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                                                               EXHIBIT 10.33 (b)

                               ALTERA CORPORATION

                         1988 DIRECTOR STOCK OPTION PLAN

                        (RESTATED EFFECTIVE MAY 7, 1997)

        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.



<PAGE>   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 940,000 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 200,000 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


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(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(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



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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.

               (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


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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 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.

               (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, 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, 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.

        10. Non-Transferability of Options. Options may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act, or the rules thereunder. The designation of a
beneficiary by an Optionee does not constitute a transfer. An Option may be
exercised, during the lifetime of the Optionee, only by the Optionee or a
transferee permitted by this Section 10.

        11. Adjustments Upon Changes in Capitalization or Merger. 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


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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 of Common Stock subject to an Option.

               In the event of the proposed dissolution or liquidation of the
Company, the Option will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. 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 Option as to all or any part of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable. 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, the Option shall be
assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation. If however
such successor corporation does not agree to fully assume such options, the
Board shall act to fully accelerate the vesting of all of the shares subject to
each outstanding option such that the Optionee 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 Optionee that the Option shall be
fully exercisable for a period of thirty (30) days from the date of such notice,
and the Option will terminate upon the expiration of such period.

        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(b) hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.

        13. Amendment and Termination of the Plan.

               (a) Amendment and Termination. The Board may amend or terminate
the Plan from time to time in such respects as the Board may deem advisable;
provided that, the following revisions or amendments shall require approval of
the shareholders of the Company in the manner described in Section 17 of the
Plan:

                      (i) any increase in the number of Shares subject to the
Plan, other than in connection with an adjustment under Section 11 of the Plan;
or

                      (ii) any change in the designation of the class of persons
eligible to be granted Options; or

                      (iii) any material increase in the benefits accruing to
participants under the Plan; or


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                      (iv) any change in the number of shares subject to Options
to be granted hereunder or in the terms thereof as set forth in Section 4(b)
hereof.

        Notwithstanding the foregoing, the provisions set forth in Section 4(b)
of this Plan (and any other Sections of this Plan that affect the formula award
terms required to be specified in this Plan by Rule 16b-3) shall not be amended
more that once every six months, other than to comport with changes in the Code,
the Employee Retirement Income Security Act, or the rules thereunder.

               (b) Shareholder Approval. Shareholder approval of any amendment
requiring shareholder approval under Section 13(a) of the Plan shall be
solicited as described in Section 17 of the Plan.

               (c) 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, unless mutually agreed otherwise between the Optionee and
the Board, which agreement must be in writing and signed by the Optionee and the
Company.

        14. 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.

               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.

        15. 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.


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        16. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.

        17. Shareholder Approval.

               (a) Continuance of the Plan shall be subject to approval by the
shareholders of the Company at or prior to the first annual meeting of
shareholders held subsequent to the granting of an Option hereunder. If such
shareholder approval is obtained at a duly held shareholders' meeting, it may be
obtained by the affirmative vote of the holders of a majority of the outstanding
shares of the Company present or represented and entitled to vote thereon. If
such shareholder approval is obtained by written consent, it may be obtained by
the written consent of the holders of a majority of the outstanding shares of
the Company.

               (b) Any required approval of the shareholders of the Company
shall be solicited substantially in accordance with Section 14(a) of the
Exchange Act and the rules and regulations promulgated thereunder.

        18. Information to Optionees. The Company shall provide to each
Optionee, during the period for which such Optionee has one or more Options
outstanding, copies of all annual reports to shareholders, proxy statements and
other information provided to all shareholders of the Company.



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                         1988 DIRECTOR STOCK OPTION PLAN
                             STOCK OPTION AGREEMENT


     Unless otherwise defined herein, the terms defined in the Plan shall have
     the same Defined meanings in this Option Agreement.

1.   NOTICE OF STOCK OPTION GRANT

     -------------------------

     -------------------------

     -------------------------


You have been granted an option to purchase Common Stock of the Company, subject
to the terms and conditions of the Plan and this Option Agreement, as follows:

     Grant Number
                                                  ----------
     Date of Grant
                                                  ----------
     Vesting Commencement Date
                                                  ----------
     Exercise Price per Share
                                                  ----------
     Total Number of Shares Granted
                                                  ----------
     Total Exercise Price
                                                  ----------
     Type of Option
                                                  ----------
     Expiration Date
                                                  ----------


2.   VESTING SCHEDULE. Shares in each period will become fully vested on the
     date shown.


<TABLE>
<S>                  <C>                 <C>                     <C>
     Shares          Vesting Type        Start Vest Date         Full Vest Date
</TABLE>


Agreed subject to all of the terms and conditions of this Option Agreement
and of the 1988 Director Stock Option Plan, and conditioned upon due and valid
execution of this Option Agreement by the Optionee.


OPTIONEE:                               ALTERA CORPORATION

                                        By:

                                        Title: Vice President