEE STOCK PURCHASE PLAN, AND FOR
THE RATIFICATION OF THE APPOINTMENT OF PRICE WATERHOUSE LLP AS INDEPENDENT
ACCOUNTANTS FOR THE 1995 FISCAL YEAR.
Both of such attorneys or substitutes (if both are present and acting at
said meeting or any adjournment(s) thereof, or, if only one shall be present and
acting, then that one) shall have and may exercise all of the powers of said
attorneys-in-fact hereunder.
Dated: , 1995
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Signature
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Signature
(This Proxy should be marked, dated, signed by the shareholder(s) exactly as
his or her name appears hereon, and returned promptly in the enclosed envelope.
Persons signing in a fiduciary capacity should so indicate. If shares are held
by joint tenants or as community property, both should sign.)
