Document:

USG_EX10.41 12.31.2012 10K

Exhibit 10.41

    
USG CORPORATION
PERFORMANCE SHARES AGREEMENT
WHEREAS, the “Grantee” is an employee of USG Corporation, a Delaware corporation (the “Company”) or a Subsidiary;
WHEREAS, the Board of Directors of the Company (the “Board”) has granted to the Grantee, as set forth in the Award Summary on the Morgan Stanley Wealth Management website on the “Date of Grant”, the number of Performance Shares (as defined in the Plan) pursuant to the Company's Long-Term Incentive Plan, as amended (the “Plan”), subject to the terms and conditions of the Plan and the terms and conditions hereinafter set forth; 

WHEREAS, Exhibit A to this Agreement contains defined terms that are used in this Agreement with initial capital letters, and other terms are defined in this Agreement for further use herein with initial capital letters; and

WHEREAS, the execution of a Performance Shares Agreement substantially in the form hereof to evidence such grant has been authorized by a resolution of the Board.

NOW, THEREFORE, the Company and the Grantee agree as follows:

		
	1.
	Grant of Performance Share Right.  Subject to the terms of the Plan, the Company hereby grants to the Grantee a targeted number of Performance Shares (the “Target Performance Shares”), payment of which depends on the Company's performance as set forth in this Agreement and in the Statement of Performance Goals (the “Statement of Performance Goals”) approved by the Board.

		
	2.
	Earning of Award.

(a)    Performance Measure.  The Grantee's right to receive all, any portion of, or more than, the Target Performance Shares will be contingent upon the achievement of specified levels of performance of the Company's total stockholder return (including reinvestment of dividends) relative to the performance of the Dow Jones U.S. Construction and Materials Index (“Total Stockholder Return”), as set forth in the Statement of Performance Goals and will be measured over the period from December 1, 2012 through December 31, 2015 (the “Performance Period”).

(b)    Below Threshold.  If, upon the conclusion of the Performance Period, Total Stockholder Return for the Performance Period falls below the threshold level, as set forth in the Performance Matrix contained in the Statement of Performance Goals, no Performance Shares for the Performance Period shall become earned.

(c)    Threshold.  If, upon the conclusion of the Performance Period, Total Stockholder Return for the Performance Period equals the threshold level, as set forth in the Performance Matrix contained in the Statement of Performance Goals, 35% of the Target Performance Shares for the Performance Period shall become earned.

(d)    Between Threshold and Target.  If, upon the conclusion of the Performance Period, Total Stockholder Return exceeds the threshold level, but is less than the target level, as set forth in the Performance Matrix contained in the Statement of Performance Goals, the Target Performance Shares shall become earned based on performance during the Performance Period, as determined by mathematical straight-line interpolation between 35% of the Target Performance Shares and 100% of the Target Performance Shares.

(e)    Target.  If, upon the conclusion of the Performance Period, Total Stockholder Return for the Performance Period equals the target level, as set forth in the Performance Matrix contained in the Statement of Performance Goals, 100% of the Target Performance Shares for the Performance Period shall become earned.

(f)    Between Target and Intermediate.  If, upon the conclusion of the Performance Period, Total Stockholder Return exceeds the target level, but is less than the intermediate level, as set forth in the Performance Matrix contained in the Statement of Performance Goals the Target Performance Shares shall become earned based on performance during the Performance Period, as determined by mathematical straight-line interpolation between 100% of the Target Performance Shares and 150% of the Target Performance Shares.

(g)    Intermediate.  If, upon the conclusion of the Performance Period, Total Stockholder Return for the Performance Period equals the intermediate level, as set forth in the Performance Matrix contained in the Statement of Performance Goals, 150% of the Target Performance Shares for the Performance Period shall become earned.

(h)    Between Intermediate and Maximum.  If, upon the conclusion of the Performance Period, Total Stockholder Return exceeds the intermediate level, but is less than the maximum level, as set forth in the Performance Matrix contained in the Statement of Performance Goals the Target Performance Shares shall become earned based on performance during the Performance Period, as determined by mathematical straight-line interpolation between 150% of the Target Performance Shares and 200% of the Target Performance Shares.

(i)    Equals or Exceeds Maximum.  If, upon the conclusion of the Performance Period, Total Stockholder Return for the Performance Period equals or exceeds the maximum level, as set forth in the Performance Matrix contained in the Statement of Performance Goals, 200% of the Target Performance Shares shall become earned.

(j)    Conditions; Determination of Earned Award.  Except as otherwise provided herein, the Grantee's right to receive any Performance Shares is contingent upon his or her remaining in the continuous employ of the Company or a Subsidiary through the end of the Performance Period.  Following the Performance Period, the Board shall determine whether and to what extent the goals relating to Total Stockholder Return have been satisfied for the Performance Period and shall determine the number of Performance Shares that shall have become earned hereunder.

		
	3.
	Effect of Change in Control.  Notwithstanding anything to the contrary in this Agreement, the following provisions shall apply in connection with a Change in Control.  Subject to the last sentence of this paragraph: (I) the treatment in connection with a Change in Control of any Performance Shares that are outstanding at the time of such Change in Control will depend upon whether the Awards made under this Agreement are Assumed (as defined in Exhibit A to this Agreement) by the entity effecting the Change in Control; (II) if the entity effecting the Change in 

Control Assumes the Awards made under this Agreement, Section 3(a) shall apply; and (III) if the entity effecting the Change in Control does not Assume the Awards made under this Agreement, then Section 3(b) shall apply.  Notwithstanding the preceding sentence, Section 4 shall apply and the following provisions of this Section shall not apply if the Change in Control occurs after termination of the Grantee's employment due to death, Disability or Retirement.

		
	(a)
	Awards Assumed by Successor:  If the awards made under this Agreement that are outstanding at the time of a Change in Control are Assumed by the entity effecting the Change in Control, the number of Performance Shares that may become payable to the Grantee shall be determined pursuant to Section 3(a)(i) below, and the circumstances in which the Grantee shall earn such number of Performance Shares are described in Section 3(a)(ii) below.  Exhibit A to this Agreement contains defined terms for the purposes of this Agreement.

		
	(i)
	Upon the occurrence of a Change in Control, the number of Performance Shares that may become payable to the Grantee (the “CIC Performance Shares”) shall be determined pursuant to Section 2 above, except that for the purposes of such calculation: 

		
	(A)
	the date on which the Change in Control occurs (the “CIC Date”) shall be substituted for December 31, 2015 in both Section 2 above and in the Statement of Performance Goals;

		
	(B)
	the Performance Period shall be the period from December 1, 2012 through the CIC Date;

		
	(C)
	the value ascribed to the Common Shares in the Change in Control shall be used as the ending Stock Price of the Common Shares for purposes of paragraph 3(c) of the Statement of Performance Goals; and

		
	(D)
	the average closing prices of the shares of the Peers shall be calculated using the 20 trading days ending on the trading day preceding the CIC Date for purposes of Section 3(c) of the Statement of Performance Goals.

		
	(ii)
	The CIC Performance Shares shall become earned by the Grantee if the Grantee remains employed through the end of the Performance Period.  Unless clause (A), (B) or (C) below applies, all of the CIC Performance Shares that are outstanding at the time of the Grantee's termination of employment prior to the end of the Performance Period shall be forfeited.  Notwithstanding the preceding sentence, any CIC Performance Shares that have not been earned by the Grantee pursuant to this Section 3(a)(ii) shall be earned on the first to occur of the following events between the CIC Date and the end of the Performance Period:

		
	(A)
	the involuntary termination of the Grantee's employment for reasons other than Cause (as defined in Exhibit A);

		
	(B)
	the Grantee's voluntary termination of employment for Good Reason (as defined in Exhibit A); or

		
	(C)
	the termination of the Grantee's employment due to the Grantee's death, Disability or Retirement (as such terms are defined in Exhibit A).

		
	(b)
	Awards Not Assumed by Successor.  Upon the occurrence of a Change in Control, any unearned Performance Shares outstanding at the time of the Change in Control that are not Assumed by the entity effecting the Change in Control shall immediately become earned in such amount as shall be determined in accordance with the terms outlined in Section 3(a)(i) above.  Any Target Performance Shares that are not Assumed and that are not earned on the CIC Date pursuant to this Section 3(b) shall be forfeited.

		
	4.
	Termination Due to Death, Disability, Retirement.  If the Grantee's employment with the Company or a Subsidiary terminates during the Performance Period but before the occurrence of a Change in Control due to the Grantee's death, Disability or Retirement, the Company shall pay to the Grantee or his or her executor or administrator, as the case may be, at the time described in Section 6 and based on the level of achievement of Total Stockholder Return during the Performance Period, a pro rata number of the Target Performance Shares based on the number of full months during the Performance Period during which the Grantee was employed by the Company, and the remaining performance shares will be forfeited.  Notwithstanding the foregoing, if a Change in Control occurs after the termination of the Grantee's employment due to death, Disability or Retirement but before the end of the Performance Period, the Grantee shall earn at the time of such Change in Control the pro rata number (determined as specified above) of such number of the Performance Shares as shall be determined in accordance with Section 3(a)(i), and any Performance Shares that are not earned on the CIC Date pursuant to this sentence shall be forfeited.

		
	5.
	Forfeiture.  In addition to the forfeiture of Performance Shares pursuant to other provisions of this Agreement, if either (i) the Grantee's employment with the Company or a Subsidiary terminates before the end of the Performance Period, and before the occurrence of a Change in Control, for any reason other than as set forth in Section 4 hereof or (ii) the Board (or a committee of the Board) finds that the Grantee has engaged in any fraud or intentional misconduct as described in Section 20 hereof, the Performance Shares will be forfeited.  Performance Shares shall be considered to have been forfeited upon the event that causes such forfeiture and shall not be considered to be outstanding thereafter.

		
	6.
	Form and Time of Payment of Performance Shares.  Payment of any Performance Shares that become earned as set forth herein will be made in the form of Common Shares.  Except as otherwise provided in Section 3, payment will be made as soon as practicable after the end of the Performance Period, or any earlier event that causes the Performance Shares to be earned, and the determination by the Board of the level of attainment of Total Stockholder Return, but, subject to Section 10 below, in no event shall such payment occur later than two and one-half months after the end of the Performance Period or such earlier event occurs.  Upon and after payment of any Performance Shares pursuant to this Section 6, such Performance Shares shall not be considered to be outstanding.  Notwithstanding the foregoing, if the event that causes the Performance Shares to be earned is a Change in Control that does not constitute a change of control for purposes of Section 409A of the Code, then to the extent necessary to comply with Section 409A of the Code, payment will be made on the next date or event under the Agreement that constitutes a permissible payment date or event under Code Section 409A.  To the extent that the Company or any Subsidiary is required to withhold any federal, state, local or foreign tax in connection with the payment of earned Performance Shares pursuant to this Agreement, it shall be a condition to the 

receipt of such Performance Shares that the Grantee make arrangements satisfactory to the Company or such Subsidiary for payment of such taxes required to be withheld, which may include by having the Company withhold Common Shares otherwise payable pursuant to this award.

		
	7.
	Payment of Dividends.  No dividends shall be accrued or earned with respect to the Performance Shares until such Performance Shares are earned by the Grantee as provided in this Agreement.

		
	8.
	Performance Shares Nontransferable.  Until payment is made to the Grantee as provided herein, neither the Performance Shares granted hereby nor any interest therein or in the Common Shares related thereto shall be transferable other than by will or the laws of descent and distribution prior to payment.

		
	9.
	Adjustments.  In the event of any change in the aggregate number of outstanding Common Shares by reason of (a) any stock dividend, extraordinary dividend, stock split, combination of shares, recapitalization or other change in the capital structure of the Company, or (b) any Change in Control, merger, consolidation, spin-off, split-off, spin-out, split-up, reorganization or partial or complete liquidation, or other distribution of assets, issuance of rights or warrants to purchase securities, or (c) any other corporate transaction or event having an effect similar to any of the foregoing, then the Board shall adjust the number of Performance Shares then held by the Grantee in such manner as to prevent dilution or enlargement of the rights of the Grantee that otherwise would result from such event.  Moreover, in the event of any such transaction or event, the Board (or a committee of the Board), in its discretion, may provide in substitution for any or all of the Grantee's rights under this Agreement such alternative consideration as it may determine to be equitable in the circumstances, subject to the provisions of Section 3 of this Agreement.

		
	10.
	Compliance with Section 409A of the Code.  To the extent applicable, it is intended that this Agreement and the Plan comply with the provisions of Section 409A of the Code, so that the income inclusion provisions of Section 409A(a)(1) of the Code do not apply to the Grantee.  This Agreement and the Plan shall be administered in a manner consistent with this intent.  Reference to Section 409A of the Code is to Section 409A of the Internal Revenue Code of 1986, as amended, and will also include any regulations or any other formal guidance promulgated with respect to such Section by the U.S. Department of the Treasury or the Internal Revenue Service.  If the event triggering the right to payment under this Agreement is the Grantee's Retirement or other separation from service with the Company and its Subsidiaries within the meaning of Section 409A(a)(2)(A)(i) of the Code and the Grantee is a “specified employee” as determined pursuant to procedures adopted by the Company in compliance with Section 409A of the Code, the date of payment under Section 6 above shall be the first day of the seventh month after the date of the Grantee's separation from service or, if earlier, the date of the Grantee's death.

		
	11.
	No Right to Future Grants; No Right of Employment; Extraordinary Item: In accepting the grant, Grantee acknowledges that:  (a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, suspended or terminated by the Company at any time, as provided in the Plan and this Award Agreement; (b) the grant of the Performance Shares is voluntary and occasional and does not create any contractual or other right to receive future grants of Performance Shares  or benefits in lieu of Performance Shares, even if Performance Shares have been granted repeatedly in the past; (c) all decisions with respect to future grants, if any, will be at the sole discretion of the Company; (d) the Grantee's participation in the Plan is voluntary; (e) the Performance Shares are an extraordinary item that does not constitute compensation of any kind 

for services of any kind rendered to the Company, its Affiliates and/or Subsidiaries, and which is outside the scope of Grantee's employment contract, if any; (f) the Performance Shares are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, end of service payments, bonuses, long-service awards, pension or retirement benefits or similar payments; (g) in the event that Grantee is an employee of an Affiliate or Subsidiary of the Company, the grant will not be interpreted to form an employment contract or relationship with the Company; and furthermore, the grant will not be interpreted to form an employment contract with the Affiliate or Subsidiary that is Grantee's employer; (h) the future value of the underlying Shares is unknown and cannot be predicted with certainty; (i) no claim or entitlement to compensation or damages arises from forfeiture or termination of the Performance Shares or diminution in value of the Performance Shares or the Shares and Grantee irrevocably releases the Company, its Affiliates and/or its Subsidiaries from any such claim that may arise; and (j) notwithstanding any terms or conditions of the Plan to the contrary, in the event of involuntary termination of Grantee's employment, Grantee's right to receive Performance Shares and vest in Performance Shares under the Plan, if any, will terminate effective as of the date that Grantee is no longer actively employed and will not be extended by any notice period mandated under local law (e.g., active employment would not include a period of “garden leave” or similar period pursuant to local law); furthermore, in the event of involuntary termination of employment, Grantee's right to vest in the Performance Shares after termination of employment, if any, will be measured by the date of termination of Grantee's active employment and will not be extended by any notice period mandated under local law.

		
	12.
	Continuous Employment.  For purposes of this Agreement, the continuous employment of the Grantee with the Company or a Subsidiary shall not be deemed to have been interrupted, and the Grantee shall not be deemed to have ceased to be an employee of the Company or Subsidiary, by reason of (a) the transfer of the Grantee's employment among the Company and its Subsidiaries or (b) an approved leave of absence.

		
	13.
	Employee Data Privacy: Grantee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Grantee's personal data as described in this document by and among, as applicable, the Company, its Affiliates and its Subsidiaries (“the Company Group”) for the exclusive purpose of implementing, administering and managing the Grantee's participation in the Plan. Grantee's understands that the Company Group holds certain personal information about Grantee, including, but not limited to, Grantee's name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any Shares of stock or directorships held in the Company, details of all Performance Shares or any other entitlement to Shares of stock awarded, canceled, exercised, vested, unvested or outstanding in Grantee's favor, for the purpose of implementing, administering and managing the Plan (“Data”). Grantee understands that Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in the Grantee's country or elsewhere, and that the recipient's country may have different data privacy laws and protections than the Grantee's country. The Grantee understands that the Grantee may request a list with the names and addresses of any potential recipients of the Data by contacting Grantee's local human resources representative. Grantee authorizes the recipients to receive, possess, use, retain and transfer the Data, in electronic or other form, for the purposes of implementing, administering and managing Grantee's participation in the Plan, including any requisite transfer of such Data as may be required to a broker or other third party with whom Grantee may elect to deposit any Shares acquired. Grantee understands that Data will be held only as long as is necessary to implement, administer and manage Grantee's 

participation in the Plan. Grantee understands that Grantee may, at any time, view Data, request additional information about the storage and processing of Data, require any necessary amendments to Data or refuse or withdraw the consents herein, in any case without cost, by contacting in writing Grantee's local human resources representative. Grantee understands, however, that refusing or withdrawing Grantee's consent may affect Grantee's ability to participate in the Plan. For more information on the consequences of Grantee's refusal to consent or withdrawal of consent, Grantee understand that Grantee may contact Grantee's local human resources representative.

		
	14.
	Relation to Plan.  This Agreement is subject to the terms and conditions of the Plan.  In the event of any inconsistency between the provisions of this Agreement and the Plan, the Plan shall govern.  All terms used herein with initial capital letters and not otherwise defined herein that are defined in the Plan shall have the meanings assigned to them in the Plan.  The Board acting pursuant to the Plan, as constituted from time to time, shall, except as expressly provided otherwise herein, have the right to determine any questions which arise in connection with the grant of the Performance Shares. 

		
	15.
	Amendments.  Any amendment to the Plan shall be deemed to be an amendment to this Agreement to the extent that the amendment is applicable hereto; provided, however, that no amendment shall adversely affect the rights of the Grantee under this Agreement without the Grantee's consent.  Notwithstanding the foregoing, the limitation requiring the consent of a Grantee to certain amendments shall not apply to any amendment that is deemed necessary by the Company to ensure compliance with Section 409A of the Code.

		
	16.
	Severability.  Subject to Section 20, if any provision of this Agreement or the application of any provision hereof to any person or circumstances is held invalid, unenforceable or otherwise illegal, the remainder of this Agreement and the application of such provision to any other person or circumstances shall not be affected, and the provisions so held to be invalid, unenforceable or otherwise illegal shall be reformed to the extent (and only to the extent) necessary to make it enforceable, valid and legal.

		
	17.
	Successors and Assigns.  Without limiting Section 8 hereof, the provisions of this Agreement shall inure to the benefit of, and be binding upon, the successors, administrators, heirs, legal representatives and assigns of the Grantee, and the successors and assigns of the Company.

		
	18.
	Governing Law.  This Agreement shall be governed by and construed in accordance with the internal substantive laws of the State of Delaware, without giving effect to any principle of law that would result in the application of the law of any other jurisdiction.

		
	19.
	The Grantee acknowledges that by clicking on the “Accept” button on the Morgan Stanley Wealth Management web page titled “Step 3: Confirm the Review/Acceptance of your Award,” the Grantee agrees to be bound by the electronic execution of this Award Agreement.  

		
	20.
	In accordance with Section 20(d) of the Plan, if the Board (or a committee of the Board) has determined that any fraud or intentional misconduct by the Grantee was a significant contributing factor to the Company having to restate all or a portion of its financial statement(s), to the extent permitted by applicable law the Grantee shall: (a) return to the Company all Performance Shares and/or Common Shares that the Grantee has not disposed of that were paid out pursuant to this Agreement; and (b) with respect to any Performance Shares and/or Common Shares that the 

Grantee has disposed of that were paid out pursuant to this Agreement, pay to the Company in cash the value of such Performance Shares on the date such Performance Shares were paid out.  The remedy specified herein shall not be exclusive, and shall be in addition to every other right or remedy at law or in equity that may be available to the Company.  Notwithstanding any other provision of this Agreement or the Plan to the contrary, if this Section 20 is held invalid, unenforceable or otherwise illegal, the remainder of this Agreement shall be deemed to be unenforceable due to a failure of consideration, and the Grantee's rights to the Performance Shares and/or Common Shares that would otherwise be granted or paid under this Agreement shall be forfeited.

Executed in the name and on behalf of the Company at Chicago, Illinois as of the 13th day of February, 2013.

USG CORPORATION

_____________________________    
Name:  Brian J. Cook
Title:  Senior Vice President, 
Human Resources

The undersigned Grantee hereby accepts the award of Performance Shares evidenced by this Performance Shares Agreement on the terms and conditions set forth herein and in the Plan.

_____________________________        
Name:
                            

PLEASE PRINT AND KEEP A COPY FOR YOUR RECORDS.

EXHIBIT A TO
 USG CORPORATION
PERFORMANCE SHARES AGREEMENT

This Exhibit A is attached to and forms a part of the USG Corporation Performance Shares Agreement, dated as of February 13, 2013.

Solely for the purposes of this Agreement, the following terms shall be defined as follows:

		
	(A)
	An award of Performance Shares shall be considered “Assumed” in connection with a Change in Control if each of the following conditions is met:

		
	(1)
	The award of Performance Shares is converted into a replacement award that preserves the value of such award at the time of the Change in Control;

		
	(2)
	the replacement award contains provisions for scheduled vesting and treatment on termination of employment (including the definitions of Cause and Good Reason) that are no less favorable to the Grantee than as set forth in this Exhibit A, and all other terms of the replacement award (other than the security and number of shares represented by the replacement awards) are substantially similar to, or more favorable to the Grantee than, those set forth in this Agreement; and

		
	(3)
	the security represented by the replacement award, if any, is of a class that is publicly held and widely traded on an established stock exchange.

		
	(B)
	“Base Pay” means Grantee's annual base salary rate as in effect from time to time.

		
	(C)
	“Cause” shall mean that the Grantee shall have:

		
	(1)
	been convicted of a criminal violation involving fraud, embezzlement or theft in connection with the Grantee's duties or in the course of the Grantee's employment with the Company or any Subsidiary;

		
	(2)
	committed intentional wrongful damage to tangible or intangible property of the Company or any Subsidiary; or

		
	(3)
	committed intentional wrongful disclosure of secret processes or confidential information of the Company or any Subsidiary.

For purposes of this Agreement, no act or failure to act on the part of the Grantee will be deemed “intentional” if it was due primarily to an error in judgment or negligence, but will be deemed “intentional” only if done or omitted to be done by the Grantee not in good faith and without reasonable belief that the Grantee's action or omission was in the best interest of the Company.  Notwithstanding the foregoing, the Grantee will not be deemed to have been terminated for “Cause” hereunder unless and until there shall have been delivered to the Grantee a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the Board then in office (excluding the Grantee if the Grantee is then a member of the Board) at a meeting of the Board called and held for such purpose, after reasonable notice to the Grantee and an opportunity for the Grantee, together with the 

Grantee's counsel (if the Grantee chooses to have counsel present at such meeting), to be heard before the Board, finding that, in the good faith opinion of the Board, the Grantee had committed an act constituting “Cause” as herein defined and specifying the particulars thereof in reasonable detail.  Nothing herein will limit the right of the Grantee or the Grantee's beneficiaries to contest the validity or propriety of any such determination.
		
	(D)
	“Disability” shall mean that the Grantee has suffered a total disability within the meaning of the Company's Long Term Disability Plan for Salaried Employees and is “disabled” within the meaning of Section 409A(a)(2)(C) of the Code.

		
	(E)
	“Good Reason” shall mean the occurrence of any of the following events, and the failure of the Company to remedy any of the following events within 10 calendar days after receipt by the Company of written notice thereof from the Grantee:

		
	(1)
	a material diminution in the Grantee's normal duties and responsibilities, including, but not limited to, the assignment without the Grantee's written consent of any diminished duties and responsibilities which are inconsistent with the Grantee's positions, duties and responsibilities with the Company immediately prior to a Change in Control, or a materially adverse change in the Grantee's reporting responsibilities or titles as in effect immediately prior to the Change in Control, whether or not resulting from an act of the Company or otherwise, or any removal of the Grantee from or any failure to re-elect the Grantee to any of such positions, except in connection with the termination of the Grantee's employment for Disability, Retirement, or Cause or as a result of the Grantee's death or by the Grantee other than for Good Reason;

		
	(2)
	if the Grantee was serving as a member of the Board immediately prior to the Change in Control, either (A) the failure to elect or the removal of the Grantee as a member of the Board of the Company (or any successor thereto) or (B) if the Grantee continues to serve as a member of the Board of the Company (or any successor thereto) following the Change in Control, the Company's securities are no longer publicly traded; provided, however, that Good Reason shall not exist if the Grantee becomes a member of the board of directors of a publicly-traded entity that as a result of the Change in Control owns the Company or substantially all of the Company's assets either directly or through one or more subsidiaries;

		
	(3)
	a reduction by the Company in the Grantee's Base Pay as in effect on the Date of Grant or as the same may be increased from time to time;

		
	(4)
	a change in the Grantee's Target Annual Direct Compensation that results in an aggregate decrease in such Target Annual Direct Compensation in excess of ten percent (10%);

		
	(5)
	the Company's requiring the Grantee, without the Grantee's written consent, to be based anywhere other than within fifty (50) miles of the Grantee's office location immediately prior to the Change in Control, except for required travel on the Company's business to an extent substantially consistent with business travel obligations immediately prior to the Change in Control;

		
	(6)
	the failure by the Company to continue in effect any investment plan, retirement plan, savings plan, supplemental retirement plan, deferred compensation plan, supplemental investment plan, life insurance plan, health and accident plan, disability plan or other welfare benefit plan in which the Grantee was participating at the time of the Change in Control (or plans providing the Grantee with substantially similar benefits), the taking of any action by the Company which would adversely affect the Grantee's participation or materially reduce the Grantee's benefits or value under any of such plans or deprive the Grantee of any material fringe benefit enjoyed by the Grantee at the time of the Change in Control, or the failure by the Company to provide the Grantee with the number of paid vacation days to which the Grantee was then entitled in accordance with the Company's normal vacation policy in effect on the date of the Change in Control; or

		
	(7)
	the failure by the Company to obtain the assumption of the obligation to perform any Change in Control Severance Agreement between the Company and Grantee by any successor as contemplated in such Change in Control Severance Agreement.

		
	(F)
	“Retirement” shall mean the Grantee's retirement under a retirement plan (including, without limitation, any supplemental retirement plan) of the Company or any Subsidiary, or the Grantee's retirement from employment with the Company or any Subsidiary after completing at least three years of continuous service with the Company or any Subsidiary and attaining the age of 62.  Without limiting the generality of the foregoing, in no event shall “Retirement” include the involuntary termination of the Grantee's employment by the Company (i) for cause or (ii) without cause if, as a result of such termination without cause, the Grantee becomes eligible to receive payments on account of such termination under an employment agreement between the Grantee and the Company.

		
	(G)
	“Target Annual Direct Compensation” means the sum of the Grantee's Base Pay, target annual incentive opportunity, and the annualized value of the most recent long-term incentive award approved by the Compensation and Organization Committee of the Board prior to the Change in Control.  For purposes of measuring annualized long-term incentives, the awards shall be measured on their date of grant using reasonable assumptions, including, but not limited to, fair value principles such as those identified in Financial Accounting Standards Board Accounting Standards Codification Topic 718; the value of such awards shall be annualized over the frequency of their grant.altera201110Kex1038

EXHIBIT 10.38 

AVALON MICROELECTRONICS INC.
Amended and Restated Stock Option Plan
December 10, 2010
WHEREAS the Corporation created and implemented a Stock Option Plan dated August 28, 2006 which was amended and restated in October 2010 (collectively, the “Old Plan”);
AND WHEREAS the purpose of this Amended and Restated Stock Option Plan is to give effect to an exchange of each unvested option held by a Participant to acquire Class C or Class D shares of the Corporation under the Old Plan ("Old Option") whereby, immediately upon the completion of the transactions contemplated by that certain agreement under which all of the issued and outstanding shares in the capital of the Corporation were sold to Altera Canada, an indirect wholly-owned subsidiary of Altera  (the “Purchase Agreement”), each Old Option of such Participant is exchanged for an Option (as defined below) and no other consideration; 
AND WHEREAS, for each such Participant, the fair market value of the Shares subject to an Option, less the Exercise Price for such Option, is intended to be equal to the fair market value of the Class C shares of the Corporation subject to the Old Option, less the exercise price for such shares under the Old Option; 
 
NOW THEREFORE, the Old Plan is hereby amended as follows, with effect immediately after the completion of the transactions contemplated by the Purchase Agreement.

		
	1
	Table of Contents

		
	2
	Definitions

		
	3
	Establishment of this Plan    

		
	3.1
	Purpose    

		
	3.2
	No Employment Rights    

		
	3.3
	No Other Rights    

		
	4
	Grant of Option    

		
	4.1
	Grant    

		
	4.2
	Limitations on Grant    

		
	4.3
	Exercise Price    

		
	4.4
	No Payment on Grant    

		
	4.5
	Options Record    

		
	4.6
	Changes in Shares    

		
	5
	Exercise of Options    

		
	6
	Vesting of Options    

		
	7
	Death or Long-Term Disability of Participant    

		
	8
	Termination of Employment other than For Cause    

		
	9
	Termination of Employment for Cause    

		
	10
	Order of Exercise    

		
	11
	Termination of Option    

		
	11.1
	Expiration of Exercise Period    

		
	11.2
	Bankrupt Participant    

		
	12
	General    

		
	12.1
	Delivery of Shares    

		
	12.2
	Consents    

		
	12.3
	Option Not Transferable    

		
	12.4
	Administration    

		
	12.5
	Incapacity    

		
	12.6
	Amendment and Termination    

		
	12.7
	Approvals    

		
	12.8
	No Fractional Shares    

		
	12.9
	Withholding    

		
	2
	Definitions

1.In this Plan, unless the context otherwise requires, the following terms have the meanings indicated:
“Affiliate” means, with respect to any Person, any other Person who directly or indirectly controls, is controlled by, or is under direct or indirect common control with, such Person, and includes any Person in like relation to an Affiliate.  A Person shall be deemed to “control” another Person if such Person possesses, directly or indirectly, the power to direct or cause the direction of the management and policies of such other Person, whether through the ownership of voting securities, by contract or otherwise; and the term “controlled” shall have a similar meaning.
“Altera” means Altera Corporation, its successors and assigns. 
“Altera Canada” means Altera Canada Co., an indirect wholly owned subsidiary of Altera.
“Articles” means the Articles of Incorporation of the Corporation as amended from time to time.
“Board” means the board of directors of the Corporation.

“Cause” shall include but not be limited to the following acts, which, in the reasonable judgment of Altera, an Employee has been found to have engaged in: (i) the Employee committed a fraud, theft, embezzlement or another similar act against the Corporation or any of its Affiliates; (ii) the Employee breached a material term of their employment agreement with the Corporation, if applicable; (iii) the Employee was prosecuted for having committed a serious indictable offence or engaged in other conduct that is materially detrimental or embarrassing to the Corporation or any of its Affiliates; (iv) the Employee compromised any trade secret or violated his or her confidentiality obligations to the Corporation or any of its Affiliates; (v) the Employee breached any non-competition or non-solicitation agreement with the Corporation or any of its Affiliates; or (vi) the Employee engaged in any grossly  negligent act or willful misconduct in the scope of his or her duties for the Corporation or any of its Affiliates.
“Corporation” means Avalon Microelectronics Inc., its successors and assigns, and any reference in this Plan to action by the Corporation means action by or under the authority of the Board or any person or committee that has been designated for that purpose by the Corporation, subject to the overriding rights of Altera Canada under any unanimous shareholder declaration pursuant to which it assumes the responsibilities of the Board.
“Date of Grant” means the date a Participant is granted an Option to purchase Shares as set out in the Options Record.
“Employee” means a person in the full-time or part-time employment of the Corporation and Employees means more than one Employee.
“Exchange” means the NASDAQ Stock Exchange or any other stock exchange upon which the Shares may be listed and posted for trading.
“Exercise Price” means the price per Share payable on the exercise of an Option as set out in the Options Record for such Option.
“Option” means a right to subscribe for one or more Shares pursuant to this Plan.
“Options Record” means the record of Options granted under this Plan, including the number, vesting terms and strike prices thereof, attached hereto as Schedule “A”.
“Options Record Excerpt” means the Options Record excerpted to only contain details of the Options held by a particular Participant.
“Original Grant Date” means the original date of grant under the Old Plan set out in the Options Record for options exercisable into shares in the capital of the Corporation granted to such Participant, such options having been disposed of in connection with the completion of the transactions contemplated in the Purchase Agreement in exchange for Options under this Plan. 
“Outstanding Issue” means Shares that are available to be, but have not yet been, issued by Altera pursuant to Options granted by the Corporation.
“Participant” means an Employee who has been granted an Option.
“Person” is to be broadly interpreted and includes an individual, a corporation, a partnership, a trust, an unincorporated organization, a governmental authority, and the executors, administrators or other legal representatives of an individual in such capacity.

“Plan” means this stock option plan, including the Options Record, as amended and restated from time to time.
“Prescribed Period” means the prescribed period set out in the notice provided for in Section 5.5 of this Plan, which shall not be Less than 15 days from the date of such notice.
“Shares” means common shares in the capital of Altera, and includes any shares of Altera into which such shares may be converted, reclassified, redesignated, subdivided, consolidated or otherwise changed.
“Vesting Period” means the period(s) referred to in the Options Record that determines when the Participant may exercise Options to subscribe for and purchase Shares. 

		
	3
	Establishment of this Plan

1.Purpose
The purpose of this Plan is to advance the interests of the Corporation by providing Participants with (a) a financial incentive for the continued improvement of the performance of the Corporation and its Affiliates and (b) encouragement to continue employment with the Corporation or its Affiliates.
2.No Employment Rights
Participation in this Plan does not give any Participant the right to continue as an Employee, or any right or interest in Options or Shares, except to Options or Shares as specifically provided in this Plan as reflected in the Options Record. Nothing in this Plan or in any Option shall be deemed, interpreted or construed to constitute an agreement, or an expression of intent, on the part of the Corporation or any of its Affiliates, to extend the employment of any Participant beyond the time at which such Participant would normally be required to retire in accordance with any applicable employment agreement or retirement plan or policy of the Corporation or any of its Affiliates then in effect.
3.No Other Rights
No Participant shall have any of the rights of a shareholder of Altera with respect to any Shares subject to an Option until such Shares have been issued to him or her upon the due exercise of the Option in accordance with the terms of this Plan, including those of the Options Record, and full payment therefor has been made by him or her to Altera.
		
	4
	Grant of Option

1.Grant
Subject to the provisions of this Plan, the Corporation may, from time to time in its discretion, determine those Employees to whom Options are to be granted, the number and type of Shares which may be purchased pursuant to such Options, the time or times when such Options shall vest and become exercisable, as well as, if applicable, the conditions that must be met for such vesting to take place, the duration of the exercise period and conditions applicable with respect to the exercise of such Options. A Participant may be granted additional Options under this Plan if the Corporation shall so determine in its absolute discretion.
2.Limitations on Grant
For so long as the Shares are listed and posted for trading on the Exchange, and unless otherwise approved by holders of the majority of voting shares of Altera, the following limitations on 

the number of Shares for issuance apply:
the number of Shares that may be reserved for issuance at any one time under this Plan shall not exceed ten percent (10%) of the Outstanding Issue at any point in time;
no Option shall be granted which could, under the terms of this Plan and any other share option, share option plan or share purchase plan of the Corporation or any of its Affiliates, result in a Participant acquiring under such plans more than 5% of the issued and outstanding Shares.
3.Exercise Price
At the time the Corporation grants an Option, the Corporation shall fix the Exercise Price of such Option at the time of such grant at the Corporation's sole and absolute discretion.
4.No Payment on Grant
No payment to the Corporation shall be required or made on the grant of an Option.
5.Options Record
The grant of an Option shall be evidenced by the delivery by the Corporation to the Participant, within 30 days of the Date of Grant, of an Options Record Excerpt setting out the terms of such granted Option. 
6.Changes in Shares
If the Shares are subdivided, consolidated, converted or reclassified or the number of Shares varies as a result of a stock dividend or of an increase or reduction of the share capital of Altera, the Corporation may adjust one or more of:
		
	1.
	the number or class or series of Shares that may be subject to Options at any particular time;

		
	2.
	the number or class or series of Shares that are subject to outstanding Options; and

		
	3.
	the Exercise Price of outstanding Options, in such manner as the Corporation considers appropriate and proportionate in the circumstances.

Upon notice to a Participant of an adjustment made in accordance with this Section 4.6, the Corporation shall deliver to the Participant an updated Options Record Excerpt reflecting such adjustment.
		
	5
	Exercise of Options

1.Subject to any policies adopted by Altera or any of its Affiliates, including the Corporation, regarding trading by insiders or employees of Altera or any of its Affiliates, including the Corporation, as the case may be, a Participant may exercise an Option in whole or in part at any time after the Option vests in accordance with this Plan including the vesting terms set out in the Options Record.
2.Subject to Section 5.1 and the Option terms set out in the Options Record, an Option may be exercised by a Participant, or as provided for in Section 12.3 hereof in the case of death of a Participant or during any period in which a Participant lacks capacity, by such Participant's heirs, executors, administrators or personal representatives, at the applicable times and in the applicable amounts by delivering to the Corporation written notice of exercise of such Option in the form attached hereto as Schedule B, together with payment in full of the Exercise Price for all Shares in respect of which the Option is being exercised.
3.Upon any such exercise of an Option, Altera shall cause the registrar and transfer agent of 

Altera to deliver to the Participant exercising such Option, or his or her personal representative in the case of the death of such Participant as contemplated in Section 12.3 (or as such Participant or his or her personal representative may otherwise direct in the written notice of exercise), evidence of the registration of the Shares in respect of which such Option was duly exercised as required hereunder (including payment in full of the applicable Exercise Price) in the name of the Participant or his or her personal representative (or as otherwise directed in the written notice of exercise), representing in the aggregate such number of Shares as such Participant or his or her personal representative shall have then paid for.
4.The Option shall be deemed to have been exercised upon actual receipt by the Corporation of the written notice of exercise, and payment in full of the Exercise Price for such Shares to Altera. Upon exercise, an Option shall be cancelled unless it is only exercised in part.
5.Notwithstanding any other provision of this Plan, the Corporation may at any time, by notice in writing to a Participant, in connection with:
		
	(a)
	any proposed sale or conveyance of all or substantially all of the property and assets of the Corporation or any of its Affiliates, including but not limited to a sale of the shares in the Corporation or any of its Affiliates or dissolution, liquidation or winding-up of the Corporation or any of its Affiliates;

		
	(b)
	any proposed merger, amalgamation or other form of corporate reorganization of the Corporation or any of its Affiliates; or

		
	(c)
	any transaction or arrangement entered into by the Corporation or any of its Affiliates which would have a similar effect as the transactions referred to in (a) or(b) above.

(in each case, a “Proposed Transaction”) require the Participant to accept termination in accordance with Section 5.6 within a prescribed period (the “Prescribed Period”) set out in said notice.
6.Upon receipt of notice in writing from the Corporation under Section 5.5 and unless limited by Section 5.7, the Participant shall, within the Prescribed Period, elect by notice in writing to the Corporation to accept termination of the Option by either:
		
	(a)
	subscribing and paying for all of the Shares then remaining unsubscribed for under an Option that has vested or would otherwise then be exercisable for all the Shares subject to the Option; or

		
	(b)
	effect a “cashless exercise”, by applying a portion of the Participant's proceeds from the closing of the Proposed Transaction to the Exercise Price payable by that Participant for the exercise of his or her vested Options, and as applicable, issuing the balance of the shares or paying the balance of the proceeds to the Participant; and

exchange unvested Options or any portion of them for options to purchase shares in the capital of the acquirer or any corporation that results from amalgamation, merger, or similar transaction involving the Corporation or any of its Affiliates (vested or unvested) made in connection with the Proposed Transaction on an 'in the money basis' attributable to such unvested Options at the then prevailing subscription price of the shares or adjusted if and to the extent that the Corporation considers it to be equitable and appropriate.
7.In any notice of election given by the Corporation under Section 5.5, the Corporation shall have the right to provide, among other things, that:
		
	(a)
	Altera shall only complete the issuance of any Shares subscribed for by the Participant;

		
	(b)
	the Participant shall be required to exercise a “cashless exercise” by applying a portion of the Participant's proceeds from the closing of the Proposed Transaction, if any, to the Exercise Price payable by that Participant for the exercise of his or her vested Options and issue the balance of the proceeds attributable to said vested Options to the Participant immediately prior to or contemporaneously with the completion of the 

Proposed Transaction;
		
	(c)
	the Corporation may at its absolute discretion agree to compensate Participants from the proceeds of a Proposed Transaction for any unvested Options or any portion thereof by exchanging options to purchase shares in the capital of the acquirer or any corporation (vested or unvested) made in connection with the Proposed Transaction on an 'in the money basis' at the then prevailing subscription price of the shares or adjusted if and to the extent that the Corporation considers it to be equitable and appropriate or by such other means as the Corporation considers equitable and appropriate; and

		
	(d)
	in the event that the Corporation in good faith determines that the Proposed Transaction will not be completed, the notice of election of the Participant given under Section 5.6 be terminated, and in such event (i) any cash paid by the Participant to Altera will be returned to the Participant or (ii) any cash paid by the Corporation or any of its Affiliates to the Participant will be immediately returned to the Corporation or such Affiliate thereof and in either case the Option shall thereafter continue to be exercisable by the Participant in accordance with its terms.

8.in the event the Participant has not elected within the Prescribed Period to subscribe for Shares pursuant to Section 5.6(a) or receive a payment of shares or cash pursuant to Section 5.6(b) under the Option, or has not paid for Shares he or she has elected to subscribe for or if the Corporation has not exercised its right to proceed under Section 5.7(b) herein, the Participant will be deemed to have elected to receive such payment for its Option pursuant to Section 5.6(b).
9.If the Participant has elected or is deemed to have elected to receive payment in cash, and if no cash payment would be made pursuant to Section 5.6(b) because the relevant value or trading price determined under Section 5.6(b) is less than the applicable Exercise Price, then the Option will be deemed to have terminated at the end of the Prescribed Period, and the Corporation shall have no further obligations to the Participant with respect thereto.
10.For the purposes of this entire Section 5, the term “date of completion” means the date on which the sale, conveyance, corporate reorganization, acquisition or redemption contemplated by this entire Section 5 takes effect.
11.The provisions of Section 5.6 requiring the Participant to make an election to exercise the Option shall only be invoked with respect to all Participants generally and not with respect to one or more of the Participants and not other Participants. Upon the subscription and payment for Shares by the Participant or the payment of cash to the Participant by the Corporation or any of its Affiliates or the deemed termination of the Option under Section 5.9, all rights of the Participant under the Option will terminate.
12.Subject to Section 5.5 and 5.6, if Altera enters into, and is continued or survives as a result of any arrangement, amalgamation, merger or other similar transaction with one or more other companies or corporations, then and in each such case and to the extent that the Corporation considers it to be equitable and appropriate in its sole and absolute discretion, each Option granted hereunder may extend to cover the number, class and kind of shares or other obligations to which the Participant would have been entitled had the Option been fully exercised immediately prior to the date such amalgamation or merger becomes effective (whether or not such Option would otherwise have been fully exercisable) and the then prevailing subscription price of the shares or other obligations so covered shall be correspondingly adjusted if and to the extent that the Corporation considers it to be equitable and appropriate.
		
	6
	Vesting of Options

1.The vesting conditions of Options granted under this Plan are set out in the Options Record.
2.Notwithstanding the vesting period(s) set forth in the Options Record, in the event Altera, any of its Affiliates and/or their respective shareholders, as the case may be, receive or accept an offer 

to acquire the shares or substantially all of the assets of Altera or such Affiliate thereof, whether effected through an acquisition for cash or securities, and whether structured as a purchase, amalgamation, merger, or otherwise, the Corporation may, in its sole discretion, deal with the vesting of Options granted under this Plan in the manner that is equitable and appropriate in light of the circumstances of the such transaction.
		
	7
	Death or Long-Term Disability of Participant

If the employment of a Participant ends by death, or if such Participant is permanently disabled and receiving long-term disability benefits then:
		
	1.
	Any vested Option held by the Participant at the time of such event is exercisable for 180 days after such event; 

		
	2
	Any unvested Option held by the Participant at the time of such event is cancelled; and

		
	3.
	The Corporation may permit, at its sole and absolute discretion, the exercise of an Option even though the Option had not vested at the time of the event under this Section 7 of this Plan.

		
	8
	Termination of Employment other than For Cause

If the employment of a Participant terminates for any reason other than for death, disability or Cause then:
		
	1.
	Any vested Option held by the Participant at the time of such termination is exercisable for 30 days after such event; and

		
	2.
	Any unvested Option held by the Participant at the time of the event is cancelled; and

		
	3.
	The Corporation may permit, at its sole and absolute discretion, the exercise of an Option even though the Option had not vested at the time of termination under this Section 8 of this Plan

		
	9
	Termination of Employment for Cause

Any vested or unvested Option held by the Participant at the time of termination for Cause are immediately forfeited and cancelled, without any further act on the part of the Corporation and without any consideration thereof to the Participant.
		
	10
	Order of Exercise

A Participant may exercise vested Options in any order in which they are received, regardless of the Date of Grant of the Options.
		
	11
	Termination of Option

1.Expiration of Exercise Period
Options shall expire on the date specified in the Options Record or on the date specified in Sections 7, 8, 9 or 11.2 as applicable and, in any event, the term of an Option shall not exceed six (6) years from the Original Grant Date as set out in the Options Record unless otherwise extended by the Corporation.
2.Bankrupt Participant
If a Participant becomes insolvent or bankrupt within the meaning of the Bankruptcy and Insolvency Act (Canada) or any other applicable bankruptcy or insolvency legislation, any unexercised Option and any unvested Option held by such Participant shall immediately terminate and cease to be exercisable, without any further act on the part of the Corporation 

and without any consideration thereof to the Participant or its bankrupt estate.
		
	12
	General

1.Delivery of Shares
Any Shares to be issued to a Participant pursuant to the exercise of an Option shall be issued not later than 30 days after the date of exercise of the Option provided payment in full is received by Altera.
2.Consents
Any issue of Shares under this Plan shall be subject to applicable law and prior receipt of all necessary or appropriate consents, if any, of any governmental or regulatory authorities or agencies.
3.Option Not Transferable
		
	1.
	No Option shall be assignable or transferable by a Participant and any purported assignment or transfer of an Option shall be void and shall render the Option void, provided that in the event of death of a Participant, such Participant's legal personal representative may exercise the Participant's Option in accordance with Section 12.3(2)

		
	2.
	In the event that a Participant should die at any time during the term of such Participant's Option, the Option may then be exercised by his or her legal personal representative, to the same extent as if the Participant was alive subject to the terms of such Options set out in the Options Record and Section 7 hereof.

		
	3.
	Except as specifically provided in the foregoing sentence, no Option and none of the rights and privileges thereby conferred shall be transferred, assigned, pledged, hypothecated in any way or made the subject of any security of any kind whatever (whether by operation of law or otherwise), and no Option and none of the rights and privileges thereby conferred shall be subject to execution, attachment or similar process. Upon any attempt by a Participant to so transfer, assign, pledge, hypothecate, make subject to a security or otherwise dispose of an Option or any of the rights and privileges thereby conferred contrary to the provisions hereof, or upon the levy of any execution, attachment or similar process upon an Option or any of the rights and privileges thereby conferred, the Option and such rights and privileges shall immediately, be void, terminate without any consideration thereof to the Participant and cease to be exercisable.

4.Administration
This Plan shall be administered by the Corporation, which may prescribe rules and regulations respecting this Plan. Unless otherwise specified. the Corporation has the exclusive authority to interpret and construe this Plan and to determine all questions respecting this Plan or any Option. Any such interpretation, construction or determination shall be final, binding and conclusive for all purposes in respect of all persons affected thereby. The Corporation may take such other actions as it considers necessary or desirable in respect of this Plan.
5.Incapacity
If a person to whom Shares are to be delivered or a payment made under this Plan is a minor or is physically or mentally incapable of giving a valid receipt, delivery or payment may instead be made to a person having the legal care or custody of the person to whom delivery or payment is to be made and any such delivery or payment constitutes a complete discharge of the obligation to make such delivery or payment. Any delivery or payment so made shall be deemed to be a delivery or payment made to the person entitled to such delivery or payment. 

Once such delivery or payment is made, no further claim may be made in respect of such delivery or payment by any person whatsoever against: (a) Altera; (b)  any of Altera's Affiliates including the Corporation; (c) Altera's or any of its Affiliates' directors, officers, employees or agents, or (d) this Plan.
6.Amendment and Termination
Subject to the rules and policies of the Exchange, the Corporation may at any time by resolution amend, suspend or terminate this Plan in any manner whatsoever, except that no such amendment, suspension or termination shall adversely affect the terms of any Option previously granted and not yet exercised or expired, without the written consent of the affected Participants.
7.Approvals
This Plan and any amendments hereto shall be subject to the approval of the Corporation and any other approvals required by applicable law, regulation or the Exchange. Any Option granted prior to receipt of any such approval shall be conditional upon such approval being given and no Option may be exercised until such approval is given. Notwithstanding any other term of this Plan, neither Altera, nor any of its Affiliates including the Corporation, is obliged to take any action or to refrain from taking any action if such action (or refraining there from) would result in a breach of any applicable law, regulation, judgment, directive, rule, consent, approval, authorization, guideline, order or policy of any governmental or other regulatory authority.
8.No Fractional Shares
Under no circumstances shall Altera be obliged to issue any fractional Shares upon the exercise of an Option. To the extent that a Participant would otherwise have been entitled to receive, on the exercise or partial exercise of an Option, a fraction of a Share in any year, the Option shall be cancelled with respect to such fraction with no consideration thereof to the Participant.
9.Withholding
Whenever Altera proposes or is required to issue or transfer Shares pursuant to an Option, Altera shall have the right to cause the Corporation to withhold from salary payments or to require the recipient of such Shares to remit to the Corporation, an amount sufficient to satisfy any federal, provincial, state and/or local withholding tax requirements prior to the issuance of the Shares. Whenever under this Plan payments are to be made in cash, such payments shall be net of an amount sufficient to satisfy any federal, provincial, state and/or local withholding tax requirements.

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