1988 Director Stock Option Plan Amended 1/17/96

ALTERA CORPORATION


1988 DIRECTOR STOCK OPTION PLAN


(Restated effective January 17, 1996)


1. Purposes of the Plan. The purposes of this Director Stock Option Plan are to attract and retain the best available personnel for service as Directors of the Company, to provide additional incentive to the Outside Directors of the Company to serve as Directors, and to encourage their continued service on the Board.


All options granted hereunder shall be "non-statutory stock options".


2. Definitions. As used herein, the following definitions shall apply:


(a) "Board" shall mean the Board of Directors of the Company.


(b) "Common Stock" shall mean the Common Stock of the Company.


(c) "Company" shall mean Altera Corporation, a California corporation.


(d) "Continuous Status as a Director" shall mean the absence of any interruption or termination of service as a Director.


(e) "Director" shall mean a member of the Board.


(f) "Employee" shall mean any person, including officers and Directors, employed by the Company or any Parent or Subsidiary of the Company. The payment of a director's fee by the Company shall not be sufficient in and of itself to constitute "employment" by the Company.


(g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended.


(h) "Option" shall mean a stock option granted pursuant to the Plan.


(i) "Optioned Stock" shall mean the Common Stock subject to an Option.


(j) "Optionee" shall mean an Outside Director who receives an Option.


(k) "Outside Director" shall mean a Director who is not an Employee.


(l) "Parent" shall mean a "parent corporation", whether now or hereafter existing as defined in Section 425(e) of the Internal Revenue Code of 1986, as amended.


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(m) "Plan" shall mean this 1988 Director Stock Option Plan, as amended.


(n) "Share" shall mean a share of the Common Stock, as adjusted in accordance with Section 11 of the Plan.


(o) "Subsidiary" shall mean a "subsidiary corporation", whether now or hereafter existing, as defined in Section 425(f) of the Internal Revenue Code of 1986, as amended.


3. Stock Subject to the Plan. Subject to the provisions of Section 11 of the Plan, the maximum aggregate number of Shares which may be optioned and sold under the Plan is 470,000 Shares (the "Pool") of Common Stock. The Shares may be authorized, but unissued, or reacquired Common Stock.


If an Option should expire or become unexercisable for any reason without having been exercised in full, the unpurchased Shares which were subject thereto shall, unless the Plan shall have been terminated, become available for future grant under the Plan.


4. Administration of and Grants of Options under the Plan.


(a) Administrator. Except as otherwise required herein, the Plan shall be administered by the Board.


(b) Procedure for Grants. All grants of Options hereunder shall be automatic and non- discretionary and shall be made strictly in accordance with the following provisions:


(i) No person shall have any discretion to select which Outside Directors shall be granted Options or to determine the number of Shares to be covered by Options granted to Outside Directors.


(ii) Each Outside Director shall be automatically granted an Option to purchase 40,000 Shares (the "First Option") upon the later to occur of (A) the effective date of this Plan, as determined in accordance with Section 6 hereof, or (B) the date on which such person first becomes an Outside Director, whether through election by the shareholders of the Company, appointment by the Board of Directors to fill a vacancy, or (for an employee director) by ceasing to be employed by the Company.


(iii) After the First Option has been granted to an Outside Director, such Outside Director shall thereafter be automatically granted an Option to purchase 10,000 Shares (a "Subsequent Option") on the day of each annual shareholders meeting, at which such Outside Director is reelected to an additional term, occurring after the grant date of such Outside Director's


-2- 3 First Option; provided, however, that in no event shall an Outside Director be granted Options to purchase in the aggregate more than 100,000 shares.


(iv) Notwithstanding the provisions of subsections (ii) and (iii) hereof, in the event that a grant would cause the number of Shares subject to outstanding Options plus the number of Shares previously purchased upon exercise of Options to exceed the Pool, then each such automatic grant shall be for that number of Shares determined by dividing the total number of Shares remaining available for grant by the number of Outside Directors on the automatic grant date. Any further grants shall then be deferred until such time, if any, as additional Shares become available for grant under the Plan through action to increase the number of Shares which may be issued under the Plan or through cancellation or expiration of Options previously granted hereunder.


(v) The terms of an Option granted hereunder shall be consistent with the requirements set forth elsewhere in this plan and shall additionally include the following:


(A) the Option shall be exercisable only while the Outside Director remains a Director of the Company, except as set forth in Section 9 hereof.


(B) Subsequent Options granted prior to January 14, 1992 and all First Options shall become exercisable in installments cumulatively with respect to 25% of the Shares on the first day of the first year after the date of grant of such First Option and with respect to 2.083% of the Shares for each month after such anniversary. Subsequent Options granted on or after January 14, 1992 shall become exercisable in installments cumulatively with respect to 8.34% of the shares for each month beginning after the First Option and all other Subsequent Options, if any, are fully vested. However, in no event shall any Option be exercisable prior to obtaining shareholder approval of the Plan in accordance with Section 17 hereof.


(c) Powers of the Board. Subject to the provisions and restrictions of the Plan, the Board shall have the authority, in its discretion: (i) to determine, upon review of relevant information and in accordance with Section 8(b) of the Plan, the fair market value of the Common Stock; (ii) to determine the exercise price per share of Options to be granted, which exercise price shall be determined in accordance with Section 8(a) of the Plan; (iii) to interpret the Plan; (iv) to prescribe, amend and rescind rules and regulations relating to the Plan; (v) to authorize any person to execute on behalf of the Company any instrument required to effectuate the grant of an Option previously granted hereunder; and (vi) to make all other determinations deemed necessary or advisable for the administration of the Plan.


(d) Effect of Board's Decision. All decisions, determinations and interpretations of the Board shall be final and binding on all Optionees and any other holders of any Options granted under the Plan.


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(e) Suspension or Termination of Option. If the President or his designee reasonably believes that an Optionee has committed an act of misconduct, the President may suspend the Optionee's right to exercise any option pending a determination by the Board of Directors (excluding the Outside Director accused of such misconduct). If the Board of Directors (excluding the Outside Director accused of such misconduct) determines an Optionee has committed an act of embezzlement, fraud, dishonesty, nonpayment of an obligat ...