1988 Director Stock Option Plan

ALTERA CORPORATION


1988 DIRECTOR STOCK OPTION PLAN


(As amended effective January 18, 1995)


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


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


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


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


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


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


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


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


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


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


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


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


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


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


(l) "Parent" shall mean a "parent corporation", whether now or
hereafter existing, as defined in Section 425(e) of the Internal Revenue
Code of 1986, as amended. 2


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


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


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


3. Stock Subject to the Plan. Subject to the provisions of Section 11 of the Plan, the maximum aggregate number of Shares which may be optioned and sold under the Plan is 200,000 Shares (the "Pool") of Common Stock. The Shares may be authorized, but unissued, or reacquired Common Stock.


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


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


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


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


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


(ii) Each Outside Director shall be automatically granted an Option
to purchase 20,000 Shares (the "First Option") upon the later to occur
of (A) the effective date of this Plan, as determined in accordance with
Section 6 hereof, or (B) the date on which such person first becomes an
Outside Director, whether through election by the shareholders of the
Company, appointment by the Board of Directors to fill a vacancy, or
(for an employee director) by ceasing to be employed by the Company.


(iii) After the First Option has been granted to an Outside
Director, such Outside Director shall thereafter be automatically
granted an Option to purchase 5,000 Shares (a "Subsequent Option") on
the day of each annual shareholders meeting, at which such Outside
Director is reelected to an additional term, occurring after the grant
date of such Outside Director's First Option; provided, however, that in
no event shall an Outside Director be granted Options to purchase in the
aggregate more than 50,000 shares.


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


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


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


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


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


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


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


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embezzlement, fraud, dishonesty, nonpayment of an obligation owed to the
Company, breach of fiduciary duty or deliberate disregard of the Company
rules resulting in loss, damage or injury to the Company, or if an Optionee
makes an unauthorized disclosure of any Company trade secret or
confidential information, engages in any conduct constituting unfair
competition, induces any Company customer to breach a contract with the
Company or induces any principal for whom the Company acts as agent to
terminate such agency relationship, neither the Optionee nor his estate
shall be entitled to exercise any option whatsoever. In making such
determination, the Board of Directors (excluding the Outside Director
accused of such misconduct) shall act fairly and shall give the Optionee an
opportunity to appear and present evidence on Optionee's behalf at a
hearing before a committee of the Board.


5. Eligibility. Options may be granted only to Outside Directors. All Options shall be automatically granted in accordance with the terms set forth in Section 4(b) hereof. An Outside Director who has been granted an Option may, if he is otherwise eligible, be granted an additional Option or Options in accordance with such provisions.


The Plan shall not confer upon any Optionee any right with respect to continuation of service as a Director or nomination to serve as a Director, nor shall it interfere in any way with any rights which the Director or the Company may have to terminate his directorship at any time.


6. Term of Plan. The Plan shall become effective upon the earlier to occur of its adoption by the Board of Directors or its approval by the shareholders of the Company as described in Section 17 of the Plan. It shall continue in effect for a term of ten (10) years unless sooner terminated under Section 13 of the Plan.


7. Term of Option. The term of each Option shall be ten (10) years from the date of grant thereof.


8. Exercise Price and Consideration.


(a) Exercise Price. The per Share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be 100% of the fair market
value per Share on the date of grant of the Option.


(b) Fair Market Value. The fair market value shall be determined by
the Board in its discretion; provided, however, that where there is a
public market for the Common Stock, the fair market value per Share shall
be the mean of the bid and asked prices of the Common Stock in the
over-the-counter market on the date of grant, as reported in the Wall
Street Journal (or, if not so reported, as otherwise reported by the
National Association of Securities Dealers Automated Quotation ("NASDAQ")
System) or, in the event the Common Stock is traded on the NASDAQ National
Market System or listed on a stock exchange, the fair market value per
Share shall be the closing price on such system or exchange on the date of
grant of the Option, as reported in the Wall Street Journal.


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(c) Form of Consideration. The consideration to be paid for the
Shares to be issued upon exercise of an Option shall consist entirely of
cash, check, other Shares of Common Stock having a fair market value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, or any combination of such methods of
payment.


9. Exercise of Option.


(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times as are set forth in
Section 4(b) hereof; provided, however, that no Options shall be
exercisable until shareholder approval of the Plan in accordance with
Section 17 hereof has been obtained.


An Option may not be exercised for a fraction of a Share.


An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received
by the Company. Full payment may consist of any consideration and method of
payment allowable under Section 8(c) of the Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. A share certificate for the
number of Shares so acquired shall be issued to the Optionee as soon as
practicable after exercise of the Option. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 11 of the Plan.


Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which
the Option is exercised.


(b) Termination of Status as a Director. In the event of the
termination of the Outside Director's Continuous Status as a Director, he
may, but only within thirty (30) days after the date of such termination,
exercise his Option to the extent that he was entitled to exercise it at
the date of such termination. To the extent that he was not entitled to
exercise an Option at the date of such termination, or if he does not
exercise such Option (which he was entitled to exercise) within the time
specified herein, the Option shall terminate.


(c) Disability of Optionee. Notwithstanding the provisions of Section
9(b) above, in the event a Director is unable to continue his service as a
Director with the Company as a result of his total and permanent disability
(as defined in Section 22(e)(3) of the Internal Revenue Code), he may, but
only within three (3) months from the date of termination, exercise his
Option to the


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extent he was entitled to exercise it at the date of such termination. To
the extent that he was not entitled to exercise the Option at the date of
termination, or if he does not exercise such Option (which he was entitled
to exercise) within the time specified herein, the Option shall terminate. ...