<PAGE> 1
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:
[X] Preliminary Proxy Statement
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
ALTERA CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
C. Wendell Bergere
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] No fee.
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[ ] $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:
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(2) Aggregate number of securities to which transaction applies:
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pursuant to Exchange Act Rule 0-11:
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Set forth the amount on which the filing fee is calculated and state how
it was determined.
[ ] 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.
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<PAGE> 2
LOGO
March 20, 1997
DEAR SHAREHOLDERS:
You are cordially invited to attend this year's annual meeting of
shareholders, which will be held on May 7, 1997 at 10:00 a.m. local time at
Altera's offices located at 2610 Orchard Parkway, San Jose, California.
One purpose of the annual meeting is for Altera's shareholders to consider
and vote upon the proposed reincorporation of Altera as a Delaware corporation.
The Board of Directors has unanimously approved the reincorporation and
recommends that the shareholders vote for the proposal to enable Altera to take
advantage of the greater flexibility of Delaware corporate law and the
substantial body of judicial interpretations of that law, and to increase the
Company's ability to attract and retain qualified directors. The attached proxy
statement describes in detail the reasons for the proposal and also compares
Altera's current California organizational documents to those the Board proposes
to put in place upon reincorporating in Delaware.
Whether or not you plan to attend the Annual Meeting, please mark, sign,
date and return the enclosed proxy card promptly in the accompanying envelope.
By returning the proxy, you can help Altera avoid the expense of duplicate proxy
solicitations and possibly having to reschedule the Annual Meeting if a quorum
of the outstanding shares is not present or represented by proxy. If you attend
the Annual Meeting and wish to change your proxy vote, you may do so simply by
voting in person at the Annual Meeting.
A copy of Altera's Annual Report to Shareholders is also enclosed for your
information. At the annual meeting we will review Altera's activities over the
past year and our plans for the future.
The Board of Directors and management look forward to seeing you at the
annual meeting.
Very truly yours,
Rodney Smith
Chairman, Chief Executive Officer, and
President
<PAGE> 3
LOGO
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
MAY 7, 1997
10:00 A.M.
TO THE SHAREHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Shareholders of Altera
Corporation, a California corporation (the "Company"), will be held on
Wednesday, May 7, 1997, at 10:00 a.m. local time, at the Company's offices at
2610 Orchard Parkway, San Jose, California, for the following purposes:
1. To elect directors to serve until the next annual meeting of
shareholders or until their successors are elected.
2. To approve an amendment to the 1996 Stock Option Plan to increase from
4,000,000 to 5,300,000 the number of shares of Common Stock reserved for
issuance thereunder.
3. A. To approve the reincorporation of the Company as a Delaware
corporation.
B. To approve the setting of the number of authorized shares of Common
Stock of the Delaware corporation at 400,000,000
4. To ratify the appointment of Price Waterhouse LLP as independent
accountants for the Company for the fiscal year ending December 31,
1997.
5. 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 March 13, 1997, are entitled to notice of and to vote at the
meeting.
All shareholders are cordially invited to attend the meeting in person.
However, to assure your representation at the meeting, you are urged to mark,
sign, date and return the enclosed Proxy as promptly as possible in the postage
prepaid envelope enclosed for that purpose. Shareholders attending the meeting
may vote in person even if they have returned a proxy card.
For the Board of Directors
ALTERA CORPORATION
C. Wendell Bergere
Secretary
San Jose, California
March 20, 1997
YOUR VOTE IS IMPORTANT.
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE MEETING, YOU ARE REQUESTED TO
COMPLETE, SIGN AND DATE THE ENCLOSED PROXY AS PROMPTLY AS POSSIBLE AND RETURN IT
IN THE ENCLOSED ENVELOPE.
<PAGE> 4
ALTERA CORPORATION
------------------------
PROXY STATEMENT FOR
ANNUAL MEETING OF SHAREHOLDERS
MAY 7, 1997
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
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 (the "Annual Meeting") to be held
on May 7, 1997, 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 20, 1997
to all shareholders entitled to vote at the Annual Meeting.
RECORD DATE AND SHARES OUTSTANDING
Shareholders of record at the close of business on March 13, 1997 (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 88,133,415 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 D.F. King & Co., Inc. to aid in the solicitation of
proxies from brokers, bank nominees, and other institutional owners. The Company
estimates that it will pay D.F. King & Co., Inc. a fee of $4,500.00 for its
services and
<PAGE> 5
will reimburse it for certain out-of-pocket expenses. The Company may reimburse
brokerage firms and other persons representing beneficial owners of shares for
their expenses in forwarding 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, telegram, or facsimile.
DEADLINE FOR RECEIPT OF SHAREHOLDER PROPOSALS FOR 1998 ANNUAL MEETING
Proposals of shareholders of the Company intended to be presented by such
shareholders at the Company's 1998 Annual Meeting of Shareholders must be
received by the Company no later than November 25, 1997 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
The Company's Board of Directors is comprised of six members, all of whom
are to be elected at the Annual Meeting. The Nominating Committee of the Board
of Directors has nominated the persons named below for election as directors at
the Annual Meeting. Unless otherwise directed, the proxy holders will vote the
proxies received by them for the six nominees named below. In the event that any
of the six 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 and qualified.
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 56 Chairman of the Board of Directors, President, 1983
Chief Executive Officer, and Director
Michael A. Ellison 51 Director 1984
Paul Newhagen 47 Vice President -- Administration and Director 1987
Robert W. Reed 50 Director 1994
William E. Terry 63 Director 1994
Deborah D. Triant 47 Director 1996
</TABLE>
There is no family relationship between any of the directors or executive
officers 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. Since October 1994, Mr. Ellison has been the Chief Executive Officer of
Steller, Inc., a distributor of electronics parts. From January 1982 to December
1992, he was a General Partner of Cable & Howse Ventures, a venture capital
investment firm. Following that, he was a private venture capital investor. Mr.
Ellison also served as a director of Wall Data Incorporated from September 1986
to January 1996.
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, 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.
2
<PAGE> 6
ROBERT W. REED has served as a director of the Company since October 1994.
In 1996, Mr. Reed retired from his position as Senior Vice President of Intel
Corporation, a semiconductor manufacturer. 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.
DEBORAH D. TRIANT, PH.D., has served as a director of the Company since May
1996. Dr. Triant is the President and Chief Executive Officer of CheckPoint
Software Technologies, Inc. ("CheckPoint"), an Internet security software
company, and a director of CheckPoint's Israeli parent company, CheckPoint
Software Technologies, Ltd. Prior to joining CheckPoint, Dr. Triant held various
marketing and technical executive positions with Adobe Systems Inc., a computer
software company, Sun Microsystems Inc., a computer networking company, and
Xerox Corp., a diversified electronics manufacturer.
VOTE REQUIRED
The six 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 seven meetings during the fiscal year ended
December 31, 1996 ("fiscal 1996"). The Board of Directors has standing audit,
compensation, and nominating committees.
The members of the Audit Committee are Michael A. Ellison, Paul Newhagen,
and Robert W. Reed. The Audit Committee held three meetings during fiscal 1996.
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.
The members of the Compensation Committee are William E. Terry and Michael
A. Ellison. The Compensation Committee held two meetings during fiscal 1996. The
purposes of the Compensation Committee are to review and approve 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 members of the Nominating Committee are Robert W. Reed, Michael A.
Ellison, Paul Newhagen, and William E. Terry. The Nominating Committee held two
meetings in fiscal 1996. The purpose of the Nominating Committee is to seek
qualified candidates for nomination and appointment to the Board of Directors.
The Nominating Committee selects 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, and customers, and the community in which
it operates. Accordingly, the Nominating Committee actively seeks qualified
candidates for nomination and election to the Board of Directors in order to
reflect such diversity. The Nominating Committee conducts its evaluation of
potential candidates independently and confidentially; therefore, it does not
accept shareholder recommendations of candidates. In February 1997, the
Nominating Committee nominated the candidates identified in this proxy for
election to the Company's Board of Directors.
3
<PAGE> 7
During fiscal 1996, only one director attended fewer than 75% of the
aggregate number of meetings of the Board of Directors and meetings of its
committees on which she served. Because Dr. Triant joined the Board of Directors
in May of 1996 after the schedule of meetings had been set for 1996, she was not
able to attend 75% of the Board of Directors' meetings for the balance of the
year due to pre-existing conflicts with the meeting schedule.
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 "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. During fiscal 1996, the Company purchased
PLD wafers and finished goods from Intel valued at $11,558,000, which exceeded
5% of the Company's consolidated gross revenues for its 1996 fiscal year of
$497,000,000.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The members of the Compensation Committee are Michael A. Ellison and
William E. Terry. Neither Mr. Ellison nor Mr. Terry was at any time during the
Company's 1996 fiscal year or at any other time an officer or employee of the
Company. No executive officer of the Company serves as a member of the board of
directors or compensation committee of any entity which has one or more
executive officers serving as a member of the Company's Board of Directors or
Compensation Committee.
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 senior executives
including the Company's Chief Executive Officer.
General Compensation Philosophy
The primary objectives of the Company's executive compensation policies
include:
- Attracting, motivating, and retaining quality employees,
- Rewarding executives based upon the Company's financial performance at
levels competitive with comparable high-growth companies, and
- Providing incentives designed to increase shareholder value.
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's compensation philosophy seeks to align management and shareholder
interests by tying cash compensation and long-term equity 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> 8
Cash Compensation
Cash compensation for the Company's senior executives consists of a fixed
base salary and an annual bonus based on the Company's financial performance.
Comparable peer company and other market data are studied in determining total
cash compensation. In order to implement its philosophy that executives be
rewarded for causing positive financial results, the Committee attempts to place
greater emphasis on the variable incentive bonus component of their total
compensation than on fixed base salaries. Thus, executive base salaries are
targeted to be at or below the median for salaries paid by such peer companies
while bonuses are targeted to bring total compensation above the median for such
peer companies if the Company meets or exceeds the annual goals established by
the Committee.
In setting annual goals for the executive bonus plan, the Committee
considers 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 goals be aggressive, emphasizing
strong revenue growth coupled with improved or consistent net income. In order
to achieve the purpose of the plan, the financial goals set by the Committee and
the corresponding bonus targets are communicated to participants prior to the
beginning of the fiscal year.
Long-Term Equity Compensation
Long-term equity incentives, including stock options and stock purchase
rights granted pursuant to the Company's Stock Option and Stock Purchase Plans,
directly align the economic interests of the Company's management and employees
with 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 of the Company's Common Stock 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
In setting the CEO's compensation, the Committee considers comparative
financial and pay data of selected peer companies in the semiconductor industry
which approximate the size of the Company in terms of employees, revenue, and
capitalization. The Committee also considers studies from independent
consultants of compensation structures. The Committee has raised Mr. Smith's
base annual salary for 1997 to $500,000 based upon the increased median base
salary level of peer company CEOs and the financial performance of the Company
in fiscal 1996, both in absolute terms and relative to the performance of the
peer companies.
The amount of the CEOs 1996 bonus was based on the Company's fiscal 1996
growth of sales revenue and net income over prior year results, subject to a cap
at 150% of the CEO's base salary. Based on the Company's results, the Committee
awarded the CEO a bonus for fiscal 1996 of $195,680.
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.
In 1996, the Company granted Mr. Smith an option to purchase 200,000 shares
(post-split) of the Company's Common Stock.
Other Executive Compensation
The Committee has adopted compensation policies for its senior executives
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 officer salaries, the CEO and
the Committee also consider factors such as the Company's performance relative
5
<PAGE> 9
to the peer companies and the individual officer's past performance and future
potential. In accordance with the Company's compensation goals, the executive
officers' base salaries for fiscal 1996 were generally at or below the median of
the range of peer company base salary data obtained by the Committee.
Cash bonuses for all executive officers for fiscal 1996 were calculated
based on the Company's actual revenues and net income compared to the Company's
internal plan, according to a formula similar to that used to determine the
CEO's bonus. The executive officers' annual cash bonuses for fiscal 1996 were at
or slightly above the median of the range of annual bonus data for peer
companies, which is consistent with the Company's fiscal 1996 relative
performance during a year in which revenues in the overall semiconductor
industry actually declined. As in the case of the CEO, executive officer bonuses
for fiscal 1997 will be awarded based on the Company's growth of sales revenue
and net income over prior year results.
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 executive officers 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. The Company has qualified
its 1987 Stock Option Plan and its 1996 Stock Option Plan as performance-based
plans and therefore compensation realized in connection with exercises of
options granted under the Plan is exempt under the statute. The Committee does
not believe that the other components of the Company's compensation will be
likely in the aggregate to materially exceed $1 million for any executive
officer in 1997 and therefore has concluded that no further action with respect
to qualifying such compensation for deductibility is necessary at this time. The
Committee will continue to evaluate the advisability of qualifying the
deductibility of such compensation in the future.
<TABLE>
<S> <C>
William E. Terry, Chairman Michael A. Ellison, Member
Compensation Committee Compensation Committee
</TABLE>
DIRECTOR COMPENSATION
Currently, the Company's non-employee directors (the "Outside 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 Outside 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.
Each Outside 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.
The Outside Directors also receive options under the Company's 1988
Director Stock Option Plan (the "Director Plan"). The Director Plan provides for
the grant of nonstatutory stock options to each of the Company's Outside
Directors ("Director Options"). Such grants occur automatically upon
commencement of service as an Outside Director (the "First Option Grant") and
upon reelection as an Outside Director (the "Subsequent Option Grant"), and are
made from a reserve of 940,000 shares of the Company's Common
6
<PAGE> 10
Stock. In 1996, the First Option Grants to Outside Directors were 40,000
(pre-split) shares of Common Stock and Subsequent Options Grants were 10,000
(pre-split) shares. The exercise price for both First Option Grants and
Subsequent Option Grants is equal to the closing price of the Company's Common
Stock on the date of the grant. Both First Option and Subsequent Option Grants
vest over a period of years according to the Director Plan. In no event shall an
Outside Director be granted Director Options to purchase more than 200,000
shares in the aggregate.
Each Outside 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 additional compensation for their services as members of the Board of
Directors.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the shares of Common Stock beneficially
owned 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 five other most highly paid officers of the Company,
and by all directors and executive officers of the Company as a group. Except as
otherwise indicated in the accompanying footnotes, beneficial ownership is shown
as of the Record Date. All percentage figures in the following table are
calculated based on the number of shares of Common Stock outstanding as of the
Record Date.
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK
-------------------------
FIVE-PERCENT SHAREHOLDERS, DIRECTORS, EXECUTIVE OFFICERS(1) NUMBER(2) PERCENT
- ------------------------------------------------------------------------------ --------- -------
<S> <C> <C>
FIVE-PERCENT SHAREHOLDERS:
Entities affiliated with The Equitable Companies Incorporated(3).............. 7,284,398 8%
Massachusetts Financial Services Company(4)................................... 4,691,470 5%
DIRECTORS AND EXECUTIVE OFFICERS:
Rodney Smith(5)............................................................... 1,830,667 2%
Paul Newhagen(6).............................................................. 995,809 1%
Michael A. Ellison(7)......................................................... 122,229 *
Robert W. Reed(8)............................................................. 31,667 *
William E. Terry(9)........................................................... 57,333 *
Deborah Triant(10)............................................................ 20,000 *
Denis M. Berlan(11)........................................................... 163,013 *
Peter Smyth(12)............................................................... 110,000 *
Clive McCarthy(13)............................................................ 281,240 *
Erik Cleage(14)............................................................... 57,216 *
All Directors and Officers as a Group (14 persons)(15)........................ 3,823,972
</TABLE>
- ---------------
* Less than 1%.
(1) 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.
(2) The share data shown in the above table reflects the 2-for-1 stock split of
the Company's outstanding common stock which was effective as to the
shareholders of record on December 18, 1996. The share data was also
adjusted in 1995 to reflect a 2-for-1 stock split which was effective as to
the shareholders of record on May 10, 1995.
(3) Based on a filing with the Securities and Exchange Commission dated
February 13, 1997, indicating beneficial ownership as of December 31, 1996.
This joint filing was made with respect to 7,284,398 shares of the
Company's Common Stock by the following reporting persons: (i) a group
(collectively referred to as "Mutuelles AXA") including Alpha Assurances
I.A.R.D. Mutuelle and Alpha Assurances Vie Mutuelle (business address:
100-101 Terrasse Boieldieu, 92042 Paris La Defense, France), AXA Assurances
I.A.R.D. Mutuelle and AXA Assurances Vie Mutuelle (business address: 21,
rue de Chateaudum, 75009 Paris, France), AXA Courtage Assurance Mutuelle
(business address: 26, rue Louis de Grand, 75002 Paris, France); (ii) AXA
(business address: 23, avenue Matignon, 75008 Paris, France); and (iii) The
Equitable Companies Incorporated (business address: 787 Seventh Avenue, New
York, New York 10019), which beneficially owns such shares through certain
of its subsidiaries. Each of the reporting persons indicates in such filing
sole voting power with respect to 6,115,170 such shares, shared voting
power with respect to 112,628 such shares and sole dispositive power with
respect to all such shares. Mutuelles AXA and AXA disclaim beneficial
ownership of all such shares.
7
<PAGE> 11
(4) Based on a filing with the Securities and Exchange Commission dated
February 11, 1997, indicating beneficial ownership as of December 31, 1996.
According to such filing, Massachusetts Financial Services Company has sole
voting power with respect to 4,597,270 shares.
(5) Includes 336,667 shares which Mr. Smith has the right to acquire within 60
days of the Record Date through exercise of options.
(6) Includes 66,667 shares which Mr. Newhagen has the right to acquire within
60 days of the Record Date through exercise of options.
(7) Includes 60,333 shares which Mr. Ellison has the right to acquire within 60
days of the Record Date through exercise of options.
(8) Mr. Reed has the right to acquire all such shares within 60 days of the
Record Date through exercise of options.
(9) Includes 53,333 shares which Mr. Terry has the right to acquire within 60
days of the Record Date through exercise of options.
(10) Includes 20,000 shares which Dr. Triant has the right to acquire within 60
days of the Record Date through exercise of options.
(11) Includes 125,666 shares which Mr. Berlan has the right to acquire within 60
days of the Record Date through exercise of options.
(12) Mr. Smyth has the right to acquire all such shares within 60 days of the
Record Date through exercise of options.
(13) Includes 51,000 shares which Mr. McCarthy has the right to acquire within
60 days of the Record Date through exercise of options.
(14) Includes 41,511 shares which Mr. Cleage has the right to acquire within 60
days of the Record Date through exercise of options.
(15) Includes 1,048,510 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 five other most highly compensated executive officers
of the Company in fiscal 1996 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
-------------------------- UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) OPTIONS (#)(1) ($)
- ---------------------------------------------- ----- ----------- ---------- --------------- -------------
<S> <C> <C> <C> <C> <C>
Rodney Smith.................................. 1996 390,778 195,680 200,000 16,246(2)
Chief Executive Officer 1995 325,000 492,814 80,000 16,618(2)
1994 312,500 375,237 40,000 13,948(2)
Denis M. Berlan............................... 1996 195,389 97,840 150,000 7,985(3)
Chief Operating Officer 1995 195,000 295,689 26,500 6,849(3)
1994 172,500 207,831 168,000 6,569(3)
Peter Smyth................................... 1996 200,004 97,840 50,000 13,617(4)
Vice President -- Sales 1995 185,000 280,525 30,000 11,148(4)
1994 177,500 213,596 18,000 10,748(4)
Erik Cleage................................... 1996 200,004 97,840 100,000 5,223(5)
Vice President -- Marketing 1995 166,269 250,198 40,000 4,407(5)
1994 154,962 90,000 16,000 4,159(5)
Clive McCarthy................................ 1996 190,004 92,948 40,000 8,920(6)
Senior Vice President -- Development 1995 175,000 265,361 0 7,225(6)
Engineering 1994 167,500 202,051 0 7,411(6)
Paul Newhagen(7).............................. 1996 190,004 92,948 40,000 6,199(8)
Vice President -- Administration 1995 170,961 265,361 30,000 4,869(9)
1994 10,657 0 38,332(10) 132,085(11)
</TABLE>
- ---------------
(1) The share data shown in the above table reflects the 2-for-1 stock split of
the Company's outstanding common stock which was effective as to the
shareholders of record on December 18, 1996. The share data was also
adjusted in 1995 to reflect a 2-for-1 stock split which was effective as to
the shareholders of record on May 10, 1995.
(2) Represents $14,746, $15,118 and $12,448 of disability insurance premiums,
life insurance premiums, and medical examination costs paid by the Company
in fiscal 1996, fiscal 1995, and fiscal 1994, respectively, and a $1,500
contribution by the Company under its 401(k) plan in each such year.
8
<PAGE> 12
(3) Represents $6,485, $5,349 and $5,069 of disability insurance premiums, life
insurance premiums, and medical examination costs paid by the Company in
fiscal 1996, fiscal 1995, and fiscal 1994, respectively, and a $1,500
contribution by the Company under its 401(k) plan in each such year.
(4) Represents $12,117, $9,648 and $9,248 of disability insurance premiums,
life insurance premiums, and medical examination costs paid by the Company
in fiscal 1996, fiscal 1995, and fiscal 1994, respectively, and a $1,500
contribution by the Company under its 401(k) plan in each such year.
(5) Represents $3,723 of disability insurance premiums, life insurance
premiums, and medical examination costs paid by the Company in fiscal 1996,
$2,907 and $2,659 of disability insurance premiums and life insurance
premiums paid by the Company in fiscal 1995 and fiscal 1994, respectively,
and a $1,500 contribution paid by the Company under its 401(k) plan in
fiscal 1996, fiscal 1995, and fiscal 1994.
(6) Represents $7,420, $5,725 and $5,911 of disability insurance premiums, life
insurance premiums, and medical examination costs paid by the Company in
fiscal 1996, fiscal 1995, and fiscal 1994, respectively, and a $1,500
contribution by the Company under its 401(k) plan in each such year.
(7) Mr. Newhagen served as a consultant to the Company from June 1993 until
becoming Vice President -- Administration in December 1994. Mr. Newhagen
has served continuously as a director of the Company since 1987.
(8) Represents $4,699 of disability insurance premiums, life insurance
premiums, and medical examination costs paid by the Company in fiscal 1996,
and a $1,500 contribution paid by the Company under its 401(k) plan.
(9) Represents $3,369 of disability insurance premiums, life insurance
premiums, and medical examination costs paid by the Company and a $1,500
contribution by the Company under its 401(k) plan.
(10) Represents 18,332 shares underlying options granted in December 1994 under
the 1987 Stock Option Plan and 20,000 shares underlying options granted
under the 1988 Director Stock Option Plan while Mr. Newhagen was a
non-employee director of the Company.
(11) Represents $113,085 in consulting fees and $19,000 in director fees paid to
Mr. Newhagen during the period January-December 1994.
9
<PAGE> 13
Options Granted During Fiscal 1996
The following table summarizes the grants of options to purchase the
Company's Common Stock made to the persons named in the Summary Compensation
Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
---------------------------------------------------------------------------- ANNUAL RATES OF STOCK
NUMBER OF % OF TOTAL OPTIONS PRICE APPRECIATION FOR
SECURITIES GRANTED TO EXERCISE OPTION TERM(1)
UNDERLYING OPTIONS EMPLOYEES IN FISCAL PRICE EXPIRATION ------------------------
NAME GRANTED(#)(2) YEAR ($/SHARE) DATE 5% ($) 10% ($)
- ---------------------- ------------------- -------------------- ---------- ------------ --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Rodney Smith(3)....... 200,000(9) 6.1% 35.00 12/17/06 4,402,262 11,156,197
Denis M. Berlan(4).... 150,000(10) 4.6% 35.00 12/17/06 3,301,697 8,367,148
Peter Smyth(5)........ 50,000(11) 1.5% 35.00 12/17/06 1,100,566 2,789,049
Erik Cleage(6)........ 100,000(12) 3.0% 35.00 12/17/06 2,201,131 5,578,099
Clive McCarthy(7)..... 40,000(13) 1.2% 35.00 12/17/06 880,452 2,231,239
Paul Newhagen(8)...... 40,000(14) 1.2% 35.00 12/17/06 880,452 2,231,239
</TABLE>
(1) 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.
(2) The options shown in the table are nonstatutory stock options that were
granted at fair market value under the Company's 1996 Stock Option Plan, as
amended (the "1996 Plan"). The share data shown in the above table reflects
the 2-for-1 stock split of the Company's outstanding common stock which was
effective as to the shareholders of record on December 18, 1996.
(3) All options previously granted to Mr. Smith under the 1987 Plan become
fully exercisable on June 7, 2001.
(4) All options previously granted to Mr. Berlan under the 1987 Plan become
fully exercisable on December 31, 2000.
(5) All options previously granted to Mr. Smyth under the 1987 Plan become
fully exercisable on December 31, 2000.
(6) All options previously granted to Mr. Cleage under the 1987 Plan become
fully exercisable on August 31, 2000.
(7) All options previously granted to Mr. McCarthy under the 1987 Plan become
fully exercisable on June 18, 2002.
(8) All options previously granted to Mr. Newhagen under the 1987 Plan become
fully exercisable on December 31, 2000.
(9) 60,000 shares vest monthly from January 1, 1997 through December 31, 1997,
40,000 shares vest monthly from January 1, 1998 through December 31, 1998,
20,000 shares vest monthly from January 1, 1999 through December 31, 1999
and 80,000 shares vest monthly from January 1, 2001 through December 31,
2001.
(10) 30,000 shares vest monthly from January 1, 1999 through December 31, 1999,
50,000 shares vest monthly from January 1, 2000 through December 31, 2000,
and 70,000 shares vest monthly from January 1, 2001 through December 31,
2001.
(11) 10,000 shares vest monthly from January 1, 2000 through December 31, 2000
and 40,000 shares vest monthly from January 1, 2001 through December 31,
2001.
(12) 20,000 shares vest monthly from January 1, 1998 through December 31, 1998,
20,000 shares vest monthly from January 1, 1999 through December 31, 1999,
20,000 shares vest monthly from January 1, 2000 through December 31, 2000,
and 40,000 shares vest monthly from January 1, 2001 through December 31,
2001.
(13) 20,000 shares vest monthly from January 1, 2000 through December 31, 2000
and 20,000 shares vest monthly from January 1, 2001 through December 31,
2001.
(14) 20,000 shares vest monthly from January 1, 2000 through December 31, 2000
and 20,000 shares vest monthly from January 1, 2001 through December 31,
2001.
10
<PAGE> 14
Option Exercises and Fiscal 1996 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 persons named in the Summary
Compensation Table.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING
UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR-END IN-THE-MONEY OPTIONS
SHARES (#) AT FISCAL YEAR-END ($)(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE (#)(1) REALIZED ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------------- --------------- ------------ ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Rodney Smith................ 0 0 300,000 500,000 10,146,264 7,990,014
Denis M. Berlan............. 0 0 114,666 339,834 3,680,692 5,529,588
Peter Smyth................. 0 0 122,000 156,000 4,072,503 2,824,004
Erik Cleage................. 3,000 62,313 62,844 236,000 1,898,734 3,780,882
Clive McCarthy.............. 20,000 644,375 49,427 218,333 1,683,098 5,845,254
Paul Newhagen............... 0 0 61,478 126,854 1,980,747 1,996,695
</TABLE>
- ---------------
(1) The share data shown in the above table reflects the 2-for-1 stock split of
the Company's outstanding common stock which was effective as to the
shareholders of record on December 18, 1996.
(2) Amounts reflecting gains on outstanding stock options are based on the
closing price of the Company's Common Stock on December 31, 1996 of $36.3438
(as adjusted to reflect the Company's 2-for-1 stock split, which was
effective on December 18, 1996).
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, 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, 1996, all Section 16(a) filing requirements applicable to its
officers, directors, and 10% shareholders were complied with, except that Clive
McCarthy filed one timely report on Form 4 reporting 6 sale transactions that
occurred during November 1996, but inadvertently failed to include in the report
2 stock option exercise transactions that also occurred during the same month.
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 an amendment to increase the share reserve under
its 1996 Stock Option Plan (the "1996 Plan"). Grants under the 1996 Plan will be
made at the discretion of the Board of Directors, and therefore, future grants
under the 1996 Plan are not yet determinable. Accordingly, the following table
sets forth grants of stock options received under the 1996 Plan during the
fiscal year ended December 31, 1996, by (1) the Chief Executive Officer of the
Company and the five other most highly compensated executive officers of the
Company as of December 31, 1996; (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> 15
NEW PLAN BENEFITS
<TABLE>
<CAPTION>
1996 STOCK OPTION
PLAN(1)
---------------------------
EXERCISE
PRICE NUMBER OF
NAME AND POSITION ($ PER SHARE) SHARES(2)
---------------------------------------------------- ------------- ---------
<S> <C> <C>
Rodney Smith........................................ 35.00 200,000
Chairman of the Board of Directors,
President and Chief Executive Officer
Denis M. Berlan..................................... 35.00 150,000
Executive Vice President -- Operations; Chief
Operating Officer
Peter Smyth......................................... 35.00 50,000
Vice President -- Sales
Erik Cleage......................................... 35.00 100,000
Vice President -- Marketing
Clive McCarthy...................................... 35.00 40,000
Senior Vice President -- Development Engineering
Paul Newhagen....................................... 35.00 40,000
Vice President -- Administration
Executive Officer Group (10 persons)................ 34.689 (3) 738,666
Non-Executive Officer Director Group (4 persons).... 24.688 (3) 140,000
Non-Executive Officer Employee Group................ 23.9058(3) 2,556,900
</TABLE>
- ---------------
(1) Only employees (including officers and directors) and consultants of the
Company or any parent or subsidiary are eligible to participate in the 1996
Stock Option Plan. Non-Executive Officer Directors are eligible to
participate in the 1988 Director Stock Option Plan.
(2) The share data shown in the above table reflects the 2-for-1 stock split of
the Company's outstanding common stock which was effective as to the
shareholders of record on December 18, 1996.
(3) Exercise prices for the grants to these groups are shown on a
weighted-average basis.
12
<PAGE> 16
COMPANY PERFORMANCE
The following graph shows a comparison, since January 1, 1992, of
cumulative total return for the Company, the Standard & Poor's 500 Index, and
the Standard & Poor's Semiconductor Index.
<TABLE>
<CAPTION>
Measurement Period Altera S&P Semiconduc-
(Fiscal Year Covered) Corporation S&P 500 Index tor Index
<S> <C> <C> <C>
1/1/92 100 100 100
1/1/93 79.213 111.885 186.066
1/1/94 143.82 110.424 248.408
1/1/95 251.124 124.033 296.673
1/1/96 502.247 159.9 325.858
12/31/96 653.375 183.492 621.171
</TABLE>
Assumes $100 invested on December 31, 1991 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.
PROPOSAL TWO -- APPROVAL OF AMENDMENT TO 1996 STOCK OPTION PLAN
The 1996 Stock Option Plan (the "1996 Plan") was adopted by the Board of
Directors in March 1996 and approved by the shareholders in May 1996. The 1996
Plan as adopted had 2,000,000 shares of Common Stock reserved for issuance
thereunder, which upon effectiveness of the Company's two-for-one stock split in
December 1996, increased the number of shares reserved thereunder to 4,000,000.
In January 1996, the Board of Directors approved amendments to the 1996
Plan, subject to shareholder approval, to increase the number of shares reserved
for issuance thereunder by 1,300,000, thereby increasing the total number of
shares issuable under the 1996 Plan from 4,000,000 to 5,300,000.
GENERAL
The 1996 Plan provides for the grant to employees and consultants of the
Company or any parent or subsidiary thereof of stock options ("Options"), which
may be incentive stock options ("Incentive Stock Options") within the meaning of
Section 422 of the Code, 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 Company does not currently have
plans to grant Incentive Stock Options under the 1996 Plan.
13
<PAGE> 17
The 1996 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 1996 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, to promote the success of
the Company's business, and to clearly align the interests of eligible employees
directly with those of the shareholders.
ADMINISTRATION
The 1996 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 1996 Plan by the Board of Directors or its committee shall be
final, conclusive, and binding upon all participants. The Board of Directors
will administer the 1996 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 1996 Plan in connection with
grants and other matters regarding officers, directors, and 10% shareholders of
the Company, as each such term is defined under Section 16 of the Exchange Act.
Currently, the Stock Option Plan Committee consists of Rodney Smith and Nathan
M. Sarkisian and the Compensation Committee consists of William E. Terry and
Michael A. Ellison. Members of the Board and the committees will receive no
additional compensation for their services in connection with the administration
of the 1996 Plan. Copies of the 1996 Plan are available upon request at the
Company's principal executive offices.
ELIGIBILITY
The 1996 Plan provides for the grant of Options to employees (including
employees who are both officers and directors of the Company) and consultants of
the Company or any parent or subsidiary of the Company whom the Board of
Directors or the committees determine are eligible to be granted Options under
the 1996 Plan ("Optionees"). Incentive Stock Options may only be granted to
employees. The Board of Directors or the committees determine the number of
shares to be subject to each Option. As of the Record Date, employees
(including officers and directors) were eligible to participate in the 1996
Plan.
In accordance with Section 162(m) of the Code, the 1996 Plan imposes 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 1996 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
1996 Plan.
The form of Option agreement currently used under the 1996 Plan for
new employees provides that an Option will be exercisable cumulatively as
to 20% of the Option shares at the end of the first year and as to 1.6667%
each month thereafter, 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.
14
<PAGE> 18
An Option is exercised by delivering to the Company a written notice
of exercise that specifies the number of full shares of Common Stock to be
purchased and by 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
1996 Plan is determined by the Board of Directors or the committees but may
not be less than 100% of the fair market value of the Common Stock on the
date the Option is granted. The 1996 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, total and permanent
disability, or in certain cases, retirement), 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) as is determined by the
Board or the committee administering the 1996 Plan at the time of grant of
such Option), after such termination (but in no event later than the 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) Retirement. If an Optionee satisfies certain requirements relating
to his or her age and tenure with the Company, the Board or the committee
administering the 1996 Plan may grant the Optionee Options that continue to
vest following his or her retirement from the Company. The Board or the
committee may determine the extended period of exercisability and vesting,
but such period may not extend beyond the date the Option would otherwise
terminate in accordance with its terms pursuant to the Option Agreement
between the Company and the Optionee.
An Optionee is eligible for extended exercisability of Options upon
retirement under the 1996 Plan only if he or she: (i) is at least 50 years
old at the time of retirement and has completed at least ten years of
service as an employee of or consultant to the Company after reaching age
40, or (ii) has terminated his or her employment or consultancy with the
Company as a result of disability (regardless of Optionee's age), has
completed ten years of service as an employee or consultant of the Company,
and is eligible for Social Security benefits. In addition, to be eligible
for extended exercisability of Options upon retirement under the 1996 Plan,
an Optionee must not have committed certain acts of misconduct, including
conduct related to employment for which either criminal or civil penalties
may be sought, willful violation of the Company's written policies,
engaging in any activity which is in competition with the Company or any
parent or subsidiary of the Company, or unauthorized disclosure of
confidential information or trade secrets of the Company or any parent or
subsidiary of the Company (collectively "Acts of Misconduct"). Any Options
for which the exercisability and/or vesting has been extended by the Board
or the committee will terminate immediately if the Optionee commits any Act
of Misconduct subsequent to his or her retirement.
(e) 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
after a termination of employment, but before his or her Options have
expired or been exercised, such 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. The Board or its Committee may in
its discretion extend the exercisability (but not the vesting) of such
Options for up to twelve months from the date of death.
15
<PAGE> 19
If an Optionee is unable to continue his or her employment with the
Company as a result of total and permanent disability, and except as
otherwise provided above under "Retirement," his or her Options may be
exercised at any time within three months after termination (or such other
period not exceeding twelve months as determined by the Board or committee
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.
(f) Term and Termination of Options. Options granted under the 1996
Plan 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.
(g) Nontransferability of Options. An Option is not transferable by
the Optionee, other than by will or the laws of descent and distribution.
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.
(h) Other Provisions. The Option agreement may contain such other
terms, provisions, and conditions not inconsistent with the 1996 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, the
Company is required to notify each Optionee as soon as practicable prior to the
effective date of the proposed transaction. The Board may, in its discretion,
provide for an Optionee to have the right to exercise his or her Options prior
to the transaction and may, in addition, accelerate the exercisability of
Options so as to permit Optionees to exercise their Options to purchase shares
of Common Stock for which the Options would not otherwise be exercisable. To the
extent an Option has not been previously exercised, it will terminate
immediately prior to the proposed liquidation or dissolution.
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 Optionees shall
have the right to exercise Options prior to such transaction for all shares of
Common Stock subject to such Options, including shares for which such Options
would not otherwise be exercisable. Options will be considered assumed if,
following the merger or sale of assets, the option or right granted to the
Optionee by the purchaser or acquiror confers the right to receive for each
share of Common Stock subject to such Options the consideration received in the
merger or sale of assets in exchange for outstanding shares of the Common Stock
on the date of the transaction; provided, however, that if the consideration
received in the merger or sale of assets was not solely common stock of the
successor corporation or its parent, the Board may, with the consent of the
successor corporation, provide for the consideration to be received upon
exercise of the Option to be solely common stock of the successor corporation or
its parent equal in fair market value to the per share consideration received by
holders of the Company's Common Stock in the merger or sale of assets.
AMENDMENT AND TERMINATION
The Board may amend, alter, suspend, or terminate the 1996 Plan, or any
part thereof, at any time and for any reason. However, the Company shall obtain
shareholder approval for any amendment to the 1996 Plan to the extent necessary
to comply with Rule 16b-3, Section 162(m), and Section 422 of the Code, or any
similar rule or statute. No such action by the Board or shareholders may alter
or impair any option or stock purchase right previously granted under the 1996
Plan without the written consent of the optionee. Unless terminated earlier, the
1996 Plan shall terminate ten years from the date of its approval by the
shareholders of the Company.
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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 be deemed to be a
Nonstatutory Options and treated as described under "Nonstatutory Options." If
an Option granted under the 1996 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 1996 Plan will not qualify for any
special tax benefits to the Optionee.
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) in the case of 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 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.
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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. During 1996, the Company
received a tax benefit (resulting from tax deductions) of $4.49 million with
respect to options exercised by employees under the 1987 Plan. This amount is in
addition to the $5.76 million received by the Company as payment of the exercise
price of such options. No tax deduction was received by the Company with respect
to the 1996 Plan.
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 (including the difference between the
exercise price and the fair market value of shares underlying an Incentive Stock
Option at exercise), plus (ii) items of tax preference, less (iii) an exclusion
of $45,000 for joint returns and $33,750 for individual returns (including the
difference between the exercise price and the fair market value of shares
underlying an Incentive Stock Option at exercise). 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. Under certain
circumstances, an optionee may affect the timing and measurement of AMTI by
filing an election with the Internal Revenue Service under Section 83(b) within
30 days after the date of exercise of an Incentive Stock Option.
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 1996 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 ADOPTION OF AMENDMENT OF 1996 STOCK OPTION PLAN
At the Annual Meeting, the shareholders are being requested to approve the
Amendment to the 1996 Plan and reserve an additional 1,300,000 shares 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 1996 Plan. IN ORDER TO PROVIDE INCENTIVES TO
ELIGIBLE EMPLOYEES AND TO ALIGN THEIR INTERESTS DIRECTLY WITH THOSE OF THE
SHAREHOLDERS, THE COMPANY'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE
PROPOSED AMENDMENT AND RECOMMENDS THAT SHAREHOLDERS VOTE FOR SUCH AMENDMENT.
PROPOSAL THREE -- REINCORPORATION IN DELAWARE AND
SETTING THE NUMBER OF AUTHORIZED SHARES
INTRODUCTION
The Board of Directors believes that the best interests of the Company and
its shareholders will be served by changing the state of incorporation of the
Company from California to Delaware (the "Reincorporation Proposal" or the
"Proposed Reincorporation"). As the Company plans for the future, the Board of
Directors and management believe that it is essential to be able to draw upon
well-established principles of corporate governance in making legal and business
decisions. The prominence and predictability of Delaware corporate law provide a
reliable foundation on which the Company's governance decisions can be based and
the Company believes that shareholders will benefit from the responsiveness of
Delaware corporate law to their needs and to those of the corporation they own.
In connection with the Proposed Reincorporation, the Board of Directors has,
subject to separate shareholder approval, set the number of authorized shares of
Common Stock of Altera Delaware at 400 million rather than the 160 million
currently authorized in Altera California's Articles of Incrorporation. The
Board of Directors believes this increase in authorized shares is necessary in
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order to provide the Board with same certainty and flexibility it currently has
under California law to make stock splits in the form of stock dividends.
Shareholders are urged to read carefully the following sections of this
Proxy Statement, including the related exhibits, before voting on the
Reincorporation Proposal and the proposal to set the number of authorized shares
of Common Stock of Altera Deleware. Throughout the Proxy Statement, the term
"Altera California" refers to the existing California corporation and the term
"Altera Delaware" refers to the new proposed Delaware corporation, a wholly
owned subsidiary of Altera California, which is the proposed successor to Altera
California. The discussion set forth below is qualified in its entirety by
reference to the Merger Agreement and the Certificate of Incorporation and the
Bylaws of Altera Delaware, copies of which are attached hereto as Appendix A,
Appendix B, and Appendix C, respectively.
PROPOSAL 3.A: REINCORPORATION IN DELAWARE
PRINCIPLE REASONS FOR REINCORPORATING IN DELAWARE
The Reincorporation Proposal is not being proposed in response to any
present attempt known to the Board of Directors to acquire control of the
Company, obtain representation on the Board of Directors or take significant
action that affects the Company. Rather, the Proposed Reincorporation has been
unanimously approved by the Company's Board of Directors for the following
principle reasons.
PROMINENCE, PREDICTABILITY AND FLEXIBILITY OF DELAWARE LAW. For many years
Delaware has followed a policy of encouraging incorporation in that state and,
in furtherance of that policy, has been a leader in adopting, construing and
implementing comprehensive, flexible corporate laws responsive to the legal and
business needs of Delaware corporations. Many corporations have chosen Delaware
initially as a state of incorporation or have subsequently changed their
corporate domicile to Delaware in a manner similar to that proposed by the
Company. Because of Delaware's prominence as the state of incorporation for many
major corporations, both the legislature and courts in Delaware have
demonstrated an ability and a willingness to act quickly and effectively to meet
changing business needs. The Delaware courts have developed considerable
expertise in dealing with corporate issues and a substantial body of case law
has developed construing Delaware law and establishing public policies with
respect to corporate legal affairs.
WELL ESTABLISHED PRINCIPLES OF CORPORATE GOVERNANCE. There is substantially
greater judicial precedent in Delaware than in California as to the legal
principles applicable to measures that may be taken by a corporation and as to
the conduct of the Board of Directors under the business judgment rule. These
well-established principles would provide the members of the Board of Directors
with a solid foundation for exercising their business judgment for the benefit
of the Company's shareholders.
INCREASED ABILITY TO ATTRACT AND RETAIN QUALIFIED DIRECTORS. Both
California and Delaware law permit a corporation to include a provision in its
certificate of incorporation which reduces or limits the monetary liability of
directors for breaches of fiduciary duty in certain circumstances. The
increasing frequency of claims and litigation directed against directors and
officers has greatly expanded the risks facing directors and officers of
corporations in exercising their respective duties. The amount of time and money
required to respond to such claims and to defend such litigation can be
substantial. It is the Company's desire to reduce these risks to its directors
and officers and to limit situations in which monetary damages can be recovered
against directors so that the Company may continue to attract and retain
qualified directors who otherwise might be unwilling to serve because of the
risks involved. The Company believes that, in general, Delaware law provides
greater protection to directors than California law and that Delaware case law
regarding a corporation's ability to limit director liability is more developed
and provides more guidance than California law. See "The Charters and Bylaws of
Altera California and Altera Delaware -- Monetary Liability of Directors."
VOTE REQUIRED FOR THE REINCORPORATION PROPOSAL
Altera-California's Board of Directors has unanimously approved the
Proposed Reincorporation and recommends that shareholders vote for the Proposed
Reincorporation.
Approval of the Reincorporation Proposal will require the affirmative vote
of the holders of a majority of the outstanding shares of Altera-California
Common Stock. A vote for the Proposed Reincorporation will also constitute
approval of the (i) Merger Agreement, the Certificate of Incorporation and the
Bylaws of Altera
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Delaware (except as to the increase in the authorized number of shares of Altera
Deleaware, as to which the shareholders are requested to vote separately) , (ii)
the assumption of Altera California's employee benefit plans and outstanding
stock options by Altera Delaware, and (iii) increase to 400,000,000 the number
of authorized shares of Common Stock of the Company. The effect of an abstention
or a broker non-vote is the same as that of a vote against the Reincorporation
Proposal.
If approved by the shareholders, the Company anticipates that the Effective
Date of the Merger will be as soon as practicable following the Annual Meeting.
However, pursuant to the Merger Agreement, the Merger may be abandoned or the
Merger Agreement may be amended by the Board of Directors (except that certain
principal terms may not be amended without further shareholder approval) either
before or after shareholder approval has been obtained and prior to the
Effective Date of the Merger if, in the opinion of the Board of Directors of
either company, circumstances arise that make it inadvisable to proceed.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THIS PROPOSAL AND
RECOMMENDS THAT SHAREHOLDERS VOTE FOR THE PROPOSED REINCORPORATION.
THE REINCORPORATION PROCESS
The Reincorporation Proposal will be effected by merging Altera California
into Altera Delaware (the "Merger"). Upon completion of the Merger, Altera
California will cease to exist and Altera Delaware will continue to operate the
business of the Company under the name Altera Corporation. Pursuant to the
Agreement and Plan of Merger between Altera California and Altera Delaware, a
copy of which is attached hereto as Appendix A (the "Merger Agreement"), each
outstanding share of Altera California Common Stock, without par value, will
automatically be converted into one share of Altera Delaware Common Stock,
$0.001 par value per share. IT IS NOT NECESSARY FOR SHAREHOLDERS TO EXCHANGE
THEIR EXISTING STOCK CERTIFICATES FOR STOCK CERTIFICATES OF ALTERA DELAWARE.
Upon the date on which the Merger is effective (the "Effective Date"),
Altera Delaware will also assume and continue the outstanding stock options and
all other employee benefit plans of Altera California. Each outstanding and
unexercised option, warrant or other right to purchase shares of Altera
California Common Stock will become an option, warrant or right to purchase the
same number of shares of Altera Delaware Common Stock on the same terms and
conditions and at the same exercise price applicable to any such Altera
California option, warrant or right at the Effective Date.
Shareholders of Altera California will have no dissenter's rights of
appraisal with respect to the Reincorporation Proposal. See "Significant
Differences Between the Corporation Laws of California and Delaware -- Appraisal
Rights."
NO CHANGE IN THE NAME, BOARD MEMBERS, BUSINESS, MANAGEMENT, EMPLOYEE PLANS OR
LOCATION OF PRINCIPAL FACILITIES OF THE COMPANY
The Reincorporation Proposal will effect a change in the legal domicile of
the Company, but not its physical location. The Proposed Reincorporation will
not result in any change in the name, business, management, fiscal year, assets
or liabilities (except to the extent of legal and other costs of effecting the
reincorporation) or location of the principal facilities of the Company. The six
directors who are members of the Board of Directors of Altera California as of
the Effective Date will become the directors of Altera Delaware. All employee
benefit plans of Altera California will be assumed and continued by Altera
Delaware. All stock options, warrants or other rights to acquire Common Stock of
Altera California will automatically be converted into an option, warrant or
right to purchase the same number of shares of Altera Delaware Common Stock at
the same price per share, upon the same terms, and subject to the same
conditions. Altera California's other employee benefit arrangements will also be
continued by Altera Delaware upon the terms and subject to the conditions
currently in effect.
ANTI-TAKEOVER IMPLICATIONS
Delaware, like many other states, permits a corporation to adopt a number
of measures through amendment of its certificate of incorporation or bylaws or
otherwise that are designed to reduce the corporation's vulnerability to
unsolicited takeover attempts. The Reincorporation Proposal is not being
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proposed in order to prevent an unsolicited takeover attempt, nor is it in
response to any present attempt known to the Board of Directors to acquire
control of the Company, obtain representation on the Board of Directors or take
significant action that affects the Company.
Nevertheless, certain effects of the Reincorporation Proposal may be
considered to have anti-takeover implications. Section 203 of the Delaware
General Corporation Law ("Section 203"), from which Altera Delaware does not
intend to opt out, restricts certain "business combinations" with "interested
stockholders" for three years following the date that a person or entity becomes
an interested stockholder, unless the Board of Directors approves the business
combination and/or other requirements are met. See "Significant Differences
Between the Corporation Laws of California and Delaware -- Stockholder Approval
of Certain Business Combinations." Removing the right of 10% shareholders to
call a special meeting has an anti-takeover impact because a hostile acquiror
could not act prior to the annual meeting to establish a majority on the board
without making a tender offer. For a detailed discussion of all of the changes
that will be implemented as part of the Proposed Reincorporation, see "The
Charters and Bylaws of Altera California and Altera Delaware." For a discussion
of differences between the laws of California and Delaware, see "Significant
Differences Between the Corporation Laws of California and Delaware."
The Board of Directors has no present intention following the Proposed
Reincorporation to amend the Certificate of Incorporation or Bylaws to include
additional provisions which might deter an unsolicited takeover attempt.
However, in the discharge of its fiduciary obligations to its shareholders, the
Board of Directors of the Company will continue to evaluate the Company's
vulnerability to potential unsolicited bids to acquire the Company on
unfavorable terms and to consider strategies to enhance the Board's ability to
maximize shareholder value in the event of an unsolicited takeover attempt.
THE CHARTERS AND BYLAWS OF ALTERA CALIFORNIA AND ALTERA DELAWARE
Although Delaware law provides the opportunity for the Board of Directors
to adopt various mechanisms which may enhance the Board's ability to maximize
shareholder value in the event of an unsolicited takeover attempt, the proposed
Altera Delaware Certificate of Incorporation and Bylaws are substantially
similar to the Company's current Articles of Incorporation and Bylaws. However,
as discussed below, the Reincorporation Proposal includes the implementation of
certain provisions in the Altera Delaware Certificate of Incorporation and
Bylaws that are different from the California Articles of Incorporation and
Bylaws, some of which alter the rights of stockholders and the powers of
management. In addition, Altera Delaware could implement certain other changes
by amending its Certificate of Incorporation and Bylaws in the future. For a
discussion of such changes, see "Significant Differences Between the Corporation
Laws of California and Delaware."
AMENDMENT TO INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK. The
Articles of Incorporation of Altera California currently authorize the Company
to issue up to 160,000,000 shares of Common Stock, without par value. The
Certificate of Incorporation of Altera Delaware currently authorizes Altera
Delaware to issue up to 400,000,000 shares of Common Stock, $0.001 par value per
share. The Board of Directors has no immediate plans for the issuance of
additional shares of Common Stock. However, the increase in the number of
authorized shares of Common Stock will provide the Company the flexibility to
undertake various types of transactions, including financings, increases in the
shares reserved for issuance pursuant to the stock option plans, stock
dividends, or other corporate purposes not yet determined. The additional shares
of Common Stock would be available for issuance without further stockholder
action, unless stockholder action is required by Delaware law or the rules of
any stock exchange on which the Common Stock may then be listed.
MONETARY LIABILITY OF DIRECTORS. The Articles of Incorporation of Altera
California and the Certificate of Incorporation of Altera Delaware both provide
for the elimination of personal monetary liability of directors to the fullest
extent permissible under law. The provision eliminating monetary liability of
directors set forth in the Altera Delaware Certificate of Incorporation is
potentially more expansive than the corresponding provision in the Altera
California Articles of Incorporation in that the former incorporates future
amendments to Delaware law with respect to the elimination of such liability. In
connection with the Proposed Reincorporation, the Company will enter into new
indemnification agreements with officers and directors to conform the agreements
to Delaware law. For a more detailed explanation of the foregoing, see
"Significant
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Differences Between the Corporation Laws of California and
Delaware -- Indemnification and Limitation of Liability."
SIZE OF THE BOARD OF DIRECTORS. The Bylaws of Altera California provide for
a variable Board of Directors ranging from four to seven members, with the exact
number currently set at six directors. Under California law, although changes in
the number of directors, in general, must be approved by a majority of the
outstanding shares, the Board of Directors may fix the exact number of directors
within a stated range set forth in the articles of incorporation or bylaws, if
the stated range has been approved by the shareholders. As provided by Delaware
law, the Altera Delaware Bylaws permit the Board of Directors to change the
authorized number of directors by resolution.
CUMULATIVE VOTING FOR DIRECTORS. Cumulative voting provides that each share
of stock normally having one vote is entitled to a number of votes equal to the
number of directors to be elected. A shareholder may then cast all such votes
for a single candidate or may allocate them among as many candidates as the
shareholder may choose. In the absence of cumulative voting, the holders of a
majority of the shares present or represented at a meeting in which directors
are to be elected would have the power to elect all the directors to be elected
at such meeting, and no person could be elected without the support of holders
of a majority of the shares present or represented at such meeting. California
corporations whose stock is listed on a national stock exchange or whose stock
is held by 800 shareholders of record and included in the Nasdaq National Market
System (a "Listed Company") can eliminate cumulative voting with shareholder
approval. The Company does not have cumulative voting. Under Delaware law,
cumulative voting in the election of directors is not mandatory, but is a
permitted option. The Altera Delaware Certificate of Incorporation does not
provide for cumulative voting rights and thus the voting rights are unchanged
from those of the Altera California Articles of Incorporation.
POWER TO CALL SPECIAL SHAREHOLDERS' MEETINGS. Under California law, a
special meeting of shareholders may be called by the Board of Directors, the
Chairman of the Board, the President, the holders of shares entitled to cast not
less than ten percent of the votes at such meeting and such additional persons
as may be authorized by the articles of incorporation or the bylaws of the
corporation. Under Delaware law, a special meeting of stockholders may be called
by the Board of Directors or by any other person authorized to do so in the
corporation's certificate of incorporation or bylaws. The Certificate of
Incorporation of Altera Delaware does not address this issue. However, the
Bylaws of Altera Delaware authorize the Board of Directors or a specially
authorized Committee of the Board to call a special meeting of stockholders. The
elimination of the right of shareholders to call a special meeting would mean
that a shareholder could not force shareholder consideration of a proposal over
the opposition of the Board of Directors by calling a special meeting of
shareholders prior to such time as the Board believed such consideration to be
appropriate or until the next annual meeting (provided that the requestor meets
the notice requirements). The restriction on the ability of shareholders to call
a special meeting means that a proposal to replace the Board could be delayed
until the next annual meeting for which the shareholders meet the notice
requirements.
FILLING VACANCIES ON THE BOARD OF DIRECTORS. Under California law, any
vacancy on the board of directors other than one created by removal of a
director may be filled by the board of directors. If the number of directors is
less than a quorum, a vacancy may be filled by the unanimous written consent of
the directors then in office, by the affirmative vote of a majority of the
directors at a meeting held pursuant to notice or waivers of notice or by a sole
remaining director. A vacancy created by removal of a director may be filled by
the board of directors only if so authorized by the corporation's articles of
incorporation or by a bylaw approved by the corporation's shareholders. Altera
California's Articles of Incorporation and Bylaws do not permit directors to
fill vacancies created by removal of a director. Under Delaware law, vacancies
and newly created directorships may be filled by a majority of the directors
then in office (even though less than a quorum) or by a sole remaining director,
unless otherwise provided in the certificate of incorporation or bylaws (or
unless the certificate of incorporation directs that a particular class of stock
is to elect such director(s), in which case a majority of the directors elected
by such class, or a sole remaining director so elected, shall fill such vacancy
or newly created directorship). The Bylaws of Altera Delaware will permit the
remaining directors to fill any vacancy created by removal of directors by the
stockholders.
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LOANS, GUARANTIES AND OTHER ASSISTANCE TO OFFICERS AND EMPLOYEES. Under
California law, any loan or guaranty to or for the benefit of a director or
officer of the corporation or its parent requires approval of the shareholders
unless such loan or guaranty is provided under a plan approved by shareholders
owning a majority of the outstanding shares of the corporation. However, under
California law, shareholders of any corporation with 100 or more shareholders of
record, such as the Company, may approve a bylaw authorizing the board of
directors alone to approve loans or guaranties to or on behalf of officers
(whether or not such officers are directors) if the board determines that any
such loan or guaranty may reasonably be expected to benefit the corporation. The
Bylaws of Altera California contain such a provision. Pursuant to the Altera
Delaware Bylaws and in accordance with Delaware law, Altera Delaware may make
loans to, guaranty the obligations of or otherwise assist its officers or other
employees and those of its subsidiaries (including directors who are also
officers or employees) when such action, in the judgment of the Board of
Directors, may reasonably be expected to benefit the corporation.
VOTING BY BALLOT. California law provides that the election of directors
may proceed in the manner described in a corporation's bylaws. Altera
California's Bylaws provide that the election of directors at a shareholders'
meeting may be by voice vote or ballot, unless prior to such vote a shareholder
demands a vote by ballot, in which case such vote must be by ballot. Under
Delaware law, the right to vote by written ballot may be restricted if so
provided in a Delaware corporation's certificate of incorporation. The Bylaws of
Altera Delaware are consistent with Altera California's Bylaws, providing that
if a stockholder specifically demands election of directors by ballot then
elections shall be held by ballot. Stockholders of Altera Delaware may therefore
continue to demand election by ballot, unless and until the Bylaws are amended,
which amendment would require a majority stockholder vote. It may be more
difficult for a stockholder to contest the outcome of a vote that has not been
conducted by written ballot.
NO ACTION BY WRITTEN CONSENT OF SHAREHOLDERS. Under California and Delaware
law, stockholders may execute an action by written consent in lieu of a
stockholder meeting. Delaware law permits a corporation to eliminate this
ability to act by written consent. The Bylaws of Altera California do not permit
shareholders to act by written consent, and similarly the Altera Delaware
Certificate of Incorporation and Altera Delaware Bylaws will not permit
stockholders to act by written consent. Additionally, the Altera Delaware
Certificate of Incorporation provides that an affirmative vote of at least
eighty percent (80%) of the then outstanding voting stock of the Corporation,
voting together as a single class, shall be required to adopt a provision
permitting shareholder action by written consent. The inability of stockholders
to act by written consent could lengthen the amount of time required for
stockholders to take action, since certain actions by written consent are not
subject to the minimum notice requirements for calling and holding stockholders'
meetings. In particular, this may deter hostile takeover attempts, because a
holder or group of holders controlling a majority in interest of Altera
Delaware's capital stock would not be able immediately to amend Altera
Delaware's Bylaws or remove directors by written consent.
SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATION LAWS OF CALIFORNIA AND DELAWARE
The corporation laws of California and Delaware differ in many respects.
Although not all of these differences are set forth in this Proxy Statement,
certain provisions, which could materially affect the rights of shareholders,
are discussed below.
STOCKHOLDER APPROVAL OF CERTAIN BUSINESS COMBINATIONS.
In recent years, a number of states have adopted special laws placing
certain restrictions on "unfriendly" corporate takeovers or other transactions
involving a corporation and one or more of its significant shareholders. Section
203 of the Delaware Corporations Code prohibits a Delaware corporation from
engaging in a "business combination" with an "interested stockholder" for three
years following the time that such person or entity becomes an interested
stockholder, unless specific conditions are met. With certain exceptions, an
interested stockholder is a person or entity who or which owns, individually or
with or through certain other persons or entities, 15 percent or more of the
corporation's outstanding voting stock (including any rights to acquire stock
pursuant to an option, warrant, agreement, arrangement or understanding, or upon
the exercise of conversion or exchange rights, and stock with respect to which
the person has voting rights only), or is an affiliate or associate of the
corporation and was the owner, individually or with or through
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certain other persons or entities of 15 percent or more of such voting stock at
any time within the previous three years, or is an affiliate or associate of any
of the foregoing.
For purposes of Section 203, the term "business combination" is defined
broadly to include mergers with or caused by the interested stockholder, sales
or other dispositions to the interested stockholder (except proportionately with
the corporation's other stockholders) of assets of the corporation or a direct
or indirect majority-owned subsidiary equal in aggregate market value to ten
percent or more of the aggregate market value of either the corporation's
consolidated assets or all of its outstanding stock, the issuance or transfer by
the corporation or a direct or indirect majority-owned subsidiary of stock of
the corporation or such subsidiary to the interested stockholder (except for
certain transfers in a conversion or exchange or a pro rata distribution or
certain other transactions, none of which increase the interested stockholder's
proportionate ownership of any class or series of the corporation's or such
subsidiary's stock or of the corporation's voting stock); or receipt by the
interested stockholder (except proportionately as a stockholder), directly or
indirectly, of any loans, advances, guaranties, pledges or other financial
benefits provided by or through the corporation or a subsidiary.
The three-year moratorium imposed on business combinations by Section 203
does not apply if: (i) prior to the time on which such stockholder becomes an
interested stockholder the board of directors of the corporation approves either
the business combination or the transaction that resulted in the person or
entity becoming an interested stockholder; (ii) upon consummation of the
transaction that made him or her an interested stockholder, the interested
stockholder owns at least 85 percent of the corporation's voting stock
outstanding at the time the transaction commenced (excluding from the 85 percent
calculation shares owned by directors who are also officers of the target
corporation and shares held by employee stock plans that do not give employee
participants the right to decide confidentially whether to accept a tender or
exchange offer); or (iii) at or after the time such person or entity becomes an
interested stockholder, the board approves the business combination and it is
also approved at a stockholder meeting by the affirmative vote of 66 2/3 percent
of the outstanding voting stock not owned by the interested stockholder.
Section 203 only applies to certain publicly held corporations that have a
class of voting stock that is (i) listed on a national securities exchange, (ii)
authorized for quotation on the NASDAQ stock market or (iii) held of record by
more than 2,000 stockholders. Although a Delaware corporation to which Section
203 applies may elect not to be governed by Section 203, Altera Delaware does
not intend to so elect to be excluded from the statutory provisions of Section
203.
Section 203 may encourage any potential acquiror to negotiate with the
Company's Board of Directors. Section 203 also might have the effect of limiting
the ability of a potential acquiror to make a two-tiered bid for Altera Delaware
in which all stockholders would not be treated equally. Shareholders should
note, however, that the application of Section 203 to Altera Delaware will
confer upon the Board the power to reject a proposed business combination in
certain circumstances. Section 203 may also discourage certain potential
acquirors unwilling to comply with its provisions. See "-- Shareholder Voting"
below.
REMOVAL OF DIRECTORS.
Under California law, any director or the entire board of directors may be
removed, with or without cause, with the approval of a majority of the
outstanding shares entitled to vote; however, no individual director may be
removed (unless the entire board is removed) if the number of votes cast against
such removal would be sufficient to elect the director under cumulative voting.
In the case of a Delaware corporation such as Altera Delaware, any director or
the entire Board of Directors may be removed, with or without cause, by the
holders of a majority of the shares then entitled to vote at an election of
directors.
CLASSIFIED BOARD OF DIRECTORS.
A classified board is one on which a certain number, but not all, of the
directors are elected on a rotating basis each year. This method of electing
directors makes changes in the composition of the board of directors more
difficult, and thus a potential change in control of a corporation a lengthier
and more difficult process. California law permits certain qualifying
corporations to provide for a classified board of directors by adopting
amendments to their articles of incorporation or bylaws, which amendments must
be approved by the
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shareholders. Although Altera California qualifies to adopt a classified board
of directors, its Board of Directors has no present intention of doing so.
Delaware law permits, but does not require, a classified board of directors,
pursuant to which the directors can be divided into as many as three classes
with staggered terms of office, with only one class of directors standing for
election each year. The Altera Delaware Certificate of Incorporation and Bylaws
do not provide for a classified board and Altera Delaware currently does not
intend to propose establishment of a classified board. The establishment of a
classified board following the Proposed Reincorporation would require the
approval of the stockholders of Altera Delaware.
INDEMNIFICATION AND LIMITATION OF LIABILITY.
California and Delaware have similar laws respecting indemnification by a
corporation of its officers, directors, employees and other agents. The laws of
both states also permit, with certain exceptions, a corporation to adopt a
provision in its articles of incorporation or certificate of incorporation, as
the case may be, eliminating the liability of a director to the corporation or
its shareholders for monetary damages for breach of the director's fiduciary
duty. There are nonetheless certain differences between the laws of the two
states respecting indemnification and limitation of liability and expenses.
California law does not permit the elimination of monetary liability where
such liability is based on: (a) intentional misconduct or knowing and culpable
violation of law; (b) acts or omissions that a director believes to be contrary
to the best interests of the corporation or its shareholders, or that involve
the absence of good faith on the part of the director; (c) receipt of an
improper personal benefit; (d) acts or omissions that show reckless disregard
for the director's duty to the corporation or its shareholders, where the
director in the ordinary course of performing a director's duties should be
aware of a risk of serious injury to the corporation or its shareholders; (e)
acts or omissions that constitute an unexcused pattern of inattention that
amounts to an abdication of the director's duty to the corporation and its
shareholders; (f) interested transactions between the corporation and a director
in which a director has a material financial interest; and (g) liability for
improper distributions, loans or guarantees.
A Delaware corporation is permitted to eliminate the liability of directors
to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director to the fullest extent permissible under Delaware
law, as such law exists currently or as it may be amended in the future.
However, the corporation's certificate of incorporation may not eliminate or
limit director monetary liability for: (a) breaches of the director's duty of
loyalty to the corporation or its stockholders; (b) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law; (c)
the payment of unlawful dividends or unlawful stock repurchases or redemptions;
or (d) transactions in which the director received an improper personal benefit.
Such limitation of liability provisions also may not limit a director's
liability for violation of, or otherwise relieve a corporation or its directors
from the necessity of complying, with federal or state securities laws, or
affect the availability of non-monetary remedies such as injunctive relief or
rescission.
California law permits indemnification of expenses incurred in derivative
or third-party actions, except that with respect to derivative actions (a) no
indemnification may be made when a person is adjudged liable to the corporation
in the performance of that person's duty to the corporation and its shareholders
unless a court determines such person is entitled to indemnity for expenses, and
then such indemnification may be made only to the extent that such court shall
determine, and (b) no indemnification may be made without court approval in
respect of amounts paid or expenses incurred in settling or otherwise disposing
of a threatened or pending action or amounts incurred in defending a pending
action that is settled or otherwise disposed of without court approval.
California law requires indemnification when the individual has defended
successfully the action on the merits. Delaware law, in contrast, requires
indemnification relating to a successful defense on the merits or otherwise.
Delaware law generally permits indemnification of expenses, including
attorney's fees, actually and reasonably incurred in the defense or settlement
of a derivative or third-party action, provided there is a determination that
the person seeking indemnification acted in good faith and in a manner
reasonably believed to be in or (in contrast to California law) not opposed to
the best interests of the corporation. Such determination may be made: (i) by a
majority vote of the directors who are not parties to such action, even
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though less than a quorum, or (ii) by independent legal counsel (if a quorum of
disinterested directors is not obtainable) or (iii) by a majority vote of a
quorum of the stockholders. However, no indemnification may be made in respect
of any derivative action in which such person is adjudged liable to the
corporation for negligence or misconduct in the performance of his or her duty
to the corporation unless and only to the extent that a court shall deem
indemnification to be proper. Delaware law requires indemnification of expenses
when the individual being indemnified has successfully defended any action,
claim, issue, or matter therein, on the merits or otherwise.
Expenses incurred by an officer or director in defending an action may be
paid in advance, under Delaware law and California law, if such director or
officer undertakes to repay such amounts if it is ultimately determined that he
or she is not entitled to indemnification. In addition, the laws of both states
authorize a corporation's purchase of indemnity insurance for the benefit of its
officers, directors, employees and agents whether or not the corporation would
have the power to indemnify against the liability covered by the policy.
California law permits a California corporation to provide rights to
indemnification beyond those provided therein to the extent such additional
indemnification is authorized in the corporation's articles of incorporation.
Thus, if so authorized, rights to indemnification may be provided pursuant to
agreements or bylaw provisions which make mandatory the permissive
indemnification provided by California law. Under California law, there are two
limitations on such additional rights to indemnification: (i) such
indemnification is not permitted for acts, omissions or transactions from which
a director of a California corporation may not be relieved of personal
liability, as described above; and (ii) such indemnification is not permitted in
circumstances where California law expressly prohibits indemnification, as
described above.
Delaware law also permits a Delaware corporation to provide indemnification
in excess of that provided by statute. In contrast to California law, Delaware
law does not require authorizing provisions in the certificate of incorporation
and does not contain express prohibitions on indemnification in certain
circumstances; limitations on indemnification may be imposed by a court,
however, based on principles of public policy. A provision of Delaware law
states that the indemnification provided by statute shall not be deemed
exclusive of any other rights under any bylaw, agreement, vote of stockholders
or disinterested directors or otherwise.
INSPECTION OF SHAREHOLDER LIST.
Both California and Delaware law allow any shareholder to inspect the
shareholder list for a purpose reasonably related to such person's interest as a
shareholder. California law provides, in addition, for an absolute right to
inspect and copy the corporation's shareholder list by persons holding an
aggregate of five percent or more of a corporation's voting shares, or
shareholders holding an aggregate of one percent or more of such shares who have
filed a Schedule 14B with the Securities and Exchange Commission in connection
with a contested election of directors. The latter provision has not been
amended in response to the elimination of Schedule 14B under the revised proxy
rules. Under California law, such absolute inspection rights also apply to a
corporation formed under the laws of any other state if its principal executive
offices are in California or if it customarily holds meetings of its board in
California. Delaware law also provides for inspection rights as to a list of
stockholders entitled to vote at a meeting within a ten day period preceding a
stockholders' meeting for any purpose germane to the meeting. However, Delaware
law contains no provisions comparable to the absolute right of inspection
provided by California law to certain shareholders.
DIVIDENDS AND REPURCHASES OF SHARES.
California law dispenses with the concept of par value of shares as well as
statutory definitions of capital, surplus and the like. The concepts of par
value, capital and surplus are retained under Delaware law.
Under California law, a corporation may not make any distribution
(including dividends, whether in cash or other property, and repurchases of its
shares, other than repurchases of its shares issued under employee stock plans
contemplated by Section 408 of the California Corporations Code) unless either
(i) the corporation's retained earnings immediately prior to the proposed
distribution equal or exceed the amount of the proposed distribution or (ii)
immediately after giving effect to such distribution, the corporation's assets
(exclusive of goodwill, capitalized research and development expenses and
deferred charges) would be at least equal to 1.25 times its liabilities (not
including deferred taxes, deferred income and other deferred credits),
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and the corporation's current assets would be at least equal to its current
liabilities (or 1.25 times its current liabilities if the average pre-tax and
pre-interest expense earnings for the preceding two fiscal years were less than
the average interest expense for such years). Such tests are applied to
California corporations on a consolidated basis.
Delaware law permits a corporation to declare and pay dividends out of
surplus or, if there is no surplus, out of net profits for the fiscal year in
which the dividend is declared and/or for the preceding fiscal year as long as
the amount of capital of the corporation following the declaration and payment
of the dividend is not less than the aggregate amount of the capital represented
by the issued and outstanding stock of all classes having a preference upon the
distribution of assets. In addition, Delaware law generally provides that a
corporation may redeem or repurchase its shares only if the capital of the
corporation is not impaired and such redemption or repurchase would not impair
the capital of the corporation.
To date, the Company has not declared or paid cash dividends on its capital
stock. The Company currently expects it will retain its future earnings for use
in the operation and expansion of its business and does not anticipate paying
any cash dividends in the foreseeable future.
SHAREHOLDER VOTING.
Both California and Delaware law generally require that a majority of the
shareholders of both acquiring and target corporations approve statutory
mergers. Delaware law does not require a stockholder vote of the surviving
corporation in a merger (unless the corporation provides otherwise in its
certificate of incorporation) if (a) the merger agreement does not amend the
existing certificate of incorporation, (b) each share of the stock of the
surviving corporation outstanding immediately before the effective date of the
merger is an identical outstanding or treasury share after the merger, and (c)
either no shares of common stock of the surviving corporation and no shares,
securities or obligations convertible into such stock are to be issued or
delivered under the plan of merger, or the authorized unissued shares or the
treasury shares of common stock of the surviving corporation to be issued or
delivered under the plan of merger plus those initially issuable upon conversion
of any other shares, securities or obligations to be issued or delivered under
such plan do not exceed 20 percent of the shares of common stock of such
constituent corporation outstanding immediately prior to the effective date of
the merger. California law contains a similar exception to its voting
requirements for reorganizations where shareholders or the corporation itself,
or both, immediately prior to the reorganization will own immediately after the
reorganization equity securities constituting more than five sixths of the
voting power of the surviving or acquiring corporation or its parent entity.
Both California law and Delaware law also require that a sale of all or
substantially all of the assets of a corporation be approved by a majority of
the outstanding voting shares of the corporation transferring such assets.
With certain exceptions, California law also requires that mergers,
reorganizations, certain sales of assets and similar transactions be approved by
a majority vote of each class of shares outstanding. In contrast, Delaware law
generally does not require class voting, except in certain transactions
involving an amendment to the certificate of incorporation that adversely
affects a specific class of shares. As a result, shareholder approval of such
transactions may be easier to obtain under Delaware law for companies which have
more than one class of shares outstanding.
California law also requires that holders of nonredeemable common stock
receive nonredeemable common stock in a merger of the corporation with the
holder of more than 50 percent but less than 90 percent of such common stock or
its affiliate unless all of the holders of such common stock consent to the
transaction. This provision of California law may have the effect of making a
"cash-out" merger by a majority shareholder more difficult to accomplish.
Although Delaware law does not parallel California law in this respect, under
some circumstances Section 203 does provide similar protection against coercive
two-tiered bids for a corporation in which the stockholders are not treated
equally. See "Significant Differences Between the Corporation Laws of California
and Delaware -- Stockholder Approval of Certain Business Combinations."
California law provides that, except in certain circumstances, when a
tender offer or a proposal for a reorganization or for a sale of assets is made
by an interested party (generally a controlling or managing person of the target
corporation), an affirmative opinion in writing as to the fairness of the
consideration to be paid to
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the shareholders must be delivered to shareholders. This fairness opinion
requirement does not apply to a corporation that does not have shares held of
record by at least 100 persons, or to a transaction that has been qualified
under California state securities laws. Furthermore, if a tender of shares or
vote is sought pursuant to an interested party's proposal and a later proposal
is made by another party at least ten days prior to the date of acceptance of
the interested party proposal, the shareholders must be informed of the later
offer and be afforded a reasonable opportunity to withdraw any vote, consent or
proxy, or to withdraw any tendered shares. Delaware law has no comparable
provision.
INTERESTED DIRECTOR TRANSACTIONS.
Under both California and Delaware law, certain contracts or transactions
in which one or more of a corporation's directors has an interest are not void
or voidable because of such interest provided that certain conditions, such as
obtaining the required approval and fulfilling the requirements of good faith
and full disclosure, are met. With certain exceptions, the conditions are
similar under California and Delaware law. Under California and Delaware law (a)
either the shareholders or the board of directors must approve any such contract
or transaction after full disclosure of the material facts, and, in the case of
board approval, the contract or transaction must also be "just and reasonable"
(in California) or "fair" (in Delaware) to the corporation or (b) the contract
or transaction must have been just and reasonable or fair as to the corporation
at the time it was approved. In the latter case, California law explicitly
places the burden of proof on the interested director. Under California law, if
shareholder approval is sought, the interested director is not entitled to vote
his shares at a shareholder meeting with respect to any action regarding such
contract or transaction. If board approval is sought, the contract or
transaction must be approved by a majority vote of a quorum of the directors,
without counting the vote of any interested directors (except that interested
directors may be counted for purposes of establishing a quorum). Under Delaware
law, if board approval is sought, the contract or transaction must be approved
by a majority of the disinterested directors (even if the disinterested
directors are less than a quorum). Therefore, certain transactions that the
Board of Directors of Altera California might not be able to approve because of
the number of interested directors, could be approved by a majority of the
disinterested directors of Altera Delaware, although less than a majority of a
quorum. The Company is not aware of any plans to propose any transaction
involving directors of the Company that could not be so approved under
California law but could be so approved under Delaware law.
SHAREHOLDER DERIVATIVE SUITS.
California law provides that a shareholder bringing a derivative action on
behalf of a corporation need not have been a shareholder at the time of the
transaction in question, provided that certain tests are met. Under Delaware
law, a stockholder may bring a derivative action on behalf of the corporation
only if the stockholder was a stockholder of the corporation at the time of the
transaction in question or if his or her stock thereafter devolved upon him or
her by operation of law. California law also provides that the corporation or
the defendant in a derivative suit may make a motion to the court for an order
requiring the plaintiff shareholder to furnish a security bond. Delaware does
not have a similar bonding requirement.
APPRAISAL RIGHTS.
Under both California and Delaware law, a shareholder of a corporation
participating in certain major corporate transactions may, under varying
circumstances, be entitled to appraisal rights pursuant to which such
shareholder may receive cash in the amount of the fair market value of his or
her shares in lieu of the consideration he or she would otherwise receive in the
transaction. Under Delaware law, such fair market value is determined exclusive
of any element of value arising from the accomplishment or expectation of a
merger or consolidation, and such appraisal rights are not available (a) with
respect to the sale, lease or exchange of all or substantially all of the assets
of a corporation, (b) with respect to a merger or consolidation by a
corporation, the shares of which are either listed on a national securities
exchange or are held of record by more than 2,000 holders if such stockholders
receive only shares of the surviving corporation or shares of any other
corporation that are either listed on a national securities exchange or held of
record by more than 2,000 holders, plus cash in lieu of fractional shares of
such corporations, or (c) to stockholders of a corporation surviving a merger if
no vote of the stockholders of the surviving corporation is required to approve
the merger under certain provisions of Delaware law.
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The limitations on the availability of appraisal rights under California
law are different from those under Delaware law. Shareholders of a California
corporation whose shares are listed on a national securities exchange or on a
list of over-the-counter margin stocks issued by the Board of Governors of the
Federal Reserve System generally do not have such appraisal rights unless the
holders of at least five percent of the class of outstanding shares claim the
right or the corporation or any law restricts the transfer of such shares.
Appraisal rights are also unavailable if the shareholders of a corporation or
the corporation itself, or both, immediately prior to the reorganization will
own immediately after the reorganization equity securities constituting more
than five-sixths of the voting power of the surviving or acquiring corporation
or its parent entity (as will be the case in the Reincorporation Proposal).
Appraisal or dissenters' rights are, therefore, not available to shareholders of
Altera California with respect to the Reincorporation Proposal. California law
generally affords appraisal rights in sale-of-asset reorganizations.
DISSOLUTION.
Under California law, shareholders holding 50 percent or more of the total
voting power may authorize a corporation's dissolution, with or without the
approval of the corporation's board of directors, and this right may not be
modified by the articles of incorporation. Under Delaware law, unless the board
of directors approves the proposal to dissolve, the dissolution must be approved
by all the stockholders entitled to vote thereon. Only if the dissolution is
initially approved by the board of directors may it be approved by a simple
majority of the outstanding shares of the corporation's stock entitled to vote.
In the event of such a board initiated dissolution, Delaware law allows a
Delaware corporation to include in its certificate of incorporation a
supermajority (greater than a simple majority) voting requirement in connection
with dissolutions. Altera Delaware's Certificate of Incorporation contains no
such super majority voting requirement, however, and a majority of the
outstanding shares entitled to vote, voting at a meeting at which a quorum is
present, would be sufficient to approve a dissolution of Altera Delaware that
had previously been approved by its Board of Directors.
CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following is a discussion of certain federal income tax considerations
that may be relevant to holders of Altera California Common Stock who receive
Altera Delaware Common Stock in exchange for their Altera California Common
Stock as a result of the Proposed Reincorporation. The discussion does not
address all of the tax consequences of the Proposed Reincorporation that may be
relevant to particular Altera California shareholders, such as dealers in
securities, or those Altera California shareholders who acquired their shares
upon the exercise of stock options, nor does it address the tax consequences to
holders of options or warrants to acquire Altera California Common Stock.
Furthermore, no foreign, state, or local tax considerations are addressed
herein. IN VIEW OF THE VARYING NATURE OF SUCH TAX CONSEQUENCES, EACH SHAREHOLDER
IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE SPECIFIC TAX
CONSEQUENCES OF THE PROPOSED REINCORPORATION, INCLUDING THE APPLICABILITY OF
FEDERAL, STATE, LOCAL OR FOREIGN TAX LAWS. This discussion is based on the
Internal Revenue Code of 1986, as amended (the "Code"), the applicable Treasury
Regulations promulgated thereunder, judicial authority and current
administrative rulings and practices in effect on the date of this Proxy
Statement.
The Proposed Reincorporation is expected to qualify as a reorganization
within the meaning of Section 368(a) of the Code, with the following tax
consequences:
(a) No gain or loss should be recognized by holders of Altera
California Common Stock upon receipt of Altera Delaware Common Stock
pursuant to the Proposed Reincorporation;
(b) The aggregate tax basis of the Altera Delaware Common Stock
received by each shareholder in the Proposed Reincorporation should be
equal to the aggregate tax basis of the Altera California Common Stock
surrendered in exchange therefor; and
(c) The holding period of the Altera Delaware Common Stock received by
each shareholder of Altera California should include the period for which
such shareholder held the Altera California
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Common Stock surrendered in exchange therefor, provided that such Altera
California Common Stock was held by the shareholder as a capital asset at
the time of Proposed Reincorporation.
The Company has not requested a ruling from the Internal Revenue Service
(the "IRS") or an opinion of counsel with respect to the federal income tax
consequences of the Proposed Reincorporation under the Code. A successful IRS
challenge to the reorganization status of the Proposed Reincorporation (in
consequence of a failure to satisfy the "continuity of interest" requirement or
otherwise) would result in a shareholder recognizing gain or loss with respect
to each share of Altera California Common Stock exchanged in the Proposed
Reincorporation equal to the difference between the shareholder's basis in such
share and the fair market value, as of the time of the Proposed Reincorporation,
of the Altera Delaware, Common Stock received in exchange therefor. In such
event, a shareholder's aggregate basis in the shares of Altera Delaware Common
Stock received in the exchange would equal their fair market value on such date,
and the shareholder's holding period for such shares would not include the
period during which the shareholder held Altera California Common Stock.
PROPOSAL 3.B: INCREASE IN AUTHORIZED SHARES
The Articles of Incorporation of Altera California currently authorize the
Company to issue up to 160 million shares of Common Stock, without par value.
The Certificate of Incorporation of Altera Delaware authorizes Altera Delaware
to issue up to 400 million shares of Common Stock, $0.001 par value per share.
The Board of Directors has no immediate plans to issue additional shares of
Common Stock for financing or any other purposes. However, the higher number of
authorized shares of Common Stock provided for in the Altera Delaware
Certificate of Incorporation will provide the Company the certainty and
flexibility to undertake various types of transactions, including stock splits
(in the form of stock dividends), financings, increases in the shares reserved
for issuance pursuant to the stock option plans, or other corporate purposes not
yet determined.
As a result of the growth rates experienced by the Company in the last two
years, the Board of Directors of Altera California has approved two 2-for-1
stock splits: the first effective on May 10, 1995 and the second effective on
December 18, 1996. The Board of Directors of Altera California has had the
flexibility to respond to the growth of the Company's business in approving the
stock splits without having to wait for shareholder approval. In particular,
under California law, the Board of Directors' approval of each stock split
automatically and proportionately increased the Company's authorized stock
without requiring shareholder approval. Under Delaware law, however, the Board
of Directors cannot split the Company's stock without shareholder approval and
cannot approve a stock dividend unless sufficient authorized shares are
available.
In order for the Board of Directors of Altera Delaware to respond to growth
of the Company's business which may occur in the future with the same
flexibility the Company has had as a California corporation, the Company must
have a sufficient number of authorized shares to cover appropriate levels of
stock dividends. Since there are currently over 88 million issued and
outstanding shares of the Company's Common Stock and approximately an additional
25 million reserved for future issuance to holders of the Company's convertible
notes and under the Company's stock option plans and employee stock purchase
plan, the number of shares of Common Stock currently authorized in Altera
California's Articles of Incorporation would be insufficient to permit the Board
of Directors of Altera Delaware to approve a 2-for-1 stock split in the form of
a 100% stock dividend or certain other types of transactions without first
obtaining stockholder approval. Under the proposed Certificate of Incorporation
of Altera Delaware, the additional shares of Common Stock would be available for
issuance without further stockholder action, unless stockholder action is
otherwise required by Delaware law or the rules of any stock exchange or
automated quotation system on which the Common Stock may then be listed or
quoted. Although the Company is not currently contemplating any additional stock
split or stock dividend and there can be no assurance that any additional stock
split or stock dividend will happen at any particular time in the future or at
all, the additional authorized shares in Altera Delaware will effectively
provide the Board with the same flexibility it had to split the shares of Altera
California.
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 this proposal. If this proposal is not approved by
the shareholders but the shareholders approve the Reincorporation Proposal, the
Company
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will reset the authorized shares of Common Stock of Altera Delaware to 160
million, as currently authorized for Altera California, and then complete the
Proposed Reincorporation. The Board of Directors has unanimously approved this
proposal and recommends that shareholders vote FOR the proposal to set the
number of authorized shares of Common Stock of Altera Delaware at 400 million in
connection with the Reincorporation Proposal.
PROPOSAL FOUR -- RATIFICATION OF APPOINTMENT OF
INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Price Waterhouse LLP, independent
accountants, to audit the financial statements of Altera for the current fiscal
year ending December 31, 1997. The Company expects 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 BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THIS
PROPOSAL AND RECOMMENDS THAT 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
C. Wendell Bergere,
Secretary
Dated: March 20, 1997
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APPENDIX A
AGREEMENT AND PLAN OF MERGER
OF ALTERA CORPORATION
A DELAWARE CORPORATION
AND
ALTERA CORPORATION
A CALIFORNIA CORPORATION
THIS AGREEMENT AND PLAN OF MERGER dated as of 1997, (the
"Agreement") is between Altera Corporation, a Delaware corporation
("Altera-Delaware") and Altera Corporation, a California corporation
("Altera-California"). Altera-Delaware and Altera-California are sometimes
referred to herein as the "Constituent Corporations."
RECITALS
A. Altera-Delaware is a corporation duly organized and existing under the
laws of the State of Delaware and has an authorized capital of 400,000,000
shares, all of which are designated "Common Stock", $0.001 par value. As of the
date hereof, 1,000 shares of Common Stock were issued and outstanding, all of
which were held by Altera-California.
B. Altera-California is a corporation duly organized and existing under the
laws of the State of California and has an authorized capital of 160,000,000
shares, all of which are designated "Common Stock". As of March 13, 1997,
88,133,415 shares of Common Stock were issued and outstanding.
C. The Board of Directors of Altera-California has determined that, for the
purpose of effecting the reincorporation of Altera-California in the State of
Delaware, it is advisable and in the best interests of Altera-California that
Altera-California merge with and into Altera-Delaware upon the terms and
conditions herein provided.
D. The respective Boards of Directors of Altera-Delaware and
Altera-California have approved this Agreement and have directed that this
Agreement be submitted to a vote of their respective stockholders and executed
by the undersigned officers.
NOW, THEREFORE, in consideration of the mutual agreements and covenants set
forth herein, Altera-Delaware and Altera-California hereby agree, subject to the
terms and conditions hereinafter set forth, as follows:
I. MERGER
1.1 Merger. In accordance with the provisions of this Agreement, the
Delaware General Corporation Law and the California General Corporation Law,
Altera-California shall be merged with and into Altera-Delaware (the "Merger"),
the separate existence of Altera-California shall cease and Altera-Delaware
shall be, and is herein sometimes referred as, the "Surviving Corporation", and
the name of the Surviving Corporation shall be Altera Corporation.
1.2 Filing and Effectiveness. The Merger shall become effective when the
following actions shall have been completed:
(a) This Agreement and the Merger shall have been adopted and approved
by the stockholders of each Constituent Corporation in accordance with the
requirements of the Delaware General Corporation Law and the California
General Corporation Law;
(b) All of the conditions precedent to the consummation of the Merger
specified in this Agreement shall have been satisfied or duly waived by the
party entitled to satisfaction thereof;
<PAGE> 36
(c) An executed Agreement and Plan of Merger meeting the requirements
of the Delaware General Corporation Law shall have been filed with the
Secretary of State of the State of Delaware; and
(d) An executed Agreement and Plan of Merger meeting the requirements
of California General Corporation Law shall have been filed with the
Secretary of State of the State of California.
The date and time when the Merger shall become effective, as aforesaid, is
herein called the "Effective Date of the Merger" or the "Effective Date."
1.3 Effect of the Merger. Upon the Effective Date of the Merger, the
separate existence of Altera-California shall cease and Altera-Delaware, as the
Surviving Corporation, (i) shall continue to possess all of Altera-California's
assets, rights, powers and property as constituted immediately prior to the
Effective Date of the Merger, (ii) shall be subject to all actions previously
taken by its and Altera-California's Board of Directors, (iii) shall succeed,
without other transfer, to all of the assets, rights, powers and property of
Altera-California in the manner more fully set forth in Section 259 of the
Delaware General Corporation Law, (iv) shall continue to be subject to all of
the debts, liabilities and obligations of Altera-Delaware as constituted
immediately prior to the Effective Date of the Merger, and (v) shall succeed,
without other transfer, to all of the debts, liabilities and obligations of
Altera-California in the same manner as if Altera-Delaware had itself incurred
them, all as more fully provided under the applicable provisions of the Delaware
General Corporation Law and the California Corporations Code.
II. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS
2.1 Certificate of Incorporation. The Certificate of Incorporation of
Altera-Delaware as in effect immediately prior to the Effective Date of the
Merger shall continue in full force and effect as the Certificate of
Incorporation of the Surviving Corporation until duly amended in accordance with
the provisions thereof and of applicable law.
2.2 Bylaws. The Bylaws of Altera-Delaware as in effect immediately prior
to the Effective Date of the Merger shall continue in full force and effect as
the Bylaws of the Surviving Corporation until duly amended in accordance with
the provisions thereof and applicable law.
2.3 Directors. The directors of Altera-Delaware immediately preceding the
Effective Date shall become the directors of the Surviving Corporation on or
after the Effective Date to serve until the expiration of their terms and until
their successors are elected and qualified.
2.4 Officers. The officers of Altera-Delaware immediately preceding the
Effective Date shall become the officers of the Surviving Corporation on or
after the Effective Date to serve at the pleasure of its Board of Directors.
III. MANNER OF CONVERSION OF STOCK
3.1 Altera-California Common Shares. Upon the Effective Date of the
Merger, each share of Altera-California Common Stock issued and outstanding
immediately prior thereto shall by virtue of the Merger and without any action
by the Constituent Corporations, the holder of such shares or any other person,
be converted into and exchanged for one (1) fully paid and nonassessable share
of Common Stock, $.01 par value, of the Surviving Corporation.
3.2 Altera-California Options, Stock Purchase Rights and Convertible
Securities.
(a) Upon the Effective Date of the Merger, the Surviving Corporation shall
assume the obligations of Altera-California under, and continue, its 1987 Stock
Option Plan, 1996 Stock Option Plan, 1988 Director Option Plan, 1987 Employee
Stock Purchase Plan and all other employee benefit plans of Altera-California.
Each outstanding and unexercised option, other right to purchase, or security
convertible into, Altera-California Common Stock (a "Right") shall become,
subject to the provisions in Section 3.2(c), an option, right to purchase or a
security convertible into the Surviving Corporation's Common Stock on the basis
of one (1) share of the Surviving Corporation's Common Stock for each one (1)
share of Altera-California Common Stock issuable pursuant to any such Right, on
the same terms and conditions and at an exercise price equal to the exercise
price applicable to any such Altera-California Right at the Effective Date of
the Merger. This
2
<PAGE> 37
Section 3.3(a) shall not apply to outstanding shares of Altera-California Common
Stock. Such outstanding shares of Common Stock are subject to Section 3.1.
(b) A number of shares of the Surviving Corporation's Common Stock shall be
reserved for issuance upon the exercise of options, stock purchase rights and
convertible securities equal to the number of shares of Altera-California Common
Stock so reserved immediately prior to the Effective Date of the Merger.
(c) The assumed Rights shall not entitle any holder thereof to a fractional
share upon exercise or conversion (unless the holder was entitled to a
fractional interest immediately prior to the Merger). In lieu thereof, any
fractional share interests to which a holder of an assumed Right would otherwise
be entitled upon exercise or conversion shall be aggregated (but only with other
similar Rights which have the same per share terms). To the extent that after
such aggregation, the holder would still be entitled to a fractional share with
respect thereto upon exercise or conversion, the holder shall be entitled upon
the exercise or conversion of all such assumed Rights pursuant to their terms
(as modified herein), to one full share of Common Stock in lieu of such
fractional share. With respect to each class of such similar Rights, no holder
will be entitled to more than one full share in lieu of a fractional share upon
exercise or conversion.
Notwithstanding the foregoing, with respect to options issued under the
Altera-California's 1987 and
1996 Stock Option Plans, as amended, that are assumed in the Merger, the number
of shares of Common Stock to which the holder would be otherwise entitled upon
exercise of each such assumed option following the Merger shall be rounded down
to the nearest whole number and the exercise price shall be rounded up to the
nearest whole cent. In addition, no "additional benefits" (within the meaning of
Section 424(a)(2) of the Internal Revenue Code of 1986, as amended) shall be
accorded to the optionees pursuant to the assumption of their options.
3.3 Altera-Delaware Common Stock. Upon the Effective Date of the Merger,
each share of Common Stock, $.01 par value, of Altera-Delaware issued and
outstanding immediately prior thereto shall, by virtue of the Merger and without
any action by Altera-Delaware, the holder of such shares or any other person, be
canceled and returned to the status of authorized but unissued shares.
3.4 Exchange of Certificates. After the Effective Date of the Merger, each
holder of an outstanding certificate representing shares of Altera-California
Common Stock may be asked to surrender the same for cancellation to an exchange
agent, whose name will be delivered to holders prior to any requested exchange
(the "Exchange Agent"), and each such holder shall be entitled to receive in
exchange therefor a certificate or certificates representing the number of
shares of the Surviving Corporation's Common Stock, as the case may be, into
which the surrendered shares were converted as herein provided. Until so
surrendered, each outstanding certificate theretofore representing shares of
Altera-California Common Stock shall be deemed for all purposes to represent the
number of shares of the Surviving Corporation's Common Stock into which such
shares of Altera-California Common Stock were converted in the Merger.
The registered owner on the books and records of the Surviving Corporation
or the Exchange Agent of any such outstanding certificate shall, until such
certificate shall have been surrendered for transfer or conversion or otherwise
accounted for to the Surviving Corporation or the Exchange Agent, have and be
entitled to exercise any voting and other rights with respect to and to receive
dividends and other distributions upon the shares of Common Stock of the
Surviving Corporation represented by such outstanding certificate as provided
above.
Each certificate representing Common Stock of the Surviving Corporation so
issued in the Merger shall bear the same legends, if any, with respect to the
restrictions on transferability as the certificates of Altera-California so
converted and given in exchange therefore, unless otherwise determined by the
Board of Directors of the Surviving Corporation in compliance with applicable
laws.
If any certificate for shares of the Surviving Corporation's stock is to be
issued in a name other than that in which the certificate surrendered in
exchange therefor is registered, it shall be a condition of issuance thereof
that the certificate so surrendered shall be properly endorsed and otherwise in
proper form for transfer, that such transfer otherwise be proper and comply with
applicable securities laws and that the person requesting such transfer pay to
the Exchange Agent any transfer or other taxes payable by reason of issuance
3
<PAGE> 38
of such new certificate in a name other than that of the registered holder of
the certificate surrendered or establish to the satisfaction of the Surviving
Corporation that such tax has been paid or is not payable.
IV. GENERAL
4.1 Covenants of Altera-Delaware. Altera-Delaware covenants and agrees
that it will, on or before the Effective Date of the Merger:
(a) Qualify to do business as a foreign corporation in the State of
California and in connection therewith irrevocably appoint an agent for
service of process as required under the provisions of Section 2105 of the
California General Corporation Law.
(b) File any and all documents with the California Franchise Tax Board
necessary for the assumption by Altera-Delaware of all of the franchise tax
liabilities of Altera-California.
(c) Take such other actions as may be required by the California
General Corporation Law.
4.2 Further Assurances. From time to time, as and when required by
Altera-Delaware or by its successors or assigns, there shall be executed and
delivered on behalf of Altera-California such deeds and other instruments, and
there shall be taken or caused to be taken by it such further and other actions
as shall be appropriate or necessary in order to vest or perfect in or conform
of record or otherwise by Altera-Delaware the title to and possession of all the
property, interests, assets, rights, privileges, immunities, powers, franchises
and authority of Altera-California and otherwise to carry out the purposes of
this Agreement, and the officers and directors of Altera-Delaware are fully
authorized in the name and on behalf of Altera-California or otherwise to take
any and all such action and to execute and deliver any and all such deeds and
other instruments.
4.3 Abandonment. At any time before the Effective Date of the Merger, this
Agreement may be terminated and the Merger may be abandoned for any reason
whatsoever by the Board of Directors of either Altera-California or of
Altera-Delaware, or of both, notwithstanding the approval of this Agreement by
the shareholders of Altera-California or by the sole stockholder of
Altera-Delaware, or by both.
4.4 Amendment. The Boards of Directors of the Constituent Corporations may
amend this Agreement at any time prior to the filing of this Agreement (or
certificate in lieu thereof) with the Secretary of State of the State of
Delaware, provided that an amendment made subsequent to the adoption of this
Agreement by the stockholders of either Constituent Corporation shall not: (i)
alter or change the amount or kind of shares, securities, cash, property and/or
rights to be received in exchange for or on conversion of all or any of the
shares of any class or series thereof of such Constituent Corporation, (ii)
alter or change any term of the Certificate of Incorporation of the Surviving
Corporation to be effected by the Merger, or (iii) alter or change any of the
terms and conditions of this Agreement if such alteration or change would
adversely affect the holders of any class or series of capital stock of any
Constituent Corporation.
4.5 Registered Office. The registered office of the Surviving Corporation
in the State of Delaware is One Rodney Square, 10th Floor, Tenth and King
Streets, Wilmington, County of New Castle, Delaware 19801, and RL&F Service
Corp. is the registered agent of the Surviving Corporation at such address.
4.6 Agreement. Executed copies of this Agreement will be on file at the
principal place of business of the Surviving Corporation at 2610 Orchard
Parkway, San Jose, California 95134, and copies thereof will be furnished to any
stockholder of either Constituent Corporation, upon request and without cost.
4.7 Governing Law. This Agreement shall in all respects be construed,
interpreted and enforced in accordance with and governed by the laws of the
State of Delaware and, so far as applicable, the merger provisions of the
California General Corporation Law.
4
<PAGE> 39
IN WITNESS WHEREOF, this Agreement having first been approved by the
resolutions of the Board of Directors of Altera-California and Altera-Delaware
is hereby executed on behalf of each of such two corporations and attested by
their respective officers thereunto duly authorized.
ALTERA CORPORATION
a Delaware corporation
By:
--------------------------------------
Rodney Smith, President and
Chief Executive Officer
ATTEST:
- --------------------------------------
C. Wendell Bergere, Secretary
ALTERA CORPORATION
a California corporation
By:
--------------------------------------
Rodney Smith, President and
Chief Executive Officer
ATTEST:
- --------------------------------------
C. Wendell Bergere, Secretary
5
<PAGE> 40
APPENDIX B
CERTIFICATE OF INCORPORATION
OF
ALTERA CORPORATION
I, the undersigned, for the purposes of incorporating and organizing a
corporation under the General Corporation Law of the State of Delaware, do
execute this Certificate of Incorporation and do hereby certify as follows:
FIRST. The name of the corporation is Altera Corporation.
SECOND. The address of the corporation's registered office in the
State of Delaware is One Rodney Square, 10th Floor, Tenth and King Streets,
in the City of Wilmington, County of New Castle, 19801. The name of its
registered agent at such address is RL&F Service Corp.
THIRD. The purpose of the corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.
FOURTH. The total number of shares of stock which the corporation
shall have authority to issue is four hundred million (400,000,000). All
such shares are to be Common Stock, par value of $0.001 per share.
FIFTH. The incorporator of the corporation is Jesse A. Finkelstein,
P.O. Box 551, Wilmington, DE 19899.
SIXTH. Unless and except to the extent that the by-laws of the
corporation shall so require, the election of directors of the corporation
need not be by written ballot.
SEVENTH. In furtherance and not in limitation of the powers conferred
by the laws of the State of Delaware, the Board of Directors of the
corporation is expressly authorized to adopt, alter, amend and repeal the
by-laws of the corporation, subject to the power of the stockholders of the
corporation to alter or repeal any by-law whether adopted by them or
otherwise.
EIGHTH. A director of the corporation shall not be liable to the
corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except to the extent such exemption from
liability or limitation thereof is not permitted under the General
Corporation Law of the State of Delaware as the same exists or may
hereafter be amended. Any amendment, modification or repeal of the
foregoing sentence shall not adversely affect any right or protection of a
director of the corporation hereunder in respect of any act or omission
occurring prior to the time of such amendment, modification or repeal.
NINTH. No action that is required or permitted to be taken by the
stockholders of the Corporation at any annual or special meeting of
stockholders may be effected by written consent of stockholders in lieu of
a meeting of stockholders. Notwithstanding anything contained in this
Certificate of Incorporation to the contrary, the affirmative vote of at
least 80 percent (80%) in voting power of the then outstanding voting stock
of the Corporation, voting together as a single class, shall be required to
amend, repeal or adopt any provision inconsistent with the Article Ninth.
TENTH. The corporation reserves the right at any time, and from time
to time, to amend, alter, change or repeal any provision contained in this
Certificate of Incorporation, and other provisions authorized by the laws
of the State of Delaware at the time in force may be added or inserted, in
the manner now or hereafter prescribed by law; and all rights, preferences
and privileges of whatsoever nature conferred upon stockholders, directors
or any other persons whomsoever by and pursuant to this Certificate of
Incorporation in its present form or as hereafter amended are granted
subject to the rights reserved in this article.
ELEVENTH. The powers of the incorporator are to terminate upon the
filing of this Certificate of Incorporation with the Secretary of State of
the State of Delaware. The names and mailing addresses of
<PAGE> 41
the persons who are to serve as the initial directors of the corporation
until the first annual meeting of stockholders of the corporation, or until
their successors are duly elected and qualified, are:
<TABLE>
<S> <C>
Rodney Smith Altera Corporation
2610 Orchard Parkway, San Jose, CA 95134
Michael A. Ellison 1211 88th Place NE
Bellevue, WA 98004
Paul Newhagen Altera Corporation
2610 Orchard Parkway, San Jose, CA 95134
Robert W. Reed 861 San Martin Place
Fremont, CA 94539
William E. Terry 925 Laurel Glen
Palo Alto, CA 94304
Deborah Triant CheckPoint Software Technologies, Inc.
400 Seaport Court, Suite 105
Redwood City, CA 94063
</TABLE>
Except as otherwise provided in this Article Eleventh, the number of
directors shall be as specified in the bylaws.
The undersigned incorporator hereby acknowledges that the foregoing
certificate of incorporation is his act and deed on March , 1997.
--------------------------------------
Jesse A. Finkelstein
Incorporator
-2-
<PAGE> 42
APPENDIX C
BY-LAWS
OF
ALTERA CORPORATION
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
ARTICLE I
OFFICES AND RECORDS
SECTION 1.1. Delaware Office. The principal office of the Corporation in
the State of Delaware shall be located in the City of Wilmington, County of New
Castle, and the name and address of its registered agent is RL&F Service Corp.,
Tenth Floor, One Rodney Square, Tenth and King Streets, Wilmington, Delaware.
SECTION 1.2. Other Offices. The Corporation may have such other offices,
either within or without the State of Delaware, as the Board of Directors may
designate or as the business of the Corporation may from time to time require.
SECTION 1.3. Books and Records. The books and records of the Corporation
may be kept at the Corporation's headquarters in San Jose, California or at such
other locations outside the State of Delaware as may from time to time be
designated by the Board of Directors.
ARTICLE II
STOCKHOLDERS
SECTION 2.1. Annual Meetings. An annual meeting of stockholders shall be
held for the election of directors at such date, time and place, either within
or without the State of Delaware, as may be designated by resolution of the
Board of Directors from time to time. Any other proper business may be
transacted at the annual meeting.
SECTION 2.2. Special Meetings. Special meetings of stockholders for any
purpose or purposes may be called at any time by the Board of Directors, or by a
committee of the Board of Directors that has been duly designated by the Board
of Directors and whose powers and authority, as expressly provided in a
resolution of the Board of Directors, include the power to call such meetings,
but such special meetings may not be called by any other person or persons.
SECTION 2.3. Notice of Meetings. Whenever stockholders are required or
permitted to take any action at a meeting, a written notice of the meeting shall
be given that shall state the place, date and hour of the meeting and, in the
case of a special meeting, the purpose or purposes for which the meeting is
called. Unless otherwise provided by law, the Certificate of Incorporation or
these by-laws, the written notice of any meeting shall be given not less than
ten nor more than sixty days before the date of the meeting to each stockholder
entitled to vote at such meeting. If mailed, such notice shall be deemed to be
given when deposited in the United States mail, postage prepaid, directed to the
stockholder at his address as it appears on the records of the Corporation.
SECTION 2.4. Adjournments. Any meeting of stockholders, annual or special,
may adjourn from time to time to reconvene at the same or some other place, and
notice need not be given of any such adjourned meeting if the time and place
thereof are announced at the meeting at which the adjournment is taken. At the
adjourned meeting the Corporation may transact any business which might have
been transacted at the original meeting. If the adjournment is for more than
thirty days, or if after the adjournment a new record date is fixed for the
adjourned meeting, notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.
SECTION 2.5. Quorum. Except as otherwise provided by law, the Certificate
of Incorporation or these by-laws, at each meeting of stockholders the presence
in person or by proxy of the holders of shares of stock
<PAGE> 43
having a majority of the votes which could be cast by the holders of all
outstanding shares of stock entitled to vote at the meeting shall be necessary
and sufficient to constitute a quorum. In the absence of a quorum, the
stockholders so present may, by majority vote, adjourn the meeting from time to
time in the manner provided in Section 2.4 of these by-laws until a quorum shall
attend. Shares of its own stock belonging to the Corporation or to another
corporation, if a majority of the shares entitled to vote in the election of
directors of such other corporation is held, directly or indirectly, by the
Corporation, shall neither be entitled to vote nor be counted for quorum
purposes; provided, however, that the foregoing shall not limit the right of the
Corporation to vote stock, including but not limited to its own stock, held by
it in a fiduciary capacity.
SECTION 2.6. Organization. Meetings of stockholders shall be presided over
by the Chairman of the Board, if any, or in his absence by the Vice Chairman of
the Board, if any, or in his absence by the President, or in his absence by a
Vice President, or in the absence of the foregoing persons by a chairman
designated by the Board of Directors, or in the absence of such designation by a
chairman chosen at the meeting. The Secretary shall act as secretary of the
meeting, but in his absence the chairman of the meeting may appoint any person
to act as secretary of the meeting.
SECTION 2.7. Voting; Proxies. Except as otherwise provided by the
Certificate of Incorporation, each stockholder entitled to vote at any meeting
of stock-holders shall be entitled to one vote for each share of stock held by
him which has voting power upon the matter in question. Each stockholder
entitled to vote at a meeting of stockholders may authorize another person or
persons to act for him by proxy, but no such proxy shall be voted or acted upon
after three years from its date, unless the proxy provides for a longer period.
A proxy shall be irrevocable if it states that it is irrevocable and if, and
only as long as, it is coupled with an interest sufficient in law to support an
irrevocable power. A stockholder may revoke any proxy which is not irrevocable
by attending the meeting and voting in person or by filing an instrument in
writing revoking the proxy or by delivering a proxy in accordance with
applicable law bearing a later date to the Secretary of the Corporation. Voting
at meetings of stockholders need not be by written ballot; provided, however,
that any election for directors must be by ballot if demanded by any stockholder
at the meeting before the election has begun. At all meetings of stockholders
for the election of directors a plurality of the votes cast shall be sufficient
to elect directors. All other elections and questions shall, unless otherwise
provided by law, the Certificate of Incorporation or these By-laws, be decided
by the vote of the holders of shares of stock having a majority of the votes
which could be cast by the holders of all shares of stock outstanding and
entitled to vote thereon.
SECTION 2.8. Fixing Date for Determination of Stockholders of Record. In
order that the Corporation may determine the stockholders entitled to notice of
or to vote at any meeting of stockholders or any adjournment thereof, or
entitled to receive payment of any dividend or other distribution or allotment
of any rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful action,
the Board of Directors may fix a record date, which record date shall not
precede the date upon which the resolution fixing the record date is adopted by
the Board of Directors and which record date: (1) in the case of determination
of stockholders entitled to vote at any meeting of stockholders or adjournment
thereof, shall, unless otherwise required by law, not be more than sixty nor
less than ten days before the date of such meeting and (2) in the case of any
other action, shall not be more than sixty days prior to such other action. If
no record date is fixed: (1) the record date for determining stockholders
entitled to notice of or to vote at a meeting of stockholders shall be at the
close of business on the day next preceding the day on which notice is given,
or, if notice is waived, at the close of business on the day next preceding the
day on which the meeting is held and (2) the record date for determining
stockholders for any other purpose shall be at the close of business on the day
on which the Board of Directors adopts the resolution relating thereto. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
SECTION 2.9. List of Stockholders Entitled to Vote. The Secretary shall
prepare and make, at least ten days before every meeting of stockholders, a
complete list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder, for
2
<PAGE> 44
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof and may be inspected by any stockholder
who is present. Upon the willful neglect or refusal of the directors to produce
such a list at any meeting for the election of directors, they shall be
ineligible for election to any office at such meeting. The stock ledger shall be
the only evidence as to who are the stockholders entitled to examine the stock
ledger, the list of stockholders or the books of the Corporation, or to vote in
person or by proxy at any meeting of stockholders.
SECTION 2.10. No Action By Consent of Stockholders. No action that is
required to be taken by the stockholders of the Corporation at any annual or
special meeting of stockholders may be effected by written consent of
stockholders in lieu of a meeting.
SECTION 2.11. Conduct of Meetings. The Board of Directors of the
Corporation may adopt by resolution such rules and regulations for the conduct
of the meeting of stockholders as it shall deem appropriate. Except to the
extent inconsistent with such rules and regulations as adopted by the Board of
Directors, the chairman of any meeting of stockholders shall have the right and
authority to prescribe such rules, regulations and procedures and to do all such
acts as, in the judgment of such chairman, are appropriate for the proper
conduct of the meeting. Such rules, regulations or procedures, whether adopted
by the Board of Directors or prescribed by the chairman of the meeting, may
include, without limitation, the following: (i) the establishment of an agenda
or order of business for the meeting; (ii) rules and procedures for maintaining
order at the meeting and the safety of those present; (iii) limitations on
attendance at or participation in the meeting to stockholders of record of the
Corporation, their duly authorized and constituted proxies or such other persons
as the chairman of the meeting shall determine; (iv) restrictions on entry to
the meeting after the time fixed for the commencement thereof; and (v)
limitations on the time allotted to questions or comments by participants.
Unless and to the extent determined by the Board of Directors or the chairman of
the meeting, meetings of stockholders shall not be required to be held in
accordance with the rules of parliamentary procedure.
SECTION 2.12 Inspectors of Elections; Opening and Closing the Polls. The
Board of Directors by resolution may appoint one or more inspectors, which
inspector or inspectors may include individuals who serve the Corporation in
other capacities, including, without limitation, as officers, employees, agents
or representatives of the Corporation, to act at the meeting and make a written
report thereof. One or more persons may be designated as alternate inspectors to
replace any inspector who fails to act. If no inspector or alternate has been
appointed to act, or if all inspectors or alternates who have been appointed are
unable to act, at a meeting of stockholders, the chairman of the meeting shall
appoint one or more inspectors to act at the meeting. Each inspector, before
discharging his or her duties, shall take and sign an oath faithfully to execute
the duties of inspector with strict impartiality and according to the best of
his or her ability. The inspectors shall have the duties prescribed by the
General Corporation Law of the State of Delaware. The chairman of the meeting
shall fix and announce at the meeting the date and time of the opening and the
closing of the polls for each matter upon which the stockholders will vote at a
meeting.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of its Board of Directors. In
addition to the powers and authorities by these By-laws expressly conferred upon
them, the Board of Directors may exercise all such powers of the Corporation and
do all such lawful acts and things as are not by law, by the Certificate of
Incorporation or by these By-laws required to be exercised or done by the
stockholders.
SECTION 3.2. Number; Qualifications. The Board of Directors shall consist
of one or more members, the number to be determined from time to time by
resolution of the Board of Directors. Directors need not be stockholders.
3
<PAGE> 45
SECTION 3.3. Election; Resignation; Removal; Vacancies. At the first annual
meeting of stockholders and at each annual meeting thereafter, the stockholders
shall elect directors each of whom shall hold office for a term of one year or
until his successor is elected and qualified. Any director, or the entire Board
of Directors, may be removed, with or without cause, by the affirmative vote of
the holders of a majority of shares then entitled to vote at the election of
directors. Any director may resign at any time upon written notice to the
Corporation. Such resignation shall be effective upon receipt unless the notice
specifies a later time for that resignation to become effective. Any newly
created directorship resulting from an increase in the authorized number of
directors or any vacancy occurring in the Board of Directors by reason of death,
resignation, retirement, disqualification, removal from office or any other
cause may be filled by the affirmative vote of the remaining members of the
Board of Directors, though less than a quorum of the Board of Directors, and
each director so elected shall hold office until the expiration of the term of
office of the director whom he has replaced or until his successor is elected
and qualified. No decrease in the number of directors constituting the whole
Board shall shorten the term of any incumbent director.
SECTION 3.4. Regular Meetings. Regular meetings of the Board of Directors
may be held at such places within or without the State of Delaware and at such
times as the Board of Directors may from time to time determine, and if so
determined notices thereof need not be given.
SECTION 3.5. Special Meetings. Special meetings of the Board of Directors
may be held at any time or place within or without the State of Delaware
whenever called by the Chairman of the Board, the President, or by any two
members of the Board of Directors. Notice of the time and place of a special
meeting of the Board of Directors shall be delivered by the person or persons
calling the meeting personally, by facsimile or by telephone to each director or
sent by first-class mail, telegram, charges prepaid, addressed to each director
at that directors' address as it is shown on the records of the Corporation. If
the notice is mailed, it shall be deposited in the United States mail at least
four (4) days before the time of the holding of the meeting. If the notice is
delivered personally or by telephone or telegraph, it shall be delivered at
least forty-eight (48) hours before the time of the holding of the special
meeting. If by facsimile transmission, such notice shall be transmitted at least
twenty-four (24) hours before the time of holding of the special meeting. Any
oral notice given personally or by telephone may be communicated either to the
director or to a person at the office of the director who the person giving the
notice has reason to believe will promptly communicate it to the director. The
notice need not specify the purpose or purposes of the special meeting or the
place of the special meeting, if the meeting is to be held at the principal
office of the Corporation.
SECTION 3.6. Telephonic Meetings Permitted. Members of the Board of
Directors, or any committee designated by the Board of Directors, may
participate in a meeting thereof by means of conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other, and participation in a meeting pursuant to this
by-law shall constitute presence in person at such meeting.
SECTION 3.7. Quorum; Vote Required for Action; Adjournment. At all meetings
of the Board of Directors fifty percent (50%) of the whole Board of Directors
shall constitute a quorum for the transaction of business. Except in cases in
which the Certificate of Incorporation or these By-laws otherwise provide, the
vote of a majority of the directors present at a meeting at which a quorum is
present shall be the act of the Board of Directors. A majority of the directors
present, whether or not a quorum, may adjourn any meeting to another time and
place. Notice of the time and place of holding an adjourned meeting need not be
given unless the meeting is adjourned for more than twenty-four (24) hours. If
the meeting is adjourned for more than twenty-four (24) hours, then notice of
the time and place of the adjourned meeting shall be given to the directors who
were not present at the time of the adjournment in the manner specified in
Section 3.5.
SECTION 3.8. Organization. Meetings of the Board of Directors shall be
presided over by the Chairman of the Board, if any, or in his absence by the
Vice Chairman of the Board, if any, or in his absence by the President, or in
their absence by a chairman chosen at the meeting. The Secretary shall act as
secretary of the meeting, but in his absence the chairman of the meeting may
appoint any person to act as secretary of the meeting.
SECTION 3.9. Informal Action by Directors. Unless otherwise restricted by
the Certificate of Incorporation or these By-laws, any action required or
permitted to be taken at any meeting of the Board of Directors, or
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of any committee thereof, may be taken without a meeting if all members of the
Board of Directors or such committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of proceedings
of the Board of Directors or such committee.
SECTION 3.10. Fees and Compensation of Directors. Directors and members of
committees may receive such compensation, if any, for their services and such
reimbursement of expenses as may be fixed or determined by resolution of the
Board of Directors. This Section 3.10 shall not be construed to preclude any
director from serving the Corporation in any other capacity as an officer,
agent, employee or otherwise and receiving compensation for those services.
SECTION 3.11. Approval of Loans to Officers. The Corporation may lend money
to, or guarantee any obligation of, or otherwise assist any officer or other
employee of the Corporation or of its subsidiary, including any officer or
employee who is a director of the Corporation or its subsidiary, whenever, in
the judgment of the directors, such loan, guaranty or assistance may reasonably
be expected to benefit the Corporation. The loan, guaranty or other assistance
may be with or without interest and may be unsecured, or secured in such manner
as the Board of Directors shall approve, including without limitation, a pledge
of shares of stock of the Corporation. Nothing in this section contained shall
be deemed to deny, limit or restrict the powers of guaranty or warranty of the
Corporation at common law or under any statutes.
ARTICLE IV
COMMITTEES
SECTION 4.1. Committees. The Board of Directors may, by resolution passed
by a majority of the whole Board of Directors, designate one or more committees,
each committee to consist of one or more of the directors of the Corporation.
The Board of Directors may designate one or more directors as alternate members
of any committee, who may replace any absent or disqualified member at any
meeting of the committee. In the absence or disqualification of a member of the
committee, the member or members thereof present at any meeting and not
disqualified from voting, whether or not he or they constitute a quorum, may
unanimously appoint another member of the Board of Directors to act at the
meeting in place of any such absent or disqualified member. Any such committee,
to the extent permitted by law and to the extent provided in the resolution of
the Board of Directors, shall have and may exercise all the powers and authority
of the Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it.
SECTION 4.2. Committee Rules. Unless the Board of Directors otherwise
provides, each committee designated by the Board of Directors may make, alter
and repeal rules for the conduct of its business. In the absence of such rules
each committee shall conduct its business in the same manner as the Board of
Directors conducts its business pursuant to Article III of these By-laws.
ARTICLE V
OFFICERS
SECTION 5.1. Officers. The officers of the Corporation shall be a
president, a secretary, and a chief financial officer. The Corporation may also
have, at the discretion of the Board of Directors, a chairman of the board, one
or more vice presidents, one or more assistant secretaries, one or more
assistant treasurers, and such other officers as may be appointed in accordance
with the provisions of Section 5.3 of these By-laws. Any number of offices may
be held by the same person.
SECTION 5.2. Election of Officers. The officers of the Corporation except
such officers as may be appointed in accordance with the provisions of Section
5.3 or Section 5.5 of these By-laws, shall be chosen by the board, subject to
the rights, if any, of an officer under any contract of employment.
SECTION 5.3. Subordinate Officers. The Board of Directors may appoint, or
may empower the president to appoint, such other officers as the business of the
Corporation may require, each of whom shall hold office for such period, have
such authority, and perform such duties as are provided in these By-laws or as
the Board of Directors may from time to time determine.
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SECTION 5.4. Removal and Resignation of Officers. Subject to the rights, if
any, of an officer under any contract of employment, any officer may be removed,
either with or without cause, by the Board of Directors at any regular or
special meeting of the board or, except in case of an officer chosen by the
Board of Directors, by any officer upon whom such power of removal may be
conferred by the Board of Directors.
Any officer may resign at any time by giving written notice to the
Corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless otherwise
specified in that notice, the acceptance of the resignation shall not be
necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the Corporation under any contract to which the officer is a
party.
SECTION 5.5. Vacancies in Offices. A vacancy in any office because of
death, resignation, removal, disqualification or any other cause shall be filled
in the manner prescribed in these By-laws for regular appointments to that
office.
SECTION 5.6. Chairman of the Board. The chairman of the board, if such an
officer be elected, shall, if present, preside at meetings of the Board of
Directors and exercise and perform such other powers and duties as may from time
to time be assigned to him by the Board of Directors or as may be prescribed by
these By-laws. If there is no president, then the chairman of the board shall
also be the chief executive officer of the Corporation and shall have the powers
and duties prescribed in Section 5.7 of these By-laws.
SECTION 5.7. President. Subject to such supervisory powers, if any, as may
be given by the Board of Directors to the chairman of the board, if there be
such an officer, the president shall be the chief executive officer of the
Corporation and shall, subject to the control of the Board of Directors, have
general supervision, direction, and control of the business and the officers of
the Corporation. He shall preside at all meetings of the shareholders and, in
the absence or nonexistence of a chairman of the board, at all meetings of the
Board of Directors. He shall have the general powers and duties of management
usually vested in the office of president of a Corporation, and shall have such
other powers and duties as may be prescribed by the Board of Directors or these
By-laws.
SECTION 5.8. Vice Presidents. In the absence or disability of the
president, the vice presidents, if any, in order of their rank as fixed by the
Board of Directors or, if not ranked, a vice president designated by the Board
of Directors, shall perform all the duties of the president and when so acting
shall have all the powers of, and be subject to all the restrictions upon, the
president. The vice presidents shall have such other powers and perform such
other duties as from time to time may be prescribed for them respectively by the
Board of Directors, these By-laws, the president or the chairman of the board.
SECTION 5.9. Secretary. The secretary shall keep or cause to be kept, at
the principal executive office of the Corporation or such other place as the
Board of Directors may direct, a book of minutes of all meetings and actions of
directors, committees of directors and shareholders. The minutes shall show the
time and place of each meeting, whether regular or special (and, if special, how
authorized and the notice given), the names of those present at directors'
meetings or committee meetings, the number of shares present or represented at
shareholders' meetings, and the proceeding thereof.
The secretary shall keep, or cause to be kept, at the principal executive
office of the Corporation or at the office of the Corporation's transfer agent
or registrar, as determined by resolution of the Board of Directors, a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.
The secretary shall give, or cause to be given, notice of all meetings of
the shareholders and of the Board of Directors required to be given by law or by
these By-laws. He shall keep the seal of the Corporation, if one be adopted, in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or by these By-laws.
SECTION 5.10. Chief Financial Officer. The chief financial officer shall
keep and maintain, or cause to be kept and maintained, adequate and correct
books and records of accounts of the properties and business transactions of the
Corporation, including accounts of its assets, liabilities, receipts,
disbursements, gains,
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losses, capital, retained earnings, and shares. The books of account shall at
all reasonable times be open to inspection by any director.
The chief financial officer shall deposit all money and other valuables in
the name and to the credit of the Corporation with such depositories as may be
designated by the Board of Directors. He shall disburse the funds of the
Corporation as may be ordered by the Board of Directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as chief financial officer and of the financial condition of the
Corporation, and shall have such other powers and perform such other duties as
may be prescribed by the Board of Directors or these By-laws.
ARTICLE VI
STOCK
SECTION 6.1. Certificates. Every holder of stock shall be entitled to have
a certificate signed by or in the name of the Corporation by the Chairman or
Vice Chairman of the Board of Directors, if any, or the President or a Vice
President, and by the Treasurer or an Assistant Treasurer, or the Secretary or
an Assistant Secretary, of the Corporation certifying the number of shares owned
by him in the Corporation. Any of or all the signatures on the certificate may
be a facsimile. In case any officer, transfer agent or registrar who has signed
or whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent, or registrar before such certificate
is issued, it may be issued by the Corporation with the same effect as if he
were such officer, transfer agent, or registrar at the date of issue.
SECTION 6.2. Lost, Stolen or Destroyed Stock Certificates; Issuance of New
Certificates. The Corporation may issue a new certificate of stock in the place
of any certificate theretofore issued by it, alleged to have been lost, stolen
or destroyed, and the Corporation may require the owner of the lost, stolen or
destroyed certificate, or his legal representative, to give the Corporation a
bond sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or the
issuance of such new certificate.
ARTICLE VII
INDEMNIFICATION
SECTION 7.1. Right to Indemnification. The Corporation shall indemnify and
hold harmless, to the fullest extent permitted by applicable law as it presently
exists or may hereafter be amended, any person who was or is made or is
threatened to be made a party or is otherwise involved in any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"proceeding") by reason of the fact that he, or a person for whom he is the
legal representative, is or was a director or officer of the Corporation or is
or was serving at the request of the Corporation as a director, officer,
employee or agent of another Corporation or of a partnership, joint venture,
trust, enterprise or nonprofit entity, including service with respect to
employee benefit plans, against all liability and loss suffered and expenses
(including attorneys' fees) reasonably incurred by such person. Notwithstanding
the preceding sentence, the Corporation shall be required to indemnify a person
in connection with a proceeding (or part thereof) initiated by such person only
if the proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.
SECTION 7.2. Prepayment of Expenses. The Corporation shall pay the expenses
(including attorneys' fees) incurred in defending any proceeding in advance of
its final disposition, provided, however, that the payment of expenses incurred
by a director or officer in advance of the final disposition of the proceeding
shall be made only upon receipt of an undertaking by the director or officer to
repay all amounts advanced if it should be ultimately determined that the
director or officer is not entitled to be indemnified under this Article VII or
otherwise.
SECTION 7.3. Claims. If a claim for indemnification or payment of expenses
under this Article VII is not paid in full within sixty days after a written
claim therefor has been received by the Corporation, the claimant may file suit
to recover the unpaid amount of such claim and, if successful in whole or in
part, shall be entitled to be paid the expense of prosecuting such claim. In any
such action the Corporation shall have the
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burden of proving that the claimant was not entitled to the requested
indemnification or payment of expenses under applicable law.
SECTION 7.4. Non-Exclusivity of Rights. The rights conferred on any person
by this Article VII shall not be exclusive of any other rights which such person
may have or hereafter acquire under any statute, provision of the Certificate of
Incorporation, these By-laws, agreement, vote of stockholders or disinterested
directors or otherwise.
SECTION 7.5. Other Indemnification. The Corporation's obligation, if any,
to indemnify any person who was or is serving at its request as a director,
officer, employee or agent of another corporation, partnership, joint venture,
trust, enterprise or nonprofit entity shall be reduced by any amount such person
may collect as indemnification from such other corporation, partnership, joint
venture, trust, enterprise or nonprofit enterprise.
SECTION 7.6. Amendment or Repeal. Any repeal or modification of the
foregoing provisions of this Article VII shall not adversely affect any right or
protection hereunder of any person in respect of any act or omission occurring
prior to the time of such repeal or modification.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Fiscal Year. The fiscal year of the Corporation shall be
determined by resolution of the Board of Directors.
SECTION 8.2. Seal. The corporate seal shall have the name of the
Corporation inscribed thereon and shall be in such form as may be approved from
time to time by the Board of Directors.
SECTION 8.3. Waiver of Notice of Meetings of Stockholders, Directors and
Committees. Any written waiver of notice, signed by the person entitled to
notice, whether before or after the time stated therein, shall be deemed
equivalent to notice. Attendance of a person at a meeting shall constitute a
waiver of notice of such meeting, except when the person attends a meeting for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at nor the purpose of any
regular or special meeting of the stockholders, directors, or members of a
committee of directors need be specified in any written waiver of notice.
SECTION 8.4. Interested Directors; Quorum. No contract or transaction
between the Corporation and one or more of its directors or officers, or between
the Corporation and any other corporation, partnership, association, or other
organization in which one or more of its directors or officers are directors or
officers, or have a financial interest, shall be void or voidable solely for
this reason, or solely because the director or officer is present at or
participates in the meeting of the Board of Directors or committee thereof which
authorizes the contract or transaction, or solely because his or their votes are
counted for such purpose, if: (1) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
Board of Directors or the committee, and the Board of Directors or committee in
good faith authorizes the contract or transaction by the affirmative votes of a
majority of the disinterested directors, even though the disinterested directors
be less than a quorum; or (2) the material facts as to his relationship or
interest and as to the contract or transaction are disclosed or are known to the
stockholders entitled to vote thereon, and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or (3) the
contract or transaction is fair as to the Corporation as of the time it is
authorized, approved or ratified, by the Board of Directors, a committee
thereof, or the stockholders. Common or interested directors may be counted in
determining the presence of a quorum at a meeting of the Board of Directors or
of a committee which authorizes the contract or transaction.
SECTION 8.5. Form of Records. Any records maintained by the Corporation in
the regular course of its business, including its stock ledger, books of
account, and minute books, may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, microphotographs, or any other information storage
device, provided that the records so kept can be converted into clearly legible
form within a reasonable time.
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SECTION 8.6. Amendment of By-Laws. These By-laws may be altered or
repealed, and new By-laws made, by the Board of Directors, but the stockholders
may make additional by-laws and may alter and repeal any by-laws whether adopted
by them or otherwise.
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Side 1
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, TO APPROVE AMENDMENT
OF THE 1996 STOCK OPTION PLAN, TO APPROVE REINCORPORATION OF THE COMPANY IN
DELAWARE, TO APPROVE SETTING THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK OF
THE DELAWARE CORPORATION AT 400,000,000, AND TO RATIFY THE APPOINTMENT OF PRICE
WATERHOUSE LLP AS INDEPENDENT ACCOUNTANTS FOR THE 1997 FISCAL YEAR.
1. Election of directors
Nominees: Rodney Smith; Michael A. Ellison; Paul Newhagen; Robert W. Reed;
William E. Terry; Deborah D. Triant
2. Proposal to amend the 1996 Stock Option Plan to increase from 4,000,000 to
5,300,000 the number of shares of Common Stock reserved for issuance thereunder.
3. Reincorporation in Delaware and Authorized Shares of Common Stock of
Delaware Corporation.
A. Proposal to approve the reincorporation of the Company as a Delaware
corporation.
B. Proposal to set the number of authorized Shares of Common Stock of the
Delaware corporation at 400,000,000.
4. Proposal to ratify the appointment of Price Waterhouse LLP as independent
accountants for the Company for the fiscal year ending December 31, 1997.
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.
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.
(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.)
<PAGE> 52
Back side:
ALTERA CORPORATION
PROXY FOR 1997 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 20, 1997, and hereby appoints
Rodney Smith and Nathan M. Sarkisian 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 1997 Annual Meeting
of Shareholders of ALTERA CORPORATION, to be held on Wednesday, May 7, 1997, 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 on the reverse side.
