EXHIBIT 10.1

 

Form of Executive Officer Stock Option Agreement

 

Unless otherwise defined herein, the terms defined in Altera’s 1996 Stock Option
Plan (the “Plan”) shall have the same defined meanings in this Option Agreement
(“Agreement”).

 

You have been granted an option to purchase Common Stock of the Company, subject
to the terms and conditions of the Plan, the Notice of Stock Option Grant
(“Notice of Grant”), and this Agreement.

 

1. Vesting Rights. Subject to the applicable provisions of the Plan and this
Agreement, this Option may be exercised, in whole or in part, in accordance with
the schedule set forth in the Notice of Grant.

 

2. Termination Period.

 

(a) General Rule. Except as provided below, this Option may be exercised for
thirty (30) days after termination of Optionee’s employment with the Company. In
no event shall this Option be exercised later than the Term/Expiration Date set
forth in the Notice of Grant.

 

(b) Death; Disability. Upon the termination of Optionee’s employment with the
Company by reason of his or her death or Disability, this Option may be
exercised for six (6) months after such termination, provided that in no event
shall this Option be exercised later than the Term/Expiration Date set forth in
the Notice of Grant.

 

(c) Retirement. Upon the termination of the Optionee’s employment by reason of
his or her Retirement, this Option may be exercised for five (5) years after
such termination provided that in no event shall this Option be exercised later
than the Term/Expiration Date as provided above. In addition, after such
termination by reason of Retirement, the Optionee shall continue to vest in this
Option, according to the vesting rights set forth in Section 1 above, for the
following number of years based upon the Optionee’s age at Retirement:

 

Age of Optionee at Retirement

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Years of Continued Vesting

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55 – less than 57

   1

57 – less than 59

   2

59 – less than 60

   3

60 +

   4

 

3. Grant of Option. The Plan Administrator of the Company hereby grants to the
Optionee named in the Notice of Grant (the “Optionee”) an option (the “Option”)
to purchase the number of Shares, as set forth in the Notice of Grant, at the
exercise price per share set forth in the Notice of Grant (the “Exercise
Price”), subject to the terms and conditions of the Plan, which is incorporated
herein by reference. Subject to Section 14(c) of the Plan, in the event of a
conflict between the terms and conditions of the Plan and the terms and
conditions of this Option Agreement, the terms and conditions of the Plan shall
prevail.

 

If designated in the Notice of Grant as an Incentive Stock Option (“ISO”), this
Option is intended to qualify as an Incentive Stock Option under Section 422 of
the Code. However, if this Option is intended to be an Incentive Stock Option,
to the extent that it exceeds the $100,000 rule of Code Section 422(d) it shall
be treated as a Nonstatutory Stock Option (“NSO”).

 

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4. Exercise of Option.

 

(a) Right to Exercise. This Option is exercisable during its term in accordance
with the Vesting Schedule set out in the Notice of Grant and the applicable
provisions of the Plan and this Option Agreement. In the event of Optionee’s
death, Disability or other termination of Optionee’s employment relationship,
the exercisability of the Option is governed by the applicable provisions of the
Plan and this Option Agreement.

 

(b) Cessation of Vesting Due to Employee Schedule Change. In the event an
Employee, who is regularly scheduled to work twenty (20) hours or more per week,
voluntarily chooses (i.e., other than for reasons protected by law) to reduce
his or her work schedule with the Company to fewer than twenty (20) hours per
week, the Shares subject to the Option shall cease to vest during the period of
time in which the Employee regularly maintains such a schedule. Shares subject
to the Option shall begin to vest again once the Employee is regularly scheduled
to work twenty (20) hours or more per week. The Administrator shall make the
determination as to when vesting shall cease or begin again. The Administrator
may, in its discretion, permit Shares subject to the Option to continue to vest
during the time that such Employee is regularly scheduled to work fewer than
(20) hours per week.

 

(c) Method of Exercise. This Option is exercisable by delivery of an exercise
notice (the “Exercise Notice”), which shall state the election to exercise the
Option, the number of Shares in respect of which the Option is being exercised
(the “Exercised Shares”), and such other representations and agreements as may
be required by the Company pursuant to the provisions of the Plan. The Exercise
Notice shall be delivered in person, by mail, via electronic mail or facsimile
or by other authorized method to the Secretary of the Company or other person
designated by the Company. The Exercise Notice shall be accompanied by payment
of the aggregate Exercise Price as to all Exercised Shares. This Option shall be
deemed to be exercised upon receipt by the Company of such fully executed
Exercise Notice accompanied by such aggregate Exercise Price.

 

No Shares shall be issued pursuant to the exercise of this Option unless such
issuance and exercise complies with all relevant provisions of law and the
requirements of any stock exchange or quotation service upon which the Shares
are then listed. Assuming such compliance, for income tax purposes the Exercised
Shares shall be considered transferred to the Optionee on the date the Option is
exercised with respect to such Exercised Shares.

 

5. Method of Payment. Payment of the aggregate Exercise Price shall be by any of
the following, or a combination thereof, at the election of the Optionee:

 

(a) cash; or

 

(b) check; or

 

(c) broker assisted cashless exercise; or

 

(d) surrender of other Shares which (i) 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 (ii) have a Fair Market Value on the date
of surrender equal to the aggregate Exercise Price of the Exercised Shares; or

 

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(e) other method authorized by the Company.

 

6. Non-Transferability of Option. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee only by the Optionee. The terms of
the Plan and this Option Agreement shall be binding upon the executors,
administrators, heirs, successors and assigns of the Optionee.

 

7. Term of Option. This Option may be exercised only within the term set out in
the Notice of Grant, and may be exercised during such term only in accordance
with the Plan and the terms of this Option Agreement.

 

8. U.S. Tax Consequences. For Optionees subject to U.S. income tax, some of the
federal and California tax consequences relating to this Option, as of the date
of this Option, are set forth below. All other Optionees should consult a tax
advisor for tax consequences relating to this Option in their respective
jurisdiction. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND
REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX ADVISER
BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.

 

(a) Exercising the Option.

 

(i) Nonstatutory Stock Option. The Optionee may incur regular federal income tax
and California income tax liability upon exercise of a NSO. The Optionee will be
treated as having received compensation income (taxable at ordinary income tax
rates) equal to the excess, if any, of the Fair Market Value of the Exercised
Shares on the date of exercise over their aggregate Exercise Price. If the
Optionee is an Employee or a former Employee, the Company will be required to
withhold from his or her compensation or collect from Optionee and pay to the
applicable taxing authorities an amount in cash equal to a percentage of this
compensation income at the time of exercise, and may refuse to honor the
exercise and refuse to deliver Shares if such withholding amounts are not
delivered at the time of exercise.

 

(ii) Incentive Stock Option. If this Option qualifies as an ISO, the Optionee
will have no regular federal income tax or California income tax liability upon
its exercise, although the excess, if any, of the Fair Market Value of the
Exercised Shares on the date of exercise over their aggregate Exercise Price
will be treated as an adjustment to alternative minimum taxable income for
federal tax purposes and may subject the Optionee to alternative minimum tax in
the year of exercise.

 

(b) Disposition of Shares.

 

(i) NSO. If the Optionee holds NSO Shares for at least one year, any gain
realized on disposition of the Shares will be treated as long-term capital gain
for federal income tax purposes.

 

(ii) ISO. If the Optionee holds ISO Shares for at least one year after exercise
and two years after the grant date, any gain realized on disposition of the
Shares will be treated as long-term capital gain for federal income tax
purposes. If the Optionee disposes of ISO Shares within one

 

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year after exercise or two years after the grant date, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to the extent of the excess, if any, of the lesser of (A) the difference
between the Fair Market Value of the Shares acquired on the date of exercise and
the aggregate Exercise Price, or (B) the difference between the sale price of
such Shares and the aggregate Exercise Price.

 

(c) Notice of Disqualifying Disposition of ISO Shares. If the Optionee sells or
otherwise disposes of any of the Shares acquired pursuant to an ISO on or before
the later of (i) two years after the grant date, or (ii) one year after the
exercise date, the Optionee shall immediately notify the Company in writing of
such disposition. The Optionee agrees that he or she may be subject to income
tax withholding by the Company on the compensation income recognized from such
early disposition of ISO Shares by payment in cash or out of the current
earnings paid to the Optionee.

 

9. Entire Agreement; Governing Law. The Plan is incorporated herein by
reference. The Plan, the Notice of Grant, and this Option Agreement constitute
the entire agreement of the parties with respect to the subject matter hereof
and supersede in their entirety all prior undertakings and agreements of the
Company and Optionee with respect to the subject matter hereof, and may not be
modified adversely to the Optionee’s interest except by means of a writing
signed by the Company and Optionee. This agreement is governed by California law
except for that body of law pertaining to conflict of laws.

 

10. NO GUARANTEE OF EMPLOYMENT. OPTIONEE UNDERSTANDS AND AGREES THAT HIS OR HER
EMPLOYMENT WITH THE COMPANY OR ITS SUBSIDIARIES IS FOR AN UNSPECIFIED DURATION
AND CONSTITUTES “AT-WILL” EMPLOYMENT. OPTIONEE ACKNOWLEDGES AND AGREES THAT THE
VESTING OF SHARES PURSUANT TO THE VESTING SCHEDULE HEREOF IS EARNED ONLY BY
CONTINUING SERVICE AS AN EMPLOYEE AT THE WILL OF THE COMPANY OR ITS SUBSIDIARY
(AND NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED AN OPTION OR PURCHASING
SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT,
THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH
HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT
AS AN EMPLOYEE FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND SHALL NOT
INTERFERE WITH OPTIONEE’S RIGHT OR THE COMPANY’S AND/OR SUBSIDIARY’S RIGHT TO
TERMINATE OPTIONEE’S EMPLOYMENT AT ANY TIME, WITH OR WITHOUT CAUSE.

 

By your signature and the signature of the Company’s representative on the
Notice of Grant, you and the Company agree that this Option is granted under and
governed by the terms and conditions of the Plan, the Notice of Grant, and this
Option Agreement. Optionee has reviewed the Plan, the Notice of Grant, and this
Option Agreement in their entirety, has had an opportunity to obtain the advice
of counsel prior to executing the Notice of Grant, and fully understands all
provisions of the Plan, the Notice of Grant, and Option Agreement. Optionee
hereby agrees to accept as binding, conclusive and final all decisions or
interpretations of the Administrator upon any questions relating to the Plan,
the Notice of Grant, and the Option Agreement. Optionee further agrees to notify
the Company upon any change in the residence address indicated on the Notice of
Grant.

 

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