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Proc-Type: 2001,MIC-CLEAR
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<SEC-DOCUMENT>0001095811-01-500338.txt : 20010312
<SEC-HEADER>0001095811-01-500338.hdr.sgml : 20010312
ACCESSION NUMBER: 0001095811-01-500338
CONFORMED SUBMISSION TYPE: 10-K
PUBLIC DOCUMENT COUNT: 8
CONFORMED PERIOD OF REPORT: 20001231
FILED AS OF DATE: 20010308
FILER:
COMPANY DATA:
COMPANY CONFORMED NAME: ALTERA CORP
CENTRAL INDEX KEY: 0000768251
STANDARD INDUSTRIAL CLASSIFICATION: SEMICONDUCTORS & RELATED DEVICES [3674]
IRS NUMBER: 770016691
STATE OF INCORPORATION: DE
FISCAL YEAR END: 1231
FILING VALUES:
FORM TYPE: 10-K
SEC ACT:
SEC FILE NUMBER: 000-16617
FILM NUMBER: 1563265
BUSINESS ADDRESS:
STREET 1: 101 INNOVATION DR
CITY: SAN JOSE
STATE: CA
ZIP: 95134
BUSINESS PHONE: 4085448000
MAIL ADDRESS:
STREET 1: 101 INNOVATION DR
CITY: SAN JOSE
STATE: CA
ZIP: 95134
</SEC-HEADER>
<DOCUMENT>
<TYPE>10-K
<SEQUENCE>1
<FILENAME>f70153e10-k.txt
<DESCRIPTION>FORM 10-K FISCAL YEAR ENDED DECEMBER 31, 2000
<TEXT>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(MARK ONE)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER: 0-16617
ALTERA CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE
(State or Other Jurisdiction of
Incorporation or Organization)
77-0016691
(I.R.S. Employer
Identification No.)
101 INNOVATION DRIVE, SAN JOSE, CALIFORNIA 95134
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code: (408) 544-7000
Securities registered pursuant to Section 12(b) of the Act:
NONE
Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the registrant's common stock held by
non-affiliates of the registrant was approximately $6,885,949,000 as of February
28, 2001, based upon the closing sale price on the Nasdaq National Market for
that date.
There were 388,666,822 shares of the registrant's common stock issued and
outstanding as of February 28, 2001.
DOCUMENTS INCORPORATED BY REFERENCE
Items 5 and 6 of Part II incorporate information by reference from the Annual
Report to Stockholders for the fiscal year ended December 31, 2000.
Items 11, 12 and 13 of Part III incorporate information by reference from the
Proxy Statement for the Annual Meeting of Stockholders to be held on May 1,
2001.
<PAGE> 2
Except for the historical information presented, the matters discussed in this
Report include forward-looking statements, as further described under Item 7 and
elsewhere in this Report. Forward-looking statements can be identified by the
use of forward-looking words, such as "may," "could," "expect," "believe,"
"plan," "anticipate," "continue," or other similar words.
PART I
ITEM 1. BUSINESS.
GENERAL
Altera Corporation, referred to as "we," "us" or "our," designs, manufactures
and markets programmable logic devices, or PLDs, and associated development
tools. Programmable logic devices are semiconductor integrated circuits that our
customers can program using our proprietary software, which operates on personal
computers and engineering workstations. Founded in 1983, we were one of the
first suppliers of complementary metal oxide semiconductor, or CMOS,
programmable logic devices and are currently a global leader in this market. We
offer a broad line of CMOS programmable logic devices that address high-speed,
high-density and low-power applications. Our products serve a wide range of
markets, including telecommunications, data communications, electronic data
processing and industrial applications.
STRATEGY
Three principal types of digital integrated circuits are used in most electronic
systems: microprocessors, memory and logic. Microprocessors are used for control
and computing tasks, memory is used to store programming instructions and data,
and logic is used to manage the interchange and manipulation of digital signals
within a system. While system designers employ a relatively small number of
standard architectures to meet their microprocessor and memory needs, they
require a wide variety of logic circuits to differentiate their end products.
According to Dataquest, the CMOS logic market consists of the following
segments:
- Semi-custom or application-specific integrated circuits, or
ASICs
- Standard logic
- Full custom devices
- Other forms of logic integrated circuits, including chipsets
The ASIC segment is comprised of programmable logic, gate arrays and cell-based
integrated circuits (also referred to as standard cells). In a broad sense, all
of these devices are indirectly competitive as they generally may be used in the
same types of applications in electronic products. However, differences in cost,
performance, density, flexibility, ease-of-use and time-to-market dictate the
extent to which they may be directly competitive for particular applications.
Programmable logic's primary advantage is that it allows for quicker design
cycles, meeting customers' needs for quick time-to-market. Programmable logic
allows customers to experiment and iterate their designs in a relatively short
amount of time and with minimum cost. In most instances, this is quicker and
easier than achieving a design in a deterministic fashion. This advantage is
amplified by the ability to have working silicon at the time the design is
finalized.
Another advantage of programmable logic is that, particularly for small volume
applications, it lowers the per unit cost of producing customized components.
While programmable logic inherently consumes more silicon (because of its
general application and on-chip programming overhead), in many cases, depending
on the complexity of the design and total unit requirements, this higher per
unit cost is more than offset by the high fixed costs of layout and mask-making
required to produce a custom integrated circuit. Further, because unprogrammed
PLDs are standard devices, we, our distributors and subcontract manufacturers --
not our customers -- hold stocks of inventory, thereby enhancing the cost
advantage of PLDs for our customers.
Our strategy is to compete with other companies in the ASIC segment of the CMOS
logic market by providing a total solution for our customers' programming logic
needs. To accomplish this goal, we offer our customers:
- PLDs with the speed, density and package types to meet their
specific needs
- State-of-the-art development tools that are easy to use and
compatible with other industry standard electronic design
automation, or EDA, tools
- Optimized system-level megafunctions to speed their design
process
- A complete customer support system
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<PAGE> 3
We have been able to introduce new product families that, as compared to their
predecessors, provide more functionality at a much lower price for any given
density because high-volume manufacturing and emerging process technologies have
resulted in cost decreases. We believe these new product families achieve the
integration, density, performance and cost advantages of other ASIC solutions.
We believe that our competitiveness within the ASIC segment in these areas,
along with the inherent advantages of programmable logic discussed above, will
enable us to compete for designs traditionally served by other ASIC devices.
PRODUCTS
We sell a wide range of products, with a total of more than 1,000 product
options among our PLD families. We offer PLDs in two fundamental technologies:
our MAX(R) products, which use floating-gate process technology, and our
FLEX(R), APEX(TM), ACEX(TM) and Excalibur(TM) products, which use static random
access memory, or SRAM, process technology. Our proprietary development tools,
the MAX+PLUS(R) II and Quartus(TM) II software, provide design development and
programming support for our PLDs. We also offer hardware used in programming
PLDs.
Devices:
We offer a wide range of general-purpose PLD families. Each device family offers
unique features as well as differing density and performance specifications for
implementing particular applications. Some of our major device families include
the following:
MAX 7000, MAX 7000S, MAX 7000A and MAX 7000B: The MAX 7000, MAX 7000S, MAX 7000A
and MAX 7000B device families are among the fastest and most widely used
high-density programmable logic families in the industry. Devices in these
families range from 600 to 10,000 usable gates and up to 256 pins and provide
several enhanced features, including support for the industry standard Joint
Test Action Group boundary-scan test, or BST, circuitry and in-system
programmability, or ISP. ISP functionality allows devices to be programmed after
they are soldered onto the printed circuit board, thereby minimizing the
possibility of lead damage or electrostatic discharge exposure when
reprogrammed. The MAX 7000 device families, which includes the 5.0-V MAX 7000
devices and the 5.0-V, ISP-based MAX 7000S devices, the 3.3-V MAX 7000A device
family and what we believe is the industry's fastest programmable logic
solution, the 2.5-V MAX 7000B device family, are fabricated on advanced CMOS
electrically erasable programmable read-only memory, or EEPROM, processes,
providing a high-density, high-speed, I/O-intensive programmable logic
solution. Devices in these families are supported by our MAX+PLUS II development
software.
MAX 3000A: The MAX 3000A devices, which are targeted at high volume, low cost
applications, range from 600 to 5,000 usable gates and up to 158 pins. The MAX
3000A devices include support for BST circuitry and ISP, are fabricated on
advanced CMOS EEPROM processes and are supported by our MAX+PLUS II development
software.
FLEX 8000: The SRAM-based FLEX 8000 device family uses our patented
FastTrack(R) Interconnect structure, a continuous routing structure that
allows for fast, predictable interconnect delays. Devices in this family range
from 2,500 to 16,000 usable gates and up to 304 pins. FLEX 8000 devices have a
5.0-V supply voltage, can interface with 3.3-V devices through the MultiVolt(TM)
I/O feature, provide low standby power and are supported by our MAX+PLUS II
development software.
FLEX 6000: Our SRAM-based FLEX 6000 family delivers the flexibility and
time-to-market advantage of programmable logic at prices that are competitive
with gate arrays. Devices in this family range from 10,000 to 24,000 usable
gates and up to 256 pins and include devices that operate at both 5.0-V and
3.3-V supply voltages. Featuring the very efficient OptiFLEX(R) architecture,
FLEX 6000 devices provide a flexible and cost-effective alternative to gate
arrays for high-volume production. Every feature in the OptiFLEX architecture is
targeted at producing maximum performance and utilization in the smallest
possible die area. Devices in this family are supported by our MAX+PLUS II and
Quartus II development software.
FLEX 10K, FLEX 10KA and FLEX 10KE: Our SRAM-based FLEX 10K, FLEX 10KA and FLEX
10KE device families offer a combination of logic and embedded memory on a
single-chip architecture. Devices in these PLD families range from 10,000 to
250,000 usable gates and up to 672 pins. With these high densities, the 5.0-V
FLEX 10K, the 3.3-V FLEX 10KA and the 2.5-V FLEX 10KE families may be used to
address the increasing levels of integration needed to accommodate today's
complex designs. The FLEX 10K family includes 0.5- and 0.42-micron devices, the
FLEX 10KA family includes 0.35- and 0.3-micron devices and the FLEX 10KE family
includes 0.25- and 0.22-micron devices. Devices in these families are supported
by our MAX+PLUS II development software.
APEX 20K, APEX 20KE and APEX 20KC: Our SRAM-based APEX 20K, APEX 20KE and APEX
20KC device families offer complete system-level integration on a single device,
and the APEX 20KC is the first PLD family utilizing copper for all layers of
metal interconnect. Devices in these families range from 30,000 to over 1.5
million usable gates and up to 1,020 pins. With high densities and performance
enhancements, the APEX 20K, APEX 20KE and APEX 20KC families deliver the latest
in design flexibility and efficiency for high-performance,
system-on-a-programmable-chip, or SOPC, design. APEX 20K devices, which operate
at a 2.5-V supply voltage, and the
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<PAGE> 4
APEX 20KE and APEX 20KC devices, which operate at a 1.8-V supply voltage, employ
the innovative MultiCore(TM) architecture, which combines the strengths of our
look-up table, product term block and enhanced embedded memory block structures.
The APEX 20K, APEX 20KE and APEX 20KC devices are supported by our Quartus II
development software.
ACEX 1K: Our SRAM-based ACEX 1K device family, which combines look-up tables and
embedded array blocks, offers complete system-level integration on a single
device. Devices in this family range from 10,000 to 100,000 usable gates and up
to 484 pins. Operating at 2.5-V supply voltage, the ACEX 1K devices are
supported by our MAX+PLUS II development software.
EXCALIBUR EMBEDDED PROCESSOR SOLUTIONS: The Excalibur solutions consist of three
embedded processor families, our Nios(TM) soft core embedded processor solution,
the ARM(R)-based embedded processor solution and the MIPS-based(TM) embedded
processor solution. Our Nios soft core embedded processor, which was available
in August 2000 and is supported by our Quartus II development software, is the
industry's first reduced instruction set computer, or RISC, embedded processor
commercially released by a major PLD vendor as a viable alternative to discrete
processor solutions. The ARM-based embedded processor PLD family uses technology
licensed from ARM Limited and will consist of multiple devices that each contain
an ARM-based RISC processor core. The MIPS-based embedded processor PLD family
uses technology licensed from MIPS Technologies, Inc. and will consist of
multiple devices that each contain a MIPS-based RISC processor core. We expect
the ARM-based and MIPS-based embedded processor PLD families to be available in
the first half of 2001.
Development Tools:
Customers use our development system software and hardware to design and
implement logic designs on our PLDs. Our MAX+PLUS II and Quartus II software
development tools run under the Microsoft Windows-based operating environments
on personal computers in addition to the UNIX environment on SUN, HP and IBM
workstations. We also provide interfaces to many industry-standard EDA tools,
including those offered by Cadence Design Systems, Inc., Mentor Graphics
Corporation, Synopsys, Inc. and Synplicity, Inc. We also sell hardware for
programming our PLDs.
In January 2001, we released the Quartus II development software, which we
believe delivers superior designer productivity and supports system-level
designs and integration with third-party tools.
MARKETING, SALES AND CUSTOMERS
We market our products in the United States, Canada, Europe, Asia, South America
and Australia through a network of direct sales personnel and electronics
distributors. In the United States and Canada, we also rely on a network of
independent sales representatives. From time to time, we expect that we may add
or delete independent sales representatives or distributors from our selling
organization as we deem appropriate to the level of business.
Throughout the United States, we have domestic sales management offices in major
metropolitan areas. Our direct sales personnel and independent sales
representatives focus on major strategic accounts. Distributors generally focus
selling activities on the broad base of small- and medium-size customers, as
well as demand fulfillment services to our major strategic accounts. Our
distributor in the United States currently is Arrow Electronics, Inc. In 2000,
Arrow acquired Wyle Electronics, which also had served as one of our domestic
distributors. Arrow is responsible for creating customer demand from its base of
customers, providing technical support and other value-added services and
filling customers' orders.
Our international business is supported by a network of distributors throughout
Europe, Asia, South America and Australia. We have representation in every major
European country, Israel, Australia, South America and various countries
throughout the Pacific Rim. In addition, we maintain international sales support
offices in the metropolitan areas of Oosterhout (Netherlands), Helsinki, Hong
Kong, Hsinchu (Taiwan), London, Ottawa, Paris, Seoul, Shanghai, Stockholm,
Stuttgart, Tokyo and Turin.
Customer support and service are important aspects of selling and marketing our
products. We provide several levels of technical user support, including
applications assistance, design services and customer training. Our applications
engineering staff publishes data sheets and application notes, conducts
technical seminars and provides design assistance via Internet and electronic
links to the customer's design station. In 2000, we expanded our customer
support services by establishing an Applications Engineering Center near San
Diego, California to provide technical support to our customers. Customer
service is supported with inventory maintained both by us and at distributors'
locations to provide short-term delivery of chips.
Through 2000, all international sales were denominated in U.S. dollars. Our
international sales are subject to those risks common to all international
activities, including governmental regulation, possible imposition of tariffs or
other trade barriers and currency fluctuations.
In the year ended December 31, 2000, worldwide sales through distributors
accounted for over 95% of total sales. In 2000, two distributors accounted for
more than 10% of sales; one accounted for 58% of sales, and the other accounted
for 11% of sales. In 1999, three distributors
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<PAGE> 5
accounted for more than 10% of sales. These three distributors accounted for
34%, 19% and 13% of sales, whereas in 1998, they accounted for 30%, 21% and 11%
of sales. The percentage increase for our largest distributor in 2000 compared
to previous years is attributable to the combination of Arrow and Wyle, our two
largest distributors in 1999 and 1998. No single end customer accounted for more
than 10% of our sales in 2000, 1999 or 1998. International sales constituted 43%
of sales in 2000, 44% of sales in 1999 and 45% of sales in 1998.
For a detailed description of our sales by geographic region, see Item 7 and
Note 14 to our consolidated financial statements.
COMPETITION
The ASIC Segment:
The ASIC segment of the CMOS logic market is comprised of programmable logic,
gate arrays and cell-based integrated circuits (also referred to as standard
cells). In a broad sense, all of these devices are indirectly competitive as
they generally may be used in the same types of applications in electronic
products. However, differences in cost, performance, density, flexibility,
ease-of-use and time-to-market dictate the extent to which they may be directly
competitive for particular applications. As PLDs have increased in density and
performance and decreased in cost, they have become more directly competitive
with other ASICs, especially gate arrays. With the introduction of our FLEX 10K
family and new APEX 20K, APEX 20KE and APEX 20KC device families, which are our
highest density PLDs, along with our FLEX 6000 devices, which are designed and
priced to be very competitive with lower density gate arrays, we seek to grow by
directly competing with other companies in the ASIC segment. Many of the
companies in the ASIC segment have substantially greater financial, technical
and marketing resources than we do. We cannot assure you that we will be
successful in competing in the ASIC segment of the CMOS logic market.
The Programmable Logic Sub-Segment:
The principal factors of competition in the programmable logic sub-segment of
the ASIC market include:
- The capability of software development tools and system-level
functional programming blocks
- Product performance and features
- Quality and reliability
- Pricing
- Technical service and support
- The ability to respond rapidly to technical innovation
- Customer service
We believe that we compete favorably with respect to these factors and that our
proprietary device architecture and our installed base of development systems
with proprietary software may provide some competitive advantage. However, as is
true of the semiconductor industry as a whole, the PLD sub-segment is intensely
competitive and is characterized by rapid technological change, rapid rates of
product obsolescence and price erosion resulting from both product obsolescence
and price competition. All of these factors may influence our future operating
results.
We experience significant direct competition from other companies that are in
the programmable logic sub-segment. Our competition in this market sub-segment
is from suppliers of products that are marketed as either field-programmable
gate arrays, or FPGAs, or complex PLDs, or CPLDs. In the high density CPLD
market, we directly compete primarily with Xilinx, Inc. and Lattice
Semiconductor Corporation.
Companies that currently compete with us in our core business may have preferred
vendor status with many of our customers, extensive marketing power, name
recognition and other significant advantages over us. Additionally, the
semiconductor industry as a whole includes many large domestic and foreign
companies that have substantially greater financial, technical and marketing
resources than we do. We expect that as the dollar volume of the programmable
logic sub-segment grows, the attractiveness of this sub-segment to larger, more
powerful competitors will continue to increase. Substantial direct or indirect
competition could have a material adverse effect on our future sales and
operating results.
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<PAGE> 6
MANUFACTURING
Wafer Supply:
We do not directly manufacture our silicon wafers. Our wafers are produced using
various semiconductor foundry wafer fabrication service providers. This enables
us to take advantage of these suppliers' high volume economies of scale, as well
as direct and more timely access to advancing process technology.
We presently have our primary wafer supply arrangements with two semiconductor
vendors: Taiwan Semiconductor Manufacturing Company, or TSMC, and Sharp
Corporation. We may negotiate additional foundry contracts and establish other
sources of wafer supply for our products as such arrangements become
economically useful or technically necessary. Although there are a number of new
state-of-the-art wafer fabrication facilities currently under construction
around the world, semiconductor foundry capacity can become limited quickly and
without much notice. Furthermore, since only newer fabrication or substantially
retrofitted facilities are able to manufacture wafers that incorporate
leading-edge technologies, any significant decrease in capacity of these
facilities would have a material adverse effect on our ability to obtain wafer
supply for our newer products. Accordingly, we cannot assure you that any
shortage in foundry manufacturing capacity will not result in production
problems for us in the future.
In December 2000, we sold our 23% equity ownership interest in WaferTech, LLC to
a subsidiary of TSMC for approximately $350 million in cash. WaferTech was
formed in 1996 as a joint venture among us, TSMC and several other partners to
build and operate a wafer manufacturing plant in Camas, Washington. As a result
of the sale, we were released from all of our obligations under the operating
agreement. We expect WaferTech to continue to supply wafers to us through TSMC.
Accordingly, we do not believe that the sale of our ownership interest in
WaferTech will have an adverse effect on our ability to obtain sufficient
quantities of wafers in the future.
We depend upon our foundry vendors to produce wafers at acceptable yields and to
deliver them to us in a timely manner. The manufacture of advanced CMOS
semiconductor wafers is a highly complex process, and we have from time to time
experienced difficulties in obtaining acceptable yields and timely deliveries
from our suppliers. Good production yields are particularly important to our
business, including our ability to meet customers' demand for products and to
maintain profit margins. Wafer production yields are dependent on a wide variety
of factors, including the level of contaminants in the manufacturing
environment, impurities in the materials used and the performance of personnel
and equipment. As is common in the semiconductor industry, we have experienced
and expect to experience production yield problems from time to time.
Difficulties in production yields can often occur when we begin production of
new products or transition to new processes. These difficulties can potentially
result in significantly higher costs and lower product availability. For
example, in the second quarter of 1999, difficulties with a vendor's
manufacturing process limited the availability of packaging material (piece
parts) used in certain of our new and proprietary FineLine BGA(TM), or ball-grid
array, packages causing limited production. This in turn limited shipments of
our new FLEX 10KE product family. Our management expects to continue to
introduce new and established products using new process technologies, and we
may encounter similar start-up difficulties during the transition to such
process technologies.
Further, production throughput times vary considerably among our wafer
suppliers, and we may experience delays from time to time in processing some of
our products which also may result in higher costs and lower product
availability. We expect that, as is customary in the semiconductor business, in
order to maintain or enhance our competitive position, we will continue to
convert our fabrication process arrangements to larger wafer sizes, smaller
circuit geometries and more advanced process technologies. Such conversions
entail inherent technological risks that can adversely affect yields, costs and
delivery lead time. In addition, if for any reason we were required to seek
alternative sources of supply, shipments could be delayed significantly while
such sources are qualified for volume production, and any significant delay
could have a material adverse effect on our operating results.
Testing and Assembly:
After wafer manufacturing is completed, each wafer is tested using a variety of
test and handling equipment. Such wafer testing is accomplished at Sharp, TSMC
and our San Jose pilot line facility, which is used primarily for new product
development. This testing is performed on equipment owned by us and consigned to
the vendors.
Resulting wafers are shipped to various Asian assembly suppliers, where good die
are separated into individual chips that are then encapsulated in ceramic or
plastic packages. As is the case with our wafer supply business, we employ a
number of independent suppliers for assembly purposes. This enables us to take
advantage of subcontractor high volume manufacturing, related cost savings,
speed and supply flexibility. It also provides us with timely access to
cost-effective advanced process and package technologies. We purchase almost all
of our assembly services from AMKOR (Korea and the Philippines), ASAT (Hong
Kong), ASE (Malaysia) and Fujitsu (Japan).
Following assembly, each of the packaged units receives final testing, marking
and inspection prior to shipment to customers. We obtain almost all of our final
test and back-end operation services from AMKOR, ASAT and ASE. Final testing by
these assembly suppliers is
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<PAGE> 7
accomplished through the use of our proprietary test software and hardware,
which is consigned to or owned by such suppliers and/or third-party commercial
testers. These suppliers also handle shipment of the products to our customers
or distributors.
Additionally, almost all of the manufacturing, assembly, testing and packaging
of our development system hardware products are performed by outside
contractors. Although our wafer fabrication, assembly and other subcontractors
have not recently experienced any serious work stoppages, the economic, social
and political situations in countries where certain subcontractors are located
are unpredictable and can be volatile. Any prolonged work stoppages or other
inability to manufacture and assemble our products would have a material adverse
effect on our operating results. Furthermore, the risks of earthquakes or power
shortages and economic risks, such as extreme currency fluctuations, adverse
changes in tax laws, tariff or freight rates or interruptions in air
transportation, could have a material adverse effect on our operating results.
BACKLOG
Our backlog of released orders as of December 31, 2000 was approximately $510.8
million as compared to approximately $309.4 million at December 31, 1999. Our
backlog consists of original equipment manufacturer, or OEM, customer-released
orders that are requested for delivery within the next six months and
distributor orders that are requested for delivery within the next three months.
We produce standard products that may be shipped from inventory within a short
time after receipt of an order. Our business has been characterized by a high
percentage of orders with near-term delivery schedules. At times, due to high
demand and supply constraints in certain products, lead times can lengthen,
causing an increase in backlog. However, orders constituting our current backlog
are cancelable without significant penalty at the option of the purchaser,
thereby decreasing backlog during periods of lower demand. In addition,
distributor shipments are subject to price adjustments, and we defer recognition
of revenue on shipments to distributors until the product is resold to the end
customer. Historically, backlog has been a poor predictor of future customer
demand. For all of these reasons, backlog as of any particular date should not
be used as a predictor of sales for any future period.
Effective January 1, 2001, our policy for determining backlog will change from a
six-month period for OEM customer-release orders to a three-month period. We do
not expect that this change will have a material effect on our backlog, as our
distributor orders accounted for over 98% of our backlog as of December 31,
2000.
RESEARCH AND DEVELOPMENT
Our total research and development activities have focused primarily on
general-purpose programmable logic devices and on the associated development
software and hardware. We have developed these related products in parallel to
provide software support to customers upon device introduction. As a result of
our research and development efforts, we have introduced a number of new PLD
families, such as the FLEX 10KE, FLEX 10KA, MAX 3000A, MAX 7000A, MAX 7000B,
APEX 20K, APEX 20KE, APEX 20KC and ACEX 1K device families. We have also
redesigned a number of our products to accommodate their manufacture on new
wafer fabrication processes. In 2001, we also released the Quartus II
development tool, which is our fourth-generation software. Additionally, we
typically release new versions of our proprietary software on a quarterly basis.
Our research and development expenditures were $178.7 million in 2000, $86.1
million in 1999 and $59.9 million in 1998. Excluding a $6.3 million one-time
charge for acquired in-process research and development, our research and
development expenditures in 2000 were $172.4 million. We have not capitalized
research and development or software costs to date. We intend to continue to
spend substantial amounts on research and development in order to continue to
develop new products and achieve market acceptance for such products,
particularly in light of the industry pattern of short product life cycles and
increasing competition within the CMOS logic market. Even if such goals are
accomplished, we cannot assure you that these products will achieve significant
market acceptance. If we are unable to successfully define, develop and
introduce competitive new products, and enhance our existing products, our
future operating results would be adversely affected.
PATENTS AND LICENSES
We own numerous United States patents and have additional pending United States
patent applications on our semiconductor products. Although our patents and
patent applications may have value in discouraging competitive entry into our
market segment, we cannot assure you that any valuable new patents will be
granted to us, or that our patents will provide meaningful protection from
competition. We believe that our future success will depend primarily upon the
technical competence and creative skills of our personnel, rather than on our
patents, licenses, or other proprietary rights.
We have in the past incurred, and in the future may continue to incur,
litigation expenses to enforce our intellectual property rights against third
parties. We cannot assure you that any such litigation would be successful or
that our patents would be upheld if challenged.
7
<PAGE> 8
In the normal course of business, we from time to time receive and make
inquiries with respect to possible patent infringements. As a result of
inquiries received from third parties, it may be necessary or desirable for us
to obtain licenses relating to one or more of our current or future products. We
cannot assure you that such licenses could be obtained, and, if obtainable,
could be obtained on conditions which would not have a material adverse effect
on our operating results. In addition, if patent litigation ensued, we cannot
assure you that these third parties would not succeed in obtaining significant
monetary damages or an injunction against the manufacture and sale of one or
more of our product families.
DIRECTORS AND EXECUTIVE OFFICERS
Our directors and executive officers and their ages are as follows:
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
Rodney Smith ................. 60 Chairman of the Board of Directors
John P. Daane ................ 37 President, Chief Executive Officer and Director
C. Wendell Bergere ........... 55 Vice President, General Counsel and Secretary
Denis Berlan ................. 50 Executive Vice President and Chief Operating Officer
Erik Cleage .................. 40 Senior Vice President, Marketing
John R. Fitzhenry ............ 51 Vice President, Human Resources
Michael Jacobs ............... 41 Senior Vice President, Worldwide Sales
Lance M. Lissner ............. 51 Senior Vice President, Business Development
Nathan Sarkisian ............. 42 Senior Vice President and Chief Financial Officer
Charles M. Clough(1) ......... 72 Director
Michael A. Ellison(2)(3) ..... 55 Director
Paul Newhagen (1) ............ 51 Director
Robert W. Reed(3) ............ 54 Director and Vice Chairman of the Board of Directors
Deborah D. Rieman ............ 51 Director
William E. Terry(1)(2) ....... 67 Director
</TABLE>
- ----------
(1) Member of Nominating Committee.
(2) Member of Compensation Committee.
(3) Member of Audit Committee.
All directors hold office until the next annual meeting of stockholders or until
their successors have been elected and qualified. There are no family
relationships between any of our directors or executive officers.
RODNEY SMITH has served as our Chairman of the Board of Directors since joining
us in November 1983 and as our President and Chief Executive Officer from
November 1983 to November 2000. Prior to November 1983, he held various
management positions with Fairchild Semiconductor Corporation, a semiconductor
manufacturer.
JOHN P. DAANE has served as our President and Chief Executive Officer since
November 2000 and as one of our directors since December 2000. Prior to joining
us, Mr. Daane spent 15 years at LSI Logic Corporation, a semiconductor
manufacturer, most recently as Executive Vice President, Communications Products
Group.
C. WENDELL BERGERE joined us in August 1995 as Vice President, General Counsel
and Secretary. From 1993 to 1995, Mr. Bergere was Special Counsel at the law
firm of Sheppard, Mullin, Richter & Hampton. From 1982 to 1993, he was Vice
President, General Counsel and Secretary of The Perkin-Elmer Corporation, a
producer of analytical and life science systems.
DENIS M. BERLAN joined us in December 1989 as Vice President, Product
Engineering and was named Vice President, Operations and Product Engineering in
October 1994. In January 1996, he was named Vice President, Operations. In
January 1997, he was named Executive Vice President and Chief Operating Officer.
He was previously employed by Advanced Micro Devices, Inc., or AMD, a
semiconductor manufacturer, and by Lattice Semiconductor Corporation, a
semiconductor manufacturer, in engineering management capacities.
8
<PAGE> 9
ERIK CLEAGE joined us as International Marketing Manager in February 1986. He
became Director, Japan and Asia Pacific Sales in April 1989, was appointed Vice
President, Marketing in August 1990 and Senior Vice President, Marketing in
January 1999. Previously, he was employed by AMD and Fairchild in various
positions.
JOHN R. FITZHENRY joined us in May 1995 as Vice President, Human Resources. From
February 1983 to May 1995, he was employed by Apple Computer, Inc., a
manufacturer of personal computers, in various human resource management
positions.
MICHAEL JACOBS joined us in January 2000 as Senior Vice President, Worldwide
Sales. From April 1997 to January 2000, Mr. Jacobs was Vice President, North
American Sales at Analog Devices, Inc., a semiconductor manufacturer, and from
December 1985 to April 1997, he held various management positions at National
Semiconductor Corporation, a semiconductor manufacturer.
LANCE M. LISSNER joined us in May 1998 as Vice President of Business Development
and Investor Relations and was appointed Senior Vice President, Business
Development in November 2000. Prior to that time, Mr. Lissner was a corporate
officer of Measurex Corporation, a developer of computer-integrated measurement,
control and information systems, where he was employed since 1973 and held
various positions in sales, marketing, engineering, and business development.
NATHAN SARKISIAN joined us in June 1992 as Corporate Controller. He was
appointed Vice President, Finance and Chief Financial Officer in August 1995 and
Senior Vice President and Chief Financial Officer in March 1998. Prior to
joining us, Mr. Sarkisian held various accounting and financial positions at
Fairchild and at Schlumberger Limited, an oil field services company.
CHARLES M. CLOUGH has served as one of our directors 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 was one of our authorized distributors in the United
States prior to its acquisition by Arrow. 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 one of our directors since April 1984 and has
been a private venture capital investor since November 2000. From October 1994
to October 2000, Mr. Ellison was the Chief Executive Officer of Steller, Inc., a
distributor of electronic parts. From January 1982 to December 1992, he was a
General Partner of Cable & Howse Ventures, a venture capital investment firm.
PAUL NEWHAGEN, one of our co-founders, has served as one of our directors since
July 1987. In March 1998, Mr. Newhagen retired from his position as our Vice
President, Administration, a position he had held since December 1994. From June
1993 to November 1994, he served as a consultant to us. From 1983 to 1993, Mr.
Newhagen held various management positions with us, including Vice President of
Finance and Administration, Chief Financial Officer and Secretary.
ROBERT W. REED has served as one of our directors since October 1994 and as our
Vice Chairman of the Board of Directors since January 2001. 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.
DEBORAH D. RIEMAN, PH.D., has served as one of our directors since May 1996. Dr.
Rieman currently manages a private investment fund and consults to technology
start-up companies. From July 1995 to May 1999, Dr. Rieman was the President and
Chief Executive Officer of CheckPoint Software Technologies, Inc., an Internet
security software company. Prior to joining CheckPoint, Dr. Rieman held various
executive and marketing positions with Adobe Systems Inc., a computer software
company, Sun Microsystems Inc., a computer networking company, and Xerox Corp.,
a diversified electronics manufacturer. Dr. Rieman also serves as a director of
Corning Inc. and Alchemedia Corp.
WILLIAM E. TERRY has served as one of our directors 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.
EMPLOYEES
As of December 31, 2000, we had 1,947 regular employees. Our success is
dependent in large part upon the continued service of our key management,
technical, sales and support employees and on our ability to continue to attract
and retain additional qualified employees. The competition for such employees is
intense and the loss of key employees could have an adverse effect on us.
9
<PAGE> 10
ITEM 2. PROPERTIES.
Our headquarters facility is located in San Jose, California on approximately 25
acres of land, which we purchased in June 1995. The campus for the headquarters
facility currently consists of four interconnected buildings totaling
approximately 500,000 square feet. Design, limited manufacturing, research,
marketing and administrative activities are performed in these facilities. We
plan to expand our headquarters facility by constructing a fifth building
totaling approximately 135,000 square feet and a multi-level garage totaling
approximately 260,000 square feet. We expect to commence construction of the
multi-level garage in the first quarter of 2001, followed by construction of the
fifth building. In 1998, we opened our 62,000 square foot design and test
engineering facility in Penang, Malaysia and, in July 2000, we began
construction of a 178,000 square foot facility on adjacent land. Both properties
are situated on land leased on a long-term basis from the Penang Development
Corporation. We also lease on a short-term basis office facilities for our
domestic and international sales management offices and our European Technology
Center (UK), Toronto Technology Center and Ottawa Technology Center. We believe
that our existing facilities and planned future expansions are adequate for our
current and foreseeable future needs.
ITEM 3. LEGAL PROCEEDINGS.
We are a party to lawsuits and may in the future become a party to lawsuits
involving various types of claims, including, but not limited to, unfair
competition and intellectual property matters. Legal proceedings tend to be
unpredictable and costly and may be affected by events outside of our control.
We cannot assure you that litigation will not have an adverse effect on our
financial position or results of operations. Our major litigation matters as of
December 31, 2000 are described below.
In June 1993, Xilinx, Inc. sued us for monetary damages and injunctive relief
based on our alleged infringement of certain patents held by Xilinx. In June
1993, we sued Xilinx for monetary damages and injunctive relief based on
Xilinx's alleged infringement of certain patents held by us. In April 1995, we
filed a separate lawsuit against Xilinx in Delaware, Xilinx's state of
incorporation, seeking monetary damages and injunctive relief based on Xilinx's
alleged infringement of one of our patents. In May 1995, Xilinx counter-claimed
against us in Delaware, asserting defenses and seeking monetary damages and
injunctive relief based on our alleged infringement of certain patents held by
Xilinx. Subsequently, the Delaware case was transferred to California. In
October 1998, both parties filed motions for summary judgment with respect to
certain issues in the first two cases regarding infringement or non-infringement
and validity or invalidity of the patents at issue in the respective cases. In
our suit, the court granted that one of our patents is invalid, granted that one
patent is not infringed, and granted another patent is not literally infringed
but denied non-infringement under the doctrine of equivalence. In October and
November 2000, Xilinx's suit went to trial and Xilinx withdrew its claim against
our MAX 5000, MAX 7000 and MAX 9000 family products. Upon completion of trial,
the jury rendered a verdict that our FLEX 8000 family products infringe the two
Xilinx patents and that the patents are valid. We have filed post trial motions
to overturn the verdicts or to seek a new trial. In a press release dated
November 17, 2000, Xilinx announced it will seek an injunction against us to
stop all shipments of our "FLEX product" and our "derivative programmable logic
devices" that Xilinx claims infringe the two Xilinx patents. The court ordered
continued mediation following the jury verdict. Due to the nature of the
litigation with Xilinx and because the Xilinx lawsuit has not yet reached the
damages trial stage, our management cannot estimate the total expense, the
possible loss, if any, or the range of loss that we may ultimately incur in
connection with the verdict. Our management cannot ensure that Xilinx will not
succeed in obtaining significant monetary damages or an injunction against the
manufacture and sale of our products, including but not limited to our FLEX 8000
family products, or succeed in invalidating our other patents. Although we
cannot make any assurances as to the results of these cases, we believe that the
jury verdict is in error and intend to pursue our post trial motions with the
court to reverse the verdict and will file an appeal if our motions are denied.
We continue to believe that we have meritorious defenses to the claims asserted
in the Xilinx suit and intend to continue to defend ourselves vigorously in this
matter. The foregoing is a forward-looking statement subject to the risks and
uncertainties of the legal proceedings, including events occurring during the
post trial motions and appeals outside of our control and unpredictability as to
its ultimate outcome.
In May 2000, we sued Xilinx, seeking monetary damages and injunctive relief
based on Xilinx's alleged infringement of certain patents held by us. In July
2000, Xilinx filed a counterclaim against us alleging infringement of certain
patents held by Xilinx. The court has issued an order setting the claim
construction hearing for our claims in April 2001. Due to the nature of the
litigation with Xilinx and because the lawsuit is still in the pre-trial stage,
our management cannot estimate the total expenses, the possible loss, if any, or
the range of loss that may ultimately be incurred in connection with the
counterclaim allegations. Although we cannot make any assurances as to the
results of this case, we believe that we have meritorious defenses to Xilinx's
counterclaim and intend to pursue our claims and defend ourselves vigorously in
this matter. The foregoing is a forward-looking statement subject to risks and
uncertainties of the legal proceeding, including events occurring during
litigation proceedings outside of our control and unpredictability as to its
ultimate outcome.
In November 2000, Xilinx filed a complaint against us with the International
Trade Commission, or ITC, to bar us from importing or selling products into the
United States that Xilinx asserts infringe three Xilinx patents not previously
asserted. Xilinx also requested a permanent cease and desist order and other
penalties, as the ITC may deem appropriate. The ITC has commenced an
investigation based on Xilinx's complaint. Due to the nature of the litigation
with Xilinx and because the lawsuit is still in the pre-trial stage, our
management cannot estimate the total expenses, the possible loss, if any, or the
range of loss that may ultimately be incurred in connection with the claim
allegations.
10
<PAGE> 11
Although we cannot make any assurances as to the results of this case, we
believe that we have meritorious defenses to Xilinx's claims and intend to
defend ourselves vigorously in this matter. The foregoing is a forward-looking
statement subject to risks and uncertainties of the legal proceeding, including
events occurring during litigation proceedings outside of our control and
unpredictability as to its ultimate outcome.
In August 1994, Advanced Micro Devices, Inc., or AMD, sued us seeking monetary
damages and injunctive relief based on our alleged infringement of certain
patents held by AMD. In September 1994, we answered the complaint asserting that
we are licensed to use the patents which AMD claims are infringed and filed a
counterclaim against AMD alleging infringement of certain patents held by us. In
October 1997, upon completion of trials bifurcated from the infringement claims,
the District Court ruled that we are licensed under all patents asserted by AMD
in the suit. In December 1997, AMD filed a Notice of Appeal of the District
Court's rulings. In April 1999, the Federal Circuit Court ruled in AMD's favor
on its appeal, finding that we are not licensed to AMD's patents, and remanded
the case back to the District Court for further proceedings. In 1999, Lattice
Semiconductor Corporation entered into an agreement with AMD that includes
assuming both the claims against us and the claims against AMD and has replaced
AMD in the suit with Vantis, a wholly owned subsidiary of Lattice. Due to the
nature of the litigation, our management cannot estimate the total expense, the
possible loss, if any, or the range of loss that may ultimately be incurred in
connection with the allegations. We cannot ensure that Lattice will not succeed
in obtaining significant monetary damages or an injunction against the
manufacture and sale of the Classic(TM), MAX 7000, FLEX 8000, MAX 9000 and FLEX
10K product families, or succeed in invalidating any of our patents remaining in
the suit. Although we cannot make any assurances as to the results of this case,
we intend to pursue our claims and defend ourselves vigorously in this matter.
The foregoing is a forward-looking statement subject to risks and uncertainties
of the legal proceeding, including the events occurring during litigation
proceedings outside of our control and unpredictability as to its ultimate
outcome.
In May 2000, we sued Lattice seeking monetary damages and injunctive relief
based on Lattice's alleged infringement of certain patents held by us. In July
2000, Lattice filed a counterclaim against us alleging infringement of certain
patents held by Lattice. Due to the nature of the litigation with Lattice and
because the lawsuit is still in the pre-trial stage, our management cannot
estimate the total expenses, the possible loss, if any, or the range of loss
that may ultimately be incurred in connection with the counterclaim allegations.
Although we cannot make any assurances as to the results of this case, we intend
to pursue our claims and defend ourselves vigorously in this matter. The
foregoing is a forward-looking statement subject to risks and uncertainties of
the legal proceeding, including events occurring during litigation proceedings
outside of our control and unpredictability as to its ultimate outcome.
In November 1999, we sued Clear Logic Inc. alleging that Clear Logic is
unlawfully appropriating our registered mask work technology in violation of the
federal mask work statute and that Clear Logic has unlawfully interfered with
our relationships and contracts with our customers. The lawsuit seeks
compensatory and punitive damages and an injunction to stop Clear Logic from
unlawfully using our mask work technology and from interfering with our
customers. Clear Logic has answered the complaint by denying that it is
infringing our mask work technology and denying that it has unlawfully
interfered with our relationships and contracts with our customers. Clear Logic
has also filed a counterclaim against us for unfair competition under California
law alleging that we have made false statements to our customers regarding Clear
Logic. Due to the nature of the litigation with Clear Logic and because the
lawsuit is still in the pre-trial stage, our management cannot estimate the
total expenses, the possible loss, if any, or the range of loss that may
ultimately be incurred in connection with the counterclaim allegations. Although
we cannot make any assurances as to the results of this case, we intend to
pursue our claims and defend ourselves vigorously in this matter. The foregoing
is a forward-looking statement subject to risks and uncertainties of the legal
proceeding, including events occurring during litigation proceedings outside of
our control and unpredictability as to its ultimate outcome.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
11
<PAGE> 12
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The textual portion of the section entitled "About Your Investment" and the
section entitled "Corporate Directory" in our 2000 Annual Report to Stockholders
for the year ended December 31, 2000, or the 2000 Annual Report, are
incorporated herein by reference.
We believe factors such as quarter-to-quarter variances in financial results,
announcements of new products, new orders and order rate variations by us or our
competitors could cause the market price of our common stock to fluctuate
substantially. In addition, the stock prices for many high technology companies
experience large fluctuations, which are often unrelated to the operating
performance of the specific companies. Broad market fluctuations, as well as
general economic conditions such as a recessionary period or high interest
rates, may adversely affect the market price of our common stock.
ITEM 6. SELECTED FINANCIAL DATA.
The section entitled "Selected Consolidated Financial Data" in our 2000 Annual
Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The following Management's Discussion and Analysis of Consolidated Financial
Condition and Consolidated Results of Operation, as well as information
contained elsewhere in this Report, contains statements that constitute
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934. These
statements include statements regarding the intent, belief or current
expectations of us, our directors or our officers with respect to, among other
things: (1) the ability of our product offerings to compete in the ASIC market,
(2) the competitive advantages of our products, (3) the outcome of current
litigation in which we are involved and (4) the expected success of our new
product lines. The success of our business operations is, in turn, dependent on
factors such as market acceptance of our current and future products, our
ability to timely and continually introduce new products and make our current
products better, the ability of our subcontractors to manufacture, assemble,
test and ship products efficiently and on a timely basis, our ability to obtain
sufficient quantities of wafers to meet demand, general competitive conditions
within the semiconductor industry and general economic conditions as set forth
under "Future Events; Risk Factors" below and elsewhere in this Report.
Forward-looking statements are not guarantees of future performance and involve
risks and uncertainties and actual results may differ materially from those
projected in the forward-looking statements as a result of various factors.
OVERVIEW
We design, manufacture and market high-performance, high-density, programmable
logic devices and associated computer aided engineering logic development tools.
Programmable logic devices are semiconductor chips that may be programmed
on-site, using software tools that run on personal computers or engineering
workstations. User benefits include ease of use, lower risk and fast
time-to-market. Our CMOS-based programmable logic devices address high-speed,
high-density and low-power applications in the telecommunications, data
communications, computer peripheral and industrial markets. FLEX and APEX
products are our SRAM-based line of embedded array programmable logic devices,
and MAX products are our line of EEPROM- and EPROM-based macrocell programmable
logic devices.
We classify our products into the following categories. All prior year data have
been restated to reflect the following compositions:
- New products consist of APEX 20KE, APEX 20KC, MAX 7000B, ACEX
1K, Excalibur families
- Mainstream products include MAX 7000A, MAX 3000A, FLEX 6000,
FLEX 10KA, FLEX 10KE, APEX 20K families
- Mature and other products include Classic, MAX 5000, MAX 7000,
MAX 7000S, MAX 9000, FLEX 8000, FLEX 10K and FLASHlogic(R)
families, Tools, MPLDs, configuration devices and Northwest
Logic design services
In general, customers prefer products with lower supply voltages because they
use less power and dissipate less heat, normally resulting in lower overall
system cost. Lower supply voltages result from more advanced fabrication
processes and yield higher performance at a lower cost. Thus, supply voltage
correlates with product maturity: lower supply voltages represent newer
products.
12
<PAGE> 13
RESULTS OF OPERATIONS
SALES | Sales were $1,376.8 million in 2000, $836.6 million in 1999 and $654.3
million in 1998. Sales increased 64.6% in 2000 from 1999 and 27.9% in 1999 from
1998. Increases in sales, in both years, were primarily due to higher unit sales
in all product categories. The increases in sales were partially offset by
decreases in average unit selling prices.
Sales of New products, which began shipping during the fourth quarter of 1999,
were $52.1 million in 2000 and marginal in 1999. Sales of Mainstream products
were $656.1 million, 158.8% higher than 1999 sales of $253.6 million. Sales of
Mature and other products were $668.6 million, 14.7% higher than 1999 sales of
$583.0 million.
As a percentage of sales, New products, mostly introduced in 2000, represented
3.8% of sales in 2000. Mainstream products represented 47.6% of sales in 2000 as
compared to 30.3% in 1999 and 12.1% in 1998. Mature and other products
represented 48.6% of sales in 2000 as compared to 69.7% in 1999 and 87.9% in
1998.
Our New and Mainstream products have been developed and introduced to the
marketplace over the last several years. These products have similar or improved
features and comparable or higher densities than their predecessors, but
advanced process technology enables us to produce these products at a lower cost
than previous generations of products. Consistent with their lower cost
structure, we have priced these products at a significant discount to our more
mature products in order to stimulate demand and broaden the appeal of
programmable logic. As a result, we experienced a shift in customer demand to
our newer, lower-priced offerings from the more mature products. New and
Mainstream products were 51.4% of total sales in 2000 as compared to 30.3% in
1999 and 12.1% in 1998.
Our management believes that lower prices on our newer product families will
enable our product offering to compete more favorably with gate array and
standard cell technologies, which represent significant market opportunities.
During 2000, additional unit sales more than offset the lower selling prices and
our management believes that over time this will continue, but we cannot assure
you that this will occur. In 2000, unit sales of Mainstream products increased
284.6%, while average unit selling prices decreased 32.7%.
In October 1999, we sold to Cypress Semiconductor Corporation the exclusive
right to manufacture, market and sell our MAX 5000 programmable logic device
product family and our equity interest in Cypress Semiconductor (Texas), Inc. We
recorded a pre-tax gain of $10.3 million. The sale of the MAX 5000 family did
not materially affect our fiscal year 2000 revenues. Excluding the MAX 5000
product family, sales grew 66.5% in 2000 and 29.8% in 1999.
Year over Year Sales Growth by Product Category:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
2000 1999
- -------------------------------------------------------
<S> <C> <C>
New N/A N/A
Mainstream 158.8% 221.5%
Mature and other 14.7% 1.3%
Total 64.6% 27.9%
</TABLE>
Customer Sectors
During 2000, we experienced strong sales in the communications market segment
driven primarily by the networking and telecommunications sectors. The
communications market segment represented 67.2% of our business in 2000 as
compared to 66.3% in 1999 and 64.0% in 1998. The electronic data processing
market segment was 17.3% of sales in 2000 as compared to 15.8% in 1999 and 17.4%
in 1998. The industrial market segment was 10.4% percent of sales in 2000 as
compared to 11.4% in 1999 and 12.2% in 1998. The consumer market segment was
2.0% in 2000 as compared to 3.0% in 1999 and 2.8% in 1998, and other markets
were 3.1% in 2000 as compared to 3.5% in both 1999 and 1998. Our management
believes that future revenue growth will be driven by product demand in the
communications market segment, but we cannot assure you that this will occur.
Geographic Areas
North America sales were $786.8 million in 2000, 67.6% higher than 1999 sales of
$469.4 million. International sales included sales in Europe, Japan and Asia
Pacific and were $590.0 million in 2000, 60.7% higher than $367.2 million in
1999. During 2000, sales in Europe were $300.2 million, an increase of 87.6%
from $160.0 million in 1999. In Japan, sales were $206.9 million, an increase of
30.6% from $158.5 million in 1999 and sales in Asia Pacific were $82.9 million,
an increase of 70.1% from $48.7 million in 1999.
13
<PAGE> 14
In 1999, North America sales grew 30.8% from 1998, while sales in Europe grew
7.1%, Japan grew 33.9% and Asia Pacific grew 75.9%. Sales for 1999 in total grew
27.9% primarily due to strength in North American and Japanese networking and
telecommunications sectors.
As a percentage of total sales, sales in North America, Europe and Asia Pacific
increased, while sales in Japan declined in 2000 compared to 1999. North America
sales increased to 57.1% of sales from 56.1% in 1999 and 54.9% in 1998, Europe
increased to 21.8% from 19.1% in 1999 and was 22.8% in 1998, Asia Pacific
increased to 6.0% from 5.8% in 1999 and 4.2% in 1998, while Japan decreased to
15.1% from 19.0% in 1999 and 18.1% in 1998.
Year over Year Sales Growth by Geographic Area:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------
2000 1999
- ----------------------------------------------------------
<S> <C> <C>
North America 67.6% 30.8%
Europe 87.6% 7.1%
Japan 30.6% 33.9%
Asia Pacific 70.1% 75.9%
Total International 60.7% 24.3%
Total 64.6% 27.9%
</TABLE>
Major items in the statements of operations, expressed as a percentage of sales,
were as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------
2000 1999 1998
- ------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cost of sales 33.9% 36.0% 38.1%
Gross margin 66.1% 64.0% 61.9%
Total research and development expenses 13.0% 10.3% 9.1%
Selling, general and administrative expenses 15.2% 17.1% 17.3%
Income from operations 37.9% 36.6% 35.5%
Gain on sale of WaferTech 12.9% -- --
Interest and other income, net 3.4% 4.4% 1.9%
Provision for income taxes 17.9% 13.3% 12.1%
Net income 36.1% 26.8% 23.6%
</TABLE>
GROSS MARGIN | Gross margin, as a percentage of sales, was 66.1% in 2000, 64.0%
in 1999 and 61.9% in 1998. The increases in gross margin were primarily
attributable to cost reductions as a result of manufacturing process
improvements.
Yields on newer, lower voltage products continued to improve for the year ended
December 31, 2000. This includes improvements in the APEX 20K, APEX 20KE, FLEX
10KE and FLEX 10KA product families. We continue to spend a significant amount
of financial resources to improve production yields on both new and established
products. Difficulties in production yields can occur when we begin production
of new products, transition to new processes or when our principal wafer
supplier, TSMC, moves production of a product from one manufacturing plant to
another. These difficulties can potentially result in significantly higher costs
and lower product availability. For example, from the fourth quarter of 1999
through the first half of 2000, process control issues associated with
WaferTech's volume ramp up resulted in low die yields on FLEX 10KA and FLEX 10KE
products leading to reduced product availability in these families. As a result,
we were unable to support distributor stocking at desired levels and in some
cases could not meet end customer demand. Our management expects to continue to
introduce new and established products using new process technologies and may
encounter similar start-up difficulties during the transition to such process
technologies. Further, production throughput times vary considerably among our
wafer suppliers, and we may experience delays from time to time in processing
some of our products which also may result in higher costs and lower product
availability.
RESEARCH AND DEVELOPMENT EXPENSES | Research and development expenses for the
year ended December 31, 2000 were $178.7 million, or 13.0% of sales, compared to
$86.1 million, or 10.3% of sales in 1999 and $59.9 million, or 9.1% of sales in
1998. For the year ended December 31, 2000, excluding the $6.3 million one-time
acquired in-process research and development charge, research and development
expenses were $172.4 million, or 12.5% percent of sales. Historically, the level
of research and development expenses as a
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<PAGE> 15
percentage of sales has fluctuated in part due to the timing of the purchase of
masks and wafers used in the development of new products. We expect that, in the
long term, research and development expenses will increase in absolute dollars
primarily due to our efforts to develop new products. Research and development
expenses include expenditures for labor, masks, prototype wafers, the
amortization of deferred stock-based compensation resulting from acquisitions,
and expenses for the development of process technology, new packages, and
software to support new products and design environments.
Excluding the one-time charge, research and development expenses increased $86.3
million, or 100.2% in 2000 and $26.2 million, or 43.7% in 1999. The increases in
absolute dollars were primarily a result of increased headcount, additional
spending on masks, prototype wafers, package development and the development of
our Quartus software and Excalibur embedded processor solutions. During 2000, we
recorded deferred stock-based compensation of $41.3 million for the acquisitions
of DesignPRO Inc. and Right Track CAD Inc. which is being amortized to research
and development expense over a period of two to four years. Amortization of
deferred stock-based compensation included in research and development expenses
was $8.3 million for the year ended December 31, 2000.
We expect to continue to make significant investments in the development of APEX
20K, APEX 20KE, APEX 20KC, Quartus software, Excalibur embedded processor
solutions and future products. During the first quarter of 1999, we shipped APEX
20K, a new family of devices, and Quartus, our new fourth generation software
design tool. During the fourth quarter of 1999, we began shipping our APEX 20KE
family of devices. The rollout of the 1.8-volt APEX 20KE product family
progressed further during the second quarter of 2000, during which time we began
shipping four new devices including the APEX EP20K1500E, the highest density
programmable device available in commercial quantities. The APEX 20KE family
offers advanced features over the APEX 20K family including lower power
consumption, faster performance, expanded I/O support and smaller die sizes.
APEX 20K and APEX 20KE devices utilize a new architecture for programmable logic
and address higher density designs. APEX 20K and APEX 20KE devices are supported
exclusively by our Quartus software. Also during the second quarter of 2000, we
announced our new Excalibur embedded processor solutions. Excalibur solutions
combine programmable logic, memory and a processor core, allowing users to
integrate an entire system on a single programmable logic device. These
solutions provide programmable flexibility and system-level integration while
bringing advanced processor technology to the broad marketplace. Furthermore,
during the fourth quarter of 2000 and the first quarter of 2001, we released
upgraded versions of our Quartus software which provide improved place-and-route
technology and enhanced device support. Our management expects APEX 20K and APEX
20KE devices, Quartus software and Excalibur solutions to be successful in the
marketplace; however, the commercial success of these products depends on market
acceptance of the use of APEX 20K and APEX 20KE devices in high-density designs,
as well as the acceptance of the Quartus design software and Excalibur
solutions. We cannot assure you that any of our products will achieve market
acceptance.
We also continue to focus our efforts on the development of new programmable
logic chips, related development software and hardware and advanced
semiconductor wafer fabrication processes. However, we cannot assure you that we
will accomplish our goals in the development and subsequent introduction of new
products and manufacturing processes. Also, we cannot assure you that our new
products will achieve market acceptance, that the new manufacturing processes
will be successful, or that our suppliers will provide us with the quality and
quantity of wafers and materials that we require. We must continue to develop
and introduce new products in a timely manner to help counter the semiconductor
industry's historical trend of declining prices as products mature.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES | Selling, general and
administrative expenses for the year ended December 31, 2000 were $210.0
million, or 15.2% of sales, compared to $143.2 million, or 17.1% of sales in
1999 and $113.2 million, or 17.3% of sales in 1998. Although total selling,
general and administrative expenses increased, they decreased as a percentage of
sales because of strong revenue growth. Selling, general and administrative
expenses include salary expenses related to field sales, marketing and
administrative personnel, commissions and incentive expenses, advertising and
promotional expenditures, and legal expenses. Selling, general and
administrative expenses also include costs related to the direct sales force and
field application engineers who work in over forty field sales offices worldwide
and stimulate demand by assisting customers in the use and proper selection of
our products. The customers then work with our distributors for order
fulfillment and logistical requirements, as over 95% of our sales are made
through distributors. Our management intends to continue to increase sales
resources in markets and regions where it anticipates this will increase sales,
enhance competitive position or improve customer service.
Selling, general and administrative expenses increased $66.8 million, or 46.6%
in 2000 and $30.0 million, or 26.5% in 1999. The increases in absolute dollars
were mainly driven by increased headcount for sales, marketing and
administration personnel, higher advertising and legal expenses, and higher
commission and incentive expenses associated with increased sales.
IN-PROCESS RESEARCH AND DEVELOPMENT | During 2000, we recorded a non-recurring
charge of $6.3 million to in-process research and development related to the
purchase of DesignPRO and Right Track. We determined this non-recurring charge
using valuation techniques generally used by appraisers in the high-technology
industry. We immediately expensed this non-recurring charge in the period of
acquisition because technological feasibility had not been established and no
alternative use had been identified. See Note 5.
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<PAGE> 16
INCOME FROM OPERATIONS | Income from operations was $521.2 million, or 37.9% of
sales, for the year ended December 31, 2000 compared to $306.0 million, or 36.6%
of sales in 1999 and $231.8 million, or 35.5% of sales in 1998. The year over
year increases in operating income, as a percentage of sales, were primarily due
to improvements in gross margin and a decrease in selling, general and
administrative expenses, partially offset by increased research and development
expenses.
INTEREST AND OTHER INCOME, NET | Interest and other income was $46.1 million, or
3.4% of sales for the year ended December 31, 2000 compared to $37.1 million, or
4.4% of sales in 1999 and $12.3 million, or 1.9% of sales in 1998. For the year
ended December 31, 1999, interest and other income included a one-time pre-tax
gain of $10.3 million from the sale of the MAX 5000 family and our equity
interest in Cypress Semiconductor (Texas), Inc. Excluding the one-time gain,
interest and other income was $26.8 million, or 3.2% of sales. Excluding the
one-time gain, the increase from 1999 to 2000, in both absolute dollars and as a
percentage of sales, was primarily due to the increase in interest income
related to higher investment balances and higher interest rates. Interest and
other income consists mainly of interest income on investments in high-quality
fixed income securities.
In 1998, interest and other income included interest expense related to the
convertible subordinated notes issued in June 1995 that was comprised of
interest expense and amortization of debt issuance costs, net of capitalized
interest related to the construction of our new headquarters. In June 1998, the
subordinated notes were converted into common stock resulting in a decrease in
interest expense during that year. No interest expense has been incurred since
the conversion.
PROVISION FOR INCOME TAXES | Our effective tax rate was 33.2% in 2000 and 32.5%
in 1999 and 1998. Excluding the one-time gain on the sale of WaferTech, which
was taxed at our marginal rate, our effective tax rate for 2000 was 31.0%. The
reduction of the effective tax rate, excluding the one-time gain, primarily
resulted from a change in the geographic source of income.
EQUITY INVESTMENT | In June 1996, we formed WaferTech, LLC, a joint venture
company, with TSMC and several other partners to build and operate a wafer
manufacturing plant in Camas, Washington. In return for a $140.4 million cash
investment, we received an 18% equity ownership in WaferTech and certain
obligations and rights to procure up to 27% of WaferTech's output at market
prices. In January 1999, we purchased from Analog Devices, Inc. an additional 5%
equity ownership interest in WaferTech for approximately $37.5 million,
increasing our ownership interest to 23%. This increased investment in WaferTech
provided us with additional obligations and rights to procure up to 35% of
WaferTech's future output. In October 1999, the partners in WaferTech
contributed $100.0 million in additional equity to support capital expansion
plans and working capital requirements of WaferTech. Our share of that
contribution was $23.0 million; we maintained our same ownership interest and
rights to acquire WaferTech's output. We accounted for our investment under the
equity method based on our ability to exercise significant influence over
WaferTech's operating and financial policies.
On December 27, 2000, we sold our 23% ownership interest in WaferTech to a
subsidiary of TSMC for $350.4 million in cash. The one-time pre-tax gain on the
sale of WaferTech was $178.1 million. For the year ended December 31, 2000, our
equity in the loss of WaferTech was $1.4 million as compared to a loss of $7.6
million in 1999 and $10.4 million in 1998.
WaferTech began production of silicon wafers in October 1998 and achieved volume
production in 1999. In past years, WaferTech had experienced lower than forecast
production yields resulting in lower than forecast output. During the year ended
December 31, 2000, WaferTech's production volumes and yields increased over the
prior year and met our targeted levels. Although we sold our equity interest in
WaferTech in December 2000, we expect to continue utilizing WaferTech as one of
our suppliers of silicon wafers.
FUTURE RESULTS; RISKS FACTORS | In addition to other information contained
elsewhere in this Report, the following important factors, among others, have
affected and, in the future, could affect, our actual results of operations and
could cause our actual results to differ materially from those expressed in
forward-looking statements made by us.
Our financial results depend on our ability to compete successfully in the
highly competitive semiconductor industry.
Our industry is intensely competitive. Future operating results will depend on
our ability to develop, manufacture and sell complex semiconductor components
and programming software that offer customers greater value than solutions
offered by competing vendors. We may not succeed in developing, manufacturing or
selling competitive products. We are developing programmable chips for
applications that are presently served by other ASIC vendors. Many of these
vendors have substantially greater financial, technical and marketing resources
than we do and have well-established market positions and a solution that has
been proven technically feasible and economically competitive over several
decades. We cannot assure you that we will be successful in displacing ASIC
vendors in the targeted applications and densities. Furthermore, other
programmable logic vendors are targeting these applications and may be
successful in securing market share from us. Moreover, our customers
increasingly use standard cell technologies to achieve greater integration in
their systems; this may not only impede our efforts to penetrate the ASIC
market, but may also displace our products in the applications that we presently
serve.
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<PAGE> 17
Our future success depends on our ability to define, develop and sell new
products.
As a semiconductor company, we operate in a dynamic market characterized by
rapid product obsolescence. We continue to focus our efforts on developing new
programmable logic chips, related development software and hardware and advanced
semiconductor wafer fabrication processes. We cannot assure you that we will be
able to continue to develop and introduce new products and manufacturing
processes or that our products and processes will achieve market acceptance or
be successful. If we do not successfully define, develop and introduce
competitive new products and enhance existing products in response to both
evolving demands of the marketplace and competitive product offerings, our
future operating results could be adversely affected.
We depend on independent subcontractors, located primarily in Asia, for the
supply and quality of our finished silicon wafers.
We depend significantly upon subcontractors to manufacture silicon wafers and
assemble, test and ship product to end customers. We also depend on all of our
subcontractors, and especially our principal foundry partner, TSMC, to improve
process technologies in a timely manner to enhance our product designs and cost
structure. Our success depends, in part, on TSMC's ability to remain successful
in its highly competitive industry. Their inability to do so could have a severe
negative impact on us. The vast majority of our products are manufactured and
shipped to customers by subcontractors located in Asia, principally Hong Kong,
Japan, Korea, Malaysia, the Philippines and Taiwan. Disruptions or adverse
supply conditions arising from market conditions, political strife, labor
disruptions and other factors could adversely affect our future results. Market
demand for silicon wafers increased significantly through the third quarter of
2000, while supply of such wafers increased at a much slower rate. This resulted
in a firmer pricing environment, less responsiveness to requests for expedited
delivery by wafer suppliers, and in some cases, unsatisfied demand. In general,
the lead time to increase market wafer supply by building additional wafer
fabrication facilities is approximately two years and in periods where demand
for wafers increases rapidly for a prolonged period, market shortages tend to
occur. We believe that under circumstances of wafer scarcity it is important to
have close business relationships with wafer suppliers in order to receive the
desired quantity of product. We believe that we enjoy close working
relationships with our principal wafer supplier, TSMC. In the latter half of
2000, business conditions changed. Our management no longer believes demand
exceeds the foundry industry's ability to supply silicon wafers. Our management
further believes that the foundry's ability to supply our desired quantity of
silicon wafers will remain through at least the first half of 2001. However, we
cannot assure you that we will succeed in securing our total desired output from
TSMC or that the possibility of future wafer scarcity will not impair or prevent
any future growth of our business.
Natural or man-made disasters, normal process fluctuations and variances in
manufacturing yields could have a severe negative impact on our operating
capabilities. For example, in September 1999, a major earthquake struck Taiwan
resulting in widespread physical damage and loss of life. The earthquake halted
wafer fabrication production at our primary vendor, TSMC, for several days and
then only limited production began. Nearly two weeks passed before full
production resumed, and a portion of the inventory in the production process was
scrapped as a result of damage incurred during the earthquake. We have sought to
diversify our operating risk by obtaining silicon wafers manufactured by
WaferTech, located in Camas, Washington. WaferTech began production of silicon
wafers in October 1998 and achieved volume production in 1999. In past quarters,
WaferTech had experienced lower than forecast production yields resulting in
lower than forecast output. During 2000, WaferTech's production volumes and
yields increased over prior periods and met our targeted levels. Although we
sold our equity interest in WaferTech in December 2000, we expect to continue
utilizing WaferTech as one of our suppliers of silicon wafers. See also
"Manufacturing -- Wafer Supply" in Part I of this Report for additional factors
related to wafer supply that may affect our operating results.
We depend on independent subcontractors for the assembly and testing of our
semiconductor products.
Although our assembly and other subcontractors have not recently experienced any
serious work stoppages, the economic, social and political situations in
countries where certain subcontractors are located are unpredictable and can be
volatile. Any political strife, prolonged work stoppages or other inability to
manufacture and assemble our products would have a material adverse effect on
our operating results.
We may be unable to adequately protect our intellectual property rights and may
face significant future litigation expenses.
We own numerous patents and patent applications and have technology licensing
agreements giving us rights to design, manufacture and package products using
certain patents owned by others. We cannot assure you that our intellectual
property rights will provide meaningful protection from competition or that we
will rely on such rights in developing additional products. We may be unable to
adequately protect our intellectual property rights and may face significant
future litigation expenses. We have in the past incurred, and in the future may
continue to incur, litigation expenses to enforce our intellectual property
rights against third parties. We cannot assure you that any such litigation
would be successful or that our patents would be upheld if challenged.
In the normal course of business, we from time to time receive and make
inquiries with respect to possible patent infringements. As a result of
inquiries received from third parties, it may be necessary or desirable for us
to obtain licenses relating to one or more of our current or future products. We
cannot assure you that such licenses could be obtained, and, if obtainable,
could be obtained on conditions which would not have a material adverse effect
on our operating results. In addition, if patent litigation ensued, we cannot
assure you that these third parties would
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not succeed in obtaining significant monetary damages or an injunction against
the manufacture and sale of one or more of our product families.
The results of present litigation could adversely affect our operating results.
We are a party to lawsuits and may in the future become a party to lawsuits
involving various types of claims, including, but not limited to, unfair
competition and intellectual property matters. Legal proceedings tend to be
unpredictable and costly and may be affected by events outside of our control.
There is no assurance that litigation will not have an adverse effect on our
financial position or results of operations. Our major litigation matters are
described under Item 3 and Note 13.
We depend on international sales for a significant portion of our revenue.
During each of the last three years, international sales constituted nearly half
of our total sales. Risks related to our foreign operations include government
regulation of exports, tariffs and other potential trade barriers, adverse
changes in tax laws, freight costs or interruptions in air transportation,
reduced protection for intellectual property rights in some countries, and
generally longer receivable collection periods. Our business is also subject to
the risks associated with the imposition of legislation and regulations relating
specifically to the import or export of semiconductor products. We cannot
predict whether quotas, duties, taxes or other charges or restrictions will be
imposed by the United States or other countries upon the importation or
exportation of our products in the future or what, if any, effect such actions
would have on our financial condition and results of operations.
Our financial results are affected by the cyclical nature of the semiconductor
industry.
The semiconductor industry is highly cyclical. In the past, the semiconductor
industry has been subject to significant downturns as a result of diminished
demand for semiconductor products, general reductions in semiconductor inventory
levels by customers, excess production capacity and accelerated declines in
average selling prices. If these or other conditions in the semiconductor
industry occur in the future, there could be an adverse effect on our operating
results.
Our quarterly operating results may fluctuate.
Our quarterly operating results may fluctuate in the future as a result of a
number of factors, including:
- The cyclical nature of the semiconductor industry
- The cyclical nature of demand for our customers' products
- General economic conditions in the countries where we sell our
products
- Price competition
- The timing of our and our competitors' new product introductions
- Product obsolescence
- The scheduling, rescheduling and cancellation of large orders by
our customers
- Our ability to develop new process technologies and achieve
volume production at the foundries of TSMC, Sharp or WaferTech
- Changes in manufacturing yields
- Adverse movements in exchange rates, interest rates or tax rates
- The availability of adequate supply commitments from our wafer
foundries and assembly and test subcontractors
Our future success depends on our ability to successfully compete with other
technology firms in attracting and retaining key technical and management
personnel.
Our future success depends in large part upon the continued service of our key
management, technical, sales and support employees and on our ability to
continue to attract and retain additional qualified employees. The competition
for such employees is intense and the loss of key employees could have an
adverse effect on our operating results.
Our stock price may be subject to significant volatility.
In recent years, the stock market has experienced extreme price volatility and
the price of our common stock has been subject to wide fluctuations. The overall
stock market, the prices of semiconductor stocks in general and the price of our
stock may continue to fluctuate greatly. We believe that factors such as
quarter-to-quarter variances in financial results, announcements of new
products, new orders and order rate variations by us or our competitors could
cause the market price of our common stock to fluctuate substantially. In
addition, the stock prices for many high technology companies experience large
fluctuations, which are often unrelated to the operating performance of the
specific companies. Broad market fluctuations, as well as general economic
conditions such as a recessionary period or high interest rates, may adversely
affect the market price of our common stock.
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NEW ACCOUNTING PRONOUNCEMENTS | In June 1998, the Financial Accounting Standards
Board, or FASB, issued Statement of Financial Accounting Standards No. 133, or
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."
SFAS No. 133 establishes standards for accounting and reporting on derivative
instruments for periods beginning after June 15, 2000. SFAS No. 133 requires
that all derivative instruments be recognized in the balance sheet as either
assets or liabilities and measured at fair value. Furthermore, SFAS No. 133
requires current recognition in earnings of changes in the fair value of
derivative instruments depending on the intended use of the derivative and the
resulting designation. In June 2000, the FASB issued SFAS No. 138, "Accounting
for Derivative Instruments and Hedging Activities - An Amendment of SFAS No.
133." SFAS No. 138 amends the accounting and reporting standards for certain
derivatives and hedging activities. Our adoption of SFAS No. 133, which became
effective January 1, 2001, will not have a material effect on our financial
statements.
LIQUIDITY AND CAPITAL RESOURCES
OPERATING ACTIVITIES | During 2000, our operating activities generated net cash
of $550.4 million, which was primarily attributable to net income of $496.9
million adjusted by non-cash items including an increase in income taxes payable
of $240.4 million, an increase in deferred income on sales to distributors of
$232.6 million, an increase in accounts payable and accrued liabilities of $73.4
million, depreciation and amortization of $40.1 million, amortization of
deferred stock-based compensation of $9.8 million, a decrease in other assets of
$9.4 million and the one-time write-off of $6.3 million for acquired in-process
research and development. These items were partially offset by an increase in
inventories of $209.3 million, an increase in deferred income taxes of $93.5
million and an increase in accounts receivable of $78.8 million. Cash from
operating activities was also offset by the gain on the sale of WaferTech of
$178.1 million. Total cash proceeds related to the WaferTech sale of $350.4
million was included as a cash inflow under investing activities.
During 1999, our operating activities generated net cash of $402.8 million,
which was primarily attributable to net income of $224.0 million adjusted by
non-cash items including an increase in income taxes payable of $76.4 million,
an increase in deferred income on sales to distributors of $66.4 million, an
increase in accounts payable and accrued liabilities of $33.7 million,
depreciation and amortization of $29.4 million, a decrease in other assets of
$19.2 million, equity in loss of WaferTech of $7.6 million and a decrease in
inventories of $5.4 million. These items were partially offset by an increase in
accounts receivable of $34.0 million, an increase in deferred income taxes of
$15.1 million and the gain on the sale of the MAX 5000 product family of $10.3
million.
INVESTING ACTIVITIES | During 2000, the net cash provided by investing
activities was $290.3 million, which was driven by cash proceeds of $350.4
million from the sale of our equity interest in WaferTech and net sales of
short-term investments of $43.0 million. These items were partially offset by
cash payments of $11.5 million for the acquisitions of DesignPRO and Right Track
and the purchase of long-term investments totaling $4.0 million. In addition,
we invested $87.5 million primarily in land, manufacturing and data processing
equipment and software, and building improvements in our headquarters and Penang
facilities.
During 1999, the net cash used for investing activities was $314.9 million. We
purchased $233.3 million (net) of short-term investments and made long-term
investments, mainly in WaferTech, totaling $62.4 million. Additionally, we
invested $29.8 million primarily for manufacturing and data processing equipment
and software. These items were partially offset by proceeds of $10.7 million
received from the sale of the MAX 5000 product family and our equity interest in
Cypress Semiconductor (Texas), Inc.
FINANCING ACTIVITIES | During 2000, the net cash used for financing activities
was $508.6 million, which was driven by the repurchase of 17.1 million shares of
our common stock for $555.5 million. The repurchase was partially offset by net
proceeds of $39.9 million from the issuance of 8.2 million shares of our common
stock to employees through various option and employee stock purchase plans. In
addition, we received $7.0 million from the sale of put warrants.
During 1999, the net cash used for financing activities was $54.7 million, which
was driven by the repurchase of 4.3 million shares of our common stock for $87.1
million. The repurchase was partially offset by net proceeds of $29.9 million
from the issuance of 10.9 million shares of our common stock to employees
through various option and employee stock purchase plans. In addition, we
received $2.4 million from the sale of put warrants.
FINANCIAL CONDITION | Since our inception, we have used a combination of equity
and debt financing and cash generated from operations to support our operating
activities.
As of December 31, 2000, we had $1,133.6 million of cash, cash equivalents and
short-term investments available to finance our operating activities and future
growth. Our management believes that capital expenditures will increase in 2001
primarily due to anticipated higher expenditures in manufacturing and data
processing equipment as well as building improvements in our headquarters and
Penang facilities. We believe the available sources of funds and cash we expect
to generate from operations will be adequate to finance current operations,
capital expenditures and common stock repurchases for at least the next year.
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EMPLOYEES | The number of employees was 1,947 in 2000, 1,398 in 1999 and 1,151
in 1998, reflecting an increase of 39.3% in 2000 and 21.5% in 1999.
IMPACT OF CURRENCY AND INFLATION | We purchase the majority of our materials and
services in U.S. dollars, and transact our foreign sales in U.S. dollars. We
have, in the past, entered into forward contracts to hedge against currency
fluctuations and to meet contractual commitments denominated in foreign
currencies. During 2000, we entered into a forward exchange contract to purchase
Malaysian ringgit to meet a portion of our firm contractual commitments to be
paid in ringgits. The contract will be settled in June 2001. We may enter into
similar contracts from time to time should conditions appear favorable.
Inflation has not significantly impacted our financial results. As of December
31, 1999, we had no open foreign exchange contracts for the purchase or sale of
foreign currencies.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
Our investment portfolio consisted of fixed income securities of $1,028.8
million as of December 31, 2000 and $776.5 million as of December 31, 1999.
These securities, like all fixed income instruments, are subject to interest
rate risk and will decline in value if market interest rates increase. If market
interest rates were to increase immediately and uniformly by 10% from levels as
of December 31, 2000 and December 31, 1999, the decline in the fair value of the
portfolio would not be material. Additionally, we have the ability to hold our
fixed income investments until maturity and, therefore, we would not expect to
recognize an adverse impact on income or cash flows.
We have international subsidiaries and branch operations and are, therefore,
subject to foreign currency rate exposure. To date, our exposure to exchange
rate volatility has not been significant. If foreign currency rates fluctuate by
10% from rates at December 31, 2000 and December 31, 1999, our financial
position and results of operations would not be materially affected. However, we
cannot assure you there will not be a material impact in the future.
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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
<TABLE>
<CAPTION>
PAGE
<S> <C>
Consolidated Balance Sheets at December 31, 2000 and 1999 22
Consolidated Statements of Operations for the years ended December 31, 2000, 1999 and 1998 23
Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998 24
Consolidated Statements of Stockholders' Equity for the years ended December 31, 2000, 1999 and 1998 25
Notes to the Consolidated Financial Statements 26
Report of Independent Accountants 39
Financial Statement Schedules
All schedules have been omitted because they are not applicable, not required, or the information required is
included in the financial statements or notes thereto.
Supplementary Financial Data 40
</TABLE>
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CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31,
-----------------------------
(In thousands, except par value amount) 2000 1999
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 496,385 $ 164,257
Short-term investments 637,224 681,409
-----------------------------
Total cash, cash equivalents and short-term investments 1,133,609 845,666
Accounts receivable, less allowance for doubtful accounts of $5,998 and
$6,865, respectively 168,940 90,101
Inventories 273,562 64,027
Deferred income taxes 178,750 84,747
Other current assets 14,498 22,344
-----------------------------
Total current assets 1,769,359 1,106,885
Property and equipment, net 207,858 155,217
Investments and other assets 26,917 177,497
-----------------------------
$ 2,004,134 $ 1,439,599
=============================
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 86,409 $ 32,272
Accrued liabilities 26,992 26,758
Accrued compensation 46,144 25,301
Deferred income on sales to distributors 460,314 227,760
Income taxes payable 136,345 9,435
-----------------------------
Total current liabilities 756,204 321,526
-----------------------------
Commitments and contingencies (See Notes 8 and 13)
Stockholders' equity:
Common stock;
$.001 par value; 700,000 shares authorized; 389,265 and 397,260 shares
issued and outstanding, respectively 389 397
Capital in excess of par value 389,184 326,241
Retained earnings 908,196 791,435
Deferred stock-based compensation (49,101) --
Accumulated other comprehensive loss (738) --
-----------------------------
Total stockholders' equity 1,247,930 1,118,073
-----------------------------
$ 2,004,134 $ 1,439,599
=============================
</TABLE>
See accompanying notes to consolidated financial statements.
22
<PAGE> 23
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------------
(In thousands, except per share amounts) 2000 1999 1998
- ----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sales $1,376,815 $ 836,623 $ 654,342
Cost of sales 466,994 301,322 249,474
------------------------------------------
Gross margin 909,821 535,301 404,868
Research and development expenses 172,373 86,065 59,864
Selling, general and administrative expenses 209,979 143,214 113,161
Acquired in-process research and development expense 6,305 -- --
------------------------------------------
Income from operations 521,164 306,022 231,843
Gain on sale of WaferTech, LLC 178,105 -- --
Interest and other income, net 46,145 37,055 12,340
------------------------------------------
Income before income taxes and equity investment 745,414 343,077 244,183
Provision for income taxes 247,107 111,499 79,356
Equity in loss of WaferTech, LLC 1,400 7,584 10,440
------------------------------------------
Net income $ 496,907 $ 223,994 $ 154,387
==========================================
Per share:
Basic net income per share $ 1.25 $ 0.57 $ 0.41
Diluted net income per share $ 1.19 $ 0.54 $ 0.39
Shares used in computing per share amounts:
Basic 396,849 396,158 373,972
Diluted 416,629 414,928 406,356
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE> 24
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years Ended December 31,
-----------------------------------------
(In thousands) 2000 1999 1998
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net income $ 496,907 $ 223,994 $ 154,387
Adjustments to reconcile net income to net cash provided by operating
activities:
Equity in loss of WaferTech, LLC 1,400 7,584 10,440
Gain on sale of WaferTech, LLC (178,105) -- --
Gain on sale of MAX 5000 product family -- (10,275) --
Depreciation and amortization 40,065 29,416 30,038
Write-off of acquired in-process research and development 6,305 -- --
Amortization of deferred stock-based compensation 9,764 -- --
Deferred income taxes (93,531) (15,103) (6,568)
Changes in assets and liabilities:
Accounts receivable, net (78,839) (33,963) (887)
Inventories (209,268) 5,375 29,014
Other assets 9,449 19,232 13,446
Accounts payable and accrued liabilities 73,361 33,671 (7,113)
Deferred income on sales to distributors 232,554 66,425 32,892
Income taxes payable 240,353 76,423 14,420
-----------------------------------------
Cash provided by operating activities 550,415 402,779 270,069
-----------------------------------------
Cash Flows from Investing Activities:
Purchases of property and equipment (87,508) (29,821) (23,950)
Proceeds from sale of WaferTech, LLC 350,384 -- --
Net change in short-term investments 42,976 (233,332) (93,269)
Acquisitions of DesignPRO and Right Track (11,535) -- --
Net change in other long-term investments (4,000) (1,928) 552
Investment in WaferTech, LLC -- (60,500) --
Proceeds from sale of MAX 5000 product family -- 10,700 --
-----------------------------------------
Cash provided by (used for) investing activities 290,317 (314,881) (116,667)
-----------------------------------------
Cash Flows from Financing Activities:
Net proceeds from issuance of common stock 39,871 29,945 15,214
Repurchase of common stock (555,453) (87,053) (60,348)
Proceeds from sale of put warrants 6,978 2,438 --
-----------------------------------------
Cash used for financing activities (508,604) (54,670) (45,134)
-----------------------------------------
Net increase in cash and cash equivalents 332,128 33,228 108,268
Cash and cash equivalents at beginning of year 164,257 131,029 22,761
-----------------------------------------
Cash and cash equivalents at end of year $ 496,385 $ 164,257 $ 131,029
=========================================
Cash paid during the year for:
Income taxes $ 106,777 $ 45,335 $ 73,526
Interest -- -- 6,568
Supplemental disclosure of non-cash activities:
Issuance of common stock and options for acquisitions 59,928 2,927 --
Conversion of subordinated debt into common stock -- -- 226,787
</TABLE>
See accompanying notes to consolidated financial statements.
24
<PAGE> 25
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
Common Stock Accumulated
Number of and Capital Deferred Other Total
Common In Excess of Retained Stock-based Comprehensive Stockholders'
(In thousands) Shares Par Value Earnings Compensation Loss Equity
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1997 356,740 $ 123,633 $ 413,054 $ -- $ -- $ 536,687
Net income -- -- 154,387 -- -- 154,387
Tax benefit resulting from employee stock
transactions -- 8,969 -- -- -- 8,969
Issuance of common stock 5,085 15,239 -- -- -- 15,239
Repurchase of common stock (7,240) (60,348) -- -- -- (60,348)
Conversion of subordinated debt into common
stock 35,955 226,787 -- -- -- 226,787
-----------------------------------------------------------------------------
Balance, December 31, 1998 390,540 314,280 567,441 -- -- 881,721
Net income -- -- 223,994 -- -- 223,994
Tax benefit resulting from employee stock
transactions -- 64,101 -- -- -- 64,101
Issuance of common stock 10,934 29,945 -- -- -- 29,945
Issuance of common stock for acquisition 116 2,927 -- -- -- 2,927
Repurchase of common stock (4,330) (87,053) -- -- -- (87,053)
Proceeds from sales of put warrants -- 2,438 -- -- -- 2,438
-----------------------------------------------------------------------------
Balance, December 31, 1999 397,260 326,638 791,435 -- -- 1,118,073
Components of comprehensive income:
Net income -- -- 496,907 -- -- 496,907
Change in unrealized loss on available-
for-sale investments, net of tax
expense of $472 -- -- -- -- (738) (738)
---------
Total comprehensive income -- -- -- -- -- 496,169
Tax benefit resulting from employee stock
transactions -- 113,859 -- -- -- 113,859
Issuance of common stock 8,201 39,871 -- -- -- 39,871
Issuance of common stock and options for
acquisitions 934 59,928 -- (41,259) -- 18,669
Deferred stock-based compensation resulting
from issuance of options and restricted
stock -- 17,606 -- (17,606) -- --
Amortization of deferred stock-based
compensation -- -- -- 9,764 -- 9,764
Repurchase of common stock (17,130) (175,307) (380,146) -- -- (555,453)
Proceeds from sales of put warrants -- 6,978 -- -- -- 6,978
-----------------------------------------------------------------------------
Balance, December 31, 2000 389,265 $ 389,573 $ 908,196 $(49,101) $ (738) $ 1,247,930
=============================================================================
</TABLE>
See accompanying notes to consolidated financial statements.
25
<PAGE> 26
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Note 1: The Company
Altera Corporation, referred to as "we," "us" or "our," was founded in 1983 and
is incorporated in the State of Delaware. We design, manufacture and market
high-performance, high-density programmable logic devices and associated
computer aided engineering logic development tools. Programmable logic devices
are semiconductor chips that can be programmed on-site, using software tools
that run on personal computers or engineering workstations. Our CMOS-based
programmable logic devices address high-speed, high-density and low-power
applications in the telecommunications, data communications, computer peripheral
and industrial markets.
Note 2: Significant Accounting Policies
BASIS OF PRESENTATION | We have a fiscal year that ends on the Friday nearest
December 31st. For presentation purposes, the consolidated financial statements
and accompanying notes refer to our fiscal year end as December 31st. The
consolidated financial statements include our accounts as well as our wholly
owned subsidiaries after elimination of all significant intercompany balances
and transactions.
USE OF ESTIMATES | Our management has made certain estimates and assumptions
concerning the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the fiscal years presented
to prepare our financial statements in conformity with accounting principles
generally accepted in the United States of America. Actual results could differ
from those estimates.
COMMON STOCK SPLIT | On April 21, 1999, we declared a two-for-one stock split in
the form of a 100 percent stock dividend to holders of record of our common
stock on May 4, 1999. Dividend shares were distributed to stockholders on May
19, 1999. On July 13, 2000, we declared a two-for-one stock split in the form of
a 100 percent stock dividend to holders of record of our common stock on July
26, 2000. Dividend shares were distributed to stockholders on August 10, 2000.
All prior period share and income per share data have been retroactively
restated to give effect to the stock splits for all periods presented.
CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS | Cash equivalents consist of highly
liquid investments with original maturities of three months or less. Short-term
investments are held as securities available for sale and are carried at their
market value as of the balance sheet date. The amortized cost of securities is
adjusted for amortization of premiums and accretion of discounts to maturity.
Such amortization is included in investment income. Realized gains or losses are
determined on the specific identification method and are reflected in income.
Net unrealized gains or losses are recorded directly in stockholders' equity
except those unrealized losses that are deemed to be other than temporary are
reflected in income.
INVENTORIES | Inventories are recorded at the lower of standard cost, which
approximates actual cost on a first-in-first-out basis, or market. The
inventories at December 31, 2000 and 1999 were comprised of the following:
<TABLE>
<CAPTION>
December 31,
----------------------
(In thousands) 2000 1999
- -------------------------------------------------------------
<S> <C> <C>
Raw materials and work in process $203,681 $ 40,612
Finished goods 69,881 23,415
----------------------
Total inventories $273,562 $ 64,027
======================
</TABLE>
26
<PAGE> 27
PROPERTY AND EQUIPMENT | Property and equipment are carried at cost less
accumulated depreciation and amortization. Depreciation and amortization are
computed using the straight-line method. Estimated useful lives of three to five
years are used for equipment and office furniture and forty years for buildings.
Amortization of leasehold improvements is computed using the shorter of the
remaining facility lease term or the estimated useful life of the improvements.
Property and equipment at December 31, 2000 and 1999 was comprised of the
following components:
<TABLE>
<CAPTION>
December 31,
-------------------------
(In thousands) 2000 1999
- ------------------------------------------------------------------------
<S> <C> <C>
Land $ 30,474 $ 20,753
Building 89,419 80,893
Equipment and software 183,315 130,016
Office furniture and fixtures 17,392 11,755
Leasehold improvements 3,190 1,623
-------------------------
Property and equipment, at cost 323,790 245,040
Accumulated depreciation and amortization (115,932) (89,823)
-------------------------
Property and equipment, net $ 207,858 $ 155,217
=========================
</TABLE>
We evaluate the recoverability of our property and equipment and intangible
assets in accordance with Statement of Financial Accounting Standards No. 121,
or SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed of." This standard requires recognition of
impairment of long-lived assets in the event the net book value of such assets
exceeds the future undiscounted cash flows attributable to such assets.
FAIR VALUE OF FINANCIAL INSTRUMENTS | For certain of our financial instruments,
including cash and cash equivalents, short-term investments, accounts receivable
and accounts payable, the carrying amounts approximate fair value due to their
short maturities.
CONCENTRATIONS OF CREDIT RISK | Financial instruments that potentially subject
us to concentrations of credit risk consist principally of cash and cash
equivalents, short-term investments and accounts receivable. We place our
short-term investments in a variety of financial instruments and, by policy,
limit the amount of credit exposure through diversification and by restricting
our investments to highly rated securities.
We sell our products to distributors and OEMs throughout the world. We perform
ongoing credit evaluations of our customers' financial condition and, generally,
require collateral, such as letters of credit, whenever deemed necessary. On
August 7, 2000, our two principal North American distributors merged as Arrow
Electronics, Inc. acquired Wyle Electronics. In 2000, our two largest
distributors, each of which accounted for more than 10% of total sales,
accounted for 58% and 11% of sales. Prior to the merger, we had three
distributors each accounting for more than 10% of total sales. In 1999, they
accounted for 34%, 19% and 13% of sales, whereas in 1998, they accounted for
30%, 21% and 11% of sales.
At December 31, 2000, one distributor accounted for 45% of total accounts
receivable. At December 31, 1999, three distributors, each of which accounted
for more than 10% of our accounts receivable, accounted for 49% of total
accounts receivable in aggregate.
FOREIGN EXCHANGE CONTRACTS | We purchase the majority of our materials and
services in U.S. dollars and our foreign sales are billed in U.S. dollars. We
have, in the past, entered into forward contracts to hedge against currency
fluctuations and meet contractual commitments denominated in foreign currencies.
During 2000, we entered into a forward exchange contract to purchase Malaysian
ringgit to meet a portion of our firm contractual commitments to be paid in
ringgits. The contract will be settled in June 2001. We may enter into similar
contracts from time to time should conditions appear favorable. Inflation has
not significantly impacted our financial results. As of December 31, 1999, we
had no open foreign exchange contracts for the purchase or sale of foreign
currencies.
REVENUE RECOGNITION | We recognize revenue from product sales upon shipment to
OEMs and end users. Reserves for sales returns and allowances are recorded at
the time of shipment. Our sales to distributors are made under agreements
allowing for returns or credits under certain circumstances. We defer
recognition of revenue on sales to distributors until products are resold by the
distributor to the end user.
27
<PAGE> 28
DEPENDENCE ON WAFER SUPPLIERS | We do not directly manufacture finished silicon
wafers. Our strategy has been to maintain relationships with wafer foundries. We
have been successful in maintaining such relationships. See Notes 6 and 7.
Although our management believes that the foundries' ability to supply our wafer
needs will remain through at least the first half of year 2001, we cannot assure
you that we will be able to satisfy our future wafer needs from current or
alternative manufacturing sources. This could result in possible loss of sales
or reduced margins.
STOCK-BASED COMPENSATION PLANS | We account for stock-based compensation using
the intrinsic value method prescribed in Accounting Principles Board Opinion No.
25, or APB No. 25, "Accounting for Stock Issued to Employees." Under APB No. 25,
compensation cost is measured as the excess, if any, of the quoted market price
of our stock at the date of grant over the exercise price of the option granted.
Compensation cost for stock options, if any, is recognized ratably over the
vesting period. We provide additional pro forma disclosures as required under
SFAS No. 123, "Accounting for Stock-Based Compensation." See Note 11.
COMPREHENSIVE INCOME | We adopted Statement of Financial Accounting Standard No.
130, or SFAS No. 130, "Reporting Comprehensive Income" as of the first quarter
of 1998. SFAS No. 130 establishes standards for reporting and disclosure of
comprehensive income and its components. In 2000, comprehensive income,
including net income and unrealized loss on available-for-sale investments, was
$496.2 million. In 1999 and 1998, comprehensive income approximated net income.
FOREIGN CURRENCY TRANSLATION | The U.S. dollar is the functional currency for
each of our foreign subsidiaries. Assets and liabilities that are not
denominated in the functional currency are remeasured into U.S. dollars and the
resulting gains or losses are included in "Interest and other income, net."
NEW ACCOUNTING PRONOUNCEMENTS | In June 1998, the Financial Accounting Standards
Board, or FASB, issued Statement of Financial Accounting Standards No. 133, or
SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities."
SFAS No. 133 establishes standards for accounting and reporting on derivative
instruments for periods beginning after June 15, 2000. SFAS No. 133 requires
that all derivative instruments be recognized in the balance sheet as either
assets or liabilities and measured at fair value. Furthermore, SFAS No. 133
requires current recognition in earnings of changes in the fair value of
derivative instruments depending on the intended use of the derivative and the
resulting designation. In June 2000, the FASB issued SFAS No. 138, "Accounting
for Derivative Instruments and Hedging Activities - An Amendment of SFAS No.
133." SFAS No. 138 amends the accounting and reporting standards for certain
derivatives and hedging activities. Our adoption of SFAS No. 133, which became
effective January 1, 2001, will not have a material effect on our financial
statements.
28
<PAGE> 29
Note 3: Income Per Share
Basic income per share is computed by dividing net income available to common
stockholders by the weighted average number of common shares outstanding during
the period and excludes the dilutive effect of stock options and restricted
stock. Diluted income per share reflects the dilution of potential common shares
outstanding during a period. In computing diluted income per share, the tax
benefit resulting from employee stock transactions, unamortized deferred
stock-based compensation and the average stock price for the period are used in
determining the number of shares assumed to be repurchased with the proceeds
from the exercise of stock options.
For the three year period ended December 31, 2000, we excluded certain stock
options from the calculation of diluted income per share because they were
anti-dilutive, but these options could be dilutive in the future. A
reconciliation of basic and diluted income per share is presented below:
<TABLE>
<CAPTION>
Years Ended December 31,
------------------------------------
(In thousands, except per share amounts) 2000 1999 1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Basic:
Net income $496,907 $223,994 $154,387
====================================
Weighted shares outstanding 396,849 396,158 373,972
====================================
Net income per share $ 1.25 $ 0.57 $ 0.41
====================================
Diluted:
Net income $496,907 $223,994 $154,387
Effect of 5.75% convertible subordinated notes -- -- 4,039
------------------------------------
Income before effect of convertible subordinated notes $496,907 $223,994 $158,426
====================================
Weighted shares outstanding 396,849 396,158 373,972
Effect of dilutive securities:
Stock options and restricted stock 19,780 18,770 16,132
5.75% convertible subordinated notes -- -- 16,252
------------------------------------
416,629 414,928 406,356
====================================
Net income per share $ 1.19 $ 0.54 $ 0.39
====================================
</TABLE>
29
<PAGE> 30
Note 4: Marketable Securities
Our portfolio of marketable securities at December 31 consists of the following:
<TABLE>
<CAPTION>
2000 1999
------------------------------------------------------- -----------
Gross Gross
Unrealized Unrealized
(In thousands) Cost Gains Losses Fair Value Fair Value
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Money market funds $ 46,128 $ -- $ -- $ 46,128 $ 5,919
Municipal bonds 475,025 537 (80) 475,482 485,926
U.S. government and agency obligations 133,973 208 (29) 134,152 41,011
Corporate bonds 213,847 662 (2,687) 211,822 161,319
Certificates of deposit and other debt securities 161,050 187 (8) 161,229 82,282
------------------------------------------------------- -----------
$ 1,030,023 $ 1,594 $ (2,804) $ 1,028,813 $ 776,457
======================================================= ===========
Included in:
Cash and cash equivalents $ 391,589 $ 95,048
Short-term investments 637,224 681,409
----------- ------------
$ 1,028,813 $ 776,457
=========== ============
</TABLE>
Our portfolio of marketable securities by contractual maturity is as follows:
<TABLE>
<CAPTION>
December 31,
--------------------------
(In thousands) 2000 1999
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Due in one year or less $ 423,984 $ 250,372
Due after one year through two years 604,829 526,085
--------------------------
$ 1,028,813 $ 776,457
==========================
</TABLE>
At December 31, 2000, unrealized loss on securities before tax was $1.2 million.
At December 31, 1999, the fair market value of securities approximated cost.
Note 5: Acquisitions
We completed the acquisitions of all outstanding capital stock of DesignPRO
Inc., a developer and provider of intellectual property cores and custom design
solutions, on April 19, 2000, Right Track CAD Inc., a developer of architectural
and computer aided design tools for advanced programmable logic devices, on May
1, 2000, and Northwest Logic, Inc., a provider of system design services and
intellectual property specializing in telecommunications, data communications
and embedded processor systems design, on September 11, 2000.
We issued 934,381 shares of our common stock and paid approximately $11.5
million in cash, net of cash acquired of $0.3 million, for all of the capital
stock of DesignPRO, Right Track and Northwest Logic. In addition, we granted
options to purchase 323,146 shares of our common stock in exchange for all of
the stock options outstanding of DesignPRO and Right Track. The fair value of
our shares issued was approximately $45.3 million and the fair value of our
options granted was approximately $14.6 million. Certain shares issued were
subject to our repurchase rights under certain circumstances. These rights lapse
over a two to four year period. We incurred direct acquisition costs of
approximately $0.4 million, which were included in the purchase price. Total
consideration for the three acquisitions was $72.1 million. The acquisitions
were accounted for under the purchase method of accounting. The purchase price
was allocated to the tangible and intangible assets acquired and liabilities
assumed based in part on an independent appraisal of their respective fair
values. Total consideration paid in connection with the acquisitions was
attributable to the following (in thousands):
30
<PAGE> 31
<TABLE>
<CAPTION>
Amortization
Amount Period
--------------------------
<S> <C> <C>
Deferred stock-based compensation $ 41,259 2 to 4 years
Market ready technology 21,446 3 to 6 years
In-process research and development 6,305 --
Other intangible assets 2,481 3 years
Tangible assets and working capital 590 --
--------
$ 72,081
========
</TABLE>
No supplemental pro forma information is presented due to the immaterial effect
on prior period results of operations.
The allocation of amounts to market ready technology and in-process research and
development were consistent with widely recognized appraisal practices. Our
analysis resulted in a valuation of market ready technology at $21.4 million.
Market ready technology represents technologies that have reached technological
feasibility, and therefore can be capitalized. We are amortizing the market
ready technology on a straight-line basis over a period of three to six years.
Our analysis also resulted in a $6.3 million charge to acquired in-process
research and development. The acquired in-process technology represents the
appraised value of technologies in the development stage that had not yet
reached technological feasibility and do not have alternative future uses. We
expensed this amount as a non-recurring charge upon consummation of the
acquisitions.
We determined the value assigned to in-process research and development by
identifying research projects in areas for which technological feasibility had
not been established. For both the Right Track and DesignPRO valuations, we
estimated the expected cash flows from the projects once commercially viable. We
then discounted the net cash flows back to their present value and applied a
percentage of completion. We determined the percentage of completion using
milestones representing our management's estimate of effort, value added, and
degree of difficulty of the portion of each project completed as of the
acquisition date, as compared to the remaining research and development to be
completed to bring each project to technical feasibility.
If we do not successfully develop our research projects discussed above, our
sales and profitability may be adversely affected in future periods and the
value of other intangible assets acquired may become impaired. Our management
believes that the in-process research and development charge is valued
consistently with the SEC staff's current views regarding valuation
methodologies. We cannot assure you that the SEC staff will not take issue with
any assumptions used in our valuation model and require us to revise the amount
allocated to in-process research and development.
Note 6: Joint Venture
In June 1996, we formed WaferTech, LLC, a joint venture company, with TSMC and
several other partners to build and operate a wafer manufacturing plant in
Camas, Washington. In return for a $140.4 million cash investment, we received
an 18% equity ownership in WaferTech and certain obligations and rights to
procure up to 27% of WaferTech's output at market prices. In January 1999, we
purchased from Analog Devices, Inc. an additional 5% equity ownership interest
in WaferTech for approximately $37.5 million, increasing our ownership interest
to 23%. This increased investment in WaferTech provided us with additional
obligations and rights to procure up to 35% of WaferTech's future output. In
October 1999, the partners in WaferTech contributed $100.0 million in additional
equity to support capital expansion plans and working capital requirements of
WaferTech. Our share of that contribution was $23.0 million; we maintained our
same ownership interest and rights to acquire WaferTech's output.
On December 27, 2000, we sold our 23% ownership interest in WaferTech to a
subsidiary of TSMC for $350.4 million in cash. The one-time pre-tax gain on the
sale was $178.1 million. Although we sold our equity interest in WaferTech in
December 2000, we will continue to utilize WaferTech as one of our suppliers of
silicon wafers. Through December 27, 2000, we accounted for our investment under
the equity method based on our ability to exercise significant influence over
WaferTech's operating and financial policies. Our equity in the loss of
WaferTech was $1.4 million for 2000, $7.6 million for 1999, $10.4 million for
1998.
31
<PAGE> 32
Note 7: Investments and Other Assets
At December 31, 2000, our long-term investments and other assets primarily
consisted of intangible assets acquired in connection with the acquisitions of
DesignPRO, Right Track and Northwest Logic of approximately $21.1 million, net
of $2.9 million of accumulated amortization. At December 31, 1999, our long-term
investments were primarily related to our investment in WaferTech of $173.7
million. On December 27, 2000, we sold our 23% ownership interest in WaferTech.
See Note 6.
In 1995, we entered into several agreements with TSMC. We agreed to make a $57.1
million deposit to TSMC for future wafer capacity allocations that extended into
2000. Under the terms of the agreement, TSMC agreed to provide us with wafers
manufactured using TSMC processes and according to our specifications, and we
agreed to purchase and TSMC agreed to supply a specific capacity of wafers per
year through 2000. Billings for actual wafers purchased from TSMC reduced the
prepaid balance. The deposits were fully utilized in 2000.
Note 8: Commitments
We lease certain of our sales facilities under non-cancelable lease agreements
expiring at various times through 2009. The leases require us to pay property
taxes, insurance, maintenance and repair costs. Future minimum lease payments
under all non-cancelable operating leases are as follows:
<TABLE>
<CAPTION>
Years ending December 31, (In thousands)
- ----------------------------------------------------------
<S> <C>
2001 $ 4,895
2002 4,490
2003 4,054
2004 2,848
2005 2,159
Thereafter 293
--------------
$ 18,739
==============
</TABLE>
We have the option to extend or renew most of our leases. Rental expense under
all operating leases amounted to $3.5 million in 2000, $2.8 million in 1999 and
$2.5 million in 1998.
Note 9: Convertible Subordinated Notes
In June 1995, we issued $230.0 million of convertible subordinated notes due in
June 2002 and bearing an interest rate of 5.75%, payable semi-annually. The
notes were convertible into shares of our common stock at a price of $6.40 per
share. On May 15, 1998, we called for the redemption of the notes effective June
16, 1998. As a result, substantially all of the notes were converted into
35,954,596 shares of common stock with the remaining notes redeemed at a price
of $1,033.06 per $1,000 principal amount of the notes. Total semi-annual
interest paid on the notes during 1998 was $6.5 million. The unamortized debt
issuance costs as of the redemption date of approximately $3.1 million was
recorded as a reduction to additional paid-in capital.
Note 10: Stockholders' Equity
In May 2000, our stockholders voted to approve an amendment to our Certificate
of Incorporation to increase the number of authorized shares from 400 million to
700 million.
COMMON STOCK REPURCHASES | During fiscal 1998, we repurchased a total of
7,240,000 shares of common stock for an aggregate cost of $60.3 million. During
fiscal 1999, we repurchased a total of 4,330,000 shares of common stock for an
aggregate cost of $87.1 million. During fiscal 2000, we repurchased a total of
17,130,000 shares of common stock for an aggregate cost of $555.5 million. As of
December 31, 2000, 48,000,000 shares were authorized for repurchase. Since the
inception of the repurchase program in 1996 through December 31, 2000, we have
repurchased a total of 29,900,000 shares. All shares were retired upon
acquisition.
PUT WARRANTS | In December 1999 and June 2000, we sold put warrants to
independent third parties. These put warrants entitled the holders the right to
sell 2,500,000 shares of our common stock to us at specified prices on stated
maturity dates. The cash proceeds from the sale of the put warrants of $7.0
million in 2000 and $2.4 million in 1999 have been included as an addition to
capital in excess of par value. As of December 31, 2000, warrants for 1,500,000
shares expired unexercised while warrants for 1,000,000 shares were exercised in
November
32
<PAGE> 33
2000. We repurchased these 1,000,000 shares for an aggregate cost of $33.7
million. These shares were included in the 29,900,000 total repurchased shares,
which count against the 48,000,000 shares authorized for repurchase under our
common stock repurchase program.
DEFERRED STOCK-BASED COMPENSATION | During 2000, we recorded aggregate deferred
stock-based compensation of $41.3 million representing the value of restricted
stock issued in conjunction with the acquisitions of DesignPRO and Right Track.
In addition, we recorded deferred stock-based compensation of $17.6 million in
conjunction with stock options and restricted stock granted to certain new
employees. The restricted stock issued was subject to our repurchase rights
under certain circumstances. These rights lapse over a two to four year period.
At December 31, 2000, 1,260,243 shares were subject to our repurchase rights.
Deferred stock-based compensation represents the difference between the grant
price and the quoted market price of our stock at the date of grant. We are
amortizing deferred stock-based compensation over the vesting period of two to
four years. Amortization of deferred stock-based compensation was $9.8 million
during 2000.
Note 11: Stock-Based Compensation Plans
At December 31, 2000, we had three stock-based compensation plans, which are
described below. We apply APB No. 25 in accounting for our plans.
STOCK OPTION PLANS | As of December 31, 2000, the 1996 Stock Option Plan had
44.0 million shares reserved for issuance and 1.8 million shares were available
for future grants. The 1998 Director Stock Option Plan had 680,000 shares
reserved for issuance and 445,000 shares were available for future grants.
Any shares reserved for issuance under the 1987 Stock Option Plan and the 1988
Director Stock Option Plan relating to ungranted stock options were cancelled
upon the adoption of the new option plans. As of December 31, 2000, under the
1987 Stock Option Plan, 9.0 million previously granted shares remained
unexercised, while under the 1988 Director Stock Option Plan, 1.2 million
previously granted shares remained unexercised.
The 1998 Director Stock Option Plan provides for the periodic issuance of stock
options to members of our Board of Directors who are not employees. Under all
stock option plans, the option's maximum term is 10 years. Options granted prior
to October 1997 generally vest over five years at annual increments as
determined by the Board of Directors. In October 1997, the Board of Directors
approved a proposal to shorten the vesting period for new grants under the 1996
Stock Option Plan whereby options granted subsequent to September 30, 1997 will
generally vest over four years at annual increments as determined by the Board
of Directors.
A summary of our stock option activity and related weighted average exercise
prices for the years ended December 31 are as follows:
<TABLE>
<CAPTION>
2000 1999 1998
----------------- ---------------- ----------------
(In thousands, except price per share amounts) Shares Price Shares Price Shares Price
- ----------------------------------------------------------------------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Options outstanding - beginning of year 46,778 $ 9.06 50,948 $ 5.45 49,732 $ 4.79
Stock options:
Granted 13,406 35.92 9,124 20.96 8,828 10.03
Exercised (7,386) 4.13 (10,276) 2.23 (4,220) 2.10
Forfeited (2,117) 17.74 (3,018) 7.39 (3,392) 6.39
----------------- ----------------- ----------------
Options outstanding - end of year 50,681 $ 16.52 46,778 $ 9.06 50,948 $ 5.45
================= ================= ================
</TABLE>
<TABLE>
<CAPTION>
2000 1999 1998
----------------- ---------------- ----------------
(In thousands, except price per share amounts) Shares Price Shares Price Shares Price
- ----------------------------------------------------------------------------- ----------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Options vested and exercisable at end of year 15,918 $ 5.86 15,426 $ 3.80 17,888 $ 2.50
Weighted-average fair value per share of options granted
during the year $ 19.06 $10.12 $ 4.21
Weighted-average fair value per share of purchase rights
granted during the year $ 14.65 $ 4.04 $ 2.53
</TABLE>
33
<PAGE> 34
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------------------------------- -----------------------------------------
Number Outstanding at Weighted Average Number Exercisable at
Range of 12/31/00 Remaining Contractual Weighted Average 12/31/00 Weighted Average
Exercise Prices (In thousands) Life (years) Exercise Price (In thousands) Exercise Price
------------------ --------------------- --------------------- ---------------- --------------------- ----------------
<S> <C> <C> <C> <C> <C>
$ 0.01 - $ 4.80 9,029 4.03 $ 2.70 6,894 $ 2.25
$ 4.91 - $ 7.66 9,878 6.07 6.83 5,244 6.17
$ 7.70 - $ 13.02 10,701 6.80 9.96 2,663 8.87
$ 13.03 - $ 23.94 9,580 8.82 21.01 971 18.08
$ 24.03 - $ 46.22 9,336 9.57 34.51 146 28.62
$ 46.31 - $ 63.44 2,157 9.55 53.50 -- --
--------------------- --------------------- ---------------- -------------------- ----------------
50,681 7.17 $ 16.52 15,918 $ 5.86
===================== ===================== ================ ==================== ================
</TABLE>
Effective January 30, 1998, we offered employees, except all officers and
director-level employees, the right to reprice their stock options granted from
January 1, 1995 through January 19, 1998. The repriced options have an exercise
price of $8.57, the fair value of our common stock on the effective date, and
the vesting schedule of such options was extended by three months. In connection
with this action, approximately 5.2 million options were repriced that
previously had a weighted average exercise price of $12.13.
EMPLOYEE STOCK PURCHASE PLAN | As of December 31, 2000, the 1987 Employee Stock
Purchase Plan had 13.7 million shares of common stock reserved for issuance.
Under the terms of the Employee Stock Purchase Plan, full-time employees, nearly
all of whom are eligible to participate, can choose each year to have up to 10%
of their annual base earnings withheld to purchase our common stock with a
maximum of $25,000 per year. The purchase price of the stock is 85% of the lower
of the closing price at the beginning or at the end of each six-month offering
period. We do not recognize compensation cost related to employee purchase
rights under the Plan.
Sales under the Employee Stock Purchase Plan were 423,988 shares of common stock
at an average price of $22.05 per share in 2000, 634,478 shares at $10.81 per
share in 1999, and 886,252 shares at $7.13 per share in 1998. There were 1.3
million shares available for future purchases under the Employee Stock Purchase
Plan as of December 31, 2000.
We received tax benefits of $113.9 million in 2000, $64.1 million in 1999 and
$9.0 million in 1998 on the exercise of non-qualified stock options and on the
disposition of stock acquired by exercise of incentive stock options or through
the Employee Stock Purchase Plan.
PRO FORMA NET INCOME AND NET INCOME PER SHARE | The fair value of each option
grant, as defined by SFAS No. 123, is estimated on the date of grant using the
Black-Scholes option-pricing model. The Black-Scholes model, as well as other
currently accepted option valuation models, was developed to estimate the fair
value of freely tradable, fully transferable options without vesting
restrictions that significantly differ from our stock option awards. These
models also require highly subjective assumptions, including future stock price
volatility and expected time until exercise, which greatly affect the fair value
on the grant date.
To compute the estimated fair value of our stock option grants and employees'
purchase rights under the Employee Stock Purchase Plan, the Black-Scholes method
was used with the following weighted-average assumptions and dividend yields of
0% for all years presented:
<TABLE>
<CAPTION>
Stock Options Employees' Purchase Rights
----------------------- --------------------------
Years ended December 31, 2000 1999 1998 2000 1999 1998
- -------------------------------------------------------------------- --------------------------
<S> <C> <C> <C> <C> <C> <C>
Expected life from vesting date (years) 0.96 0.83 0.73 0.50 0.50 0.50
Expected stock price volatility 57.3% 53.2% 48.0% 84.6% 45.9% 56.0%
Risk-free interest rate 6.2% 5.7% 5.2% 5.9% 4.5% 5.3%
</TABLE>
Had we recorded compensation costs based on the estimated grant date fair value
as defined by SFAS No. 123, for awards granted under its Stock Option Plans and
Stock Purchase Plan, our net income and net income per share would have been
reduced to the pro forma amounts below for the years ended December 31, 2000,
1999 and 1998:
<TABLE>
<CAPTION>
(In thousands, except per share amounts) 2000 1999 1998
- -------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Pro forma net income $ 440,513 $ 199,850 $ 139,986
Pro forma net income per share:
Basic $ 1.11 $ 0.50 $ 0.37
Diluted 1.07 0.49 0.36
</TABLE>
34
<PAGE> 35
Note 12: Income Taxes
U.S. and foreign components of income before income taxes were:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------
(In thousands) 2000 1999 1998
- -----------------------------------------------------------------------------------
<S> <C> <C> <C>
United States $619,032 $280,254 $207,273
Foreign 126,382 62,823 36,910
--------------------------------------------
Income before income taxes $745,414 $343,077 $244,183
============================================
</TABLE>
Unremitted earnings of our foreign subsidiaries that are considered permanently
invested outside the United States and on which no deferred taxes have been
provided, aggregate to approximately $138.5 million at December 31, 2000.
The provision for income taxes consists of:
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------
(In thousands) 2000 1999 1998
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Current tax expense:
United States $ 282,547 $ 113,510 $ 62,978
State 29,454 15,365 15,488
Foreign 20,075 6,793 7,458
-------------------------------------------------
Total current tax expense 332,076 135,668 85,924
-------------------------------------------------
Deferred taxes:
United States (64,892) (18,064) (1,833)
State (10,481) (4,552) (1,549)
Foreign (9,596) (1,553) (3,186)
-------------------------------------------------
Total deferred taxes (84,969) (24,169) (6,568)
-------------------------------------------------
Total provision for income taxes $ 247,107 $ 111,499 $ 79,356
=================================================
</TABLE>
Deferred tax assets (liabilities) were as follows:
<TABLE>
<CAPTION>
(In thousands) 2000 1999
- -----------------------------------------------------------------------------
<S> <C> <C>
Assets:
Accrued expenses and reserves $ 179,766 $ 80,591
Acquisition costs 6,084 6,779
Other 1,235 14,676
-----------------------------
Gross deferred tax assets 187,085 102,046
Depreciation (5,032) (13,300)
Deferred tax asset valuation allowance (3,303) (3,999)
-----------------------------
Net deferred tax assets $ 178,750 $ 84,747
=============================
</TABLE>
The change in deferred taxes includes $9.0 million of deferred taxes related to
the investment in WaferTech. The valuation allowances of $3.3 million at
December 31, 2000, and $4.0 million at December 31, 1999 are attributable to
deferred tax assets from the 1994 acquisition of Intel's programmable logic
business. Sufficient uncertainty exists regarding the realizability of these
assets and, accordingly, valuation allowances are required.
35
<PAGE> 36
Our income taxes payable for federal, state, and foreign purposes have been
reduced by the tax benefits associated with exercise of non-qualified stock
options and disposition of stock acquired by exercise of incentive stock options
or through the Employee Stock Purchase Plan. We receive an income tax benefit
calculated as the tax effect of the difference between the fair market value of
the stock issued at the time of exercise and the option price. These benefits
were credited directly to stockholders' equity and amounted to $113.9 million in
2000, $64.1 million in 1999 and $9.0 million in 1998.
The items accounting for the difference between income taxes computed at the
federal statutory rate and the provision for income taxes are as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
-------------------------------------------------
(In thousands) 2000 1999 1998
- ---------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Tax provision at U.S. statutory rates $ 260,895 $ 120,077 $ 85,464
State taxes net of federal benefit 20,872 8,920 8,061
Foreign income taxed at lower rates (24,157) (9,040) (6,830)
Interest income on municipal obligations (6,878) (5,950) (5,014)
Other net (3,625) (2,508) (2,325)
-------------------------------------------------
Total provision for income taxes $ 247,107 $ 111,499 $ 79,356
=================================================
</TABLE>
Note 13: Litigation
We are a party to lawsuits and may in the future become a party to lawsuits
involving various types of claims, including, but not limited to, unfair
competition and intellectual property matters. Legal proceedings tend to be
unpredictable and costly and may be affected by events outside of our control.
We cannot assure you that litigation will not have an adverse effect on our
financial position or results of operations. Our major litigation matters as of
December 31, 2000 are described below.
In June 1993, Xilinx, Inc. sued us for monetary damages and injunctive relief
based on our alleged infringement of certain patents held by Xilinx. In June
1993, we sued Xilinx for monetary damages and injunctive relief based on
Xilinx's alleged infringement of certain patents held by us. In April 1995, we
filed a separate lawsuit against Xilinx in Delaware, Xilinx's state of
incorporation, seeking monetary damages and injunctive relief based on Xilinx's
alleged infringement of one of our patents. In May 1995, Xilinx counter-claimed
against us in Delaware, asserting defenses and seeking monetary damages and
injunctive relief based on our alleged infringement of certain patents held by
Xilinx. Subsequently, the Delaware case was transferred to California. In
October 1998, both parties filed motions for summary judgment with respect to
certain issues in the first two cases regarding infringement or non-infringement
and validity or invalidity of the patents at issue in the respective cases. In
our suit, the court granted that one of our patents is invalid, granted that one
patent is not infringed, and granted another patent is not literally infringed
but denied non-infringement under the doctrine of equivalence. In October and
November 2000, Xilinx's suit went to trial and Xilinx withdrew its claim against
our MAX 5000, MAX 7000 and MAX 9000 family products. Upon completion of trial,
the jury rendered a verdict that our FLEX 8000 family products infringe the two
Xilinx patents and that the patents are valid. We have filed post trial motions
to overturn the verdicts or to seek a new trial. In a press release dated
November 17, 2000, Xilinx announced it will seek an injunction against us to
stop all shipments of our "FLEX product" and our "derivative programmable logic
devices" that Xilinx claims infringe the two Xilinx patents. The court ordered
continued mediation following the jury verdict. Due to the nature of the
litigation with Xilinx and because the Xilinx lawsuit has not yet reached the
damages trial stage, our management cannot estimate the total expense, the
possible loss, if any, or the range of loss that we may ultimately incur in
connection with the verdict. Our management cannot ensure that Xilinx will not
succeed in obtaining significant monetary damages or an injunction against the
manufacture and sale of our products, including but not limited to our FLEX 8000
family products, or succeed in invalidating our other patents. Although we
cannot make any assurances as to the results of these cases, we believe that the
jury verdict is in error and intend to pursue our post trial motions with the
court to reverse the verdict and will file an appeal if our motions are denied.
We continue to believe that we have meritorious defenses to the claims asserted
in the Xilinx suit and intend to continue to defend ourselves vigorously in this
matter.
In May 2000, we sued Xilinx, seeking monetary damages and injunctive relief
based on Xilinx's alleged infringement of certain patents held by us. In July
2000, Xilinx filed a counterclaim against us alleging infringement of certain
patents held by Xilinx. The court has issued an order setting the claim
construction hearing for our claims in April 2001. Due to the nature of the
litigation with Xilinx and because the lawsuit is still in the pre-trial stage,
our management cannot estimate the total expenses, the possible loss, if any, or
the range of loss that may ultimately be incurred in connection with the
counterclaim allegations. Although we cannot make any assurances as to the
results of this case, we believe that we have meritorious defenses to Xilinx's
counterclaim and intend to pursue our claims and defend ourselves vigorously in
this matter.
36
<PAGE> 37
In November 2000, Xilinx filed a complaint against us with the International
Trade Commission, or ITC, to bar us from importing or selling products into the
United States that Xilinx asserts infringe three Xilinx patents not previously
asserted. Xilinx also requested a permanent cease and desist order and other
penalties, as the ITC may deem appropriate. The ITC has commenced an
investigation based on Xilinx's complaint. Due to the nature of the litigation
with Xilinx and because the lawsuit is still in the pre-trial stage, our
management cannot estimate the total expenses, the possible loss, if any, or the
range of loss that may ultimately be incurred in connection with the claim
allegations. Although we cannot make any assurances as to the results of this
case, we believe that we have meritorious defenses to Xilinx's claims and intend
to defend ourselves vigorously in this matter.
In August 1994, Advanced Micro Devices, Inc., or AMD, sued us seeking monetary
damages and injunctive relief based on our alleged infringement of certain
patents held by AMD. In September 1994, we answered the complaint asserting that
we are licensed to use the patents which AMD claims are infringed and filed a
counterclaim against AMD alleging infringement of certain patents held by us. In
October 1997, upon completion of trials bifurcated from the infringement claims,
the District Court ruled that we are licensed under all patents asserted by AMD
in the suit. In December 1997, AMD filed a Notice of Appeal of the District
Court's rulings. In April 1999, the Federal Circuit Court ruled in AMD's favor
on its appeal, finding that we are not licensed to AMD's patents, and remanded
the case back to the District Court for further proceedings. In 1999, Lattice
Semiconductor Corporation entered into an agreement with AMD that includes
assuming both the claims against us and the claims against AMD and has replaced
AMD in the suit with Vantis, a wholly owned subsidiary of Lattice. Due to the
nature of the litigation, our management cannot estimate the total expense, the
possible loss, if any, or the range of loss that may ultimately be incurred in
connection with the allegations. We cannot ensure that Lattice will not succeed
in obtaining significant monetary damages or an injunction against the
manufacture and sale of the Classic, MAX 7000, FLEX 8000, MAX 9000 and FLEX 10K
product families, or succeed in invalidating any of our patents remaining in the
suit. Although we cannot make any assurances as to the results of this case, we
intend to pursue our claims and defend ourselves vigorously in this matter.
In May 2000, we sued Lattice seeking monetary damages and injunctive relief
based on Lattice's alleged infringement of certain patents held by us. In July
2000, Lattice filed a counterclaim against us alleging infringement of certain
patents held by Lattice. Due to the nature of the litigation with Lattice and
because the lawsuit is still in the pre-trial stage, our management cannot
estimate the total expenses, the possible loss, if any, or the range of loss
that may ultimately be incurred in connection with the counterclaim allegations.
Although we cannot make any assurances as to the results of this case, we intend
to pursue our claims and defend ourselves vigorously in this matter.
In November 1999, we sued Clear Logic Inc. alleging that Clear Logic is
unlawfully appropriating our registered mask work technology in violation of the
federal mask work statute and that Clear Logic has unlawfully interfered with
our relationships and contracts with our customers. The lawsuit seeks
compensatory and punitive damages and an injunction to stop Clear Logic from
unlawfully using our mask work technology and from interfering with our
customers. Clear Logic has answered the complaint by denying that it is
infringing our mask work technology and denying that it has unlawfully
interfered with our relationships and contracts with our customers. Clear Logic
has also filed a counterclaim against us for unfair competition under California
law alleging that we have made false statements to our customers regarding Clear
Logic. Due to the nature of the litigation with Clear Logic and because the
lawsuit is still in the pre-trial stage, our management cannot estimate the
total expenses, the possible loss, if any, or the range of loss that may
ultimately be incurred in connection with the counterclaim allegations. Although
we cannot make any assurances as to the results of this case, we intend to
pursue our claims and defend ourselves vigorously in this matter.
37
<PAGE> 38
Note 14: Segment and Geographic Information
We operate in a single industry segment comprising the design, development,
manufacture, and sale of CMOS programmable logic integrated circuits and
associated engineering development software and hardware. Our sales by major
geographic area (based on destination) were as follows:
<TABLE>
<CAPTION>
Years Ended December 31,
--------------------------------------------------
(In thousands) 2000 1999 1998
- ----------------------------------------------------------------------------------
<S> <C> <C> <C>
North America:
United States $ 660,590 $ 438,807 $ 336,295
Other 126,168 30,561 22,627
--------------------------------------------------
Total North America 786,758 469,368 358,922
Europe 300,229 160,027 149,391
Japan 206,958 158,513 118,342
Asia Pacific 82,870 48,715 27,687
--------------------------------------------------
Total $1,376,815 $ 836,623 $ 654,342
==================================================
</TABLE>
The majority of our long-lived assets were located in the United States.
Long-lived assets included net property and equipment and long-term investments
and other assets. Long-lived assets that were outside the United States
constituted 26% of the total at December 31, 2000, and less than 10% of the
total at December 31, 1999 and 1998. No single country outside of the United
States constituted more than 10% of total long-lived assets for years ended
December 31, 2000, 1999 and 1998. No single end customer provided more than 10%
of our sales for years ended December 31, 2000, 1999 and 1998.
Note 15: Employee Benefits Plans
We have a plan to provide retirement and incidental benefits for our eligible
employees, known as the Altera Corporation Savings and Retirement Plan, or the
Plan. As allowed under Section 401(k) of the Internal Revenue Code, the Plan
provides tax deferred salary deductions for eligible employees. Participants in
the Plan may make salary deferrals of up to 20% of the eligible annual salary,
limited by the maximum dollar amount allowed by the Internal Revenue Code. For
every dollar deferred under the Plan, we make a matching contribution equal to
100% up to the first 5% of the salary deferred with a maximum of $1,500 per
participant per year. Effective January 1, 2001, we increased the maximum limit
of matching contribution from $1,500 to $2,000 per participant per year.
Participants become fully vested as to the matching contribution after five
years. Our contributions to the Plan were $1.3 million in both 2000 and 1999 and
$1.1 million in 1998.
38
<PAGE> 39
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and Board of Directors of Altera Corporation:
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of stockholders' equity and of cash flows
present fairly, in all material respects, the financial position of Altera
Corporation and its subsidiaries at December 31, 2000 and 1999, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 2000, in conformity with accounting principles
generally accepted in the United States of America. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States of America which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PricewaterhouseCoopers LLP
San Jose, California
January 17, 2001
39
<PAGE> 40
Supplementary Financial Data
Quarterly Financial Information (UNAUDITED)
<TABLE>
<CAPTION>
(In thousands, except per share amounts) First Quarter Second Quarter Third Quarter Fourth Quarter
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
2000
Sales $272,781 $340,686 $395,395 $367,953
Gross profit 178,191 226,001 262,701 242,928
Net income 75,154 98,262 117,989 205,502
Basic net income per share 0.19 0.25 0.30 0.52
Diluted net income per share 0.18 0.23 0.28 0.50
- ----------------------------------------------------------------------------------------------------------------
1999
Sales $186,399 $197,783 $215,121 $237,320
Gross profit 117,245 125,515 138,414 154,127
Net income 46,975 51,078 55,572 70,369
Basic net income per share 0.12 0.13 0.14 0.18
Diluted net income per share 0.11 0.12 0.13 0.17
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
40
<PAGE> 41
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information concerning our executive officers and directors required by this
Item is incorporated by reference to the section in Item 1 of this Report
entitled "Directors and Executive Officers." The section entitled "Section 16(a)
Beneficial Ownership Reporting Compliance" in our Proxy Statement is
incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
The sections entitled "Executive Compensation," "Director Compensation" and
"Employment Contracts and Change of Control Arrangements" in our Proxy
Statement are incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The section entitled "Security Ownership of Certain Beneficial Owners and
Management" in our Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The sections entitled "Director Compensation" and "Certain Business
Relationships" in our Proxy Statement are incorporated herein by reference.
41
<PAGE> 42
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) The following documents are filed as part of this Report:
1. Financial Statements
The information required by this item is included in Item 8 of
Part II of this Report.
2. Financial Statement Schedules.
All schedules have been omitted as they are either not required,
not applicable, or the required information is included in the
financial statements or notes thereto.
3. Exhibits.
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT
- -------------- -------
<S> <C>
2.1(**) Assignment and Assumption Agreement dated as of November 15,
2000 between Registrant and TSMC Development, Inc.(14)
3.1 Amended and Restated Certificate of Incorporation filed with
the Delaware Secretary of State on June 9, 2000.(12)
3.2 By-laws of the Registrant as adopted May 5, 1997 (which became
the By-laws of the Registrant on June 19, 1997).(6)
4.1 Specimen copy of certificate for shares of common stock of the
Registrant.(7)
10.3(a)+ 1987 Stock Option Plan, and forms of Incentive and
Nonstatutory Stock Option Agreements, as amended March 22,
1995 and as restated effective May 10, 1995.(4)
10.4(b)+ 1987 Employee Stock Purchase Plan, and form of Subscription
Agreement, as restated effective May 10, 2000.(12)
10.22(*) Advanced Micro Devices, formerly MMI, Settlement Agreement and
associated Series E Preferred Stock Purchase Agreement and
Patent License Agreement, all dated March 31, 1987.(1)
10.26 Form of Indemnification Agreement entered into with each of
the Registrant's officers and directors.(7)
10.33(b)+ 1988 Director Stock Option Plan and form of Outside Director
Nonstatutory Stock Option Agreement restated effective May 7,
1997.(11)
10.37 LSI Products Supply Agreement with Sharp Corporation, dated
October 1, 1993.(2)
10.37(a) Letter Agreement, dated August 20, 1996, by and between
Registrant and Sharp Corporation, amending the LSI Product
Supply Agreement, dated October 1, 1993.(11)
10.37(b) Letter Agreement, dated May 22, 1997, by and between
Registrant and Sharp Corporation, amending the LSI Product
Supply Agreement, dated October 1, 1993.(11)
10.37(c) Letter Agreement, dated May 22, 1998, by and between
Registrant and Sharp Corporation, amending the LSI Product
Supply Agreement, dated October 1, 1993.(11)
#10.38+ Altera Corporation Nonqualified Deferred Compensation Plan and
Trust Agreement dated February 1, 1994, and forms of Deferred
Compensation Agreement.
10.39(*) Wafer Supply Agreement dated June 26, 1995 between Registrant
and Taiwan Semiconductor Manufacturing Co., Ltd.(3)
10.42(*) Amendment No. 1 dated as of October 1, 1995 to Wafer Supply
Agreement dated as of June 26, 1995 by and between Registrant
and Taiwan Semiconductor Manufacturing Co., Ltd. and to Option
Agreement 1 dated as of June 26, 1995 between Registrant and
Taiwan Semiconductor Manufacturing Co., Ltd.(5)
10.42(a) Amendment of Wafer Supply Agreement dated June 1, 1997 by and
between Registrant and Taiwan Semiconductor Manufacturing Co.,
Ltd.(11)
10.45(a)+ 1996 Stock Option Plan, as amended October 5, 1999 and
restated as of May 10, 2000.(12)
#10.45(b)+ Form of Stock Option Agreement under 1996 Stock Option Plan.
10.50 Agreement and Plan of Merger dated June 18, 1997.(6)
10.51(a)+ 1998 Director Stock Option Plan.(8)
10.51(b)+ Form of Stock Option Agreement under 1998 Director Stock
Option Plan.(8)
</TABLE>
42
<PAGE> 43
<TABLE>
<S> <C>
10.53 Product Distribution Agreement with Arrow Electronics
Incorporated, effective January 26, 1999.(9)
10.55+ Form of Restricted Stock Purchase Agreement.(10)
10.56(a)+ 2000 Non-Qualified Stock Option Plan No. 1.(13)
10.56(b)+ Form of Stock Option Agreement for Former Employees of
Northwest Logic, Inc.(13)
10.56(c)+ Form of Stock Option Agreement for Former Founding
Shareholders of Northwest Logic, Inc.(13)
10.57(a)+ Restricted Stock Purchase Agreement between the Registrant and
John Daane.(15)
#10.57(b)+ Severance Agreement, dated as of November 30, 2000, by and
between John Daane and Registrant.
#10.57(c)+ Change in Control Severance Agreement, dated as of November
30, 2000, by and between John Daane and Registrant.
#11.1 Computation of Earnings per Share (included on page 29).
#13.1 Annual Report to Stockholders for the fiscal year ended
December 31, 2000 (to be deemed filed only to the extent
required by the instructions to Exhibits for Reports on Form
10-K).
#21.1 Subsidiaries of the Registrant.
#23.1 Consent of PricewaterhouseCoopers LLP.
#24.1 Power of Attorney (included on page 45).
</TABLE>
(1) Incorporated by reference to identically numbered exhibit of the
Registrant's Registration Statement on Form S-1 (File No. 33-17717), as
amended, which became effective March 29, 1988.
(2) Incorporated by reference to identically numbered exhibit of the
Registrant's Report on Form 10-K for the fiscal year ended December 31,
1993.
(3) Incorporated by reference to identically numbered exhibit of the
Registrant's Report on Form 10-Q for the quarter ended June 30, 1995.
(4) Incorporated by reference to identically numbered exhibit of the
Registrant's Registration Statement on Form S-8 (File No. 33-61085), as
amended, which became effective July 17, 1995.
(5) Incorporated by reference to identically numbered exhibit of the
Registrant's Report on Form 10-K for the fiscal year ended December 31,
1995.
(6) Incorporated by reference to identically numbered exhibit of the
Registrant's Report on Form 10-Q for the quarter ended June 30, 1997.
(7) Incorporated by reference to identically numbered exhibit of the
Registrant's Report on Form 10-K for the fiscal year ended December 31,
1997.
(8) Incorporated by reference to identically numbered exhibit of the
Registrant's Report on Form 10-K for the fiscal year ended December 31,
1998.
(9) Incorporated by reference to identically numbered exhibit of the
Registrant's Report on Form 10-Q for the quarter ended March 31, 1999.
(10) Incorporated by reference to identically numbered exhibit of the
Registrant's Registration Statement on Form S-8 (File No. 333-31304),
filed on February 29, 2000.
(11) Incorporated by reference to identically numbered exhibit of the
Registrant's Report on Form 10-K for the fiscal year ended December 31,
1999.
(12) Incorporated by reference to identically numbered exhibit of the
Registrant's Report on Form 10-Q for the quarter ended June 30, 2000.
(13) Incorporated by reference to identically numbered exhibit of the
Registrant's Report on Form 10-Q for the quarter ended September 30,
2000.
(14) Incorporated by reference to identically numbered exhibit of the
Registrant's Report on Form 8-K, filed on December 15, 2000.
43
<PAGE> 44
(15) Incorporated by reference to exhibit 4.2 of the Registrant's
Registration Statement on Form S-8 (File No. 333-54384), filed on
January 26, 2001.
# Filed herewith.
* Confidential treatment has previously been granted for portions of this
exhibit pursuant to an order of the Commission.
** Confidential treatment has previously been requested for portions of
this exhibit.
+ Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Report on Form 10-K pursuant to Item 14(c)
thereof.
(b) Reports on Form 8-K.
The following reports on Form 8-K were filed during the fourth quarter
of fiscal 2000.
1. Current Report on Form 8-K dated November 17, 2000 and filed on
December 11, 2000 announcing a jury verdict in the Xilinx
litigation.
2. Current Report on Form 8-K dated December 14, 2000 and filed on
December 15, 2000 announcing the sale of our equity interest in
WaferTech, LLC.
44
<PAGE> 45
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report on Form 10-K to be
signed on its behalf, by the undersigned thereto duly authorized.
ALTERA CORPORATION
By: /s/ NATHAN SARKISIAN
--------------------------------------
Nathan Sarkisian
Senior Vice President and Chief
Financial Officer
March 6, 2001
POWER OF ATTORNEY
Know all persons by these present, that each person whose signature appears
below constitutes and appoints Nathan Sarkisian, his or her attorney-in-fact,
with the power of substitution, for him or her in any and all capacities, to
sign any amendments to this Report on Form 10-K, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or his or her substitute or substitutes, may do or cause
to be done by virtue hereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this Report
on Form 10-K has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
SIGNATURE CAPACITY IN WHICH SIGNED DATE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
/s/ RODNEY SMITH Chairman of the Board of Directors March 6, 2001
- -----------------
Rodney Smith
/s/ JOHN P. DAANE President, Chief Executive Officer and Director March 6, 2001
- ------------------ (Principal Executive Officer)
John P. Daane
/s/ NATHAN SARKISIAN Senior Vice President and Chief Financial Officer March 6, 2001
- --------------------- (Principal Financial and Accounting Officer)
Nathan Sarkisian
/s/ CHARLES M. CLOUGH Director March 6, 2001
- ----------------------
Charles M. Clough
/s/ MICHAEL A. ELLISON Director March 6, 2001
- ----------------------
Michael A. Ellison
/s/ PAUL NEWHAGEN Director March 6, 2001
- ------------------
Paul Newhagen
/s/ ROBERT W. REED Director and Vice Chairman of the Board of Directors March 6, 2001
- -------------------
Robert W. Reed
</TABLE>
45
<PAGE> 46
<TABLE>
<S> <C> <C>
/s/ DEBORAH D. RIEMAN Director March 6, 2001
- ----------------------
Deborah D. Rieman
/s/ WILLIAM E. TERRY Director March 6, 2001
- ---------------------
William E. Terry
</TABLE>
46
<PAGE> 47
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NUMBER EXHIBIT
- -------------- -------
<S> <C>
2.1** Assignment and Assumption Agreement dated as of November 15,
2000 between Registrant and TSMC Development, Inc.(14)
3.1 Amended and Restated Certificate of Incorporation filed with
the Delaware Secretary of State on June 9, 2000.(12)
3.2 By-laws of the Registrant as adopted May 5, 1997 (which became
the By-laws of the Registrant on June 19, 1997).(6)
4.1 Specimen copy of certificate for shares of common stock of the
Registrant.(7)
10.3(a)+ 1987 Stock Option Plan, and forms of Incentive and
Nonstatutory Stock Option Agreements, as amended March 22,
1995 and as restated effective May 10, 1995.(4)
10.4(b)+ 1987 Employee Stock Purchase Plan, and form of Subscription
Agreement, as restated effective May 10, 2000.(12)
10.22* Advanced Micro Devices, formerly MMI, Settlement Agreement and
associated Series E Preferred Stock Purchase Agreement and
Patent License Agreement, all dated March 31, 1987.(1)
10.26 Form of Indemnification Agreement entered into with each of
the Registrant's officers and directors.(7)
10.33(b)+ 1988 Director Stock Option Plan and form of Outside Director
Nonstatutory Stock Option Agreement restated effective May 7,
1997.(11)
10.37 LSI Products Supply Agreement with Sharp Corporation, dated
October 1, 1993.(2)
10.37(a) Letter Agreement, dated August 20, 1996, by and between
Registrant and Sharp Corporation, amending the LSI Product
Supply Agreement, dated October 1, 1993.(11)
10.37(b) Letter Agreement, dated May 22, 1997, by and between
Registrant and Sharp Corporation, amending the LSI Product
Supply Agreement, dated October 1, 1993.(11)
10.37(c) Letter Agreement, dated May 22, 1998, by and between
Registrant and Sharp Corporation, amending the LSI Product
Supply Agreement, dated October 1, 1993.(11)
#10.38+ Altera Corporation Nonqualified Deferred Compensation Plan and
Trust Agreement dated February 1 1994, and forms of Deferred
Compensation Agreement.
10.39* Wafer Supply Agreement dated June 26, 1995 between Registrant
and Taiwan Semiconductor Manufacturing Co., Ltd.(3)
10.42* Amendment No. 1 dated as of October 1, 1995 to Wafer Supply
Agreement dated as of June 26, 1995 by and between Registrant
and Taiwan Semiconductor Manufacturing Co., Ltd. and to Option
Agreement 1 dated as of June 26, 1995 between Registrant and
Taiwan Semiconductor Manufacturing Co., Ltd.(5)
10.42(a) Amendment of Wafer Supply Agreement dated June 1, 1997 by and
between Registrant and Taiwan Semiconductor Manufacturing Co.,
Ltd.(11)
10.45(a)+ 1996 Stock Option Plan, as amended October 5, 1999 and
restated as of May 10, 2000.(12)
#10.45(b)+ Form of Stock Option Agreement under 1996 Stock Option Plan.
10.50 Agreement and Plan of Merger dated June 18, 1997.(6)
10.51(a)+ 1998 Director Stock Option Plan.(8)
10.51(b)+ Form of Stock Option Agreement under 1998 Director Stock
Option Plan.(8)
</TABLE>
<PAGE> 48
<TABLE>
<S> <C>
10.53 Product Distribution Agreement with Arrow Electronics
Incorporated, effective January 26, 1999.(9)
10.55+ Form of Restricted Stock Purchase Agreement.(10)
10.56(a)+ 2000 Non-Qualified Stock Option Plan No. 1.(13)
10.56(b)+ Form of Stock Option Agreement for Former Employees of
Northwest Logic, Inc.(13)
10.56(c)+ Form of Stock Option Agreement for Former Founding
Shareholders of Northwest Logic, Inc.(13)
10.57(a)+ Restricted Stock Purchase Agreement between the Registrant and
John Daane.(15)
#10.57(b)+ Severance Agreement, dated as of November 30, 2000, by and
between John Daane and Registrant.
#10.57(c)+ Change in Control Severance Agreement, dated as of November
30, 2000, by and between John Daane and Registrant.
#11.1 Computation of Earnings per Share (included on page 29).
#13.1 Annual Report to Stockholders for the fiscal year ended
December 31, 2000 (to be deemed filed only to the extent
required by the instructions to Exhibits for Reports on Form
10-K).
#21.1 Subsidiaries of the Registrant.
#23.1 Consent of PricewaterhouseCoopers LLP.
#24.1 Power of Attorney (included on page 45).
</TABLE>
(1) Incorporated by reference to identically numbered exhibit of the
Registrant's Registration Statement on Form S-1 (File No. 33-17717), as
amended, which became effective March 29, 1988.
(2) Incorporated by reference to identically numbered exhibit of the
Registrant's Report on Form 10-K for the fiscal year ended December 31,
1993.
(3) Incorporated by reference to identically numbered exhibit of the
Registrant's Report on Form 10-Q for the quarter ended June 30, 1995.
(4) Incorporated by reference to identically numbered exhibit of the
Registrant's Registration Statement on Form S-8 (File No. 33-61085), as
amended, which became effective July 17, 1995.
(5) Incorporated by reference to identically numbered exhibit of the
Registrant's Report on Form 10-K for the fiscal year ended December 31,
1995.
(6) Incorporated by reference to identically numbered exhibit of the
Registrant's Report on Form 10-Q for the quarter ended June 30, 1997.
(7) Incorporated by reference to identically numbered exhibit of the
Registrant's Report on Form 10-K for the fiscal year ended December 31,
1997.
(8) Incorporated by reference to identically numbered exhibit of the
Registrant's Report on Form 10-K for the fiscal year ended December 31,
1998.
(9) Incorporated by reference to identically numbered exhibit of the
Registrant's Report on Form 10-Q for the quarter ended March 31, 1999.
(10) Incorporated by reference to identically numbered exhibit of the
Registrant's Registration Statement on Form S-8 (File No. 333-31304),
filed on February 29, 2000.
(11) Incorporated by reference to identically numbered exhibit of the
Registrant's Report on Form 10-K for the fiscal year ended December 31,
1999.
(12) Incorporated by reference to identically numbered exhibit of the
Registrant's Report on Form 10-Q for the quarter ended June 30, 2000.
(13) Incorporated by reference to identically numbered exhibit of the
Registrant's Report on Form 10-Q for the quarter ended September 30,
2000.
(14) Incorporated by reference to identically numbered exhibit of the
Registrant's Report on Form 8-K, filed on December 15, 2000.
<PAGE> 49
(15) Incorporated by reference to exhibit 4.2 of the Registrant's
Registration Statement on Form S-8 (File No. 333-54384), filed on
January 26, 2001.
# Filed herewith.
* Confidential treatment has previously been granted for portions of this
exhibit pursuant to an order of the Commission.
** Confidential treatment has previously been requested for portions of
this exhibit.
+ Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Report on Form 10-K pursuant to Item 14(c)
thereof.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.38
<SEQUENCE>2
<FILENAME>f70153ex10-38.txt
<DESCRIPTION>EXHIBIT 10.38
<TEXT>
<PAGE> 1
EXHIBIT 10.38
ALTERA CORPORATION
NONQUALIFIED DEFERRED COMPENSATION PLAN
PLAN AND TRUST AGREEMENT
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1998)
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I -- PLAN ADMINISTRATION.................................................................2
ARTICLE II -- ELIGIBILITY, PARTICIPATION AND BENEFICIARY DESIGNATION.............................2
ARTICLE III -- PLAN CONTRIBUTIONS AND ALLOCATIONS................................................3
ARTICLE IV -- VESTING............................................................................4
ARTICLE V -- TRUST FUND..........................................................................5
ARTICLE VI -- GENERAL DUTIES OF THE COMMITTEE AND THE TRUSTEE....................................6
ARTICLE VII -- ALLOCATION OF TRUST INCOME OR LOSS................................................6
ARTICLE VIII -- PARTICIPANTS' ACCOUNTS...........................................................7
ARTICLE IX -- PAYMENTS TO A PLAN BENEFICIARY.....................................................8
ARTICLE X -- HARDSHIP WITHDRAWALS...............................................................10
ARTICLE XI -- TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO PLAN BENEFICIARIES WHEN COMPANY
INSOLVENT.........................................................................11
ARTICLE XII -- INVESTMENT AND ADMINISTRATION OF TRUST FUND......................................12
ARTICLE XIII -- ACCOUNTING BY TRUSTEE...........................................................14
ARTICLE XIV -- RESPONSIBILITY OF TRUSTEE........................................................14
ARTICLE XV -- TAXES, EXPENSES AND COMPENSATION OF TRUSTEE.......................................15
ARTICLE XVI -- PROTECTION OF TRUSTEE............................................................16
ARTICLE XVII -- INDEMNIFICATION OF TRUSTEE......................................................17
ARTICLE XVIII -- RESIGNATION AND REMOVAL OF TRUSTEE AND LEGAL
COUNSEL........................................................................17
ARTICLE XIX -- DURATION AND TERMINATION OF TRUST AND AMENDMENT..................................18
ARTICLE XX -- MISCELLANEOUS.....................................................................18
</TABLE>
-i-
<PAGE> 3
ALTERA CORPORATION
NONQUALIFIED DEFERRED COMPENSATION PLAN AND TRUST
(AS AMENDED AND RESTATED EFFECTIVE JANUARY 1, 1998)
THIS PLAN AND TRUST AGREEMENT, effective as of February 1, 1994, is
hereby amended and restated in its entirety effective as of January 1, 1998 by
and between Altera Corporation (the "Company"), acting on behalf of itself and
any designated subsidiaries, and Charles Schwab and Company as trustee (the
"Trustee"). Throughout, Company shall include wherever relevant any entity that
is directly or indirectly controlled by the Company or any entity in which the
Company has a significant equity or investment interest, as determined by the
Company.
RECITALS:
1. The Company maintains the Nonqualified Deferral Compensation Plan
(the "Plan") for the benefit of a select group of management or highly
compensated employees designated by the Company as well as members of the
Company's Board of Directors (the "Board").
2. Under the Plan, the Company is obligated to pay vested accrued
benefits to Plan Participants and their beneficiary or beneficiaries ("Plan
Beneficiaries"), from the Company's general assets.
3. The Company has established an irrevocable trust (the "Trust") to
which it contributes to meet its obligations under the Plan, and such
contributions are held by the Trustee and invested, reinvested and distributed,
all in accordance with the provisions of this Plan.
4. The Company intends that amounts allocated to the Trust and the
earnings thereon shall be used by the Trustee to satisfy the liabilities of the
Company under the Plan with respect to each Participant for whom an Account has
been established and such utilization shall be in accordance with the procedures
set forth herein.
5. The Company intends that the assets of the Trust shall at all times
be subject to the claims of the general creditors of the Company as provided in
Article XI.
6. The Company intends that the existence of the Trust shall not alter
the characterization of the Plan as "unfunded" for purposes of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and shall not be
construed to provide income to the Participants under the Plan prior to actual
payment of the vested accrued benefits thereunder.
<PAGE> 4
NOW THEREFORE, the Company does hereby establish the Plan and Trust as
follows and does also hereby agree that the Plan and Trust shall be structured,
held and disposed of as follows:
ARTICLE I
PLAN ADMINISTRATION
A. The Plan shall be administered by the Retirement Plans Committee of
the Company (the "Committee"). Subject to the provisions in the Plan and to the
specific duties delegated by the Board of Directors to such Committee, the
Committee shall be responsible for the general administration and interpretation
of the Plan and for carrying out its provisions. The Committee shall have such
powers as may be necessary to discharge its duties hereunder, including, but not
by way of limitation, the following powers and duties:
(1) discretionary authority to construe and interpret the terms
of the Plan, and to determine eligibility and the amount, manner and
time of payment of any benefits hereunder;
(2) to prescribe procedures to be followed by Participants for
purposes of Plan participation and distribution of benefits; and
(3) to take such other action as may be necessary and
appropriate for the proper administration of the Plan.
B. The Committee may adopt such rules, regulations and bylaws and may
make such decisions as it deems necessary or desirable for the proper
administration of the Plan. Any rule or decision that is not inconsistent with
the provisions of the Plan shall be conclusive and binding upon all persons
affected by it, and there shall be no appeal from any ruling by the Committee
that is within its authority, except as otherwise provided herein.
ARTICLE II
ELIGIBILITY, PARTICIPATION AND BENEFICIARY DESIGNATION
A. Eligible Participants. The following categories of individuals who
provide services to the Company ("Eligible Participants") shall be eligible to
participate in the Plan: (i) employees who are designated as eligible to
participate on the attached Exhibit A to this Plan; (ii) any other employee or
category of employee that is designated by the Committee as eligible to
participate in the Plan, and (iii) members of the Company's Board of Directors.
The Committee reserves the right to modify the definition of Eligible
Participants at any time. Any Eligible Participant who has commenced
participation in the Plan shall be referred to in this Plan as a "Participant."
-2-
<PAGE> 5
B. Participation. Each Participant may elect to commence participation
in the Plan by completing an Altera Corporation Nonqualified Deferred
Compensation Plan Deferred Compensation Agreement ("Deferred Compensation
Agreement") within 30 days following the date on which the Committee gives such
individual written notice that the individual is an Eligible Participant. Any
Eligible Participant who does not execute a Deferred Compensation Agreement
within the time periods described herein may nevertheless participate in the
Plan commencing with Compensation paid in the next succeeding calendar year by
filing an executed Deferred Compensation Agreement with the Committee before the
beginning of such calendar year.
C. Beneficiary Designation. Each Participant, prior to entering the
Plan, shall designate a beneficiary or beneficiaries to receive the remainder of
any interest of the Participant under the Plan. A Participant may change his or
her beneficiary designation at any time on written notice to the Committee. Each
beneficiary designation shall be in a form prescribed by the Committee and will
be effective only when filed with the Committee during the Participant's
lifetime. Each beneficiary designation filed with the Committee will cancel all
previously filed beneficiary designations. In the absence of a valid
designation, or if no designated beneficiary survives the Participant, the
Participant's interest shall be distributed to the Participant's estate.
ARTICLE III
PLAN CONTRIBUTIONS AND ALLOCATIONS
A. Participant Deferrals. Each Participant participating in the Plan
shall execute a Deferred Compensation Agreement authorizing the Company to
withhold a specific dollar amount or a percentage of the Participant's
Compensation which would otherwise be paid to the Participant with respect to
services rendered. Compensation shall be defined for purposes of the foregoing
as the cash compensation payable to the Participant in connection with the
Participant's services to the Company, including all amounts which a Participant
elects to have the Company contribute on his behalf as a deferral contribution
("Compensation"). The deferral percentage is applied to Compensation after all
other applicable payroll deductions have been applied. The Committee may, in its
discretion, establish in the Deferred Compensation Agreement minimum and maximum
levels of bonus and non-bonus compensation that may be deferred pursuant to the
Plan. Compensation deferrals made by a Participant under this Plan shall be held
as an asset of the Company.
B. Election Changes. A Participant may, in such form as the Committee
may prescribe, discontinue deferral of future compensation at any time; however,
no other modifications to the Deferred Compensation Agreement may be made prior
to the commencement of the calendar year following written notification to the
Company of any desired modifications. The Committee has the power to establish
uniform and nondiscriminatory rules and from time to time to modify or change
such rules governing the manner and method by which Compensation deferral
contributions shall be made, as well as the manner and method by which
Compensation deferral contribution may be changed or discontinued temporarily or
permanently. All Compensation deferral contributions shall
-3-
<PAGE> 6
be authorized by the Participant in writing, made by payroll deduction and
deducted from the Participant's Compensation without reduction for any taxes or
withholding (except to the extent required by law or the regulations).
Notwithstanding the foregoing, each Participant shall remain liable for any and
all employment taxes owing with respect to such Participant's Compensation
deferral contributions.
C. Cessation of Eligible Status. In the event a Participant ceases to be
an Eligible Participant while also a participant in the Plan, such Participant
may continue to make Compensation deferral contributions under the Plan through
the end of the payroll period in which the Participant ceases to be an Eligible
Participant. Thereafter, such Participant shall not make any further
Compensation deferral contributions to the Plan unless or until he or she again
meets the eligibility requirements of Article II above.
D. Company Matching Contributions. As of the last day of each calendar
year or such earlier time or times as the Committee may determine, the Company
may make a matching contribution to the Trust in such amount as the Board shall
specify.
E. Company Discretionary Contributions. The Company may, in its sole
discretion, make discretionary contributions to the Accounts of one or more
Participants at such times and in such amounts as the Board shall determine.
F. Allocations. The Compensation deferral contributions and any Company
contributions made under the Plan on behalf of a Participant shall be credited
to the Participant's Account. The Committee shall establish and maintain
separate subaccounts as it determines to be necessary and appropriate for the
proper administration of the Plan. Each Participant Account consists of the
aggregate interest of the Participant under the Plan (and in the Trust Fund), as
reflected in the records maintained by the Company for such purposes.
ARTICLE IV
VESTING
A. Compensation Deferral Contributions. The value of a Participant's
Account attributable to the Participant's Compensation deferral contributions
shall always be fully vested and nonforfeitable.
B. Company Contributions. The value of a Participant's Account
attributable to any Company contributions pursuant to Article III.D and E shall
vest in its entirety five (5) years after the date of the Company contribution
to which such value relates, provided the Participant has remained in the
continuous service of the Company throughout such five-year period. If the
Participant's employment with the Company (or service on the Board, as
applicable) terminates for any reason prior to the expiration of such five-year
period, unless determined otherwise by the Board, no portion
-4-
<PAGE> 7
of the Participant's Account attributable to Company contributions occurring
within the preceding five-year period shall be considered vested for purposes of
this Plan. Upon termination of a Participant's employment with the Company for
any reason, any portion of the Participant's Account that is not then vested
(including allocable earnings, as determined by the Committee), shall be
forfeited.
ARTICLE V
TRUST FUND
A. Trust. The Company hereby establishes the Trust with the Trustee,
consisting of such sums of money and other property acceptable to the Trustee as
from time to time shall be paid or delivered to the Trustee. All such money and
other property, all investments and reinvestments made therewith or proceeds
thereof and all earnings and profits thereon, less all payments and charges as
authorized herein, shall constitute the "Trust Fund" or "Trust." The Trust Fund
shall at all times be subject to the claims of general creditors of the Company
as provided in Article XI.
B. Grantor Trust. The Trust hereby established shall be irrevocable, but
for the issuance by the Internal Revenue Service of unfavorable tax rulings on
the status of the Trust as a grantor trust. Subject to Article XI, Trust assets
shall be held for the exclusive purpose of providing vested accrued benefits to
the Trust Beneficiaries and defraying expenses of the Trust in accordance with
the provisions of this Plan. No part of the income or corpus of the Trust Fund
shall be recoverable by or for the Company prior to the termination of the Trust
and the satisfaction of all liabilities under the Plans.
C. Assignment. No right or interest to receive accrued benefits from the
Trust may be assigned, sold, anticipated, alienated or otherwise transferred by
the Plan Beneficiaries.
D. Trustee. The Trustee accepts the Trust established under this Plan on
the terms and subject to the provisions set forth herein, and it agrees to
discharge and perform fully and faithfully all of the duties and obligations
imposed upon it under this Plan.
E. Trust Assets. The principal of the Trust and any earnings thereon
shall be held separate and apart from other funds of the Company and shall be
used exclusively for the uses and purposes herein set forth. Neither the Plan
Beneficiaries nor the Plan shall have any preferred claim on, or any beneficial
ownership interest in, any assets of the Trust prior to the time such assets are
paid to a Plan Beneficiary as vested accrued benefits as provided in Article IX,
and all rights created under the Plan and the Trust under this Plan shall be
mere unsecured, contractual rights of the Participants against the Company.
-5-
<PAGE> 8
ARTICLE VI
GENERAL DUTIES OF THE COMMITTEE AND THE TRUSTEE
A. Committee Duties. The Committee will provide the Trustee with a copy
of any future amendment to this Plan promptly upon its adoption. The Committee
may from time to time hire outside consultants, accountants, actuaries, legal
counsel or record keepers to perform such tasks as the Committee may from time
to time determine.
B. Trustee Duties. The Trustee shall manage, invest and reinvest the
Trust Fund as provided in Article XII of this Plan. The Trustee shall collect
the income on the Trust Fund, and make distributions therefrom, all as
hereinafter provided.
C. Company Contributions. While the Plan remains in effect, and prior to
a Change in Control, as defined below, the Company shall make contributions to
the Trust Fund at least once each quarter. The amount of any quarterly
contributions shall be at the discretion the Company. At the close of each
calendar year, the Company shall make an additional contribution to the Trust
Fund to the extent that previous contributions to the Trust Fund for the current
calendar year are not equal to the total of the Compensation deferrals made by
each Participant plus Company matching contributions and discretionary
contributions, if any, accrued, as of the close of the current calendar year.
The Trustee shall not be liable for any failure by the Company to provide
contributions sufficient to pay all accrued benefits under the Plan in full in
accordance with the terms of this Plan.
D. Department of Labor Determination. In the event that any Participants
are found to be ineligible, that is, not members of a select group of management
or highly compensated employees, according to a determination made by the
Department of Labor, the Committee will take whatever steps it deems necessary,
in its sole discretion to equitably protect the interests of the affected
Participants.
ARTICLE VII
ALLOCATION OF TRUST INCOME OR LOSS
A. Determination of Net Income. As of each Valuation Date (as defined in
Article VII.D below), the Committee shall determine the net income or loss of
the Trust Fund based on a statement from the Trustee of the receipts and
disbursements of the Trust Fund since the immediately preceding Valuation Date
and of the fair market value of the Fund as of the Valuation Date. If one or
more separate investment funds have been established as provided in Article XII,
each fund shall be valued separately on each Valuation Date and the net income
or loss of each fund shall be allocated to each Account invested in such
investment fund. In addition, self-directed accounts as defined under Article
XII.B shall be valued according to Section C of this Article.
B. Valuation. As of each Valuation Date and prior to any allocation of
contributions and forfeitures to be made as of such date, the net income or loss
of the Trust Fund since the immediately preceding Valuation Date, including net
appreciation or depreciation and any expenses paid by the
-6-
<PAGE> 9
Trust, shall be allocated to each Account in the ratio that the value, as of the
immediately preceding Valuation Date of each such Account invested in the Trust
Fund bears to the value, as of the immediately preceding Valuation Date, of all
Accounts invested in the Trust Fund. If one or more separate investment funds
have been established, the net income or loss of each fund shall be allocated to
each Account invested in such investment fund in proportion to the value of each
Account invested in such funds as of the immediately preceding Valuation Date.
The Committee shall adopt suitable procedures to establish a proportionate
crediting of Trust income or loss to those portions of Accounts in the case of
contributions or hardship withdrawals that have occurred in the interim period
since the immediately preceding Valuation Date.
C. Valuation of Segregated Accounts. The portion of any Participants's
Account invested on a segregated basis as provided in Article XII shall be
valued separately on each Valuation Date and the net income or loss allocated to
such Account shall be based on the assets, including income, gain, loss and/or
other change in value of the assets constituting such portion of the Account.
D. Valuation Dates. The Trust Fund, any separate investment funds and
any segregated account shall be valued as of the last day of each calendar year
and as of any other date the Company directs the Trustee to value the Trust
Fund, as provided in Article VII.E.
E. Special Valuation Dates at Committee Discretion. The Committee may
direct the Trustee to determine the fair market value of the Trust Fund and may
make a determination of Trust income or loss as of any date other than the last
day of a calendar year.
ARTICLE VIII
PARTICIPANTS' ACCOUNTS
A. Separate Accounts. The Committee shall open and maintain a separate
Account for each Participant. Each Participant's Account shall reflect the
amounts allocated thereto and distributed therefrom and such other information
as affects the value of such Account pursuant to this Plan. The Committee may
maintain records of Accounts to the nearest whole dollar.
B. Statement of Accounts. As soon as practicable after the end of each
calendar year the Committee shall furnish to each Participant a statement of his
or her Account, determined as of the end of such calendar year. Upon the
discovery of any error or miscalculation in an Account, the Committee shall
correct it, to the extent correction is practically feasible; provided, however,
that any such statement of Account shall be considered to reflect accurately the
status of the Participant's Account for all purposes under the Plan unless,
subject to any longer period required by ERISA, the Participant reports a
discrepancy to the Committee within six (6) months after receipt of the
statement. The Committee shall have no obligation to make adjustments to an
Participant's Account for any discrepancy reported to the Committee more than
six (6) months after receipt of the
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<PAGE> 10
statement, or for a discrepancy caused by the Participant's error. Statements to
Participants are for reporting purposes only, and no allocation, valuation or
statement shall vest any right or title in any part of the Trust Fund, nor
require any segregation of Trust assets, except as is specifically provided in
this Plan.
C. Accounts Which Are Not Segregated. When a Participant's services to
the Company cease and distribution of benefits is not deferred, the amount of
the benefit shall be based on the value of the vested portion of the
Participant's Account as of the Valuation Date immediately preceding his or her
termination date plus any contribution subsequently credited to such Account and
less any distributions subsequently made from the Account.
D. Segregated Accounts. Payment to a Participant shall be based on the
value of the vested portion of the Participant's segregated Account at the date
of distribution. The value of his or her segregated Account shall be the current
fair market value, including any income or loss, of the property constituting
such segregated Account.
ARTICLE IX
PAYMENTS TO A PLAN BENEFICIARY
A. General. Payments of vested accrued benefits to Plan Beneficiaries
from the Trust Fund shall be made in accordance with the distribution event
specified by the Participant in the Deferred Compensation Agreement between the
Company and the Participant (the "Distribution Event"); provided, however, the
Trustee shall make such payments, as directed by the Committee, to the extent
the Company is not at such time Insolvent as defined in Article XI. Except as
otherwise expressly provided in the Participant's Deferred Compensation
Agreement, no distribution shall be made or commenced prior to the Participant's
Distribution Event or a "Change of Control," whichever occurs earlier. A
Participant may, at least one year prior to the Participant's specified
Distribution Event, revoke such Distribution Event in favor of an alternative
Distribution Event; provided that a Participant may revoke a Distribution Event
once only, and provided further, that any such revocation shall not be given
effect if, during the one year period after the date of such revocation, the
Participant voluntarily terminates his or her services to the Company. For
purposes of this Plan, a "Change in Control" shall be deemed to have occurred if
any person (including a "Group" as such term is used in Section 13(d)(3) of the
Securities Exchange Act of 1934) acquires shares of the Company either (i)
having a majority of the total number of votes that may be cast for the election
of directors of the Company or (ii) possessing, directly or indirectly, the
power to control the direction of management or policies of the Company;
provided, however, that no Change of Control shall be deemed to occur in the
event of a merger, consolidation or reorganization of the Company where the
shareholders of the Company are substantially the same as before such merger,
consolidation or reorganization. The Trustee shall have no responsibility to
determine whether a Change in Control has occurred and shall be advised of such
event by the Company.
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<PAGE> 11
B. Cash Distributions. Where the distribution of all or any portion of a
Participant's Account is to be deferred in the form of cash, the Account shall
continue to be held and invested in the Trust subject to revaluation as provided
in Article VII.
C. In Kind Distributions. In kind distributions shall be (i) made only
in the Committee's discretion, (ii) made only in a form of investment that was
held on behalf of the Participant as a segregated investment pursuant to Article
XII.B in a separate investment fund pursuant to Article XII.D immediately
preceding the date of distribution, (iii) limited to the amount of such
investment so held, and (iv) based on the fair market value of the distributable
property, as determined by the Trustee at the time of distribution.
D. Method of Distribution. Payment to any Plan Beneficiary shall be made
pursuant to the Deferred Compensation Agreement executed by the Participant, in
whole or in part. A Participant may specify, at least ninety (90) days prior to
the Participant's Distribution Event, whether such distribution shall be made:
(1) In a lump sum, in cash and/or, in the Committee's
discretion, in kind, or
(2) In annual installments over a period not to exceed ten (10)
years equal to 1/n of the Participant's vested accrued benefit where n is the
number of installments remaining to be paid, subject to such reasonable
procedures and guidelines as the Committee may establish, or
(3) In annual installments over a period not to exceed ten (10)
years, based on percentages specified by the Participant, subject to an annual
minimum percentage of five percent (5%) and such other limitations as the
Committee may establish.
E. Certain Distributions. In case of any distribution to a minor or to a
legally incompetent person, the Committee may (1) direct the Trustee to make the
distribution to his legal representative, to a designated relative, or directly
to such person for his benefit, or (2) instruct the Trustee to use the
distribution directly for his support, maintenance, or education. The Trustee
shall not be required to oversee the application, by any third party, of any
distributions made pursuant to this Article IX.E.
F. IRS Determination. Notwithstanding any other provisions of this Plan,
if any amounts held in the Trust are found in a "determination" (within the
meaning of Section 1313(a) of the Internal Revenue Code of 1986, as amended (the
"Code")), to have been includible in the gross income of any Trust Beneficiary
prior to payment of such amounts from the Trust, the Trustee shall, as soon as
practicable pay such amounts to the Plan Beneficiary, as directed by the
Company. For purposes of this Section, the Trustee shall be entitled to written
notice from the Committee that a determination described in the preceding
sentence has occurred and to receive a copy of such notice. The Trustee shall
have no responsibility until so advised by the Committee.
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ARTICLE X
HARDSHIP WITHDRAWALS
A. General Rule. At the request of a Participant, the Committee shall
authorize a withdrawal at any time of the accrued benefit attributable to the
Participant's Compensation deferrals and gains or losses thereon under the
Participant's Account, provided that authorization for such withdrawal and the
amount thereof shall be given only on account of an unforeseeable emergency. The
term "unforeseeable emergency" shall mean severe financial hardship to the
Participant resulting from a sudden and unexpected illness or accident of the
Participant or of a dependent (as defined in Internal Revenue Code section
152(a)) of the Participant, loss of the Participant's property due to casualty,
or other similar extraordinary and unforeseeable circumstances arising as a
result of events beyond the control of the Participant. The circumstances that
will constitute an unforeseeable emergency will depend upon the facts of each
case, but in any case, payment may not be made to the extent that such hardship
is or may be relieved --
(1) Through reimbursement or compensation by insurance or
otherwise,
(2) By liquidation of the Participant's assets, to the extent
the liquidation of such assets would not itself cause severe financial hardship,
or
(3) By cessation of deferrals under the Plan.
The Committee shall establish reasonable procedures and guidelines uniformly
applied, to determine whether an unforeseeable emergency exists; provided,
however, that no withdrawal request shall be granted if to do so could result in
the inclusion of Trust Fund amounts in the gross income of Plan Beneficiaries
prior to payment of such amounts from the Trust Fund because approval of such
request would be inconsistent with any applicable statute, regulation, notice,
ruling or other pronouncement of the Internal Revenue Service interpreting this
or similar provisions.
ARTICLE XI
TRUSTEE RESPONSIBILITY REGARDING PAYMENTS TO
PLAN BENEFICIARIES WHEN COMPANY INSOLVENT
A. Company Insolvency. The Company shall be considered "Insolvent" and
an "Insolvency" shall be deemed to exist for purposes of this Plan under any of
the following circumstances:
(1) The Company is unable to pay its debts as they mature,
defined as having a weighted average overdue payables
balance in excess of 270 days.
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<PAGE> 13
(2) A receiver or trustee is appointed to take possession of
all or substantially all of the assets of the Company.
(3) There is a general assignment by the Company for the
benefit of creditors.
(4) An action or proceeding is commenced by or against the
Company under any insolvency or bankruptcy act, or any
other statute or regulation having as its purpose the
protection of creditors, and the action or proceeding is
not discharged within 60 days after the date of
commencement.
B. Plan Suspension. Notwithstanding any provision in this Plan to the
contrary, if at any time while the Trust is still in existence the Company
becomes Insolvent, the Trustee shall upon written notice thereof suspend the
payment of all amounts from the Trust Fund and shall thereafter (i) not permit
any further elective Compensation deferral contributions by the Participants and
(ii) discontinue all contributions by the Company to the Trust on behalf of the
Participants. The Trustee shall hold the Trust Fund in suspense for the benefit
of the Company's creditors until it receives a court order directing the
disposition of the Trust Fund; provided, however, that the Trustee may deduct or
continue to deduct its fees and expenses, including fees of any consultants,
actuaries, accountants, legal counsel or record keepers retained by the Company
or Trustee to provide services to the Trust.
C. Notice of Insolvency. By its approval and execution of this Plan, the
Company represents and agrees that its Board, the Committee, and its Chief
Executive Officer, as from time to time acting, shall have the fiduciary duty
and responsibility on behalf of the Company's creditors to give to the Trustee
prompt written notice of the Company's Insolvency and the Trustee shall be
entitled to rely thereon to the exclusion of all directions or claims to pay
vested accrued benefits thereafter made. Absent such notice, the Trustee shall
have no responsibility for determining whether or not the Company has become
Insolvent.
D. If after being Insolvent, the Company later becomes solvent without
the entry of a court order concerning the disposition of the Trust Fund, or if
any bankruptcy or insolvency proceedings referred to in Article XI.A are
dismissed, the Company shall by written notice so inform the Trustee and the
Trustee shall thereupon resume all its duties and responsibilities under this
Plan without regard to this Article XI until and unless the Company again
becomes Insolvent as such term is defined herein.
E. If the Trustee discontinues payments from the Trust pursuant to this
Article XI and subsequently resumes payments, or removes the suspended status of
the Trust, interest will be added to the Accounts of all Executives, including
those Accounts from which a payment was held in suspense, for the period of
discontinuance at not less than the average rate on 90-Day Treasury Bills
auctioned during the period of discontinuance, to be determined and calculated
by the Company. The Company will not make any other contributions to the Trust
that otherwise would have been made during the period of discontinuance.
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<PAGE> 14
ARTICLE XII
INVESTMENT AND ADMINISTRATION OF TRUST FUND
A. Investments. The Trustee shall have the power:
(1) To invest and reinvest the Trust Funds; provided,
however, the Trustee may delegate this investment
authority, in whole or in part, and subject to such
terms and conditions and as the Trustee shall require,
to the Committee or to an Investment Manager who meets
the requirements under the Altera Corporation Employee
Retirement and Savings Plan;
(2) To collect and receive any and all money and other
property due to the Trust Fund and to give full
discharge therefore;
(3) To settle, compromise or submit to arbitration any
claims, debts or damages due or owing to or from the
Trust; to commence or defend suits or legal proceedings
to protect any interest of the Trust; and to represent
the Trust in all suits or legal proceedings in any court
or before any other body or tribunal;
(4) Generally to do all acts, whether or not expressly
authorized, which the Trustee may deem necessary or
desirable for the protection of the Trust Fund.
Persons dealing with the Trustee shall be under no obligation to
see to the proper application of any money paid or property delivered to the
Trustee or to inquire into the Trustee's authority as to any transaction.
B. Segregated Investments; Participant Direction Permitted. The
Committee may, in its discretion, provide Participants with a list of permitted
investments available for hypothetical investment and the Participant may
designate, in a manner specified by the Committee, one or more investments that
his or her Account will be deemed to be invested in for purposes of determining
the amount of earnings to be credited to that Account. The Company may, but need
not, acquire investments corresponding to those designated by the Participants
hereunder, and it is not under any obligation to maintain any investment it may
make. Any such investments, if made, shall be in the name of the Company (or the
Trustee), and shall be an asset of the Company in which no Participant shall
have any interest. For valuation and record keeping purposes, Accounts shall be
segregated and shall be valued separately by the Trustee under the provisions of
Article VII.C. Valuations of such Accounts shall be made at such times as the
Committee may require, but no less frequently than annually. Such Accounts may
be charged with their proportionate share of any general expenses charged to the
Trust or with the full share of any expense incurred directly or indirectly in
connection with such Accounts.
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<PAGE> 15
C. Participant Direction Subject to Committee and Trustee Approval.
Neither the Committee nor the Trustee shall be under any obligation to approve
or disapprove any specific investment medium. Neither the Company nor the
Trustee has any liability for any losses or damage that may occur or result from
(i) the approval of or failure to approve of any specific investment medium;
(ii) the imposition of any administrative rules relating to the timing of
investment elections of any sort; or (iii) any administrative delay in carrying
out or failure to carry out investment elections within a specified time. The
Committee or the Trustee may disapprove or refuse to carry out any investment
request which in its opinion would subject the Company or the Trustee to
burdensome administrative responsibilities or which the Committee determines to
be inappropriate from a legal, financial or social perspective. The Trustee, in
approving any investment medium or in making investments under this Plan, shall
not be restricted by statutes governing the legal investment of trust funds.
D. Separate Investment Funds - Committee May Establish Separate Funds.
The Committee may, in its sole discretion, direct the Trustee to create one or
more separate investment funds, having such different specific investment
objectives as the Committee shall from time to time determine. The Committee
shall determine and may from time to time redetermine the number of investment
funds and the specific objectives of said funds and the investments or kinds of
investment which shall be authorized therefor.
E. Committee To Establish Rules. The Committee may at any time make such
uniform and nondiscriminatory rules as it determines necessary regarding the
administration of the directed investment option. The Committee may also develop
and maintain rules governing the rights of Participants to change their
investment directions and the frequency with which such changes can be made.
ARTICLE XIII
ACCOUNTING BY TRUSTEE
The Trustee shall keep accurate and detailed records of all investments,
receipts, disbursements, and all other transactions required to be done,
including such specific records as shall be agreed upon in writing between the
Committee and the Trustee. All such accounts, books and records shall be open to
inspection and audit at all reasonable times by the Committee, the Committee's
representatives or agents. Within one hundred and twenty (120) days following
the close of each calendar quarter and within one hundred and twenty (120) days
after the removal or resignation of the Trustee, the Trustee shall deliver to
the Committee a written account of its administration of the Trust during such
quarter or during the period from the close of the last preceding quarter to the
date of such removal or resignation, setting forth all investments, receipts,
disbursements and other actions effected by it, including a description of all
securities and investments purchased and sold, with the cost or net proceeds of
such purchases or sales (accrued interest paid or receivable being shown
separately), and showing all cash, securities and other
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property held in the Trust at the end of such quarter or as of the date of such
removal or resignation, as the case may be. The written approval of any
accounting by the Committee shall be final as to all matters and transactions
stated or shown therein and binding upon the Committee and all persons who then
shall be or then after shall become interested in this Trust. Failure of the
Committee to notify the trustee within 180 days after receipt of any accounting
of its disapproval of such accounting shall be the equivalent of written
approval.
ARTICLE XIV
RESPONSIBILITY OF TRUSTEE
The Trustee shall act with the care, skill, prudence and diligence under
the circumstances then prevailing that a prudent person acting in a like
capacity and familiar with such matters would use; provided, however, that the
Trustee shall incur no liability to anyone for any action taken pursuant to a
direction, request or approval given by the Committee or any Participant which
is contemplated by and complies with the terms of this Trust Agreement, and to
that extent the Trustee shall be relieved of the prudent person rule for
investments. The Trustee may hire agents, accountants, actuaries record keepers
and financial consultants. Expenses of such persons shall be deemed to be
expenses of management and administration of the Trust within the meaning of
Article XV.D, below. The Trustee shall have, without exclusion, all powers
conferred on Trustee by applicable law unless expressly provided otherwise
herein.
ARTICLE XV
TAXES, EXPENSES AND COMPENSATION OF TRUSTEE
A. Company Assets. It is the intention of the Company to have the corpus
and income of the Trust established hereunder treated as assets and income of
the Company to be used to satisfy the Company's legal liability under the Plan
in respect of all of the Participants, and the Company agrees that all income,
deductions and credits of the Trust Fund belong to the Company as owner for
income tax purposes and will be included on the Company's income tax returns.
B. Taxes. The Company shall from time to time pay taxes (references in
this Plan to the payment of taxes shall include interest and applicable
penalties) of any and all kinds whatsoever which at any time are lawfully levied
or upon or become payable in respect of the Trust Fund, the income or any
property forming a part thereof, or any security transaction pertaining thereto.
To the extent that any taxes levied or assessed upon the Trust Fund are not paid
by the Company or contested by the Company pursuant to the last sentence of this
Article, the Trustee shall pay such taxes out of the Trust Fund, and the Company
shall, upon demand by the Trustee, deposit into the Trust Fund an amount equal
to the amount paid from the Trust Fund to satisfy such tax liability. If
requested by the Company, the Trustee shall at the Company's expense, contest
the validity of such
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<PAGE> 17
taxes in any manner deemed appropriate by the Company or its counsel, but only
if it has received an indemnity bond or other security satisfactory to it to pay
any expenses of such contest. Alternatively, the Company may itself contest the
validity of any such taxes, but any such contest shall not affect the Company's
obligation to reimburse the Trust Fund for taxes paid from the Trust Fund.
C. Withholding. In making payments from the Trust, the Trustee shall be
liable for federal income tax withholding, and shall withhold the appropriate
amount of tax, if any, as provided by applicable law and regulation, from any
payment made to a Plan Beneficiary, unless the Company does not provide the
Trustee with the necessary information as set forth in regulations, in which
case the Company shall assume all relevant liability.
D. Compensation; Expenses. The Trustee may be paid compensation by the
Company in accordance with any written agreement for this purpose between them;
provided, however, that a Trustee who is an officer, director or employee of the
Company shall serve without compensation. The Trustee shall be reimbursed by the
Company for its reasonable expenses of management and administration of the
Trust, including reasonable compensation of any agent engaged by the Trustee to
assist it in such management and administration. The Trustee shall be able to
charge the Trust Fund for such compensation and for any reasonable expenses
including counsel, appraisal or accounting fees, and the same may be deducted
from the Trust Fund unless paid by the Company within sixty (60) days after the
Company receives written billing by the Trustee; provided that this paragraph
shall not apply while a dispute over the amount of such charges exists.
ARTICLE XVI
PROTECTION OF TRUSTEE
A. Certification. The Committee shall certify to the Trustee the name or
names of any person or persons authorized to act for the Company. Until the
Committee notifies the Trustee, in a similarly signed notice, that any such
person is no longer authorized to act for the Company, the Trustee may continue
to rely upon the authority of such person. The Trustee may rely upon any
certificate, notice or direction of the Committee which the Trustee reasonably
believes to have been signed by a duly authorized officer or agent of the
Company. Notices to the Trustee shall be sent in writing to the Trustee, Charles
Schwab & Company, ________. No communication shall be binding upon the Trust
Fund or the Trustee until it is received by the Trustee and unless it is in
writing and signed by an authorized person. Notices to the Company shall be sent
in writing attention to the Company's principal office to the Chief Financial
Officer, c/o Altera Corporation, 101 Innovation Drive, San Jose, CA 95134, or to
such other address as the Company may specify. No notice shall be binding upon
the Company until it is received by the Company.
B. Legal Counsel. The Trustee may consult with any legal counsel ("Legal
Counsel"), except as provided in Article XVIII.C, for the purpose of obtaining
advice on topics including but
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not limited to the construction of this Plan, its duties hereunder, or any act
which it proposes to take or omit, and shall not be liable for any action taken
or omitted in good faith pursuant to such advice. Expenses of Legal Counsel
shall be deemed to be expenses of management and administration of the Trust
within the meaning of Article XV.D hereof.
C. Trustee Duties. The Trustee shall discharge its duties under this
Plan in a manner consistent with the objectives of this Plan. The Trustee shall
not be liable for any loss sustained by the Trust Fund by reason of the
purchase, retention, sale or exchange of any investment in good faith and in
accordance with the provisions of this Plan. The Trustee shall have no
responsibility or liability for any failure of the Company to make contributions
to the Trust Fund or to pay vested accrued benefits when due. The Trustee's
duties and obligations shall be limited to those expressly imposed upon it under
the provisions of this Plan relating to the Trust, and the Trustee shall not
have responsibility under the provisions of this Plan relating to the Plan,
notwithstanding any reference to the Plan.
ARTICLE XVII
INDEMNIFICATION OF TRUSTEE
To the fullest extent permitted by law, the Company agrees to indemnify,
to defend, and to hold harmless the Trustee against any liability whatsoever for
any action taken or omitted by such Trustee in good faith in connection with
this Plan or duties hereunder and for any expenses or losses for which the
Trustee may become liable as a result of any such actions or non-actions unless
resultant from gross negligence or willful misconduct.
ARTICLE XVIII
RESIGNATION AND REMOVAL OF TRUSTEE AND LEGAL COUNSEL
A. Resignation. The Trustee may resign upon thirty (30) days' prior
written notice to the Company, except that any such resignation shall not be
effective until a successor trustee has been appointed, and such successor has
accepted the appointment in writing, but in any event no later that 90 days
after such resignation. The Company shall condition its acceptance of such
successor on the obtaining from such successor of a written statement that the
successor has read the Trust Agreement and understands its obligations
thereunder.
B. Removal. The Company may remove the Trustee upon thirty (30) days'
prior written notice to the Trustee. Any such removal shall not be effective
until the close of such notice period and delivery by the Company to the Trustee
of (i) an instrument in writing appointing a successor trustee, (ii) an
acceptance of such appointment in writing executed by such successor, and (iii)
a
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written statement by such proposed successor that the successor has read the
Trust Agreement and understands its obligations thereunder.
C. Successor Trustee. Upon the resignation or removal of the Trustee and
appointment of a successor, the Trustee shall transfer and deliver the Trust
Fund to such successor. Following the effective date of the appointment of the
successor, the Trustee's responsibility hereunder shall be limited to managing
the assets in its possession, transferring such assets to the successor and
settling its final account. Neither the Trustee nor the successor shall be
liable for the acts of the other. All of the provisions set forth herein with
respect to the Trustee shall relate to each successor with the same force and
effect as if such successor had been originally named as the Trustee hereunder.
ARTICLE XIX
DURATION AND TERMINATION OF TRUST AND AMENDMENT
A. Irrevocable. The Trust is hereby declared to be irrevocable and shall
continue until all vested accrued benefits have been paid.
B. Termination of Trust. If this Trust terminates under the provisions
of Article XIX.A, the Trustee shall liquidate the Trust Fund and, after its
final accounting has been settled, shall distribute to the Company the net
balance of any assets of the Trust Fund remaining after all vested accrued
benefits and administration expenses have been paid. Upon making such
distribution, the Trustee shall be relieved from all further liability.
C. Plan Amendment. This Plan may be amended, or the Plan terminated or
suspended, by an instrument in writing executed on behalf of the Company by the
Committee, or a duly appointed representative of the Board of Directors and
delivered to the Trustee, provided, however, that (i) no amendment will be made
to this Plan which will cause this Plan, the Trust or the assets of the Trust
Fund to be governed by or subject to Part 2, 3 or 4 of Title I of ERISA, (ii) no
such amendment shall adversely affect any Plan Beneficiary's accrued benefit,
(iii) no such amendment shall increase the duties or responsibilities of the
Trustee unless the Trustee consents thereto in writing, (iv) no such amendment
which would cause the Trust to be other than a "grantor trust," or have
contributions to the Trust by the Company, or income and gains of the Trust
Fund, constitute a taxable event to the Trust or to the Executives, and (v) no
such amendment shall cause the vested accrued benefit paid to Plan Beneficiaries
from the Trust Fund to become nondeductible to the Company in the year of
payment.
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ARTICLE XX
MISCELLANEOUS
A. California Law. This Plan and the Trust hereby created shall be
construed and regulated by the laws of the State of California.
B. Headings. The headings of sections in this Plan are used herein for
convenience of reference only and in case of any conflict the text of this Plan
shall control.
C. Successorship. This Plan shall be binding upon and inure to the
benefit of any successor to the Company or its business as the result of merger,
consolidation, reorganization, transfer of assets or otherwise, and any
subsequent successor thereto; and any such successor shall be deemed to be the
"Company" under this Plan. In the event of any such merger, consolidation,
reorganization, transfer of assets or other similar transaction, the successor
to the Company or its business or any subsequent successor thereto shall
promptly notify the Trustee in writing of its successorship and furnish the
Trustee with the information specified in Article XVI.A of this Plan. In no
event shall any such transaction described herein suspend or delay the rights of
Trust Beneficiaries to receive their vested accrued benefits hereunder.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
CHARLES SCHWAB & COMPANY
ALTERA CORPORATION TRUSTEE
By: /s/ Nathan M. Sarkisian /s/ illegible
--------------------------------- ---------------------------------
(Title) CFO
Date: 9/9/97 Date: 9/25/97
------------------------------- ----------------------------
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<PAGE> 21
ALTERA CORPORATION
NONQUALIFIED DEFERRED COMPENSATION PLAN
DEFERRED COMPENSATION AGREEMENT
1. I ACKNOWLEDGE THAT THE TERMS AND CONDITIONS OF THE ALTERA CORPORATION
NONQUALIFIED DEFERRED COMPENSATION PLAN ("PLAN") HAVE BEEN EXPLAINED TO
ME, INCLUDING THE TAX CONSEQUENCES OF MY DECISION TO PARTICIPATE IN THE
PLAN.
2. I AGREE TO DEFER ALL OR A PORTION OF MY CURRENT INCOME, AND TO HAVE THAT
INCOME PAID TO ME AT A LATER DATE PURSUANT TO THE TERMS AND CONDITIONS
OF THE PLAN, WHICH IS INCORPORATED BY REFERENCE, IN ITS ENTIRETY, IN
THIS AGREEMENT. NOTE: ACTUAL BENEFITS PAYABLE UNDER THE PLAN MAY BE
GREATER OR LESS THAN AMOUNTS DEFERRED DEPENDING ON THE EARNINGS OR
LOSSES THAT ARE CREDITED TO THE PARTICIPANT'S ACCOUNT IN ACCORDANCE WITH
THE PLAN.
3. I ACKNOWLEDGE THAT UNDER THE TERMS OF THE PLAN, NO PAYMENTS CAN BE MADE
IN THE EVENT ALTERA CORPORATION IS INSOLVENT (AS DEFINED IN THE PLAN).
4. I UNDERSTAND THAT THIS AGREEMENT IS NOT AN EMPLOYMENT AGREEMENT, DOES
NOT GUARANTEE THAT I WILL RECEIVE ANY PREDETERMINED AMOUNT OF
COMPENSATION, AND DOES NOT GUARANTEE THAT I WILL RECEIVE ANY BONUS.
5. I UNDERSTAND THAT ANY INCOME I DEFER WILL BE HELD AS AN ASSET OF ALTERA
CORPORATION AND WILL REMAIN SUBJECT TO THE CLAIMS OF THE GENERAL
CREDITORS OF ALTERA CORPORATION.
6. I UNDERSTAND THAT THE RETIREMENT PLANS COMMITTEE HAS THE SOLE
DISCRETIONARY AUTHORITY TO ADMINISTER THE INVESTMENT OF FUNDS DEFERRED
UNDER THE PLAN AND TO REVIEW FROM TIME TO TIME SUCH INVESTMENTS
CONSISTENT WITH PROPER PLAN ADMINISTRATION.
7. I UNDERSTAND THAT ALL APPLICABLE TAXES AND ANY ELECTIVE DEFERRALS (e.g.,
ESPP, 401(k), MEDICAL INSURANCE PREMIUMS, ETC.) WILL BE DEDUCTED FROM MY
PAYCHECK (SALARY AND ANY BONUS) PRIOR TO DEFERRALS BEING MADE TO THE
PLAN. THEREFORE, I UNDERSTAND THAT THE PERCENTAGE OF GROSS SALARY AND
BONUS I ELECT TO DEFER MAY NOT EXCEED THE AMOUNT THAT IS NECESSARY TO
MAKE ALL SUCH DEDUCTIONS.
<PAGE> 22
A. ELECTION TO DEFER COMPENSATION
1. Please choose one of the following with respect to salary:
_____ I elect to defer ______ % (not to exceed 65%) of gross
salary; or
_____ I elect to defer 100% of my salary after all applicable
payroll deductions have been made; I understand that I may not
participate in the 401(k) Plan.
2. Please choose one of the following with respect to any future
bonus:
_____ I elect to defer ______ % (not to exceed 80%) of any
future bonus; or
_____ I elect to defer 100% of any future bonus after all
applicable payroll deductions have been made; I understand that I may
not participate in the 401(k) Plan.
3. Please choose one of the following with respect to any incentive
payments:
_____ I elect to defer ______ % (not to exceed 65%) of any
incentive payments; or
_____ I elect to defer 100% of any incentive payments after all
applicable payroll deductions have been made; I understand that I may
not participate in the 401(k) Plan.
I understand that I may only contribute up to 65% of my gross salary and any
incentive payments and up to 80% of any future bonus if I also participate in
the 401(k) Plan. If I elect to defer 100% of my salary, any future bonus, or any
incentive payment (after all applicable payroll deductions have been made), I
understand that I may not participate in the 401(k) Plan. If I later decide to
participate in the 401(k) Plan, I understand that my deferrals to the Plan will
be reduced to 0% for the remainder of the year.
I understand that I may discontinue deferral of future Compensation at any time
during the year, but that I may make no other change in the Agreement until the
beginning of the calendar year after I have notified Altera Corporation in
writing of the change I desire. I also understand that if I discontinue deferral
of future Compensation during the year, I cannot restart deferral until the
beginning of the succeeding calendar year.
<PAGE> 23
I understand that under the terms of the Plan I may, under certain
circumstances, elect to make changes to the (a) Distribution Event (one-time
only), (b) method of payment, (c) distribution at death and (d) designation of
beneficiary, but at this time I am not electing to make any such changes.
Agreed:
- --------------------------------
(Signature)
ALTERA CORPORATION
- --------------------------------
(Print Name) By:
---------------------------------
- --------------------------------
(Social Security Number)
<PAGE> 24
ALTERA CORPORATION
NONQUALIFIED DEFERRED COMPENSATION PLAN
DEFERRED COMPENSATION AGREEMENT
1. I ACKNOWLEDGE THAT THE TERMS AND CONDITIONS OF THE ALTERA CORPORATION
NONQUALIFIED DEFERRED COMPENSATION PLAN ("PLAN") HAVE BEEN EXPLAINED TO
ME, INCLUDING THE TAX CONSEQUENCES OF MY DECISION TO PARTICIPATE IN THE
PLAN.
2. I AGREE TO DEFER ALL OR A PORTION OF MY CURRENT INCOME, AND TO HAVE THAT
INCOME PAID TO ME AT A LATER DATE PURSUANT TO THE TERMS AND CONDITIONS
OF THE PLAN, WHICH IS INCORPORATED BY REFERENCE, IN ITS ENTIRETY, IN
THIS AGREEMENT. NOTE: ACTUAL BENEFITS PAYABLE UNDER THE PLAN MAY BE
GREATER OR LESS THAN AMOUNTS DEFERRED DEPENDING ON THE EARNINGS OR
LOSSES THAT ARE CREDITED TO THE PARTICIPANT'S ACCOUNT IN ACCORDANCE WITH
THE PLAN.
3. I ACKNOWLEDGE THAT UNDER THE TERMS OF THE PLAN, NO PAYMENTS CAN BE MADE
IN THE EVENT ALTERA CORPORATION IS INSOLVENT (AS DEFINED IN THE PLAN).
4. I UNDERSTAND THAT THIS AGREEMENT IS NOT AN EMPLOYMENT AGREEMENT, DOES
NOT GUARANTEE THAT I WILL RECEIVE ANY PREDETERMINED AMOUNT OF
COMPENSATION, AND DOES NOT GUARANTEE THAT I WILL RECEIVE ANY BONUS.
5. I UNDERSTAND THAT ANY INCOME I DEFER WILL BE HELD AS AN ASSET OF ALTERA
CORPORATION AND WILL REMAIN SUBJECT TO THE CLAIMS OF THE GENERAL
CREDITORS OF ALTERA CORPORATION.
6. I UNDERSTAND THAT THE RETIREMENT PLANS COMMITTEE HAS THE SOLE
DISCRETIONARY AUTHORITY TO ADMINISTER THE INVESTMENT OF FUNDS DEFERRED
UNDER THE PLAN AND TO REVIEW FROM TIME TO TIME SUCH INVESTMENTS
CONSISTENT WITH PROPER PLAN ADMINISTRATION.
7. I UNDERSTAND THAT ALL APPLICABLE TAXES AND ANY ELECTIVE DEFERRALS (E.G.,
ESPP, 401(k), MEDICAL INSURANCE PREMIUMS, ETC.) WILL BE DEDUCTED FROM MY
PAYCHECK (SALARY AND ANY BONUS) PRIOR TO DEFERRALS BEING MADE TO THE
PLAN. THEREFORE, I UNDERSTAND THAT THE PERCENTAGE OF GROSS SALARY AND
BONUS I ELECT TO DEFER MAY NOT EXCEED THE AMOUNT THAT IS NECESSARY TO
MAKE ALL SUCH DEDUCTIONS.
<PAGE> 25
A. ELECTION TO DEFER COMPENSATION
1. Please choose one of the following with respect to salary:
_____ I elect to defer ______ % (not to exceed 65%) of gross
salary; or
_____ I elect to defer 100% of my salary after all applicable
payroll deductions have been made; I understand that I may not
participate in the 401(k) Plan.
2. Please choose one of the following with respect to any future
bonus:
_____ I elect to defer ______ % (not to exceed 80%) of any
future bonus; or
_____ I elect to defer 100% of any future bonus after all
applicable payroll deductions have been made; I understand that I may
not participate in the 401(k) Plan.
3. Please choose one of the following with respect to any incentive
payments:
_____ I elect to defer ______ % (not to exceed 65%) of any
incentive payments; or
_____ I elect to defer 100% of any incentive payments after all
applicable payroll deductions have been made; I understand that I may
not participate in the 401(k) Plan.
I understand that I may only contribute up to 65% of my gross salary and any
incentive payments and up to 80% of any future bonus if I also participate in
the 401(k) Plan. If I elect to defer 100% of my salary, any future bonus, or any
incentive payment (after all applicable payroll deductions have been made), I
understand that I may not participate in the 401(k) Plan. If I later decide to
participate in the 401(k) Plan, I understand that my deferrals to the Plan will
be reduced to 0% for the remainder of the year.
I understand that I may discontinue deferral of future Compensation at any time
during the year, but that I may make no other change in the Agreement until the
beginning of the calendar year after I have notified Altera Corporation in
writing of the change I desire. I also understand that if I discontinue deferral
of future Compensation during the year, I cannot restart deferral until the
beginning of the succeeding calendar year.
B. DISTRIBUTION - ONLY TO BE COMPLETED BY FIRST YEAR PARTICIPANTS
I understand that all vested amounts held for my benefit under the Plan shall
begin to be distributed upon the occurrence of a "Distribution Event" (described
below), subject to earlier distribution upon a change of control or unforeseen
emergency as described in the Plan.
<PAGE> 26
Distribution of vested amounts held for my benefit under the Plan should
commence pursuant to the following choice (select one):
_____ Specific date or age (not to exceed 70), without regard to
termination of employment; OR
_____ Earlier of (i) __________ specific date or age (not to
exceed 70), or (ii) termination of employment; OR
_____ Termination of employment.
I understand that actual payout of assets starts within 105 days after the end
of the calendar year in which my specified Distribution Event occurs. I
understand further that I may not make further deferrals to the Plan while I am
receiving a distribution of benefits from the Plan.
I understand that the Distribution Event specified above may be changed only
ONCE during the course of my Plan participation and in addition, (i) may only be
changed at least one year prior to the originally specified Distribution Event,
and (ii) if I choose a later date or age, such age or date must be at least
three years later than the original date or age; provided, however, that no such
change shall be given effect if I voluntarily terminate my services to the
Company during the one-year period after such change.
C. METHOD OF PAYMENT (ONE METHOD MUST BE CHECKED IN ORDER FOR THIS TO BE A
VALID AGREEMENT)
I elect that the payment of all vested amounts due me under this Agreement and
the Plan shall be made in the following manner:
_____ One single lump sum payment.
_____ Annual installments equal to 1/n of the assets on deposit in the
trust credited to my account, where n is the number of
installments remaining to be paid. I hereby elect _____ annual
payments (not to exceed 10 years), upon my elected Distribution
Event.
_____ Annual installments equal to a specified % of the vested assets
credited to my account under the Trust. I hereby elect _____
annual payments (not to exceed 10 years). Please indicate the
installment % by year in the space provided below. NOTE:
Installment percentages must be in 5% increments and are subject
to a 5% minimum percentage:
<TABLE>
<CAPTION>
Year %
---- -----
<S> <C>
1 ______
2 ______
</TABLE>
<PAGE> 27
<TABLE>
<S> <C>
3 ______
4 ______
5 ______
6 ______
7 ______
8 ______
9 ______
10 ______
</TABLE>
I understand that my elected method of distribution can be changed up to 90 days
prior to the Distribution Event specified above; provided, however, that no such
change shall be given effect if I voluntarily terminate my services to the
Company during the 90-day period after such change.
I understand further that my elected method of distribution may be modified by
Altera Corporation at any time prior to my termination of employment, provided
that any such modification that impairs my rights under this Agreement and the
Plan shall be subject to my consent.
<PAGE> 28
D. SPECIAL ELECTION FOR DISTRIBUTION AT DEATH
By checking the box below, I can elect a lump sum payment of the remainder of my
interest under the Plan in the event I should die before all amounts payable to
me under the Plan have been paid, notwithstanding my elections under B and C
above.
[ ] I hereby elect a lump sum distribution at death.
[ ] Annual installments equal to 1/n of the assets on deposit in the trust
credited to my account, where n is the number of installments remaining
to be paid. I hereby elect _____ annual payments (not to exceed 10
years) at death. NOTE: If no box is checked, distribution at death will
occur in accordance with your elections under B and C above.
[ ] Annual installments equal to a specified % of the vested assets credited
to my account under the Trust. I hereby elect _____ annual payments (not
to exceed 10 years) at death. Please indicate the installment % by year
in the space provided below. NOTE: Installment percentages must be in 5%
increments and are subject to a 5% minimum percentage.
<TABLE>
<CAPTION>
Year %
---- ------
<S> <C>
1 ______
2 ______
3 ______
4 ______
5 ______
6 ______
7 ______
8 ______
9 ______
10 ______
</TABLE>
<PAGE> 29
E. DESIGNATED BENEFICIARY
I designate the following beneficiary to receive the remainder of my interest
under the Plan in the event that I should die before all amounts payable to me
under the Plan have been paid. I understand that I may change this Designated
Beneficiary at any time on written notice to Altera.
_____ Please follow the Beneficiary Election on file for the Altera
Corporation Employee Retirement and Savings Plan.
OR
_____ Name(s) and Relationship:_______________________________________________
________________________________________________________________________
________________________________________________________________________
The foregoing Election is voluntarily made by me after reviewing the terms of
the Plan and with knowledge that this Election is irrevocable until changed in
accordance with the terms of the Plan.
Agreed:
- ---------------------------------
(Signature)
ALTERA CORPORATION
- ---------------------------------
(Print Name)
By
---------------------------------
- ---------------------------------
(Social Security Number)
- --------------------------------- ------------------------------------
(Date) (Date)
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.45(B)
<SEQUENCE>3
<FILENAME>f70153ex10-45b.txt
<DESCRIPTION>EXHIBIT 10.45(B)
<TEXT>
<PAGE> 1
Exhibit 10.45(b)
1996 STOCK OPTION PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined herein, the terms defined in the Plan shall
have the same meanings in this Option.
I. 1. NOTICE OF STOCK OPTION GRANT
NAME: ________________________________
ADDRESS: _____________________________
You have been granted an option to purchase Common Stock of the Company,
subject the terms and conditions of the Plan and this Option Agreement, as
Grant Number ___________
Date of Grant ___________
Vesting Commencement ___________
Exercise Price per Share ___________
Total Number of Shares ___________
Total Exercise ___________
Type of Option Nonstatutory Stock Option
Expiration Date ___________
2. VESTING SCHEDULE. Shares in each period will become fully vested on
the date shown (see Vesting Rights Section I.3).
<TABLE>
<CAPTION>
Shares Vesting Type Start Vest Date Full Vest Date
------ ------------ --------------- --------------
<S> <C> <C> <C>
</TABLE>
Agreed to subject to all of the terms and conditions of this Option
Agreement and of the 1996 Stock Option Plan, and conditioned upon due and valid
execution of this Option Agreement by the Optionee.
OPTIONEE: ALTERA CORPORATION
By:
- ----------------------------- ---------------------------------
Title: Vice President
<PAGE> 2
3. Vesting Rights. This Option may be exercised, in whole or in
part, in accordance with the following schedule:
25% of the Shares subject to the Option shall vest twelve months
after the Vesting Commencement Date, and 1/48 of the Shares subject to the
Option shall vest each month thereafter.
4. Termination Period.
(a) General Rule. Except as provided below, this Option
may be exercised for thirty (30) days after termination of Optionee's employment
or consulting relationship with the Company. In the event of the Optionee's
change in status from Employee to Consultant or Consultant to Employee, this
Option Agreement shall remain in effect. In no event shall this Option be
exercised later than the Term/Expiration Date as provided above.
(b) Death; Disability. Upon the termination of the
Optionee's employment or consulting relationship 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 as provided above.
II.
1. Grant of Option. The Plan Administrator of the Company hereby grants
to the Optionee named in the Notice of Grant attached as Part I of this
Agreement (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").
2. 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 or
consulting relationship, the exercisability of the Option is governed by the
applicable provisions of the Plan and this Option Agreement.
(b) 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
2
<PAGE> 3
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.
3. 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
(e) other method authorized by the Company.
4. 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.
5. 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.
6. 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.
3
<PAGE> 4
(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. In the event that the Optionee
undergoes a change of status from Employee to Consultant, any Incentive Stock
Option of the Optionee that remains unexercised shall cease to qualify as an
Incentive Stock Option and will be treated for tax purposes as a Nonstatutory
Stock Option on the ninety-first (91st) day following such change of status.
(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 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.
4
<PAGE> 5
7. Entire Agreement; Governing Law. The Plan is incorporated herein by
reference. The Plan 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.
8. 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 OR CONSULTANT 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 OR CONSULTANT 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 OR
CONSULTING RELATIONSHIP AT ANY TIME, WITH OR WITHOUT CAUSE.
9. Entire Agreement. This agreement sets forth the entire agreement and
understanding between the Company and Optionee relating to the subject matter
herein and merges all prior discussions between them. No modification of or
amendment to this Agreement, nor any waiver of any rights under this Agreement,
will be effective unless in a signed writing.
By your signature and the signature of the Company's representative on
page one of this Option Agreement, you and the Company agree that this Option is
granted under and governed by the terms and conditions of the Plan and this
Option Agreement. Optionee has reviewed the Plan and this Option Agreement in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Option Agreement and fully understands all provisions of the Plan
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 and Option Agreement. Optionee further agrees to
notify the Company upon any change in the residence address indicated on the
Notice of Stock Option Grant.
5
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.57(B)
<SEQUENCE>4
<FILENAME>f70153ex10-57b.txt
<DESCRIPTION>EXHIBIT 10.57(B)
<TEXT>
<PAGE> 1
EXHIBIT 10.57(b)
ALTERA CORPORATION
SEVERANCE AGREEMENT
This Severance Agreement (the "Agreement") is made and entered into
effective as of November 30, 2000 (the "Effective Date") by and between John
Daane (hereinafter referred to as "Executive") and Altera Corporation (the
"Company").
WHEREAS, Executive desires to accept employment with the Company as its
Chief Executive Officer ("CEO");
WHEREAS, the Company desires to employ Executive as its CEO; and
WHEREAS, the Company and Executive agree that Executive shall be
eligible for severance under the circumstances set forth in Section 2 of this
Agreement;
Accordingly, the parties agree as follows:
1. Term of Agreement. This Agreement shall commence on the first day of
Executive's employment with the Company, and terminate on the date which is five
(5) years following such date, unless the term of this Agreement is extended at
the sole discretion of the Company's Board of Directors. Nothing in this
Agreement shall be construed as creating an obligation to extend the term of the
Agreement.
2. Executive's Eligibility for Severance.
Executive shall be entitled to the "Severance Package" as
defined in Section 3 of this Agreement if (but only if) the Company terminates
Executive's employment for reasons other than (A) Executive's death, (B) for
Cause, or (C) if Executive is eligible to receive the "Change In Control
Severance Package" due to a "Change in Control" as defined and provided for in
the Altera Corporation Change In Control Severance Agreement between the
parties, dated November 30, 2000. Executive is not entitled to the Severance
Package if Executive terminates his employment for any reason. In addition, as a
condition of Executive receiving the Severance Package, Executive and the
Company agree to sign a release agreement in the form attached hereto as Exhibit
"A" within thirty days of the effective date of Executive's termination and
prior to Executive receiving the Severance Package.
3. Severance Package. In the event Executive is entitled to the
Severance Package pursuant to Section 2, above, it shall be payable within
thirty days of Executive's termination. The Severance Package shall consist of
(i) payment equivalent to two year's of Executive's then-current base salary,
and (ii) one year of accelerated stock vesting, which applies to all Executive's
restricted stock and option grants. The Severance Package shall be paid in lieu
of any other severance to Executive.
4. Certain Definitions. As used herein, the following terms shall have
the following respective meanings:
1
<PAGE> 2
(a) Disability. If, in the sole opinion of the Company,
Executive shall be prevented from properly performing his duties hereunder by
reason of any physical or mental incapacity for a period of more than ninety
(90) days in the aggregate in any twelve-month period, then, to the extent
permitted by law, Company may terminate Executive's employment. Nothing in this
Section shall affect Executive's rights under any disability plan in which he is
a participant. If Executive elects to receive disability benefits due to a
Disability, such election shall not prohibit Executive from receiving the
Severance Package pursuant to Section 3 above.
(b) Cause. The following shall constitute "Cause" for
termination:
(i) Executive's deliberate dishonesty with respect to
the Company or any subsidiary or affiliate thereof; or
(ii) Executive's conviction of a crime involving moral
turpitude; or
(iii) Criminal acts pertaining to the Company or any of
its affiliates or shareholders; material and fraudulent falsification;
embezzlement or unauthorized conversion of property; or willful disclosure of
trade secrets or other information likely to be used to the detriment of the
Company.
5. Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company expressly to assume
and agree to perform this Agreement to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain an assumption of this Agreement prior to the effectiveness of
any succession shall entitle Executive to severance from the Company in the same
amount and on the same terms as Executive would be entitled if Executive were
eligible pursuant to Section 2 herein for the Severance Package. As used in this
Agreement, "Company" shall mean the Company as defined above and any successor
to its business or assets as aforesaid which assumes and agrees to perform this
Agreement by operation of law, or otherwise.
(b) This Agreement shall inure to the benefit of and be
enforceable by Executive's personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If
Executive should die while any amount would still be payable to Executive
hereunder if he had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
Executive's devisee, legatee or other designee or if there is no such designee,
to Executive's estate.
6. Notice. All notices or other communications required or permitted
hereunder shall be made in writing and shall be deemed to have been duly given
if delivered (a) by hand or (b) by a nationally recognized overnight courier
service or (c) by United States
2
<PAGE> 3
first class registered or certified mail, return receipt requested, to the
principal address of the other party, as set forth below. The date of notice
shall be deemed to be the earlier of actual receipt of notice by any permitted
means, or five business days following dispatch by overnight delivery service or
the United States Mail. Executive shall be obligated to notify the Company in
writing of any change in his address. Notice of change of address shall be
effective only when done in accordance with this section.
Company's Notice Address:
C. Wendell Bergere, Esq.
Vice President, General Counsel and Secretary
Altera Corporation
101 Innovation Drive
San Jose, California 95134
Executive's Notice Address:
John Daane
156 Highland Avenue
Los Gatos, California 95030
7. At-Will Employment Status. Nothing in this Agreement creates any
contractual rights in favor of Executive with respect to the terms of his
employment. Additionally, as set forth in detail in the Company's Employee
Handbook, Executive's employment with the Company is "at-will." This means that
Executive is free to resign at any time and the Company is free to terminate
Executive's employment at any time for any reason, with or without advanced
notice. Executive's "at-will" status cannot be altered except in a writing which
has been approved by the Board of Directors of the Company.
8. Miscellaneous
(a) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
(b) The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of the State of California.
(c) No waiver by Executive at any time of any breach of, or
compliance with, any provision of this Agreement to be performed by the Company
shall be deemed a waiver of that or any other provisions at any subsequent time.
(d) This Agreement may be amended only by a written agreement
executed by each of the parties hereto. No amendment of or waiver of, or
modification of any obligation under this Agreement will be enforceable unless
set forth in a writing signed by the party against which enforcement is sought.
Any amendment effected in
3
<PAGE> 4
accordance with this Section will be binding upon all parties hereto and each of
their respective successors and assigns.
(e) This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
(f) Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law.
(g) The Company shall do, make, execute and deliver all such
additional and further acts, things, assurances and instruments as Executive may
reasonably request in order to assure Executive his rights hereunder and to
carry into effect the provisions and intent of this Agreement. The Company shall
upon Executive's request, convert any options which are incentive stock options
into nonqualified options and shall amend any outstanding option agreements in a
manner consistent with this Agreement.
9. Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and during
the term of the Agreement supercedes the provisions of all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative
of any party hereto with respect to the subject matter hereof.
10. Acknowledgement. Executive acknowledges that he has had the
opportunity to consult legal counsel concerning this Agreement, that Executive
has read and understands the Agreement, that Executive is fully aware of its
legal effect, and that Executive has entered into it freely based on his own
judgment and not on any representations or promises other than those contained
in this Agreement.
ALTERA CORPORATION, EXECUTIVE
a Delaware corporation
Date: 11/29/00 Date: 11/30/00
----------------------------- -------------------------------
By: /s/ RODNEY SMITH /s/ JOHN DAANE
----------------------------- -------------------------------
Name: Rodney Smith Name of Executive
----------------------------
Title: CEO
---------------------------
4
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-10.57(C)
<SEQUENCE>5
<FILENAME>f70153ex10-57c.txt
<DESCRIPTION>EXHIBIT 10.57(C)
<TEXT>
<PAGE> 1
EXHIBIT 10.57(c)
ALTERA CORPORATION
CHANGE IN CONTROL SEVERANCE AGREEMENT
This Change in Control Severance Agreement (the "Agreement") is made and
entered into effective as of November 30, 2000 (the "Effective Date") by and
between John Daane (hereinafter referred to as "you," "your" or "Executive") and
Altera Corporation (the "Company").
WHEREAS, the Company considers it essential to the best interests of its
stockholders to foster the continuous employment of key management personnel,
and in this connection, the Board of Directors of the Company (the "Board")
recognizes that, as is the case with many publicly held corporations, the
possibility of a change in control of the Company may exist and that such
possibility, and the uncertainty and questions that it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders;
WHEREAS, the Board has determined that appropriate steps should be taken
to reinforce and encourage the continued attention and dedication of members of
the Company's senior management, including yourself, to their assigned duties
without distraction in the face of the possibility of a change in control of the
Company; and
WHEREAS, in order to induce you to accept the position as Chief
Executive Officer ("CEO") of the Company, the Company agrees that you shall
receive the severance benefits set forth in Section 3 of this Agreement in the
event your employment with the Company is terminated under the circumstances
described in Section 2(b), below, subsequent to a "Change in Control" of the
Company;
Accordingly, the parties agree as follows:
1. Term of Agreement. This Agreement shall commence on the first day of
your employment with the Company, and shall terminate on the date which is five
(5) years following such date, unless within such term a Change in Control has
occurred, in which case this Agreement shall terminate upon the date that all
obligations of the parties hereto under this Agreement have been satisfied.
2. Change in Employment Status.
(a) Any termination of your employment following a Change in
Control by the Company or by you shall be communicated by written notice of
termination to the other party hereto in accordance with Section 7, which notice
shall specify the effective date of such termination and specify the provisions
of this Agreement, if any, upon which such termination is based.
(b) You shall be entitled to the benefits provided in Section 3
if (but only if) within 24 months following a Change in Control one or more of
the following events (the "Trigger Events") occur: (i) your employment is
terminated with an effective date within such 24 month period by the Company for
reasons other than (A) your death; (B) for Cause, (ii) you are reassigned by the
Company to a position other than CEO and you terminate your employment with an
effective date within 90 days of such reassignment; or (iii) the Company moves
its
1
<PAGE> 2
headquarters more than 60 miles from the location of its present headquarters
and you terminate your employment with an effective date within 90 days of such
move.
3. Severance Upon the Occurrence of a Trigger Event. In the event of the
occurrence of a Trigger Event, you shall receive from the Company within thirty
(30) days of the date of termination the "Change in Control Severance Package,"
as herein defined. The Change in Control Severance Package shall consist of (i)
payment equivalent to twenty-four months of your then-current base salary, (ii)
a bonus equivalent to two times your target bonus, if any, for the fiscal year
in which the Change in Control occurs, and (iii) accelerated vesting of all
options and restricted shares which have been granted or issued at least six
months prior to the Change in Control. The Change in Control Severance Package
(or Limited Payment Amount, as defined in Section 4) provided for herein shall
be paid in lieu of any other severance to you.
4. Limits on Amounts Payable.
(a) Notwithstanding anything contained in this Agreement to the
contrary, to the extent that any payment or benefit (within the meaning of
Section 280G(b)(2) of the Code to you or for your benefit, paid or payable or
distributed or distributable pursuant to Section 3 of this Agreement ("Payment"
or "Payments"), would be subject to the excise tax imposed under Code Section
4999, or any interest or penalties are incurred by you with respect to such
excise tax (such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), the Payments shall be
reduced (but not below zero) if and to the extent that a reduction in the
Payments would result in you retaining a larger amount, on an after-tax basis
(taking into account federal, state and local income taxes and the Excise Tax),
than if you received all of the Payments (any such reduced amount is hereinafter
referred to as the "Limited Payment Amount"). Unless you shall have given prior
written notice specifying a different order to the Company to effectuate the
Limited Payment Amount, the Company shall reduce or eliminate the Payments by
(i) first reducing or eliminating those Payments which are not payable in cash,
and then (ii) by reducing or eliminating cash Payments. Any notice given by you
pursuant to the preceding sentence shall take precedence over the provisions of
any other plan, arrangement or agreement governing your rights and entitlements
to any benefits set forth in Section 3.
(b) An initial determination as to whether the Payments shall be
reduced to the Limited Payment Amount and the amount of such Limited Payment
Amount shall be made, at the Company's expense, by the accounting firm that is
the Company's independent accounting firm as of the date of the Change in
Control (the "Accounting Firm"). The Accounting Firm shall provide its
determination (the "Determination"), together with detailed supporting
calculations and documentation, to the Company and you within five (5) days of
your termination date, if applicable, or such other time as requested by the
Company or by you (provided you reasonably believe that any of the Payments may
be subject to the Excise Tax). If the Accounting Firm determines that no Excise
Tax is payable by you with respect to a Payment or Payments, it shall furnish
you with an opinion reasonably acceptable to you that no Excise Tax will be
imposed with respect to any such Payment or Payments. Within ten (10) days of
the delivery of the Determination to you, you shall have the right to dispute
the Determination (the "Dispute"). If there is no Dispute, the Determination
shall be binding, final and conclusive upon the Company and you.
5. Certain Definitions. As used herein, the following terms shall have
the following respective meanings:
2
<PAGE> 3
(a) Change in Control. A "Change in Control" shall occur or be
deemed to have occurred only if any of the following events occur:
(i) any "person" as such term is defined in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (other than (A) the Company, (B) any "group" including you, (C)
any employee benefit plan of the Company, or (D) any corporation owned directly
or indirectly by the stockholders of the Company in substantially the same
proportion as their ownership of stock of the Company) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing in the aggregate more
than 50% of either (A) the total combined voting power of the Company's then
outstanding stock or (B) the total fair market value of the Company's then
outstanding stock.
(ii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than (A) a merger
or consolidation which would result in the stock of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into stock of the surviving entity) 50% or
more of the total combined voting power and the total combined fair market value
of the stock of the Company or such surviving entity outstanding immediately
after such merger or consolidation; or
(iii) the stockholders of the Company approve a plan of
complete liquidation of the Company or an agreement for the sale, lease,
exchange or disposition by the Company of all or substantially all of the
Company's assets.
(b) Disability. If, in the sole opinion of the Company,
Executive shall be prevented from properly performing his duties hereunder by
reason of any physical or mental incapacity for a period of more than ninety
(90) days in the aggregate in any twelve-month period, then, to the extent
permitted by law, Company may terminate Executive's employment. Nothing in this
Section shall affect Executive's rights under any disability plan in which he is
a participant. If the Company terminates Executive's employment pursuant to this
provision within 24 months following a Change in Control, Executive shall
receive the Change in Control Severance Package provided in this Agreement. If
Executive elects to receive disability benefits due to a Disability, such
election shall not prohibit Executive from receiving severance benefits.
(c) Cause. The following shall constitute "Cause" for
termination:
(i) Your deliberate dishonesty with respect to the
Company or any subsidiary or affiliate thereof; or
(ii) Your conviction of a crime involving moral
turpitude; or
(iii) Criminal acts pertaining to the Company or any of
its affiliates or shareholders; material and fraudulent falsification;
embezzlement or unauthorized conversion of property; violation of conflict of
interest or vendor relations policies; or willful disclosure of trade secrets or
other information likely to be used to the detriment of the Company.
6.
3
<PAGE> 4
Successors; Binding Agreement.
(a) The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company expressly to assume
and agree to perform this Agreement to the same extent that the Company would be
required to perform it if no such succession had taken place. Failure of the
Company to obtain an assumption of this Agreement prior to the effectiveness of
any succession shall be a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the same terms as you
would be entitled hereunder if you had been terminated without Cause. As used in
this Agreement, "Company" shall mean the Company as defined above and any
successor to its business or assets as aforesaid which assumes and agrees to
perform this Agreement by operation of law, or otherwise.
(b) This Agreement shall inure to the benefit of and be
enforceable by your personal or legal representatives, executors,
administrators, successors, heirs, distributees, devisees and legatees. If you
should die while any amount would still be payable to you hereunder if you had
continued to live, all such amounts, unless otherwise provided herein, shall be
paid in accordance with the terms of this Agreement to your devisee, legatee or
other designee or if there is no such designee, to your estate.
7. Notice. All notices or other communications required or permitted
hereunder shall be made in writing and shall be deemed to have been duly given
if delivered (a) by hand or (b) by a nationally recognized overnight courier
service or (c) by United States first class registered or certified mail, return
receipt requested, to the principal address of the other party, as set forth
below. The date of notice shall be deemed to be the earlier of actual receipt of
notice by any permitted means, or five business days following dispatch by
overnight delivery service or the United States Mail. You shall be obligated to
notify the Company in writing of any change in your address. Notice of change of
address shall be effective only when done in accordance with this section.
Company's Notice Address:
C. Wendell Bergere, Esq.
Vice President, General Counsel and Secretary
Altera Corporation
101 Innovation Drive
San Jose, California 95134
Executive's Notice Address:
John Daane
156 Highland Avenue
Los Gatos, California 95030
8. At-Will Employment Status. Nothing in this Agreement creates any
contractual rights in favor of you with respect to the terms of your employment.
Additionally, as set forth in detail in the Company's Employee Handbook, your
employment with the Company is "at-will." This means that you are free to resign
at any time and the Company is free to terminate your employment at any time for
any reason. Your "at-will" status cannot be altered except in a writing which
has been approved by the Board of Directors of the Company.
4
<PAGE> 5
9. Miscellaneous
(a) The invalidity or unenforceability of any provision of this
Agreement shall not affect the validity or enforceability of any other provision
of this Agreement, which shall remain in full force and effect.
(b) The validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of the State of California.
(c) No waiver by you at any time of any breach of, or compliance
with, any provision of this Agreement to be performed by the Company shall be
deemed a waiver of that or any other provisions at any subsequent time.
(d) This Agreement may be amended only by a written agreement
executed by each of the parties hereto. No amendment of or waiver of, or
modification of any obligation under this Agreement will be enforceable unless
set forth in a writing signed by the party against which enforcement is sought.
Any amendment effected in accordance with this Section will be binding upon all
parties hereto and each of their respective successors and assigns.
(e) This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
(f) Any payments provided for hereunder shall be paid net of any
applicable withholding required under federal, state or local law.
(g) The Company shall do, make, execute and deliver all such
additional and further acts, things, assurances and instruments as you may
reasonably request in order to assure you your rights hereunder and to carry
into effect the provisions and intent of this Agreement. The Company shall upon
your request, convert any options which are incentive stock options into
nonqualified options and shall amend any outstanding option agreements in a
manner consistent with this Agreement.
10. Entire Agreement. This Agreement sets forth the entire agreement of
the parties hereto in respect of the subject matter contained herein and during
the term of the Agreement supercedes the provisions of all prior agreements,
promises, covenants, arrangements, communications, representations or
warranties, whether oral or written, by any officer, employee or representative
of any party hereto with respect to the subject matter hereof.
5
<PAGE> 6
11. Acknowledgement. Executive acknowledges that he has had the
opportunity to consult legal counsel concerning this Agreement, that Executive
has read and understands the Agreement, that Executive is fully aware of its
legal effect, and that Executive has entered into it freely based on his own
judgment and not on any representations or promises other than those contained
in this Agreement.
ALTERA CORPORATION, EXECUTIVE
a Delaware corporation
Date: 11/29/00 Date: 11/30/00
----------------------------- -------------------------------
By: /s/ RODNEY SMITH /s/ JOHN DAANE
----------------------------- -------------------------------
Name: Rodney Smith Name of Executive
----------------------------
Title: CEO
---------------------------
6
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-13.1
<SEQUENCE>6
<FILENAME>f70153ex13-1.txt
<DESCRIPTION>EXHIBIT 13.1
<TEXT>
<PAGE> 1
EXHIBIT 13.1
CORPORATE PROFILE
Altera Corporation, The Programmable Solutions Company(R), is a world leader in
one of the fastest growing segments of the semiconductor industry: high-density
programmable logic devices (PLDs). Altera PLDs are standard integrated circuits
that offer significant advantages over custom logic chips such as
application-specific integrated circuits (ASICs). Today's high-density PLDs,
used in concert with Altera's desktop software design tools and optimized
intellectual property building blocks, allow electronic systems manufacturers to
execute on a single chip the same functionality that previously consumed an
entire printed circuit board. This methodology, called "system on a programmable
chip" (SOPC), helps electronic systems manufacturers shorten time-to-market and
reduce development costs.
Altera serves over 13,000 customers in three primary market segments:
communications, electronic data processing, 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(R) under the symbol ALTR. Altera's web site is located at
http://www.altera.com.
<PAGE> 2
SELECTED CONSOLIDATED FINANCIAL DATA
<TABLE>
<CAPTION>
FIVE-YEAR SUMMARY
Years ended December 31,
(In thousands, except per share amounts) 2000 1999 1998 1997 1996
- ----------------------------------------- ---------- ---------- ---------- -------- --------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Sales $1,376,815 $ 836,623 $ 654,342 $631,114 $497,306
Cost of sales 466,994 301,322 249,474 236,958 191,958
---------- ---------- ---------- -------- --------
Gross margin 909,821 535,301 404,868 394,156 305,348
Research and development expenses 172,373 86,065 59,864 54,417 49,513
Selling, general, and administrative
expenses 209,979 143,214 113,161 112,784 87,742
Acquired in-process research and
development expense 6,305 -- -- -- --
---------- ---------- ---------- -------- --------
Income from operations 521,164 306,022 231,843 226,955 168,093
Gain on sale of WaferTech, LLC 178,105 -- -- -- --
Interest and other income (expense), net 46,145 37,055 12,340 2,616 1,044
---------- ---------- ---------- -------- --------
Income before income taxes, equity
investment and cumulative effect
of change in accounting principle 745,414 343,077 244,183 229,571 169,137
---------- ---------- ---------- -------- --------
Income before equity investment and
cumulative effect of change in
accounting principle 498,307 231,578 164,827 151,517 109,135
Equity in loss of WaferTech, LLC 1,400 7,584 10,440 -- --
---------- ---------- ---------- -------- --------
Income before cumulative effect of
change in accounting principle 496,907 223,994 154,387 151,517 109,135
Cumulative effect of change in
accounting principle -- -- -- 18,064 --
---------- ---------- ---------- -------- --------
Net income $ 496,907 $ 223,994 $ 154,387 $133,453 $109,135
---------- ---------- ---------- -------- --------
Income per share before cumulative
effect of change in accounting
principle:
Basic $ 1.25 $ 0.57 $ 0.41 $ 0.43 $ 0.31
Diluted 1.19 0.54 0.39 0.39 0.29
Net income per share:
Basic $ 1.25 $ 0.57 $ 0.41 $ 0.38 $ 0.31
Diluted 1.19 0.54 0.39 0.34 0.29
Shares used in computing income per
share:
Basic 396,849 396,158 373,972 354,100 349,624
Diluted 416,629 414,928 406,356 410,464 403,252
BALANCE SHEET DATA:
Working capital $1,013,155 $ 785,359 $ 587,923 $430,371 $295,020
Total assets 2,004,134 1,439,599 1,093,331 952,518 778,212
Long-term debt -- -- -- 230,000 230,000
Stockholders' equity 1,247,930 1,118,073 881,721 536,687 370,245
Book value per share 3.21 2.81 2.26 1.50 1.06
</TABLE>
<PAGE> 3
About Your Investment
STOCK OWNERSHIP PROFILE
The Company estimates that at December 31, 2000, there were more than 100,000
holders of Altera stock.
STOCK PRICE
Altera's initial public offering took place on March 31, 1988. The Company's
price-to-earnings ratio at each year-end for the last five years was as follows:
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
29.6 21.4 39.0 45.9 27.7
</TABLE>
Computed using earnings that exclude the cumulative effect of change in
accounting principle in 1997, and the one-time effects relating to the WaferTech
transaction in 2000.
TRADING VOLUME
The average trading volume in the company's stock increased 6.8% in 2000 over
1999, as measured by Nasdaq(R). Trading volume in 2000 averaged 9.4 million
shares per day, compared to 8.8 million shares per day in 1999 and 10.2 million
shares in 1998, retroactively adjusted for 2-for-1 splits of the Company's
common stock in the fourth quarter of 1996, the second quarter of 1999, and the
third quarter of 2000.
ESTIMATED STOCK OWNERSHIP PERCENTAGE
<TABLE>
<S> <C>
Institutional Investors 80%
Individuals 15%
Officers, Directors & Employees 5%
</TABLE>
<PAGE> 4
CORPORATE DIRECTORY
BOARD OF DIRECTORS
Rodney Smith
Chairman of the Board
Altera Corporation
John Daane
President and Chief Executive Officer
Altera Corporation
Charles M. Clough
Former Chairman, President,
and Chief Executive Officer
Wyle Electronics
Michael A. Ellison
Former Chief Executive Officer
Steller, Inc.
Paul Newhagen
Former Vice President, Administration
Altera Corporation
Robert W. Reed
Former Senior Vice President
Intel Corporation
William E. Terry
Former Director and
Executive Vice President
Hewlett-Packard Company
Deborah Rieman, Ph.D.
Former President and
Chief Executive Officer
CheckPoint Software Technologies, Inc.
CORPORATE OFFICERS
John Daane
President and Chief Executive Officer
C. Wendell Bergere
Vice President, General Counsel,
and Secretary
Denis Berlan
Executive Vice President and
Chief Operating Officer
Erik R. Cleage
Senior Vice President, Marketing
John R. Fitzhenry
Vice President, Human Resources
Jordan Plofsky
Senior Vice President,
Embedded Processor Products
Lance M. Lissner
Senior Vice President,
Business Development
Nathan Sarkisian
Senior Vice President and
Chief Financial Officer
Michael Jacobs
Senior Vice President,
Worldwide Sales
APPOINTED OFFICERS
Bahram Ahanin
Vice President, Design Automation
Alain Bismuth
Vice President,
New Market Development
Robert Blake
Vice President, Product Planning
Melonie C. Brophy
Vice President, Finance and Treasurer
Misha R. Burich
Senior Vice President,
Software Development
James W. Callas
Vice President, Finance and
Corporate Controller
Timothy W. Colleran
Vice President, Product Marketing
Donald F. Faria
Vice President, Customer Marketing
and Applications
Francois Gregoire
Vice President, Technology
Frank L. Hannig
Vice President and
Chief Information Officer
William Y. Hata
Vice President, Product Engineering
Ben A. Lee
Vice President, Asia Pacific
Craig Lytle
Vice President,
Intellectual Property Business Unit
Robert C. Mahoney
Vice President, Strategic Accounts
Bruce Mielke
Vice President, Test Development
Thomas B. Murchie
Vice President, Operations
Chris T. K. Oh
Vice President, Asia Pacific Operations
Timothy J. Propeck
Vice President, North America Sales
Timothy J. Southgate
Vice President, Software Engineering
Clifton S. Tong
Vice President, Corporate Marketing
Nigel Toon
Vice President and
Managing Director, Europe
John E. Turner
Senior Vice President,
Design Engineering
Scott Wylie
Vice President, Investor Relations
CORPORATE HEADQUARTERS
101 Innovation Drive
San Jose, California 95134
(408) 544-7000
INDEPENDENT ACCOUNTANTS
PricewaterhouseCoopers LLP
San Jose, California
STOCK LISTING
For the past two years, the quarterly high and low closing sales prices for the
common stock, retroactively adjusted for 2-for-1 splits in 1999 and 2000, were:
<TABLE>
<CAPTION>
2000 1999
-------------------- -------------------
Quarter High Low High Low
- ------- -------- -------- ------- -------
<S> <C> <C> <C> <C>
First 48 1/2 24 17 1/4 12 5/32
Second 57 5/16 36 9/32 20 5/32 16 1/32
Third 64 13/16 43 31/32 27 5/8 17 9/16
Fourth 51 1/16 23 15/16 33 7/8 20 7/8
</TABLE>
REGISTRAR/TRANSFER AGENT
Fleet National Bank
c/o EquiServe
P.O. Box 43010
Providence, Rhode Island 02940
(781) 575-3120
http://www.EquiServe.com
WEB SITE
For current information on Altera Corporation, visit our web site at
http://www.altera.com.
ADDITIONAL INFORMATION
Please direct all requests to:
Investor Relations
101 Innovation Drive
San Jose, California 95134
(408) 544-7707
Business releases may be requested from our Fax-on-Demand service at
(800) 789-2587 in the United States and Canada, and at (408) 894-0466 from other
international locations.
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-21.1
<SEQUENCE>7
<FILENAME>f70153ex21-1.txt
<DESCRIPTION>EXHIBIT 21.1
<TEXT>
<PAGE> 1
EXHIBIT 21.1
SUBSIDIARIES OF THE REGISTRANT
The following list identifies only Registrant's significant subsidiaries as
defined in Rule 1-02(w) of Regulation S-X.
<TABLE>
<CAPTION>
JURISDICTION YEAR
NAME OF INCORPORATION ORGANIZED
------------------------------------------------------------------
<S> <C> <C>
Altera International, Inc. Cayman Islands 1997
Altera International Limited Hong Kong 1997
</TABLE>
47
</TEXT>
</DOCUMENT>
<DOCUMENT>
<TYPE>EX-23.1
<SEQUENCE>8
<FILENAME>f70153ex23-1.txt
<DESCRIPTION>EXHIBIT 23.1
<TEXT>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-22877, No. 33-37159, No. 33-57350, No. 33-61085,
No. 333-06859, No. 333-32555, No. 333-62917, No. 333-81787, No. 333-31304, No.
333-37216, No. 333-41688, No. 333-47722 and No. 333-54384) and Form S-3 (No.
333-44746) of Altera Corporation of our report dated January 17, 2001 relating
to the financial statements, which appears in this Form 10-K.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
San Jose, California
March 6, 2001
48
</TEXT>
</DOCUMENT>
</SEC-DOCUMENT>
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