<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission
Only (as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
</TABLE>
ALTERA CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
<PAGE> 2
LOGO
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 13, 1998
10:00 A.M.
TO THE STOCKHOLDERS:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Altera
Corporation, a Delaware corporation (the "Company"), will be held on Wednesday,
May 13, 1998, at 10:00 a.m. local time, at the Company's offices at 101
Innovation Drive, San Jose, California, for the following purposes:
1. To elect directors to serve until the next annual meeting of
stockholders or until their successors are elected.
2. To approve an amendment to the 1996 Stock Option Plan to increase from
5,300,000 to 6,500,000 the number of shares of Common Stock reserved for
issuance thereunder.
3. To approve an amendment to the 1987 Employee Stock Purchase Plan to
increase from 2,800,000 to 3,100,000 the number of shares of Common
Stock reserved for issuance thereunder.
4. To approve the adoption of the 1998 Director Stock Option Plan and the
reservation of 170,000 shares of Common Stock for issuance thereunder.
(Approval of this plan will make effective the termination of the 1988
Director Stock Option Plan and the cancellation of approximately 170,000
shares reserved thereunder.)
5. To ratify the appointment of Price Waterhouse LLP as independent
accountants for the Company for the fiscal year ending December 31,
1998.
6. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy
Statement accompanying this Notice. Only stockholders of record at the close of
business on March 19, 1998, are entitled to notice of and to vote at the
meeting.
All stockholders 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. Stockholders 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
April 9, 1998
- --------------------------------------------------------------------------------
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> 3
ALTERA CORPORATION
------------------------
PROXY STATEMENT FOR
ANNUAL MEETING OF STOCKHOLDERS
MAY 13, 1998
INFORMATION CONCERNING SOLICITATION AND VOTING
GENERAL
The enclosed proxy is solicited on behalf of the Board of Directors of
Altera Corporation, a Delaware corporation ("Altera" or the "Company"), for use
at Altera's Annual Meeting of Stockholders (the "Annual Meeting") to be held on
May 13, 1998, or at any adjournment(s) or postponement(s) thereof, for the
purposes set forth herein and in the accompanying Notice of Annual Meeting of
Stockholders.
Altera's principal executive offices are located at 101 Innovation Drive,
San Jose, California 95134. The telephone number at that address is (408)
544-7000.
These proxy solicitation materials were mailed on or about April 9, 1998 to
all stockholders entitled to vote at the Annual Meeting.
RECORD DATE AND SHARES OUTSTANDING
Stockholders of record at the close of business on March 19, 1998 (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 88,932,482 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 stockholder 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 Delaware 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 will reimburse it for certain out-of-pocket expenses. The Company
may reimburse brokerage firms and other
2
<PAGE> 4
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 STOCKHOLDER PROPOSALS FOR 1999 ANNUAL MEETING
Proposals of stockholders of the Company intended to be presented by such
stockholders at the Company's 1999 Annual Meeting of Stockholders must be
received by the Company no later than December 10, 1998 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 seven 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 seven nominees named below. In the event that
any of the seven 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
stockholders 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................... 57 Chairman of the Board of Directors, President and 1983
Chief Executive Officer
Charles M. Clough.............. 69 Director 1997
Michael A. Ellison............. 52 Director 1984
Paul Newhagen.................. 48 Director and Former Vice President -- Administration 1987
Robert W. Reed................. 51 Director 1994
William E. Terry............... 64 Director 1994
Deborah D. Triant.............. 48 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.
CHARLES M. CLOUGH has served as a director of the Company since August
1997. In August 1997, Mr. Clough retired from his position as Chairman of the
Board of Directors of Wyle Electronics, a distributor of semiconductor products
and computer systems. From 1982 to 1997, Mr. Clough held various management
positions at Wyle Electronics, including President, Chief Executive Officer and
Chairman. Wyle Electronics is one of the Company's authorized distributors in
the United States. Prior to joining Wyle Electronics, he had spent 27 years with
Texas Instruments holding a number of management and executive positions
relating to semiconductor operations, including the head of Bipolar operations,
European Semiconductor group and worldwide marketing.
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.
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<PAGE> 5
PAUL NEWHAGEN, a co-founder of the Company, has served as a director of the
Company since July 1987. In April 1998, Mr. Newhagen retired from his position
as Vice President -- Administration of the Company, a position he had held since
December 1994. From June 1993 to November 1994, he served as a consultant to the
Company. From 1983 to 1993, Mr. Newhagen held various management positions at
the Company, including Vice President of Finance and Administration, Chief
Financial Officer and Secretary.
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 seven 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 Delaware law.
BOARD AND COMMITTEE MEETINGS
The Board of Directors held six meetings during the fiscal year ended
December 31, 1997 ("fiscal 1997"). 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 1997.
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 three meetings during fiscal 1997.
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 one
meeting in fiscal 1997. 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 stockholders, 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
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<PAGE> 6
such diversity. The Nominating Committee conducts its evaluation of potential
candidates independently and confidentially; therefore, it does not accept
stockholder recommendations of candidates. In February 1998, the Nominating
Committee nominated the candidates identified in this proxy for election to the
Company's Board of Directors.
During fiscal 1997, no director attended fewer than 75% of the meetings of
the Board of Directors and committees thereof, if any, upon which such director
served.
CERTAIN BUSINESS RELATIONSHIPS
In August 1997, Charles M. Clough retired from his position as Chairman of
the Board of Directors of Wyle Electronics. Immediately thereafter, the Company
named Mr. Clough to its Board of Directors. Mr. Clough is currently a director
of the Company and is a nominee for director. See "-- Nominees." Wyle
Electronics is one of the Company's authorized distributors in the United
States. During fiscal 1997, the Company's sales to end customers in which Wyle
Electronics acted as the Company's distributor exceeded 5% of the Company's
consolidated gross revenues for its 1997 fiscal year of $631.1 million.
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 1997 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 stockholder
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.
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
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<PAGE> 7
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 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 stockholders. 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. Granting stock options are also an important
element in retaining key employees in a competitive industry. 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 and revenue. The
Committee also considers studies from independent consultants of compensation
structures. The Committee has raised Mr. Smith's base annual salary for 1998 to
$550,000 based upon the increased median base salary level of peer company CEOs
and the financial performance of the Company in fiscal 1997, both in absolute
terms and relative to the performance of the peer companies.
The amount of the CEO's 1997 bonus was based on the Company's fiscal 1997
growth of sales revenue and net income over prior year results, subject to a cap
at 150% of the CEO's base salary. During 1997, the Company's revenues grew 27%
and net income grew 39%, excluding a one-time charge for a change in accounting
policy. The revenue growth exceeded the growth rates of all other peer
competitors and more than doubled the median competitor growth rate. The net
income was a record percentage of revenue at 24%. Based on the Company's
results, the Committee awarded the CEO a bonus for fiscal 1997 of $313,250.
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 1997, the Company granted Mr. Smith an option to purchase 150,000 shares 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
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 1997 were generally at or below the median of
the range of peer company base salary data obtained by the Committee.
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<PAGE> 8
Cash bonuses for all executive officers for fiscal 1997 were based on the
Company's revenues and net income compared to prior year revenues and net
income, calculated on the same basis as the CEO's bonus. The executive officers'
annual cash bonuses for fiscal 1997 were above the median of the range of annual
bonus data for peer companies. As in the case of the CEO, executive officer
bonuses for fiscal 1998 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 1998 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 stockholders 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 "1988 Director Plan"). The 1988 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 Stock. In 1997,
the First Option Grants to Outside Directors were 20,000 shares of Common Stock
and Subsequent Option Grants were 5,000 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 Grants
and Subsequent Option Grants vest over a period of years according to the 1988
Director Plan. In no event shall an Outside Director be granted Director Options
to purchase more than 200,000 shares in the aggregate.
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<PAGE> 9
Pursuant to its terms, the 1988 Director Plan will terminate in 1998, along
with any remaining shares reserved for issuance thereunder. Accordingly, the
Company intends to adopt the 1998 Director Stock Option Plan as a replacement
for the 1988 Director Plan. The terms of the 1998 Director Stock Option Plan are
substantially similar to those of the 1988 Director Plan. See "Proposal
Four -- Approval of the 1998 Director Stock Option Plan."
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 (i) persons known by the Company to beneficially own greater than 5% of
the Company's outstanding stock, (ii) each director of the Company, (iii) the
Chief Executive Officer and the four other most highly paid officers of the
Company and (iv) 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
-----------------------
NAME AND ADDRESS OF BENEFICIAL OWNER(1) NUMBER PERCENT(2)
--------------------------------------- --------- ----------
<S> <C> <C>
FIVE-PERCENT STOCKHOLDERS:
FMR Corp.(3)................................................ 9,741,770 11.0%
Entities affiliated with The Equitable Companies
Incorporated(4)........................................... 9,573,567 10.8%
DIRECTORS AND EXECUTIVE OFFICERS:
Rodney Smith(5)............................................. 1,904,000 2.1%
Paul Newhagen(6)............................................ 990,794 1.1%
Charles M. Clough........................................... 1,510 *
Michael A. Ellison(7)....................................... 118,229 *
Robert W. Reed(8)........................................... 41,667 *
William E. Terry(9)......................................... 77,333 *
Deborah Triant(10).......................................... 40,000 *
Denis Berlan(11)............................................ 221,550 *
Nathan Sarkisian(12)........................................ 74,925 *
Erik Cleage(13)............................................. 89,379 *
All directors and executive officers as a group (13
persons)(14).............................................. 3,815,100 4.2%
</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 in a corresponding footnote, the business address of each of the
beneficial owners listed in this table is 101 Innovation Drive, San Jose,
California 95134.
(2) Applicable percentage of ownership is based on 88,932,482 shares of Common
Stock outstanding as of the Record Date together with applicable options
for such stockholder. Beneficial ownership is determined in accordance with
the rules of the Securities and Exchange Commission, and includes voting
and investment power with respect to shares. Shares of Common Stock subject
to options currently exercisable or exercisable within 60 days after the
Record Date are deemed outstanding for computing the percentage ownership
of the person holding such options, but are not deemed outstanding for
computing the percentage of any other person.
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<PAGE> 10
(3) Based on a filing with the Securities and Exchange Commission dated January
10, 1998, indicating beneficial ownership as of December 31, 1997. This
joint filing was made with respect to 9,741,770 shares of the Company's
Common Stock by the following reporting persons: (i) FMR Corp., (ii) Edward
C. Johnson 3d, Chairman and owner of 12.0% of FMR Corp. and (iii) Abigail
Johnson, a director and owner of 24.5% of FMR Corp. Though their ownership
of voting common stock and the execution of a shareholders' voting
agreement, Mr. Johnson and Ms. Johnson may be deemed to form a controlling
group with respect to FMR Corp. According to such filing, FMR Corp. has
sole voting power with respect to 604,100 such shares and sole dispositive
power with respect to all 9,741,770 such shares. The business address for
each such reporting person is 82 Devonshire Street, Boston, Massachusetts
02109.
(4) Based on a filing with the Securities and Exchange Commission dated
February 10, 1998, indicating beneficial ownership as of January 31, 1998.
This joint filing was made with respect to 9,573,567 shares of the
Company's Common Stock by the following reporting persons: (i) a group
(collectively referred to as "Mutuelles AXA") consisting of 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 Chateaudun, 75009
Paris, France) and AXA Courtage Assurance Mutuelle (business address: 26,
rue Louis le Grand, 75002 Paris, France); (ii) AXA-UAP (business address:
23, avenue Matignon, 75008 Paris, France); and (iii) The Equitable
Companies Incorporated (business address: 1290 Avenue of the Americas, New
York, New York 10104), 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 3,571,818 such shares, shared voting
power with respect to 5,251,296 such shares and sole dispositive power with
respect to all 9,573,567 such shares. Each of the Mutuelles AXA and AXA-UAP
disclaim beneficial ownership of all such shares.
(5) Includes 430,000 shares which Mr. Smith has the right to acquire within 60
days of the Record Date through exercise of options.
(6) Includes 85,000 shares which Mr. Newhagen has the right to acquire within
60 days of the Record Date through exercise of options.
(7) Includes 56,333 shares which Mr. Ellison has the right to acquire within 60
days of the Record Date through exercise of options.
(8) Includes 41,667 shares which Mr. Reed has the right to acquire within 60
days of the Record Date through exercise of options.
(9) Includes 73,333 shares which Mr. Terry has the right to acquire within 60
days of the Record Date through exercise of options.
(10) Includes 40,000 shares which Dr. Triant has the right to acquire within 60
days of the Record Date through exercise of options.
(11) Includes 184,000 shares which Mr. Berlan has the right to acquire within 60
days of the Record Date through exercise of option.
(12) Includes 73,500 shares which Mr. Sarkisian has the right to acquire within
60 days of the Record Date through exercise of options.
(13) Includes 33,334 shares which Mr. Cleage has the right to acquire within 60
days of the Record Date through exercise of options.
(14) Includes 1,269,834 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.
9
<PAGE> 11
EXECUTIVE COMPENSATION
Summary of Officer Compensation
The following table summarizes the total compensation of the Chief
Executive Officer and the four other most highly compensated executive officers
of the Company in fiscal 1997 as well as the total compensation earned by 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($) OPTIONS(#) ($)
--------------------------- ---- --------- -------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Rodney Smith........................... 1997 496,172 313,250 150,000 17,840(1)
President and Chief Executive Officer 1996 390,778 195,680 200,000 16,246(1)
1995 325,000 492,814 80,000 16,618(1)
Denis M. Berlan........................ 1997 258,010 162,890 100,000 8,505(2)
Chief Operating Officer 1996 195,389 97,840 150,000 7,985(2)
1995 195,000 295,689 26,500 6,849(2)
Paul Newhagen.......................... 1997 225,008 140,963 20,000 6,700(3)
Former Vice President 1996 190,004 92,948 40,000 6,199(3)
-- Administration 1995 170,961 265,361 30,000 4,869(3)
Nathan Sarkisian....................... 1997 223,278 140,963 50,000 5,269(4)
Vice President -- Finance and 1996 172,984 85,610 100,000 3,825(4)
Chief Financial Officer 1995 123,424 227,453 115,800 4,044(4)
Erik Cleage............................ 1997 240,009 112,770 40,000 6,045(5)
Vice President -- Marketing 1996 200,004 97,840 100,000 5,223(5)
1995 166,269 250,198 40,000 4,407(5)
</TABLE>
- ---------------
(1) Represents $16,340, $14,746 and $15,118 of disability insurance premiums,
life insurance premiums and medical examination costs paid by the Company in
fiscal 1997, fiscal 1996 and fiscal 1995, respectively, and a $1,500
contribution by the Company under its 401(k) plan in each such year.
(2) Represents $7,005, $6,485 and $5,349 of disability insurance premiums, life
insurance premiums and medical examination costs paid by the Company in
fiscal 1997, fiscal 1996 and fiscal 1995, respectively, and a $1,500
contribution by the Company under its 401(k) plan in each such year.
(3) Represents $5,200, $4,699 and $3,369 of disability insurance premiums, life
insurance premiums and medical examination costs paid by the Company in
fiscal 1997, fiscal 1996 and fiscal 1995, respectively, and a $1,500
contribution paid by the Company under its 401(k) plan in each such year.
(4) Represents $3,134, $2,325 and $2,544 of disability insurance premiums and
life insurance premiums paid by the Company in fiscal 1997, fiscal 1996 and
fiscal 1995, respectively, and a $1,500 contribution by the Company under
its 401(k) plan in each such year.
(5) Represents $4,545, $3,723 and $2,907 of disability insurance premiums, life
insurance premiums and medical examination costs paid by the Company in
fiscal 1997, fiscal 1996 and fiscal 1995, respectively, and a $1,500
contribution paid by the Company under its 401(k) plan in each such year.
10
<PAGE> 12
Options Granted During Fiscal 1997
The following table summarizes the grants of options to purchase the
Company's Common Stock made to the persons named in the Summary Compensation
Table.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS POTENTIAL REALIZABLE VALUE AT
---------------------------------------------------------------- ASSUMED ANNUAL RATES OF
NUMBER OF % OF TOTAL OPTIONS STOCK PRICE APPRECIATION FOR
SECURITIES GRANTED TO EXERCISE OPTION TERM(2)
UNDERLYING OPTIONS EMPLOYEES PRICE EXPIRATION ------------------------------
NAME GRANTED(#)(1) IN FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
---- ------------------ ------------------ --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Rodney Smith......... 150,000(3) 7.6% 30.56 12/12/07 2,883,089 7,306,313
Denis M. Berlan...... 100,000(4) 5.1% 30.56 12/12/07 1,922,059 4,870,875
Paul Newhagen........ 20,000(5) 1.0% 30.56 12/12/07 384,412 974,175
Nathan Sarkisian..... 50,000(6) 2.5% 30.56 12/12/07 961,030 2,435,438
Erik Cleage.......... 40,000(7) 2.0% 30.56 12/12/07 768,824 1,948,350
</TABLE>
- ---------------
(1) 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").
(2) The 5% and 10% assumed compound rates of annual stock price appreciation are
mandated by the rules of the Securities and Exchange Commission and do not
represent the Company's estimate or projection of future Common Stock
prices.
(3) 6,250 shares vest monthly from January 1, 2001 through December 31, 2002.
(4) 4,166 shares vest monthly from January 1, 2001 through December 31, 2002.
(5) 1,666 shares vest monthly from January 1, 2001 through December 31, 2001.
(6) 2,083 shares vest monthly from January 1, 2001 through December 31, 2002.
(7) 3,333 shares vest monthly from January 1, 2001 through December 31, 2001.
Option Exercises and Fiscal 1997 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 IN-
OPTIONS AT FISCAL YEAR- THE-MONEY OPTIONS AT
SHARES END(#) FISCAL YEAR-END($)(1)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Rodney Smith............ -- -- 395,000 555,000 5,964,973 10,321,872
Denis M. Berlan......... 10,000 407,000 160,666 383,834 3,356,214 4,597,463
Paul Newhagen........... -- -- 77,333 130,999 1,253,165 2,244,323
Nathan Sarkisian........ 6,500 308,047 61,750 248,550 875,021 494,532
Erik Cleage............. 60,000 2,525,998 39,844 244,000 2,540,488 807,545
</TABLE>
- ---------------
(1) Amounts reflecting gains on outstanding stock options are based on the
closing price of the Company's Common Stock on December 31, 1997 of $33.125.
11
<PAGE> 13
Termination of Employment Arrangement
Effective April 1, 1998, Mr. Newhagen resigned from his position as Vice
President -- Administration of the Company. Although the Company currently has
no compensatory plan or arrangement with Mr. Newhagen, the Company anticipates
that it may from time to time enter into consulting arrangements with Mr.
Newhagen as needed. Mr. Newhagen intends to continue his services as a director
of the Company, subject to re-election at this Annual Meeting. As a non-employee
director, Mr. Newhagen will be eligible to receive outside director compensation
and stock option grants under the 1998 Director Stock Option Plan, if such plan
is approved at this Annual Meeting.
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% stockholders
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, 1997, all Section 16(a) filing requirements applicable to its
officers, directors, and 10% stockholders were complied with. In making these
statements, the Company has relied upon the written representations of its
officers and directors.
12
<PAGE> 14
COMPANY PERFORMANCE
The following graph shows a comparison, since January 1, 1993, of
cumulative total return for the Company, the Standard & Poor's 500 Index and the
Standard & Poor's Semiconductor Index.
<TABLE>
<CAPTION>
S&P
Measurement Period Semiconductor
(Fiscal Year Covered) Altera Corporation S&P 500 Index Index
<S> <C> <C> <C>
1/1/93 100 100 100
1/1/94 254.36 107.06 152.68
1/1/95 325.24 105.41 177.82
1/1/96 772.8 141.36 240.08
1/1/97 1129.11 170.01 431
12/31/97 1029.11 222.72 462.68
</TABLE>
Assumes $100 invested on December 31, 1992 in Altera Common Stock, Standard &
Poor's 500 Index and Standard & Poor's Semiconductor Index. Total return is
based on historical results and is not intended to indicate future performance.
- ---------------
* 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 stockholders 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 1997, the stockholders approved an amendment to the 1996 Plan to increase the
number of shares reserved for issuance thereunder by 1,300,000 at that year's
annual meeting.
As of the Record Date, options to purchase an aggregate of 4,470,408 shares
were outstanding and 794,345 shares (exclusive of the 1,200,000 shares subject
to stockholder approval at this Annual Meeting) were available for future grant.
In addition, 35,247 shares had been issued pursuant to the exercise of stock
options granted under the 1996 Plan. The 1996 Plan authorizes the Board of
Directors to grant stock options to eligible employees and consultants of the
Company. The 1996 Plan is structured to allow the Board of
13
<PAGE> 15
Directors broad discretion in creating equity incentives in order to assist the
Company in attracting, retaining and motivating the best available personnel for
the successful conduct of the Company's business. The Board of Directors
believes that the remaining shares available for grant under the 1996 Plan are
insufficient to accomplish these purposes.
In February 1998, the Board of Directors approved an amendment to the 1996
Plan, subject to stockholder approval, to increase the number of shares reserved
for issuance thereunder by 1,200,000, thereby increasing the total number of
shares issuable under the 1996 Plan from 5,300,000 to 6,500,000.
In December 1997, the Company reactivated its program to repurchase up to
2,000,000 shares of its Common Stock. Under the program, which was previously
authorized by the Board of Directors, the shares may be purchased in the open
market from time to time at the discretion of the Company's management. Since
the program's reactivation, the Company has repurchased 540,000 shares in the
aggregate, which in turn has resulted in a corresponding reduction in the
Company's total number of shares outstanding.
STOCKHOLDER PROPOSAL
At the Annual Meeting, the stockholders are being requested to approve the
proposed amendment to the 1996 Plan to increase from 5,300,000 to 6,500,000 the
number of shares reserved for issuance thereunder.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present or represented and voting at the Annual Meeting
will be required to approve the amendment to the 1996 Plan. IN ORDER TO PROVIDE
INCENTIVES TO ELIGIBLE EMPLOYEES AND TO ALIGN THEIR INTERESTS DIRECTLY WITH
THOSE OF THE STOCKHOLDERS, THE COMPANY'S BOARD OF DIRECTORS HAS UNANIMOUSLY
APPROVED THE PROPOSED AMENDMENT AND RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" SUCH
AMENDMENT.
The essential features of the 1996 Plan are outlined below.
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 Internal Revenue Code of 1986, as amended (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.
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 stockholders.
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 to employees other than officers
14
<PAGE> 16
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% stockholders 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 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, approximately 950
employees (including officers) were eligible to participate in the 1996 Plan.
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
500,000 shares per fiscal year; provided, however, that new hires may receive
additional Option grants for no more than 500,000 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.
Effective October 1, 1997, the form of Option agreement used under the 1996
Plan for all new employees provides that an Option will be exercisable
cumulatively as to 25% of the Option shares at the end of the first year and
then monthly in equal amounts until 100% of the Option shares have vested at the
end of four years, so long as employment continues. Additional Options granted
to existing employees will typically vest monthly over a one-year period ending
four years from the date of grant.
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 Delaware
General Corporation Law.
(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
15
<PAGE> 17
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.
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
16
<PAGE> 18
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
stockholder 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 stockholders 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
stockholders of the Company.
TAX INFORMATION
Incentive Stock Options
The Code provides to Optionees favorable federal income tax treatment of
Options which qualify as Incentive Stock 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. 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.
17
<PAGE> 19
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.
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.
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 1997, the Company
received a tax benefit (resulting from tax deductions) of approximately $47.0
million and $962,000 with respect to options exercised by employees under the
1987 Plan and the 1996 Plan, respectively. These amounts are in addition to
approximately $7.3 million and $731,000 received by the Company as payment of
the exercise price of such options under each plan, respectively.
Tax Summary
The foregoing summary of the effect of federal income taxation upon the
Optionee and the Company with respect to the grant of Options and purchase of
shares under the 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.
PARTICIPATION IN THE 1996 PLAN
The grant of stock options under the 1996 Plan to executive officers,
including the executive officers named in the Summary Compensation Table herein
(the "Named Officers"), is subject to the discretion of the Board of Directors.
Since the 1996 Plan's inception, Messrs. Smith, Berlan, Newhagen, Sarkisian and
Cleage were granted options to purchase 350,000, 250,000, 60,000, 150,000 and
140,000 shares, respectively. See "Proposal One -- Election of Directors
-- Executive Compensation -- Options Granted During Fiscal 1997" for
information with respect to the grant of options to the Named Officers during
fiscal 1997. Since the 1996 Plan's inception, all current executive officers as
a group (including the Named Officers) and all other employees as a group were
granted options to purchase 1,074,000 and 3,636,570 shares, respectively. During
fiscal 1997, all current executive officers as a group (including the Named
Officers) and all other employees as a group were granted options to purchase
398,000 and 1,577,570 shares, respectively, pursuant to the 1996 Plan. As of the
date hereof, there has been no determination as to future awards under the 1996
Plan. Accordingly, future benefits or amounts received are not determinable.
PROPOSAL THREE -- APPROVAL OF AMENDMENT TO
1987 EMPLOYEE STOCK PURCHASE PLAN
The 1987 Employee Stock Purchase Plan (the "1987 Purchase Plan") was
adopted by the Board of Directors in August 1987 and approved by the
stockholders in September 1987. Since the Plan's adoption, the Board of
Directors has authorized amendments to the 1987 Purchase Plan to increase the
shares reserved for issuance thereunder from 200,000 to 700,000 which increases
were approved by the stockholders. As a result of the Company's two-for-one
stock splits in each of May 1995 and December 1996, the number of shares
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<PAGE> 20
reserved for issuance thereunder increased to 2,800,000. In January 1998, the
Board of Directors approved an amendment to the 1987 Purchase Plan, subject to
stockholder approval, to increase the number of shares reserved for issuance
thereunder by 300,000, thereby increasing the total number of shares issuable
thereunder from 2,800,000 to 3,100,000.
STOCKHOLDER PROPOSAL
At the Annual Meeting, the stockholders are being requested to approve the
proposed amendment of the 1987 Purchase Plan to increase from 2,800,000 to
3,100,000 the number of shares reserved for issuance thereunder.
VOTE REQUIRED AND BOARD OF DIRECTORS' RECOMMENDATION
The affirmative vote of the holders of a majority of the shares of the
Company's Common Stock present or represented and voting at the Annual Meeting
will be required to approve the amendment to the 1987 Purchase Plan. THE
COMPANY'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE PROPOSED AMENDMENT AND
RECOMMENDS THAT THE STOCKHOLDERS VOTE "FOR" SUCH AMENDMENT.
The essential features of the 1987 Purchase Plan are outlined below.
GENERAL
The 1987 Purchase Plan, and the right of participants to make purchases
thereunder, is intended to qualify as an "Employee Stock Purchase Plan" under
the provisions of Sections 421 and 423 of the Code. The provisions of the 1987
Purchase Plan shall, accordingly, be construed so as to extend and limit
participation in a manner consistent with the requirements of those sections of
the Code.
The 1987 Purchase Plan is not a qualified deferred compensation plan under
Section 401(a) of the Code, and is not subject to the provisions of ERISA.
PURPOSE
The purpose of the 1987 Purchase Plan is to provide employees of the
Company (and any of its subsidiaries which is designated by the Board of
Directors) with an opportunity to purchase Common Stock of the Company through
accumulated payroll deductions.
ADMINISTRATION
The 1987 Purchase Plan may be administered by the Board of the Company or a
committee of members of the Board appointed by the Board. Once appointed, the
members of the committee shall continue to serve until otherwise directed by the
Board. The administration, interpretation or application of the 1987 Purchase
Plan by the Board of Directors or its committee shall be final, conclusive and
binding upon all participants. Members of the Board who are eligible employees
are permitted to participate in the 1987 Purchase Plan, provided that such
members may not vote on any matter affecting the administration of the 1987
Purchase Plan or the grant of any Option pursuant to the 1987 Purchase Plan,
and, if a committee is established to administer the 1987 Purchase Plan, no
member of the Board who is eligible to participate in the 1987 Purchase Plan may
be a member of the committee. No charges for administrative or other costs may
be made against the payroll deductions of a participant in the 1987 Purchase
Plan. Members of the Board receive no additional compensation for their services
in connection with the administration of the 1987 Purchase Plan.
ELIGIBILITY
Any person, including an officer, who is customarily employed for at least
20 hours per week and more than five months in a calendar year by the Company
(or any of its subsidiaries which is designated from time to time by the Board)
as of the first day of a given offering period shall be eligible to participate
in the 1987 Purchase Plan. Notwithstanding the foregoing, no participant shall
be granted an Option under the 1987 Purchase Plan which would permit the
participant's rights to purchase stock under all employee stock
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<PAGE> 21
purchase plans of the Company and its subsidiaries to accrue at a rate which
exceeds $25,000 of fair market value of such stock (determined at the time such
Option is granted) for each calendar year in which such Option is outstanding at
any time. Furthermore, if the number of shares which would otherwise be subject
to Options under the 1987 Purchase Plan at the beginning of an offering period
exceeds the number of shares then available for grant, a pro rata allocation of
the available shares shall be made in as uniform a manner as is practicable and
as the Company shall determine to be equitable. As of the Record Date, 1,074
employees were eligible to participate in the 1987 Purchase Plan.
OFFERING PERIODS
Typically, the 1987 Purchase Plan is implemented by one offering during
each six-month period of the plan. Prior to 1998, the offering periods commenced
on or about February 16 and August 16 of each year. In January 1998, the Board
of Directors approved a change to the commencement dates of the offering periods
from February 16 and August 16 to April 16 and October 16, respectively. In
order to transition to the new periods, there will be two offering periods of
4-months duration in 1998. Beginning October 16, 1998, the standard 6-month
offering periods will resume. In the future, the Board of Directors may alter
the duration of the offering periods with respect to future offerings without
stockholder approval if such change is announced at least 15 days prior to the
scheduled beginning of the first offering period to be affected.
ENROLLMENT IN THE PLAN
Eligible employees become participants in the 1987 Purchase Plan by filing
with the Company's payroll office a completed subscription agreement authorizing
payroll deductions prior to the applicable offering date, unless a later time
for filing the subscription agreement has been set by the Board for all eligible
employees with respect to a given offering. A person who becomes employed after
the commencement of an offering may not participate in the 1987 Purchase Plan
until the commencement of the next offering.
PURCHASE PRICE
The purchase price per share at which shares are sold under the 1987
Purchase Plan is the lower of: (i) 85% of the fair market value of a share of
the Common Stock of the Company on the first day of the offering period; or (ii)
85% of the fair market value of a share of the Common Stock of the Company on
the last day of the offering period. The 1987 Purchase Plan provides that,
because the Company's Common Stock is currently traded on the Nasdaq National
Market, the fair market value of a share of the Common Stock on a given date
shall be the closing price on the Nasdaq National Market, on such date, as
reported in The Wall Street Journal.
PAYMENT OF THE PURCHASE PRICE; PAYROLL DEDUCTIONS
The purchase price of the shares is accumulated by payroll deductions
during the offering period. The deductions may not exceed 10% of a participant's
eligible compensation received on each payday. The aggregate of such payroll
deductions during the offering period cannot exceed 10% of his or her aggregate
compensation during such offering period. Partial share dollar amounts carried
over into the following offering period will reduce the withholding if it would
exceed 10% of a participant's eligible compensation. Compensation is defined as
all regular straight time gross earnings, plus sales commissions and sales
incentives earned during the entire offering period, but exclusive of payments
for overtime, shift premium, other incentive compensation, other incentive
payments, bonuses, or other compensation. Payroll deductions shall commence on
the first payday following the first day of the offering period and shall
continue at the same percentage rate until the end of the offering period unless
sooner terminated. No interest shall accrue on the payroll deductions of a
participant in the 1987 Purchase Plan. At any time during the offering period, a
participant may discontinue payroll deductions under the 1987 Purchase Plan
without withdrawing amounts contributed through prior payroll deductions. All
payroll deductions received or held by the Company under the 1987 Purchase Plan
may be used by the Company for any corporate purpose, and the Company is not
obligated to segregate such payroll deductions.
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<PAGE> 22
PURCHASE OF STOCK; GRANT OF OPTIONS
On the first day of each offering period, each eligible employee
participating in the 1987 Purchase Plan shall be granted an option (an "Option")
to purchase (at the per-share option price) up to a number of shares determined
by dividing such employee's payroll deductions accumulated during such offering
period (not to exceed an amount equal to 10% of his or her compensation during
such offering period) by the Option purchase price determined as described under
"Purchase Price" above, subject to the limitations set forth in the 1987
Purchase Plan.
EXERCISE OF OPTIONS
Unless the participant's participation is discontinued, each participant's
Option for the purchase of the maximum number of full shares will be exercised
automatically at the end of the offering period at the applicable price.
WITHDRAWAL
A participant may withdraw all, but no less than all, the payroll
deductions credited to his or her account under the 1987 Purchase Plan at any
time prior to the last day of the offering period by giving written notice to
the Company. All of the participant's payroll deductions credited to his or her
account will be paid to him or her promptly after receipt of his or her notice
of withdrawal, and his or her option for the current period will be
automatically terminated, and no further payroll deductions for the purchase of
shares will be made during the offering period.
In the event that a participant fails to remain in the continuous employ of
the Company for at least 20 hours per week during the offering period, such
participant will be deemed to have elected to withdraw from the 1987 Purchase
Plan and the payroll deductions credited to such participant's account will be
returned to such participant and his or her Option will be automatically
terminated.
A participant's withdrawal from an offering does not have any effect upon
such participant's eligibility to participate in subsequent offerings under the
1987 Purchase Plan or in any similar plan which may be adopted by the Company.
TERMINATION OF INTERRUPTION OF EMPLOYMENT
Upon termination or interruption of a participant's employment for any
reason, including retirement or death, prior to the last day of the offering
period, the payroll deductions credited to the participant's account will be
returned to such participant, or, in the case of the participant's death, to the
person or persons entitled thereto as specified in the participant's
subscription agreement, and his or her Option will be automatically terminated.
ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR MERGER
In the event any change, such as a stock split or payment of a stock
dividend, is made in the Company's capitalization which results in an increase
or decrease in the number of outstanding shares of Common Stock without receipt
of additional consideration by the Company, an appropriate adjustment will be
made in the shares subject to purchase and in the purchase price per share,
subject to any required action by the stockholders. In the event of the proposed
dissolution or liquidation of the Company, the offering period will terminate
immediately prior to the consummation of such proposed action, unless otherwise
provided by the Board. In the event of a proposed sale of all or substantially
all of the assets of the Company, or the merger of the Company with or into
another corporation, each Option shall be assumed or an equivalent option shall
be substituted by such successor corporation or a parent or subsidiary of such
successor corporation, unless the participant shall have the right to exercise
the Option as to all of the optioned stock, including shares as to which the
Option would not otherwise be exercisable. If the Board makes an Option fully
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Board shall notify the participant that
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<PAGE> 23
the Option shall be fully exercisable for a period of 15 days from the date of
such notice, and the Option will terminate upon the expiration of such period.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the number of shares available for grant, as
well as the price per share of Common Stock covered by each outstanding Option,
in the event that the Company effects one or more reorganizations,
recapitalizations, rights offerings or other increases or reductions of shares
of its outstanding Common Stock, and in the event of the Company being
consolidated with or merged into any other corporation.
NONASSIGNABILITY
Neither payroll deductions credited to a participant's account nor any
rights with regard to the exercise of an Option or to receive shares under the
1987 Purchase Plan may be assigned, transferred, pledged or otherwise disposed
of in any way (other than by will, the laws of descent, and distribution or as
provided in the 1987 Purchase Plan) by the participant. Any such attempt at
assignment, transfer, pledge or other disposition shall be without effect,
except that the Company may treat such act as an election to withdraw from the
1987 Purchase Plan.
AMENDMENT AND TERMINATION OF THE PLAN
The Board of Directors may at any time or from time to time amend or
terminate the 1987 Purchase Plan, except that such termination shall not affect
Options previously granted nor may any amendment make any change in an Option
granted prior thereto which adversely affects the rights of any participant. No
amendment may be made to the 1987 Purchase Plan without prior approval of the
stockholders of the Company if such amendment would increase the number of
shares reserved for issuance under the 1987 Purchase Plan, permit payroll
deductions at a rate in excess of 10% of the participant's compensation as
defined in the 1987 Purchase Plan, modify the designation of the employees (or
class of employees) eligible to participate in the plan, or materially increase
the benefits which may accrue to participants under the 1987 Purchase Plan. The
1987 Purchase Plan shall continue in effect until August 2007, unless sooner
terminated as described above.
TAX INFORMATION
The 1987 Purchase Plan and the right of participants to make purchases
thereunder is intended to qualify under the provisions of Sections 421 and 423
of the Code. Under these provisions, no income will be taxable to a participant
at the time of grant of the Option or the purchase of shares. A participant may
become liable for tax upon disposition of the shares acquired, as follows.
If the shares are sold or disposed of (including by way of gift) at least
two years after the offering date (the first day of the offering period during
which shares were purchased) and more than one year after the date on which
shares were transferred to the employee, then the lesser of (a) the excess of
the fair market value of the shares at the time of such disposition over the
purchase price of the shares subject to the Option (the "Option Price") or (b)
15% of the fair market value of the shares on the offering date, will be treated
as ordinary income to the participant. Any further gain or loss upon such
disposition will be treated as long-term capital gain or loss. If the shares are
sold and the sales price is less than the Option Price, there is no ordinary
income and the participant has a capital loss for the difference.
If the shares are sold or disposed of (including by way of gift or by
exchange in connection with the exercise of an incentive stock option) before
the expiration of the holding periods described above, then the excess of the
fair market value of the shares on the date of Option exercise over the Option
Price will be treated as ordinary income to the participant. This excess will
constitute ordinary income in the year of sale or other disposition even if no
gain is realized on the sale or a gratuitous transfer of the shares is made. Any
gain or loss also recognized in connection with any such sale or exchange will
be treated as capital gain or loss and will be treated as short-term capital
gain or loss if the shares have been held less than one year.
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<PAGE> 24
If shares are sold or disposed of before the expiration of the statutory
holding periods, the Company is generally entitled to a tax deduction in an
amount equal to the ordinary income recognized by the participant in connection
with such sale or disposition.
The foregoing summary of the effect of federal income taxation upon the
participant and the Company with respect to the shares purchased under the 1987
Purchase Plan does not purport to be complete. Reference should be made to the
applicable provisions of the Code. In addition, the summary does not discuss the
tax implications of a participant's death or the provisions of the income tax
laws of any municipality, state or foreign country in which the participant may
reside.
PARTICIPATION IN THE 1987 PURCHASE PLAN
Eligible employees participate in the 1987 Purchase plan voluntarily and
each such employee determines his or her level of payroll deductions within the
guidelines fixed by the 1987 Purchase Plan. Accordingly, future purchases under
the 1987 Purchase Plan are not determinable at this time.
PROPOSAL FOUR -- APPROVAL OF THE 1998 DIRECTOR STOCK OPTION PLAN
On January 14, 1998, the Board of Directors adopted the 1998 Director Stock
Option Plan (the "Director Plan") and reserved 170,000 shares of Common Stock
for issuance thereunder subject to stockholder approval. As of the Record Date,
no options to purchase stock had been granted pursuant to the Director Plan.
The Director Plan is intended to replace the 1988 Director Stock Option
Plan which, along with the remaining 170,632 shares reserved for issuance
thereunder, will terminate upon stockholder approval of the Director Plan. The
terms of the proposed Director Plan are substantially similar to those of the
1988 Director Stock Option Plan.
STOCKHOLDER PROPOSAL
At the Annual Meeting, the stockholders are being requested to approve the
adoption of the 1998 Director Stock Option Plan and the reservation of 170,000
shares of Common Stock 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 adoption of the 1998 Director Stock Option Plan.
THE COMPANY'S BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE 1998 DIRECTOR
STOCK OPTION PLAN AND RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE ADOPTION OF
THE 1998 DIRECTOR STOCK OPTION PLAN. APPROVAL OF THE 1998 DIRECTOR STOCK OPTION
PLAN WILL MAKE EFFECTIVE THE TERMINATION OF THE 1988 DIRECTOR STOCK OPTION PLAN
AND THE CANCELLATION OF APPROXIMATELY 170,000 SHARES RESERVED FOR ISSUANCE
THEREUNDER.
SUMMARY OF THE DIRECTOR PLAN
The discussion set forth below is qualified in its entirety by reference to
the 1998 Director Stock Option Plan, a copy of which is attached hereto as
Appendix A.
General. The purpose of the Director Plan is to attract and retain the best
available personnel for positions for service as non-employee directors of the
Company, to provide additional incentive to the non-employee directors of the
Company and to encourage their continued service on the Board of Directors.
Administration. The Director Plan provides for grants of options to be made
in the following ways. Each non-employee director is automatically granted an
option to purchase 20,000 shares (the "First Option") upon the date on which
such individual first becomes a director, whether through election by the
stockholders of the Company or by appointment by the Board in order to fill a
vacancy. In addition, each non-employee director is automatically granted an
option to purchase 5,000 shares (the "Subsequent Option") on the day of the
annual stockholder meeting at which the director is reelected to an additional
term. However, for the first grant of a
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Subsequent Option, the non-employee director receives a pro-rated grant which
reflects the portion of the year up through the date of re-election that he or
she has served as a director. The Board may, at any time, amend the Director
Plan to increase or decrease the number of shares subject to either the First
Option or the Subsequent Option without obtaining stockholder approval.
Eligibility. Only non-employee directors of the Board of Directors of the
Company are eligible to receive nonstatutory stock options under the Director
Plan.
Terms and Conditions of Options. Each option is evidenced by a director
option agreement between the Company and the optionee, and is subject to the
following additional terms and conditions:
(a) Exercise Price. The exercise price of options granted under the
Director Plan is 100% of the fair market value per share of the Common Stock on
the date of grant, generally determined with reference to the closing sale price
for the Common Stock (or the closing bid if no sales were reported) on the last
market trading day prior to the date the option is granted.
(b) Exercise of Option. The First Option shall vest as to 25% of the
optioned stock one year from the date of grant, and 1/48th of the optioned stock
each month thereafter, provided the person continues to serve as a director on
such dates. The Subsequent Option shall vest as to 1/12th of the optioned stock
at the end of each month beginning after all prior option grants under the
Director Plan have vested, provided the person continues to serve as a director
on such dates. However, the first Subsequent Option shall vest at a rate equal
to the number of shares subject to the first Subsequent Option divided by the
number of months from the date the director became an non-employee director to
the date of the stockholder's meeting at which the director was granted the
first Subsequent Option.
(c) Forms of Consideration. The means of payment for shares issued upon
exercise of an option is specified in each option agreement. The Director Plan
permits payment to be made by cash, check, other shares of Common Stock of the
Company (with some restrictions), cashless exercises or any combination thereof.
(d) Term of Option. The term of any option shall be ten (10) years from the
date of grant. No option may be exercised after the expiration of its term.
(e) Suspension or Termination of Option. If the President or his designee
reasonably believes that an optionee has committed an act of misconduct, the
President or his designee may suspend the optionee's right to exercise his or
her options pending a determination by the Board. If the Board determines an
optionee has committed an act of misconduct, neither the optionee nor his or her
estate shall be entitled to exercise any of his or her options. The optionee has
a right to appear and present evidence at a hearing before a committee of the
Board at such determination.
(f) Termination of Directorship. If an optionee's status as a director
terminates for any reason (other than death or disability), then all options
held by the optionee under the Director Plan expire on the earlier of (i) the
date set forth in his or her notice of grant or (ii) the expiration date of such
option. To the extent the option is exercisable at the time of such termination,
the optionee may exercise all or part of his or her option for up to three (3)
months following the termination or for such other period of time as determined
by the Board. If a sale of optioned stock would subject the optionee to
liability under Section 16 of the Securities and Exchange Act of 1934, the
option will terminate on the earlier of (i) the fifteenth day after the last day
upon which such sale would result in liability or (ii) two hundred ten (210)
days following the date of termination of the optionee's directorship.
(g) Death or Disability. If an optionee's status as a director terminates
as a result of disability, then all options held by such optionee under the
Director Plan expire on the earlier of (i) 3 months from the date of such
termination or (ii) the expiration date of such option. If an optionee's status
as a director terminates as a result of death, then all options held by such
optionee under the Director Plan expire on the earlier of (i) 6 months from the
date of such termination or (ii) the expiration date of such option. The
optionee (or the optionee's estate or the person who acquires the right to
exercise the option by bequest or inheritance), may
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exercise all or part of the option at any time before such expiration to the
extent that the option was exercisable at the time of such termination.
(h) Nontransferability of Options. Options granted under the Director Plan
are not transferable other than by will or the laws of descent and distribution,
and may be exercised during the optionee's lifetime only by the optionee.
(i) Other Provisions. The director option agreement may contain other
terms, provisions and conditions not inconsistent with the Director Plan as may
be determined by the Administrator.
Adjustments Upon Changes in Capitalization. In the event that the stock of
the Company changes by reason of any stock split, reverse stock split, stock
dividend, combination, reclassification or other similar change in the capital
structure of the Company effected without the receipt of consideration,
appropriate adjustments shall be made in the number and class of shares of stock
subject to the Director Plan, the number and class of shares of stock subject to
any option outstanding under the Director Plan, and the exercise price of any
such outstanding option.
In the event of a proposed liquidation or dissolution, any unexercised
options will terminate prior to such action. The Board may give the optionee the
right to exercise any unexercised options prior to their termination.
In the event of a merger of the Company or the sale of substantially all of
the assets of the Company, each option may be assumed or an equivalent option
substituted for by the successor corporation. If an option is assumed or
substituted for by the successor corporation, it shall continue to vest as
provided in the Director Plan. However, if a non-employee director's status as a
director of the Company or the successor corporation, as applicable, is
terminated other than upon a voluntary resignation by the non-employee director,
each option granted to such non-employee director shall become fully vested and
exercisable. If the successor corporation does not agree to assume or substitute
for the option, each option shall become fully vested and exercisable for a
period of thirty days from the date the Board notifies the optionee of the
option's full exercisability, after which period the option shall terminate.
Amendment and Termination of the Director Plan. The Board may amend, alter,
suspend or terminate the Director Plan, or any part thereof, at any time and for
any reason. However, the Company shall obtain stockholder approval for any
amendment to the Director Plan to the extent necessary to comply with applicable
laws. No such action by the Board or stockholders may alter or impair any option
previously granted under the Director Plan without the written consent of the
optionee.
FEDERAL INCOME TAX CONSEQUENCES
An optionee does not recognize any taxable income at the time he or she is
granted a nonstatutory stock option. Upon exercise, the optionee recognizes
taxable income generally measured by the excess of the then fair market value of
the shares over the exercise price. The Company is entitled to a deduction in
the same amount as the ordinary income recognized by the optionee. Upon a
disposition of such shares by the optionee, any difference between the sale
price and the optionee's exercise price, to the extent not recognized as taxable
income as provided above, is treated as long-term or short-term capital gain or
loss, depending on the holding period.
THE FOREGOING IS ONLY A SUMMARY OF THE EFFECT OF FEDERAL INCOME TAXATION
UPON OPTIONEES AND THE COMPANY WITH RESPECT TO THE GRANT AND EXERCISE OF OPTIONS
UNDER THE DIRECTOR PLAN. IT DOES NOT PURPORT TO BE COMPLETE, AND DOES NOT
DISCUSS THE TAX CONSEQUENCES OF THE DIRECTOR'S DEATH OR THE PROVISIONS OF THE
INCOME TAX LAWS OF ANY MUNICIPALITY, STATE OR FOREIGN COUNTRY IN WHICH THE
DIRECTOR MAY RESIDE.
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PARTICIPATION IN THE DIRECTOR PLAN
As discussed earlier, grants under the Director Plan will be automatically
made on the date on which an individual first becomes a director and on the date
of each annual stockholder meeting at which such director is reelected to an
additional term. Accordingly, the following table sets forth grants of stock
options that will be received under the Director Plan during the term of such
plan by (1) the Chief Executive Officer of the Company and the four other most
highly compensated executive officers of the Company as of December 31, 1997,
(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.
NEW PLAN BENEFITS
1998 DIRECTOR STOCK OPTION PLAN
<TABLE>
<CAPTION>
EXERCISE PRICE NUMBER OF
NAME AND POSITION (PER SHARE) SHARES
----------------- -------------- ---------
<S> <C> <C>
Rodney Smith................................................ -- --
Chairman of the Board of Directors,
President and Chief Executive Officer
Denis M. Berlan............................................. -- --
Executive Vice President -- Operations and
Chief Operating Officer
Paul Newhagen............................................... -- --
Former Vice President -- Administration
Nathan Sarkisian............................................ -- --
Vice President -- Finance and Chief Financial Officer
Erik Cleage................................................. -- --
Vice President -- Marketing
Executive Group (7 persons)................................. -- --
Non-Executive Officer Director Group (6 persons)............ --(1) 28,750(2)
Non-Executive Officer Employee Group........................ -- --
</TABLE>
- ---------------
(1) Future exercise prices of options are unknown, as they are based upon fair
market value at the date of grant.
(2) To be granted in fiscal 1998. Assumes Messrs. Clough, Ellison, Newhagen,
Reed and Terry and Dr. Triant continue to serve on the Board of Directors
until the dates of their respective grants. Non-employee directors will
receive annual grants of 5,000 shares each on each re-election of their
service as a director, provided however, that the grant on the initial
re-election shall be equal to a pro rata portion of 5,000 shares based upon
the portion of one year that such individual served as a director prior to
the initial re-election.
PROPOSAL FIVE -- RATIFICATION OF APPOINTMENT OF
INDEPENDENT ACCOUNTANTS
The Board of Directors has selected Price Waterhouse LLP, independent
accountants, to audit the financial statements of Altera Corporation for the
current fiscal year ending December 31, 1998. 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.
STOCKHOLDER PROPOSAL
At the Annual Meeting, the stockholders are being requested to ratify the
Board of Directors' selection of Price Waterhouse LLP as the Company's outside
auditors for fiscal 1998.
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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 this proposal. THE COMPANY'S BOARD OF DIRECTORS HAS
UNANIMOUSLY APPROVED THIS PROPOSAL AND RECOMMENDS THAT STOCKHOLDERS 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: April 9, 1998
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APPENDIX A
1998 DIRECTOR STOCK OPTION PLAN
1. PURPOSES OF THE PLAN. The purposes of this 1998 Director Stock Option
Plan are to attract and retain the best available personnel for service as
Outside Directors (as defined herein) of the Company, to provide additional
incentive to the Outside Directors of the Company to serve as Directors, and to
encourage their continued service on the Board.
All options granted hereunder shall be nonstatutory stock options.
2. DEFINITIONS. As used herein, the following definitions shall apply:
(a) "Board" means the Board of Directors of the Company.
(b) "Code" means the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" means the common stock of the Company.
(d) "Company" means Altera Corporation, a Delaware corporation.
(e) "Director" means a member of the Board.
(f) "Employee" means any person, including officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. The
payment of a Director's fee by the Company shall not be sufficient in and
of itself to constitute "employment" by the Company.
(g) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(h) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock exchange
or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock
Market, its Fair Market Value shall be the closing sales price for such
stock (or the closing bid, if no sales were reported) as quoted on such
exchange or system for the last market trading day prior to the time of
determination as reported in The Wall Street Journal or such other
source as the Administrator deems reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market
Value of a Share of Common Stock shall be the mean between the high bid
and low asked prices for the Common Stock for the last market trading
day prior to the time of determination, as reported in The Wall Street
Journal or such other source as the Board deems eliable; or
(iii) In the absence of an established market for the Common Stock,
the Fair Market Value thereof shall be determined in good faith by the
Board.
(i) "Inside Director" means a Director who is an Employee.
(j) "Option" means a stock option granted pursuant to the Plan.
(k) "Optioned Stock" means the Common Stock subject to an Option.
(l) "Optionee" means a Director who holds an Option.
(m) "Outside Director" means a Director who is not an Employee.
(n) "Parent" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(o) "Plan" means this 1998 Director Stock Option Plan.
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(p) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 10 of the Plan.
(q) "Subsidiary" means a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Internal Revenue
Code of 1986.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 10 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 170,000 Shares of Common Stock (the "Pool"). The Shares may be
authorized, but unissued, or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been exercised
in full, the unpurchased Shares which were subject thereto shall become
available for future grant or sale under the Plan (unless the Plan has
terminated). Shares that have actually been issued under the Plan shall not be
returned to the Plan and shall not become available for future distribution
under the Plan.
4. ADMINISTRATION AND GRANTS OF OPTIONS UNDER THE PLAN.
(a) Except as otherwise provided herein, the Plan shall be
administered by the Board.
(b) Procedure for Grants. All grants of Options to Outside Directors
under this Plan shall be automatic and nondiscretionary and shall be made
strictly in accordance with the following provisions:
(i) Except as provided in Section 11(c), no person shall have any
discretion to select which Outside Directors shall be granted Options or
to determine the number of Shares to be covered by Options granted to
Outside Directors.
(ii) Each Outside Director shall be automatically granted an Option
to purchase 20,000 Shares (the "First Option") on the date on which such
person first becomes an Outside Director, whether through election by
the stockholders of the Company or appointment by the Board to fill a
vacancy.
(iii) Each Outside Director shall be automatically granted an
Option to purchase 5,000 Shares (a "Subsequent Option") on the day of
the annual stockholder meeting at which such Outside Director is
reelected to an additional term; provided, however, that for the first
grant of a Subsequent Option (the "First Subsequent Option"), each
Outside Director shall be automatically granted an Option to purchase
the number of Shares equal to 5,000 multiplied by a fraction, the
numerator of which equals the number of whole months (rounded up to the
next whole month) from the date the Outside Director first became an
Outside Director to the date of the annual stockholders' meeting at
which the Outside Director was granted the First Subsequent Option and
the denominator of which equals twelve.
(iv) The exercise price per Share for all Options granted under the
Plan shall be 100% of the Fair Market Value per Share on the date of
grant of the Option.
(v) The terms of a First Option granted hereunder shall be as
follows:
(A) the term of the First Option shall be ten (10) years.
(B) the First Option shall be exercisable only while the Outside
Director remains a Director of the Company, except as set forth in
Sections 8 and 10 hereof.
(C) subject to Section 10 hereof, the First Option shall become
exercisable as to twenty-five percent (25%) of the Shares subject to
the First Option on the first anniversary of its date of grant and as
to 1/48th of the Shares subject to the First Option at the end of
each month thereafter, provided that the Optionee continues to serve
as a Director on such dates.
(vi) The terms of a Subsequent Option granted hereunder shall be as
follows:
(A) the term of the Subsequent Option shall be ten (10) years.
(B) the Subsequent Option shall be exercisable only while the
Outside Director remains a Director of the Company, except as set
forth in Sections 8 and 10 hereof.
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(C) subject to Section 10 hereof, the Subsequent Option shall
vest and become exercisable as to 1/12th of the Shares subject to the
Subsequent Option at the end of each month beginning after all prior
Option grants under the Plan have vested, provided that the Optionee
continues to serve as a Director on such dates. Notwithstanding the
prior sentence, the First Subsequent Option shall vest and become
exercisable beginning after the Annual Option grant made under the
Plan has fully vested as to an amount equal to the number of Shares
subject to the First Subsequent Option divided by the number of whole
months (rounded up to the nearest whole month) from the date the
Outside Director first became an Outside Director to the date of the
annual stockholders' meeting at which the Outside Director was
granted the First Subsequent Option.
(vii) In the event that any Option granted under the Plan would
cause the number of Shares subject to outstanding Options plus the
number of Shares previously purchased under Options to exceed the Pool,
then the remaining Shares available for Option grant shall be granted
under Options to the Outside Directors on a pro rata basis. No further
grants shall be made until such time, if any, as additional Shares
become available for grant under the Plan through action of the Board or
the stockholders to increase the number of Shares which may be issued
under the Plan or through cancellation or expiration of Options
previously granted hereunder.
(viii) Powers of the Board. Subject to the provisions and
restrictions of the Plan, the Board shall have the authority, in its
discretion: (i) to determine, upon review of relevant information and in
accordance with Section 2(h) of the Plan, the fair market value of the
Common Stock; (ii) to determine the exercise price per share of Options
to be granted, which exercise price shall be determined in accordance
with Section 4(b)of the Plan; (iii) to interpret the Plan; (iv) to
prescribe, amend and rescind rules and regulations relating to the Plan;
(v) to authorize any person to execute on behalf of the Company any
instrument required to effectuate the grant of an Option previously
granted hereunder; (vi) to increase or decrease the number of Shares
subject to either the First Option or Subsequent Option pursuant to
Section 11(c) herein; (vii) to increase the length of time an Option
remains exercisable after the termination of an Optionee's status as a
Director; and (viii) to make all other determinations deemed necessary
or advisable for the administration of the Plan.
(ix) Effect of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees
and any other holders of any Options granted under the Plan.
(x) Suspension or Termination of Option. If the President or his
designee reasonably believes that an Optionee has committed an act of
misconduct, the President may suspend the Optionee's right to exercise
any option pending a determination by the Board of Directors (excluding
the Outside Director accused of such misconduct). If the Board of
Directors (excluding the Outside Director accused of such misconduct)
determines an Optionee has committed an act of embezzlement, fraud,
dishonesty, nonpayment of an obligation owed to the Company, breach of
fiduciary duty or deliberate disregard of the Company rules resulting in
loss, damage or injury to the Company, or if an Optionee makes an
unauthorized disclosure of any Company trade secret or confidential
information, engages in any conduct constituting unfair competition,
induces any Company customer to breach a contract with the Company or
induces any principal for whom the Company acts as agent to terminate
such agency relationship, neither the Optionee nor his estate shall be
entitled to exercise any option whatsoever. In making such
determination, the Board of Directors (excluding the Outside Director
accused of such misconduct) shall act fairly and shall give the Optionee
an opportunity to appear and present evidence on Optionee's behalf at a
hearing before a committee of the Board.
5. ELIGIBILITY. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4 hereof.
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The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate the Director's relationship with the Company at any time.
6. TERM OF PLAN. The Plan shall become effective upon the earlier to occur
of its adoption by the Board or its approval by the stockholders of the Company
as described in Section 16 of the Plan. It shall continue in effect until
terminated under Section 11 of the Plan.
7. FORM OF CONSIDERATION. The consideration to be paid for the Shares to
be issued upon exercise of an Option, including the method of payment, shall
consist of (i) cash, (ii) check, (iii) other shares which (x) in the case of
Shares acquired upon exercise of an Option, have been owned by the Optionee for
more than six (6) months on the date of surrender, and (y) have a Fair Market
Value on the date of surrender equal to the aggregate exercise price of the
Shares as to which said Option shall be exercised, (iv) consideration received
by the Company under a cashless exercise program implemented by the Company in
connection with the Plan, or (v) any combination of the foregoing methods of
payment.
8. EXERCISE OF OPTION.
(a) Procedure for Exercise; Rights as a Stockholder. Any Option
granted hereunder shall be exercisable at such times as are set forth in
Section 4 hereof; provided, however, that no Options shall be exercisable
until stockholder approval of the Plan in accordance with Section 16 hereof
has been obtained.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for the
Shares with respect to which the Option is exercised has been received by the
Company. Full payment may consist of any consideration and method of payment
allowable under Section 7 of the Plan. Until the issuance (as evidenced by the
appropriate entry on the books of the Company or of a duly authorized transfer
agent of the Company) of the stock certificate evidencing such Shares, no right
to vote or receive dividends or any other rights as a stockholder shall exist
with respect to the Optioned Stock, notwithstanding the exercise of the Option.
A share certificate for the number of Shares so acquired shall be issued to the
Optionee as soon as practicable after exercise of the Option. No adjustment
shall be made for a dividend or other right for which the record date is prior
to the date the stock certificate is issued, except as provided in Section 10 of
the Plan.
Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of the
Plan and for sale under the Option, by the number of Shares as to which the
Option is exercised.
(b) Termination of Continuous Status as a Director. Subject to Section
10 hereof, in the event an Optionee's status as a Director terminates
(other than upon the Optionee's death or total and permanent disability (as
defined in Section 22(e)(3) of the Code)), the Optionee may exercise his or
her Option, but only within three (3) months (or such other period of time
determined by the Board at the time of grant) following the date of such
termination, and only to the extent that the Optionee was entitled to
exercise it on the date of such termination (but in no event later than the
expiration of its ten (10) year term); provided, however, that in the event
that a sale of the Option Stock received upon exercise of this Option would
subject the Director to liability under Section 16 of the Securities and
Exchange Act of 1934, as amended, then the Option will terminate on the
earlier of (i) the fifteenth day after the last date upon which such sale
would result in liability, or (ii) two hundred ten (210) days following the
date of such termination of status as a Director. To the extent that the
Optionee was not entitled to exercise an Option on the date of such
termination, and to the extent that the Optionee does not exercise such
Option (to the extent otherwise so entitled) within the time specified
herein, the Option shall terminate.
(c) Disability of Optionee. In the event Optionee's status as a
Director terminates as a result of total and permanent disability (as
defined in Section 22(e)(3) of the Code), the Optionee may exercise
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his or her Option, but only within three (3) months following the date of
such termination, and only to the extent that the Optionee was entitled to
exercise it on the date of such termination (but in no event later than the
expiration of its ten (10) year term). To the extent that the Optionee was
not entitled to exercise an Option on the date of termination, or if he or
she does not exercise such Option (to the extent otherwise so entitled)
within the time specified herein, the Option shall terminate.
(d) Death of Optionee. In the event of the death of an Optionee:
(i) during the term of the Option who is at the time of his
death a Director of the Company and who shall have been in Continuous
Status as a Director since the date of grant of the Option, the
Option may be exercised, at any time within six (6) months following
the date of death (but in no event later than the expiration of the
Option's term), by the Optionee's estate or by a person who acquired
the right to exercise the Option by bequest or inheritance, but only
to the extent of the right to exercise that would have accrued had
the Optionee continued living and remained in Continuous Status a
Director for six (6) months after the date of death.
(ii) within thirty (30) days after the termination of Continuous
Status as a Director, the Option may be exercised, at any time within
six (6) months following the date of death (but in no event later
than the expiration of the Option's term), by the Optionee's estate
or by a person who acquired the right to exercise the Option by
bequest or inheritance, but only to the extent of the right to
exercise that had accrued at the date of termination.
9. NON-TRANSFERABILITY OF OPTIONS. The Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution or pursuant to a qualified
domestic relations order as defined by the Code, Title I of the Employee
Retirement Income Security Act, or the rules thereunder. An Option may be
exercised, during the lifetime of the Optionee, only by the Optionee.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION, DISSOLUTION, MERGER OR
ASSET SALE.
(a) Changes in Capitalization. Subject to any required action by the
stockholders of the Company, the number of Shares covered by each
outstanding Option, the number of Shares which have been authorized for
issuance under the Plan but as to which no Options have yet been granted or
which have been returned to the Plan upon cancellation or expiration of an
Option, as well as the price per Share covered by each such outstanding
Option, shall be proportionately adjusted for any increase or decrease in
the number of issued Shares resulting from a stock split, reverse stock
split, stock dividend, combination or reclassification of the Common Stock,
or any other increase or decrease in the number of issued Shares effected
without receipt of consideration by the Company; provided, however, that
conversion of any convertible securities of the Company shall not be deemed
to have been "effected without receipt of consideration." Except as
expressly provided herein, no issuance by the Company of shares of stock of
any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of Shares subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, to the extent that an Option has
not been previously exercised, it shall terminate immediately prior to the
consummation of such proposed action. The Board may, in the exercise of its
sole discretion in such instances, declare that any Option shall terminate
as of a date fixed by the Board and give each Optionee the right to
exercise his or her Option as to all or any part of the Optioned Stock
including Shares as to which the Option would not otherwise be exercisable.
(c) Merger or Asset Sale. In the event of a merger of the Company with
or into another corporation or the sale of substantially all of the assets
of the Company, outstanding Options may be assumed or equivalent options
may be substituted by the successor corporation or a Parent or Subsidiary
thereof (the "Successor Corporation"). If an Option is assumed or
substituted for, the Option or equivalent option shall continue to be
exercisable as provided in Section 4 hereof for so long as the Optionee
serves as a Director or a director of the Successor Corporation. Following
such assumption or substitution, if the
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Optionee's status as a Director or director of the Successor Corporation,
as applicable, is terminated other than upon a voluntary resignation by the
Optionee, the Option or equivalent option shall become fully exercisable,
including as to Shares for which it would not otherwise be exercisable.
Thereafter, the Option or equivalent option shall remain exercisable in
accordance with Sections 8(b) through (d) above.
If the Successor Corporation does not assume an outstanding Option or
substitute for it an equivalent option, the Option shall become fully vested and
exercisable, including as to Shares for which it would not otherwise be
exercisable. In such event the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and upon the expiration of such period the Option shall terminate.
For the purposes of this Section 10(c), an Option shall be considered
assumed if, following the merger or sale of assets, the Option confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
immediately prior to the merger or sale of assets, the consideration (whether
stock, cash, or other securities or property) received in the merger or sale of
assets by holders of Common Stock for each Share held on the effective date of
the transaction (and if holders were offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares).
If such consideration received in the merger or sale of assets is not solely
common stock of the Successor Corporation or its Parent, the Administrator may,
with the consent of the Successor Corporation, provide for the consideration to
be received upon the exercise of the Option, for each Share of Optioned Stock
subject to 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 Common Stock in the merger or sale of assets.
11. AMENDMENT AND TERMINATION OF THE PLAN.
(a) Amendment and Termination. The Board may at any time amend, alter,
suspend, or discontinue the Plan, but no amendment, alteration, suspension,
or discontinuation shall be made which would impair the rights of any
Optionee under any grant theretofore made, without his or her consent. In
addition, to the extent necessary and desirable to comply with any
applicable law, regulation or stock exchange rule, the Company shall obtain
stockholder approval of any Plan amendment in such a manner and to such a
degree as required including any increase in the number of Shares subject
to the Plan, other than in connection with an adjustment under Section
10(a) of the Plan.
(b) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated.
(c) Adjustment of First and Subsequent Options. The Board may, at any
time, amend the Plan to increase or decrease the number of Shares subject
to either the First Option or the Subsequent Option without obtaining
stockholder approval.
12. TIME OF GRANTING OPTIONS. The date of grant of an Option shall, for all
purposes, be the date determined in accordance with Section 4 hereof.
13. CONDITIONS UPON ISSUANCE OF SHARES. Shares shall not be issued pursuant
to the exercise of an Option unless the exercise of such Option and the issuance
and delivery of such Shares pursuant thereto shall comply with all relevant
provisions of law, including, without limitation, the Securities Act of 1933, as
amended, the Exchange Act, the rules and regulations promulgated thereunder,
state securities laws, and the requirements of any stock exchange upon which the
Shares may then be listed, and shall be further subject to the approval of
counsel for the Company with respect to such compliance.
As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares, if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.
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Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.
14. RESERVATION OF SHARES. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
15. OPTION AGREEMENT. Options shall be evidenced by written option
agreements in such form as the Board shall approve.
16. STOCKHOLDER APPROVAL. The Plan shall be subject to approval by the
stockholders of the Company within twelve (12) months after the date the Plan is
adopted. Such stockholder approval shall be obtained in the degree and manner
required under applicable state and federal law and any stock exchange rules.
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ALTERA CORPORATION
1996 STOCK OPTION PLAN
1. Purposes of the Plan. The purposes of this Stock Option Plan are:
- to attract and retain the best available personnel for
positions of substantial responsibility,
- to provide additional incentive to Employees and Consultants,
and
- to promote the success of the Company's business.
Options granted under the Plan may be Incentive Stock Options or
Nonstatutory Stock Options, as determined by the Administrator at the time of
grant.
2. Definitions. As used herein, the following definitions shall apply:
(a) "Administrator" means the Board or any Committees as shall be
administering the Plan, in accordance with Section 4 of the Plan.
(b) "Applicable Laws" means the legal requirements relating to the
administration of stock option plans under U. S. state corporate laws, U.S.
federal and state securities laws, the Code and the applicable laws of any
foreign country or jurisdiction where Options are, or will be, granted under the
Plan.
(c) "Board" means the Board of Directors of the Company.
(d) "Code" means the Internal Revenue Code of 1986, as amended.
(e) "Committee" means a Committee appointed by the Board in
accordance with Section 4 of the Plan.
(f) "Common Stock" means the Common Stock of the Company.
(g) "Company" means Altera Corporation, a Delaware corporation.
(h) "Consultant" means any person, including an advisor, engaged by
the Company or a Parent or Subsidiary to render services and who is compensated
for such services. The term "Consultant" shall not include Directors who are
paid only a director's fee by the Company or who are not compensated by the
Company for their services as Directors.
(i) "Continuous Status as an Employee or Consultant" means that the
employment or consulting relationship with the Company, any Parent, or
Subsidiary, is not interrupted or terminated. Continuous Status as an Employee
or Consultant shall not be
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<PAGE> 37
considered interrupted in the case of (i) any leave of absence approved by the
Company or (ii) transfers between locations of the Company or between the
Company, its Parent, any Subsidiary, or any successor. A leave of absence
approved by the Company shall include sick leave, military leave, or any other
personal leave approved by an authorized representative of the Company. For
purposes of Incentive Stock Options, no such leave may exceed ninety days,
unless reemployment upon expiration of such leave is guaranteed by statute or
contract. If reemployment upon expiration of a leave of absence approved by the
Company is not so guaranteed, on the 181st day of such leave any Incentive Stock
Option held by the Optionee shall cease to be treated as an Incentive Stock
Option and shall be treated for tax purposes as a Nonstatutory Stock Option.
(j) "Director" means a member of the Board.
(k) "Disability" means total and permanent disability as defined in
Section 22(e)(3) of the Code.
(l) "Employee" means any person, including Officers and Directors,
employed by the Company or any Parent or Subsidiary of the Company. Neither
service as a Director nor payment of a director's fee by the Company shall be
sufficient to constitute "employment" by the Company.
(m) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(n) "Fair Market Value" means, as of any date, the value of Common
Stock determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock Market, its
Fair Market Value shall be the closing sales price for such stock (or the
closing bid, if no sales were reported) as quoted on such exchange or system for
the last market trading day prior to the time of determination, as reported in
The Wall Street Journal or such other source as the Administrator deems
reliable;
(ii) If the Common Stock is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a Share of Common Stock shall be the mean between the high bid and low asked
prices for the Common Stock on the last market trading day prior to the day of
determination, as reported in The Wall Street Journal or such other source as
the Administrator deems reliable;
(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(o) "Incentive Stock Option" means an Option intended to qualify as
an incentive stock option within the meaning of Section 422 of the Code and the
regulations promulgated thereunder.
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(p) "Misconduct" means the commission of any act that is inimical,
contrary, or harmful to the interests of the Company (or any Parent or
Subsidiary), including but not limited to (1) conduct related to employment for
which either criminal or civil penalties may be sought, (2) willful violation of
the Company's written policies, (3) engaging in any activity that is in
competition with the Company (or any Parent or Subsidiary), or (4) unauthorized
disclosure of confidential information or trade secrets of the Company (or any
Parent or Subsidiary). The foregoing definition shall not be deemed to be
inclusive of all acts or omissions that the Company (or any Parent or
Subsidiary) may consider as Misconduct for purposes of the Plan.
(q) "Nonstatutory Stock Option" means an Option not intended to
qualify as an Incentive Stock Option.
(r) "Notice of Grant" means a written notice evidencing certain
terms and conditions of an individual Option grant. The Notice of Grant is part
of the Option Agreement.
(s) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(t) "Option" means a stock option granted pursuant to the Plan.
(u) "Option Agreement" means a written agreement between the Company
and an Optionee evidencing the terms and conditions of an individual Option
grant. The Option Agreement is subject to the terms and conditions of the Plan.
(v) "Optioned Stock" means the Common Stock subject to an Option.
(w) "Optionee" means an Employee or Consultant who holds an
outstanding Option.
(x) "Parent" means a "parent corporation", whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(y) "Plan" means this 1996 Stock Option Plan.
(z) "Retirement" means:
(i) a termination of Optionee's Continuous Status as an
Employee or Consultant, other than for Misconduct, after attaining age fifty
(50) with at least ten (10) years of service as an Employee or Consultant of the
Company rendered after attaining age forty (40); or
(ii) a termination of Optionee's Continuous Status as an
Employee or Consultant as a result of Disability, regardless of Optionee's age,
if Optionee has completed at least ten (10) years of service as an Employee or
Consultant of the Company and if Optionee qualifies for Social Security
disability benefits at the time of such termination.
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(aa) "Rule 16b-3" means Rule 16b-3 of the Exchange Act or any
successor to Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(bb) "Section 16" means Section 16 of the Securities Exchange Act of
1934, as amended.
(cc) "Share" means a share of the Common Stock, as adjusted in
accordance with Section 12 of the Plan.
(dd) "Subsidiary" means a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 424(f) of the Code.
3. Stock Subject to the Plan. Subject to the provisions of Section 12 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 6,500,000 Shares. The Shares may be authorized, but unissued,
or reacquired Common Stock.
If an Option expires or becomes unexercisable without having been exercised in
full, the unpurchased Shares which were subject thereto shall become available
for future grant or sale under the Plan (unless the Plan has terminated);
provided, however, that Shares that have actually been issued under the Plan
shall not be returned to the Plan and shall not become available for future
distribution under the Plan.
4. Administration of the Plan.
(a) Procedure.
(i) Multiple Administrative Bodies. If permitted by Rule
16b-3, the Plan may be administered by different bodies with respect to
Directors, Officers who are not Directors, and Employees who are neither
Directors nor Officers.
(ii) Administration With Respect to Directors and Officers
Subject to Section 16. With respect to Option grants made to Employees who are
also Officers or Directors subject to Section 16 of the Exchange Act, the Plan
shall be administered by (A) the Board, if the Board may administer the Plan in
a manner complying with the rules under Rule 16b-3 relating to the disinterested
administration of employee benefit plans under which Section 16 exempt
discretionary grants and awards of equity securities are to be made, or (B) a
committee or committees designated by the Board to administer the Plan, which
committee shall be constituted to comply with the rules under Rule 16b-3
relating to the disinterested administration of employee benefit plans under
which Section 16 exempt discretionary grants and awards of equity securities are
to be made. Once appointed, such Committee shall continue to serve in its
designated capacity until otherwise directed by the Board. From time to time the
Board may increase the size of the Committee and appoint additional members,
remove members (with or without cause) and substitute new members, fill
vacancies (however caused), and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by the
rules under Rule 16b-3 relating to the disinterested administration of employee
benefit plans under which Section 16 exempt discretionary grants and awards of
equity securities are to be made.
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<PAGE> 40
(iii) Administration With Respect to Other Persons. With
respect to Option grants made to Employees or Consultants who are neither
Directors nor Officers of the Company, the Plan shall be administered by (A) the
Board or (B) a committee or committees designated by the Board, which committee
shall be constituted to satisfy Applicable Laws. Once appointed, such Committee
shall serve in its designated capacity until otherwise directed by the Board.
The Board may increase the size of the Committee and appoint additional members,
remove members (with or without cause) and substitute new members, fill
vacancies (however caused), and remove all members of the Committee and
thereafter directly administer the Plan, all to the extent permitted by
Applicable Laws.
(b) Powers of the Administrator. Subject to the provisions of the
Plan, and in the case of a Committee, subject to the specific duties delegated
by the Board to such Committee, the Administrator shall have the authority, in
its discretion:
(i) to grant options to Employees and Consultants
hereunder;
(ii) to determine the Fair Market Value of the Common Stock,
in accordance with Section 2(n) of the Plan;
(iii) to determine the Consultants and Employees eligible to
be granted Options hereunder;
(iv) to determine whether and to what extent Options are
granted hereunder;
(v) to determine the number of shares of Common Stock to be
covered by each Option granted hereunder;
(vi) to approve forms of agreement for use under the Plan;
(vii) to determine the terms and conditions, not inconsistent
with the terms of the Plan, of any award granted hereunder. Such terms and
conditions include, but are not limited to, the exercise price, the time or
times when Options may be exercised (which may be based on performance
criteria), any vesting acceleration, and any restriction or limitation regarding
any Option or the shares of Common Stock relating thereto, based in each case on
such factors as the Administrator, in its sole discretion, shall determine;
(viii) to construe and interpret the terms of the Plan and
awards granted pursuant to the Plan;
(ix) to prescribe, amend, and rescind rules and regulations
relating to the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax treatment under
foreign tax laws;
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<PAGE> 41
(x) to modify or amend each Option (subject to Section 14(c)
of the Plan), including the discretionary authority to extend the
post-termination exercisability period of Options longer than is otherwise
provided for in the Plan;
(xi) to authorize any person to execute on behalf of the
Company any instrument required to effect the grant of an Option previously
granted by the Administrator; and
(xii) to make all other determinations deemed necessary or
advisable for administering the Plan.
(c) Effect of Administrator's Decision. The Administrator's
decisions, determinations and interpretations shall be final and binding on all
Optionees and any other holders of Options.
5. Eligibility. Nonstatutory Stock Options may be granted to those
Employees and Consultants selected by the Administrator. Incentive Stock Options
may be granted only to those Employees selected by the Administrator. If
otherwise eligible, an Employee or Consultant who has been granted an Option may
be granted additional Options.
6. Limitations.
(a) Each Option shall be designated in the written option agreement
as either an Incentive Stock Option or a Nonstatutory Stock Option. However,
notwithstanding such designation, to the extent that the aggregate Fair Market
Value of the Shares with respect to which Incentive Stock Options are
exercisable for the first time by the Optionee during any calendar year (under
all plans of the Company and any Parent or Subsidiary) exceeds $100,000, such
Options shall be treated as Nonstatutory Stock Options. For purposes of this
Section 6(a), Incentive Stock Options shall be taken into account in the order
in which they were granted.
(b) Neither the Plan nor any Option shall confer upon an Optionee
any right with respect to continuing the Optionee's employment or consulting
relationship with the Company, nor shall they interfere in any way with the
Optionee's right or the Company's right to terminate such employment or
consulting relationship at any time, with or without cause.
(c) The following limitations shall apply to grants of Options to
Employees:
(i) No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than 500,000 Shares.
(ii) In connection with his or her initial employment, an
Employee may be granted Options to purchase up to an additional 500,000 Shares
which shall not count against the limit set forth in subsection (i) above.
(iii) The foregoing limitations shall be adjusted
proportionately in connection with any change in the Company's capitalization as
described in Section 12.
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<PAGE> 42
7. Term of Plan. Subject to Section 18 of the Plan, the Plan shall become
effective upon its approval by the shareholders of the Company as described in
Section 18 of the Plan. It shall continue in effect for a term of ten (10) years
unless terminated earlier under Section 14 of the Plan.
8. Term of Option. The term of each Option shall be stated in the Notice
of Grant; provided, however, that in the case of an Incentive Stock Option, the
term shall be ten (10) years from the date of grant or such shorter term as may
be provided in the Notice of Grant.
9. Option Exercise Price and Consideration.
(a) Exercise Price. The per share exercise price for the Shares to
be issued pursuant to exercise of an Option shall be no less than 100% of the
Fair Market Value per Share on the date of grant.
(b) Waiting Period and Exercise Dates. At the time an Option is
granted, the Administrator shall fix the period within which the Option may be
exercised and shall determine any conditions which must be satisfied before the
Option may be exercised. In so doing, the Administrator may specify that an
Option may not be exercised until the completion of a service period.
(c) Form of Consideration. The Administrator shall determine the
acceptable form of consideration for exercising an Option, including the method
of payment. In the case of an Incentive Stock Option, the Administrator shall
determine the acceptable form of consideration at the time of grant. Such
consideration may consist entirely of:
(i) cash;
(ii) check;
(iii) promissory note;
(iv) other Shares which (A) in the case of Shares acquired
upon exercise of an option, have been owned by the Optionee for more than six
months on the date of surrender, and (B) have a Fair Market Value on the date of
surrender equal to the aggregate exercise price of the Shares as to which said
Option shall be exercised;
(v) delivery of a properly executed exercise notice together
with such other documentation as the Administrator and the broker, if
applicable, shall require to effect an exercise of the Option and delivery to
the Company of the sale or loan proceeds required to pay the exercise price;
(vi) a reduction in the amount of any Company liability to the
Optionee, including any liability attributable to the Optionee's participation
in any Company-sponsored deferred compensation program or arrangement;
(vii) any combination of the foregoing methods of payment;
or
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<PAGE> 43
(viii) such other consideration and method of payment for the
issuance of Shares to the extent permitted by Applicable Laws.
10. Exercise of Option.
(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable according to the terms of the Plan and at
such times and under such conditions as determined by the Administrator and set
forth in the Option Agreement.
An Option may not be exercised for a fraction of a Share.
An Option shall be deemed exercised when the Company receives:
(i) written notice of exercise (in accordance with the Option Agreement) from
the person entitled to exercise the Option, and (ii) full payment for the Shares
with respect to which the Option is exercised. Full payment may consist of any
consideration and method of payment authorized by the Administrator and
permitted by the Option Agreement and the Plan. Shares issued upon exercise of
an Option shall be issued in the name of the Optionee or, if requested by the
Optionee, in the name of the Optionee and his or her spouse. Until the stock
certificate evidencing such Shares is issued (as evidenced by the appropriate
entry on the books of the Company or of a duly authorized transfer agent of the
Company), no right to vote or receive dividends or any other rights as a
shareholder shall exist with respect to the Optioned Stock, notwithstanding the
exercise of the Option. The Company shall issue (or cause to be issued) such
stock certificate promptly after the Option is exercised. No adjustment will be
made for a dividend or other right for which the record date is prior to the
date the stock certificate is issued, except as provided in Section 12 of the
Plan.
Exercising an Option in any manner shall decrease the number
of Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) Termination of Employment or Consulting Relationship.
(i) In General. Upon termination of an Optionee's Continuous
Status as an Employee or Consultant, other than upon the Optionee's death,
Disability, or Retirement, the Optionee may exercise his or her Option within
such period of time as is specified in the Notice of Grant to the extent that he
or she is entitled to exercise it on the date of termination (but in no event
later than the expiration of the term of such Option as set forth in the Notice
of Grant). In the absence of a specified time in the Notice of Grant, the Option
shall remain exercisable for thirty (30) days following the Optionee's
termination. In the case of an Incentive Stock Option, such period of time for
exercise shall not exceed three (3) months from the date of termination. If, on
the date of termination, the Optionee is not entitled to exercise his or her
entire Option, the Shares covered by the unexercisable portion of the Option
shall revert to the Plan. If, after termination, the Optionee does not exercise
his or her Option within the time specified by the Administrator, the Option
shall terminate, and the Shares covered by such Option shall revert to the Plan.
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<PAGE> 44
Notwithstanding the above, in the event of an Optionee's
change in status from Consultant to Employee or Employee to Consultant, the
Optionee's Continuous Status as an Employee or Consultant shall not
automatically terminate solely as a result of such change in status. In the
event of an Optionee's change in status from Employee to Consultant, each
Incentive Stock Option held by the Optionee shall cease to be treated as an
Incentive Stock Option and shall be treated for tax purposes as a Nonstatutory
Stock Option three months and one day following such change of status.
(ii) Retirement of Optionee. In the event of termination of an
Optionee's Continuous Status as an Employee or Consultant as a result of his or
her Retirement, such Optionee's Option shall, in the sole discretion of the
Administrator, and so long as no act of Misconduct is committed by Optionee,
continue to vest, continue to become exercisable, and may be exercised during
such period of time as is determined by the Administrator and as provided in the
Option Agreement (but in no event may the Option be exercised after the
expiration date of the term of such Option as set forth in the Option
Agreement). If, at the end of such period of time, the Optionee is not entitled
to exercise his or her entire Option, the Shares covered by the unexercisable
portion of the Option shall revert to the Plan. If the Optionee does not
exercise his or her Option within the time specified by the Administrator, the
Option shall terminate, and the Shares covered by such Option shall revert to
the Plan. If Optionee commits an act of Misconduct, the Option shall immediately
terminate, and the Shares covered by such Option shall revert to the Plan.
(iii) Disability of Optionee. Upon termination of an
Optionee's Continuous Status as an Employee or Consultant as a result of the
Optionee's Disability, the Optionee may exercise his or her Option at any time
within three (3) months (or such other period of time not exceeding twelve (12)
months as is determined by the Administrator, with such determination in the
case of an Incentive Stock Option being made at the time of grant of the Option)
from the date of termination, but only to the extent that the Optionee is
entitled to exercise it on the date of termination (and in no event later than
the expiration of the term of the Option as set forth in the Notice of Grant).
If, on the date of termination, the Optionee is not entitled to exercise his or
her entire Option, the Shares covered by the unexercisable portion of the Option
shall revert to the Plan. If, after termination, the Optionee does not exercise
his or her Option within the time specified herein, the Option shall terminate,
and the Shares covered by such Option shall revert to the Plan.
(iv) Death of Optionee. Upon the death of an Optionee:
(A) during the term of the Option who is at the
time of his or her death an Employee or Consultant of the Company and who shall
have been in Continuous Status as an Employee or Consultant since the date of
grant of the Option, the Option may be exercised by the Optionee's estate or by
a person who acquired the right to exercise the Option by bequest or inheritance
at any time within six (6) months (or, in the case of Retirement, such longer
period of time, not to exceed 12 months, as determined by the Administrator)
following the date of death, but in no event later than the date of expiration
of the term of such Option as set forth in the Option Agreement, and only to the
extent of the right to exercise the Option that would have accrued had the
Optionee continued living and remained in Continuous Status as an
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<PAGE> 45
Employee or Consultant six (6) months after the date of death, subject to the
limitation set forth in Section 6(a); or
(B) within thirty (30) days (or such other period
of time not exceeding three (3) months as is determined by the Administrator,
with such determination in the case of an Incentive Stock Option being made at
the time of grant of the Option) after his or her termination of Continuous
Status as an Employee or Consultant, the Option may be exercised by the
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, at any time within six (6) months (or, in the case of
Retirement, such longer period of time, not to exceed 12 months, as determined
by the Administrator) following the date of death, but in no event later than
the date of expiration of the term of such Option as set forth in the Option
Agreement, and only to the extent of the right to exercise the Option that had
accrued at the date of termination.
(c) Buyout Provisions. The Administrator may at any time offer to
buy out for a payment in cash or Shares, an Option previously granted based on
such terms and conditions as the Administrator shall establish and communicate
to the Optionee at the time that such offer is made.
(d) Rule 16b-3. Options granted to individuals subject to Section 16
of the Exchange Act ("Insiders") must comply with the applicable provisions of
Rule 16b-3 and shall contain such additional conditions or restrictions as may,
in the Administrator's sole discretion, be necessary and desirable to qualify
thereunder for the maximum exemption from Section 16 of the Exchange Act with
respect to Plan transactions.
11. Non-Transferability of Options. An Option may not be sold, pledged,
assigned, hypothecated, transferred, or disposed of in any manner other than by
will or by the laws of descent or distribution and may be exercised, during the
lifetime of the Optionee, only by the Optionee.
12. Adjustments Upon Changes in Capitalization, Dissolution, Merger, or
Asset Sale.
(a) Changes in Capitalization. Subject to any required action by the
shareholders of the Company, the number of shares of Common Stock covered by
each outstanding Option, and the number of shares of Common Stock which have
been authorized for issuance under the Plan but as to which no Options have yet
been granted or which have been returned to the Plan upon cancellation or
expiration of an Option, as well as the price per share of Common Stock covered
by each such outstanding Option, shall be proportionately adjusted for any
increase or decrease in the number of issued shares of Common Stock resulting
from a stock split, reverse stock split, stock dividend, combination, or
reclassification of the Common Stock, or any other increase or decrease in the
number of issued shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding, and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of
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<PAGE> 46
any class, shall affect, and no adjustment by reason thereof shall be made with
respect to, the number or price of shares of Common Stock subject to an Option.
(b) Dissolution or Liquidation. In the event of the proposed
dissolution or liquidation of the Company, the Administrator shall notify each
Optionee as soon as practicable prior to the effective date of such proposed
transaction. The Administrator in its discretion may provide for an Optionee to
have the right to exercise his or her Option prior to such transaction as to all
of the Optioned Stock covered thereby, including Shares as to which the Option
would not otherwise be exercisable. In addition, the Administrator may provide
that any Company repurchase option applicable to any Shares purchased upon
exercise of an Option shall lapse as to all such Shares, provided the proposed
dissolution or liquidation takes place at the time and in the manner
contemplated. To the extent it has not been previously exercised, an Option will
terminate immediately prior to the consummation of such proposed action.
(c) Merger or Asset Sale. In the event of a merger of the Company
with or into another corporation, or the sale of substantially all of the assets
of the Company, each outstanding Option shall be assumed or an equivalent option
substituted by the successor corporation or a Parent or Subsidiary of the
successor corporation. In the event that the successor corporation refuses to
assume or substitute for the Option, the Optionee shall have the right to
exercise the Option as to all of the Optioned Stock, including Shares as to
which it would not otherwise be exercisable. If an Option is exercisable in lieu
of assumption or substitution in the event of a merger or sale of assets, the
Administrator shall notify the Optionee that the Option shall be fully
exercisable for a period of fifteen (15) days from the date of such notice, and
the Option shall terminate upon the expiration of such period. For the purposes
of this paragraph, the Option shall be considered assumed if, following the
merger or sale of assets, the option or right confers the right to purchase or
receive, for each Share of Optioned Stock subject to the Option immediately
prior to the merger or sale of assets, the consideration (whether stock, cash,
or other securities or property) received in the merger or sale of assets by
holders of Common Stock for each Share held on the effective date of the
transaction (and if holders were offered a choice of consideration, the type of
consideration chosen by the holders of a majority of the outstanding Shares);
provided, however, that if such consideration received in the merger or sale of
assets was not solely common stock of the successor corporation or its Parent,
the Administrator may, with the consent of the successor corporation, provide
for the consideration to be received upon the exercise of the Option, for each
Share of Optioned Stock subject to 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 Common Stock in the merger or sale of
assets.
13. Date of Grant. The date of grant of an Option shall be, for all
purposes, the date on which the Administrator makes the determination granting
such Option, or such other later date as is determined by the Administrator.
Notice of the determination shall be provided to each Optionee within a
reasonable time after the date of such grant.
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<PAGE> 47
14. Amendment and Termination of the Plan.
(a) Amendment and Termination. The Board may at any time amend,
alter, suspend, or terminate the Plan.
(b) Shareholder Approval. The Company shall obtain shareholder
approval of any Plan amendment to the extent necessary and desirable to comply
with Rule 16b-3 or with Section 422 of the Code (or any successor rule or
statute or other applicable law, rule, or regulation, including the requirements
of any exchange or quotation system on which the Common Stock is listed or
quoted). Such shareholder approval, if required, shall be obtained in such a
manner and to such a degree as is required by the applicable law, rule, or
regulation.
(c) Effect of Amendment or Termination. No amendment, alteration,
suspension, or termination of the Plan shall impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
15. Conditions Upon Issuance of Shares.
(a) Legal Compliance. Shares shall not be issued pursuant to the
exercise of an Option unless the exercise of such Option and the issuance and
delivery of such Shares shall comply with all relevant provisions of law,
including, without limitation, the Securities Act of 1933, as amended, the
Exchange Act, the rules and regulations promulgated thereunder, Applicable Laws,
and the requirements of any stock exchange or quotation system upon which the
Shares may then be listed or quoted, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.
(b) Investment Representations. As a condition to the exercise of an
Option, the Company may require the person exercising such Option to represent
and warrant at the time of any such exercise that the Shares are being purchased
only for investment and without any present intention to sell or distribute such
Shares if, in the opinion of counsel for the Company, such a representation is
required.
16. Liability of Company.
(a) Inability to Obtain Authority. The inability of the Company to
obtain authority from any regulatory body having jurisdiction, which authority
is deemed by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares hereunder, shall relieve the Company of any liability in
respect of the failure to issue or sell such Shares as to which such requisite
authority shall not have been obtained.
(b) Grants Exceeding Allotted Shares. If the Optioned Stock covered
by an Option exceeds, as of the date of grant, the number of Shares which may be
issued under the Plan without additional shareholder approval, such Option shall
be void with respect to such excess Optioned Stock, unless shareholder approval
of an amendment sufficiently increasing the number of Shares subject to the Plan
is timely obtained in accordance with Section 14(b) of the Plan.
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<PAGE> 48
17. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.
18. Shareholder Approval. Continuance of the Plan shall be subject to
approval by the shareholders of the Company within twelve (12) months before or
after the date the Plan is adopted. Such shareholder approval shall be obtained
in the manner and to the degree required under Applicable Laws and the rules of
any stock exchange upon which the Common Stock is listed.
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<PAGE> 49
ALTERA CORPORATION
1987 EMPLOYEE STOCK PURCHASE PLAN
The following constitute the provisions of the 1987 Employee Stock
Purchase Plan of Altera Corporation.
1. Purpose. The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of
the Plan shall, accordingly, be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.
2. Definitions.
(a) "Board" shall mean the Board of Directors of the Company.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Common Stock" shall mean the Common Stock, $0.001 par value, of
the Company.
(d) "Company" shall mean Altera Corporation, a Delaware corporation.
(e) "Compensation" shall mean all regular straight-time gross
earnings, plus sales commissions and sales incentives, but exclusive of payments
for overtime, shift premium, other incentive compensation, other incentive
payments, bonuses, or other compensation.
(f) "Continuous Status as an Employee" shall mean the absence of any
interruption or termination of service as an Employee. Continuous Status as an
Employee shall not be considered interrupted in the case of a leave of absence
agreed to in writing by the Company, provided that such leave is for a period of
not more than ninety (90) days or reemployment upon the expiration of such leave
is guaranteed by contract or statute.
(g) "Designated Subsidiaries" shall mean the Subsidiaries which have
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
(h) "Employee" shall mean any person, including an officer, who is
customarily employed for at least twenty (20) hours per week and more than five
(5) months in a calendar year by the Company or one of its Designated
Subsidiaries.
<PAGE> 50
(i) "Exercise Date" shall mean the last day of each offering period
of the Plan.
(j) "Offering Date" shall mean the first day of each offering period
of the Plan.
(k) "Plan" shall mean this Employee Stock Purchase Plan.
(l) "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than fifty percent (50%) of the voting shares are held by the
Company or a Subsidiary, whether or not such corporation now exists or is
hereafter organized or acquired by the Company or a Subsidiary.
3. Eligibility.
(a) Any person who is an Employee as of the Offering Date of a given
offering period shall be eligible to participate in such offering period under
the Plan, subject to the requirements of paragraph 5(a) and the limitations
imposed by Section 423(b) of the Code.
(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately after the
grant, such Employee (or any other person whose stock would be attributed to
such Employee pursuant to Section 425(d) of the Code) would own stock and/or
hold outstanding options to purchase stock possessing five percent (5%) or more
of the total combined voting power or value of all classes of stock of the
Company or of any subsidiary of the Company; or (ii) which permits his rights to
purchase stock under all employee stock purchase plans (described in Section 423
of the Code) of the Company and its subsidiaries to accrue at a rate which
exceeds Twenty-five Thousand Dollars ($25,000) of fair market value of such
stock (determined at the time such option is granted) for each calendar year in
which such option is outstanding at any time.
4. Offering Periods. The Plan shall be implemented by one offering during
each six (6) month period of the Plan, commencing on or about August 16, 1988,
and continuing thereafter until terminated in accordance with paragraph 19
hereof. The Board shall have the power to change the duration of offering
periods with respect to future offerings without shareholder approval if such
change is announced at least fifteen (15) days prior to the scheduled beginning
of the first offering period to be affected.
5. Participation.
(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deduction, on the form
provided by the Company, and filing it with the Company's payroll office prior
to the applicable Offering Date, unless a later time for filing the subscription
agreement is set by the Board for all eligible Employees with respect to a given
offering.
<PAGE> 51
(b) Payroll deductions for a participant shall commence on the first
payroll following the Offering Date and shall end on the Exercise Date of the
offering to which such authorization is applicable, unless sooner terminated by
the participant as provided in paragraph 6(c) or 10.
6. Payroll Deductions.
(a) At the time a participant files his subscription agreement, he
shall elect to have payroll deductions made on each payday during the offering
period in an amount not exceeding ten percent (10%) of the Compensation which he
receives on such payday, and the aggregate of such payroll deductions during the
offering period shall not exceed ten percent (10%) of his aggregate Compensation
during said offering period.
(b) All payroll deductions made by a participant shall be credited
to his account under the Plan. A participant may not make any additional
payments into such account.
(c) A participant may discontinue his participation in the Plan as
provided in paragraph 10. A participant may also lower to zero, but not
thereafter increase, the rate of his payroll deductions during the offering
period by notifying the Company in writing. The decrease shall be effective
fifteen (15) days following the Company's receipt of the notification. Should an
eligible Employee decided to again participate in the Plan for future offering
periods, he must complete and file with the Company a new authorization for
payroll deduction.
7. Grant of Option.
(a) On the Offering Date of each offering period, each eligible
Employee participating in the Plan shall be granted an option to purchase (at
the per-share option price) up to a number of shares of the Company's Common
Stock determined by dividing such Employee's payroll deductions accumulated
during such offering period (not to exceed an amount equal to ten percent (10%)
of his Compensation during the applicable offering period) by the option price
as defined in Section 7(b) herein, subject to the limitations set forth in
Sections 3(b) and 12 hereof, and provided, however, that in no event shall such
option be exercisable for a number of shares in excess of Twelve Thousand Five
Hundred Dollars ($12,500) divided by eighty-five percent (85%) of the fair
market value of a share of the Company's Common Stock on the Offering Date. Fair
market value of a share of the Company's Common Stock shall be determined as
provided in Section 7(b) herein.
(b) The option price per share of the shares offered in a given
offering period shall be the lower of: (i) eighty-five percent (85%) of the fair
market value of a share of the Common Stock of the Company on the Offering Date;
or (ii) eighty-five percent (85%) of the fair market value of a share of the
Common Stock of the Company on the Exercise Date. The fair market value of the
Company's Common Stock on a given date shall be determined by the Board in its
discretion; provided, however, that where there is a public market for the
Common
<PAGE> 52
Stock, the fair market value per share shall be the mean of the bid and asked
prices of the Common Stock for such date, as reported in The Wall Street Journal
(or, if not so reported, as otherwise reported by the National Association of
Securities Dealers Automated Quotation (NASDAQ) System) or, in the event the
Common Stock is listed on a stock exchange, the fair market value per share
shall be the closing price on such exchange on such date, as reported in The
Wall Street Journal.
8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in paragraph 10, his option for the purchase of shares will be
exercised automatically on the Exercise Date of the offering period, and the
maximum number of full shares subject to option will be purchased for him at the
applicable option price with the accumulated payroll deductions in his account.
The shares purchased upon exercise of an option hereunder shall be deemed to be
transferred to the participant on the Exercise Date. During his lifetime, a
participant's option to purchase shares hereunder is exercisable only by him.
9. Delivery. As promptly as practicable after the Exercise Date of each
offering period, the Company shall arrange the delivery to each participant, as
appropriate, of a certificate representing the shares purchased upon exercise of
his option. Any cash remaining to the credit of a participant's account under
the Plan at the termination of each offering period which is insufficient to
purchase a full share of Common Stock of the Company shall be credited to the
participant's account for the next offering period, thereby reducing the maximum
amount which may be withheld from Compensation during such next offering period
if it would otherwise exceed the limits set forth in paragraphs 3(b) or 6(a),
or, if requested by the participant or if the participant has elected not to
participate for such following period, shall be returned to said participant.
10. Withdrawal; Termination of Employment.
(a) A participant may withdraw all, but not less than all, the
payroll deductions credited to his account under the Plan at any time prior to
the Exercise Date of the offering period by giving written notice to the
Company. All of the participant's payroll deductions credited to his account
will be paid to him promptly after receipt of his notice of withdrawal, and his
option for the current period will be automatically terminated, and no further
payroll deductions for the purchase of shares will be made during the offering
period.
(b) Upon termination of the participant's Continuous Status as an
Employee prior to the Exercise Date of the offering period for any reason,
including retirement or death, the payroll deductions credited to his account
will be returned to him or, in the case of his death, to the person or persons
entitled thereto under paragraph 14, and his option will be automatically
terminated.
(c) In the event an Employee fails to remain in Continuous Status as
an Employee of the Company for at least twenty (20) hours per week during the
offering period in which the employee is a participant, he will be deemed to
have elected to withdraw from the
<PAGE> 53
Plan, and the payroll deductions credited to his account will be returned to him
and his option terminated.
(d) A participant's withdrawal from an offering will not have any
effect upon his eligibility to participate in a succeeding offering or in any
similar plan which may hereafter be adopted by the Company.
11. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.
12. Stock.
(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be three million one
hundred thousand (3,100,000) shares, subject to adjustment upon changes in
capitalization of the Company as provided in paragraph 18. If the total number
of shares which would otherwise be subject to options granted pursuant to
Section 7(a) hereof on the Offering Date of an offering period exceeds the
number of shares then available under the Plan (after deduction of all shares
for which options have been exercised or are then outstanding), the Company
shall make a pro rata allocation of the shares remaining available for option
grant in as uniform a manner as shall be practicable and as it shall determine
to be equitable. In such event, the Company shall give written notice of such
reduction of the number of shares subject to the option to each Employee
affected thereby, and shall similarly reduce the rate of payroll deductions, if
necessary.
(b) The participant will have no interest or voting right in shares
covered by his option until such option has been exercised.
(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant and
his spouse.
13. Administration. The Plan shall be administered by the Board of the
Company or a committee of members of the Board appointed by the Board. The
administration, interpretation or application of the Plan by the Board or its
committee shall be final, conclusive and binding upon all participants. Members
of the Board who are eligible Employees are permitted to participate in the
Plan, provided that:
(a) Members of the Board who are eligible to participate in the Plan
may not vote on any matter affecting the administration of the Plan or the grant
of any option pursuant to the Plan.
(b) If a committee is established to administer the Plan, no member
of the Board who is eligible to participate in the Plan may be a member of the
committee.
14. Designation of Beneficiary.
<PAGE> 54
(a) A participant may file a written designation of a beneficiary
who is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to the end of
the offering period but prior to delivery to him of such shares and cash. In
addition, a participant may file a written designation of a beneficiary who is
to receive any cash from the participant's account under the Plan in the event
of such participant's death prior to the Exercise Date of the offering period.
(b) Such designation of beneficiary may be changed by the
participant at any time by written notice. In the event of the death of a
participant, and in the absence of a beneficiary validly designated under the
Plan who is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the estate
of the participant; or, if no such executor or administrator has been appointed
(to the knowledge of the Company), the Company, in its discretion, may deliver
such shares and/or cash to the spouse or to any one or more dependents or
relatives of the participant; or, if no spouse, dependent or relative is known
to the Company, then to such other person as the Company may designate.
15. Transferability. Neither payroll deductions credited to a
participant's account nor any rights, with regard to the exercise of an option
or to receive shares under the Plan, may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in paragraph 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds in accordance with paragraph 10.
16. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.
17. Reports. Individual accounts will be maintained for each participant
in the Plan. Statements of account will be given to participating Employees
promptly following the Exercise Date, which statements will set forth the
amounts of payroll deductions, the per share purchase price, the number of
shares purchased and the remaining cash balance, if any.
18. Adjustments Upon Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the number of shares of Common Stock
covered by each option under the Plan which has not yet been exercised and the
number of shares of Common Stock which have been authorized for issuance under
the Plan but have not yet been placed under option (collectively, the
"Reserves"), as well as the price per share of Common Stock covered by each
option under the Plan which has not yet been exercised, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of shares of Common Stock effected without receipt of
consideration by the Company; provided, however, that conversion of any
<PAGE> 55
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,
whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issue by the Company of shares of stock
of any class, or securities convertible into shares of stock of any class, shall
affect, and no adjustment by reason thereof shall be made with respect to, the
number or price of shares of Common Stock subject to an option.
In the event of the proposed dissolution or liquidation of the Company,
the offering period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, each option under the
Plan shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the Board determines, in the exercise of its sole discretion and in lieu
of such assumption or substitution, that the participant shall have the right to
exercise the option as to all of the optioned stock, including shares as to
which the option would not otherwise be exercisable. If the Board makes an
option fully exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify the participant that the option
shall be fully exercisable for a period of fifteen (15) days from the date of
such notice, and the option will terminate upon the expiration of such period.
The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per share
of Common Stock covered by each outstanding option, in the event that the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of shares of its outstanding Common Stock, and
in the event of the Company being consolidated with or merged into any other
corporation.
19. Amendment or Termination. The Board may at any time terminate or amend
the Plan. Except as provided in paragraph 18, no such termination can affect
options previously granted, nor may an amendment make any change in any option
theretofore granted which adversely affects the rights of any participant, nor
may an amendment be made without prior approval of the shareholders of the
Company (obtained in the manner described in paragraph 21) if such amendment
would:
(a) Increase the number of shares that may be issued under the Plan;
(b) Permit payroll deductions at a rate in excess of ten percent
(10%) of the participant's Compensation;
(c) Change the designation of the employees (or class of employees)
eligible for participation in the Plan; or
<PAGE> 56
(d) If the Company has a class of equity securities registered under
Section 12 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") at the time of such amendment, materially increase the benefits which may
accrue to participants under the Plan.
If any amendment requiring shareholder approval under this paragraph 19 of
the Plan is made subsequent to the first registration of any class of equity
securities by the Company under Section 12 of the Exchange Act, such shareholder
approval shall be solicited as described in paragraph 21 of the Plan.
20. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.
21. Shareholder Approval.
(a) Continuance of the Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months before or after the date
the Plan is adopted. If such shareholder approval is obtained at a duly held
shareholders' meeting, it must be obtained by the affirmative vote of the
holders of a majority of the outstanding shares of the Company, or if such
shareholder approval is obtained by written consent, it must be obtained by the
unanimous written consent of all shareholders of the Company; provided, however,
that approval at a meeting or by written consent may be obtained by a lesser
degree of shareholder approval if the Board determines, in its discretion after
consultation with the Company's legal counsel, that such a lesser degree of
shareholder approval will comply with all applicable laws and will not adversely
affect the qualification of the Plan under Section 423 of the Code.
(b) If and in the event that the Company registers any class of
equity securities pursuant to Section 12 of the Exchange Act, any required
approval of the shareholders of the Company obtained after such registration
shall be solicited substantially in accordance with Section 14(a) of the
Exchange Act and the rules and regulations promulgated thereunder.
(c) If any required approval by the shareholders of the Plan itself
or of any amendment thereto is solicited at any time otherwise than in the
manner described in paragraph 21(b) hereof, then the Company shall, at or prior
to the first annual meeting of shareholders held subsequent to the later of (i)
the first registration of any class of equity securities of the Company under
Section 12 of the Exchange Act; or (ii) the granting of an option hereunder to
an officer or director after such registration, do the following:
(1) furnish in writing to the holders entitled to vote for the
Plan substantially the same information which would be required (if proxies to
be voted with respect to approval or disapproval of the Plan or amendment were
then being solicited) by the rules and regulations in effect under Section 14(a)
of the Exchange Act at the time such information is furnished; and
<PAGE> 57
(2) file with, or mail for filing to, the Securities and
Exchange Commission four (4) copies of the written information referred to in
subsection (1) hereof not later than the date on which such information is first
sent or given to shareholders.
22. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.
As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.
23. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in paragraph 21. It shall continue in effect for a term of
twenty (20) years unless sooner terminated under paragraph 19.
<PAGE> 58
[ALTERA LOGO]
Altera Corporation is a world leader in one of the semiconductor industry's
fastest growing segments: high density programmable logic devices (PLDs) and
associated software tools for logic development. Altera PLDs are standard
integrated circuits that offer significant advantages over custom logic chips
such as gate arrays by helping electronics systems manufacturers shorten
time-to-market and reduce development costs. Altera software design tools run
on personal computers and engineering workstations. The Company's broad line of
programmable logic devices and easy-to-use development tools offer customers
solutions for the high speed, high density, and lower power applications that
drive the electronics industry's growth. Altera products serve over 13,000
customers in three primary market areas: communications, computing, and
industrial applications. The Company sells its chips worldwide and derives
nearly half of its revenues from markets outside the United States. Altera
common stock is traded on The Nasdaq Stock Market under the symbol ALTR.
Altera's Internet Web site is located at http://www.altera.com.
DETACH HERE
PROXY
ALTERA CORPORATION
PROXY FOR 1998 ANNUAL MEETING OF STOCKHOLDERS
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned stockholder of ALTERA CORPORATION, a Delaware corporation,
hereby acknowledges receipt of the Notice of Annual Meeting of Stockholders and
Proxy Statement, each dated April 9, 1998, 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 1998 Annual Meeting of Stockholders of ALTERA
CORPORATION, to be held on Wednesday May 13, 1998 at 10:00 a.m., local time at
101 Innovation Drive, 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.
- ----------- -----------
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
- ----------- -----------
<PAGE> 59
DETACH HERE
[ X ] Please mark votes as
in this example.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS INDICATED, WILL BE
VOTED FOR ITEMS 1, 2, 3, 4 AND 5.
1. Election of directors.
Nominees: Rodney Smith; Charles M. Clough; Michael A. Ellison;
Paul Newhagen; Robert W. Reed; William E. Terry;
Deborah D. Triant
[ ] FOR ALL NOMINEES [ ] WITHHELD FROM ALL NOMINEES
[ ]_______________________________________
For all nominees except as noted above
[ ] MARK HERE FOR ADDRESS CHANGE AND NOTE BELOW
2. To approve an amendment to the 1996 Stock Option Plan to increase from
5,300,000 to 6,500,000 the number of shares of Common Stock reserved for
issuance thereunder.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. To approve an amendment to the 1987 Employee Stock Purchase Plan to increase
from 2,800,000 to 3,100,000 the number of shares of Common Stock reserved for
issuance thereunder.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
4. To approve the adoption of the 1998 Director Stock Option Plan and the
reservation of 170,000 shares of Common Stock for issuance thereunder.
(Approval of this plan will make effective the termination of the 1988
Director Stock Option Plan and the cancellation of approximately 170,000
shares reserved thereunder.)
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
5. To ratify the appointment of Price Waterhouse LLP as independent accountants
for the Company for the fiscal year ending December 31, 1998.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
6. To transact such other business as may properly come before the meeting or
any adjournment 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 power of said
attorneys-in-fact hereunder.
(This Proxy should be marked, dated, signed by the stockholder(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.)
Signature:________________________________________ Date:________________________
Signature:________________________________________ Date:________________________
