Exhibit 4.8

                         SUBSCRIPTION RECEIPT AGREEMENT

                                      among

                           ZARLINK SEMICONDUCTOR INC.

                                     - and -

                             CIBC WORLD MARKETS INC.

                                     - and -

                      COMPUTERSHARE TRUST COMPANY OF CANADA

                           Providing for the Issue of
                              Subscription Receipts

                           Dated as of July [30], 2007

<PAGE>

                                TABLE OF CONTENTS

ARTICLE 1 INTERPRETATION...................................................... 2

   1.1   Definitions.......................................................... 2
   1.2   Headings............................................................. 5
   1.3   References........................................................... 5
   1.4   Certain Rules of Interpretation...................................... 5
   1.5   Day Not a Business Day............................................... 6
   1.6   Applicable Law....................................................... 6
   1.7   Conflict............................................................. 6
   1.8   Currency............................................................. 6
   1.9   Severability......................................................... 6
   1.10  Actions by the Underwriters.......................................... 6

ARTICLE 2 ISSUE OF SUBSCRIPTION RECEIPTS...................................... 6

   2.1   Issue of Subscription Receipts....................................... 6
   2.2   Payment Acknowledgement.............................................. 7
   2.3   Terms of Subscription Receipts....................................... 8
   2.4   Fractional Subscription Receipts..................................... 8
   2.5   Register for Subscription Receipts................................... 8
   2.6   Registers Open for Inspection........................................ 8
   2.7   Receiptholder not a Debentureholder or a Shareholder................. 8
   2.8   Subscription Receipts to Rank Pari Passu............................. 9
   2.9   Signing of Subscription Receipt Certificates......................... 9
   2.10  Certification by the Subscription Receipt Agent...................... 9
   2.11  Issue in Substitution for Subscription Receipt
         Certificates Lost, etc............................................... 9
   2.12  Exchange of Subscription Receipt Certificates....................... 10
   2.13  Charges for Exchange................................................ 10
   2.14  Transfer and Registration of Subscription Receipts.................. 10
   2.15  Global Subscription Receipt......................................... 12
   2.16  Proceeds to be Placed in Escrow..................................... 13
   2.17  Subscription Receipts and Trading................................... 13
   2.18  Right of Rescission................................................. 14
   2.19  Cancellation of Surrendered Subscription
         Receipt Certificates................................................ 14

ARTICLE 3 ISSUANCE OF UNDERLYING CONVERTIBLE DEBENTURES OR
REFUND  OF SUBSCRIPTION PRICE................................................ 14

   3.1   Notice of Acquisition............................................... 14
   3.2   Release of Funds on Acquisition Closing Date........................ 14
   3.3   Issue of Underlying Convertible Debentures.......................... 15
   3.4   Fractions........................................................... 15
   3.5   Payment on Termination.............................................. 16

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                                      -ii-


ARTICLE 4 INVESTMENT OF ESCROWED FUNDS AND PAYMENT OF INTEREST............... 17
   4.1   Investment of Escrowed Funds........................................ 17
   4.2   Segregation of Escrowed Funds....................................... 17
   4.3   Third Party Interest................................................ 17

ARTICLE 5 RIGHTS AND COVENANTS OF ZARLINK.................................... 17

   5.1   Optional Purchases by Zarlink....................................... 17
   5.2   General Covenants................................................... 18
   5.3   Subscription Receipt Agent's Remuneration, Expenses
         and Indemnification................................................. 19
   5.4   Performance of Covenants by Subscription Receipt Agent.............. 19
   5.5   Accounting.......................................................... 19
   5.6   Payments by Subscription Receipt Agent.............................. 20
   5.7   Regulatory Matters.................................................. 20
   5.8   Anti-Money Laundering and Privacy................................... 20

ARTICLE 6 ENFORCEMENT........................................................ 21

   6.1   Suits by Receiptholders............................................. 21

ARTICLE 7 MEETINGS OF RECEIPTHOLDERS......................................... 21

   7.1   Right to Convene Meetings........................................... 21
   7.2   Notice.............................................................. 22
   7.3   Chairperson......................................................... 22
   7.4   Quorum.............................................................. 22
   7.5   Power to Adjourn.................................................... 22
   7.6   Show of Hands....................................................... 22
   7.7   Poll and Voting..................................................... 23
   7.8   Regulations......................................................... 23
   7.9   Zarlink and Subscription Receipt Agent may be Represented........... 24
   7.10  Powers Exercisable by Special Resolution............................ 24
   7.11  Meaning of Special Resolution....................................... 25
   7.12  Powers Cumulative................................................... 26
   7.13  Minutes............................................................. 26
   7.14  Instruments in Writing.............................................. 27
   7.15  Binding Effect of Resolutions....................................... 27
   7.16  Holdings by Zarlink Disregarded..................................... 27

ARTICLE 8 SUPPLEMENTAL AGREEMENTS............................................ 27

   8.1   Provision for Supplemental Agreements for Certain Purposes.......... 27

ARTICLE 9 CONCERNING THE SUBSCRIPTION RECEIPT AGENT.......................... 28

   9.1   Rights and Duties of Subscription Receipt Agent..................... 28
   9.2   Evidence, Experts and Advisers...................................... 29

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                                     -iii-


   9.3   Documents, etc. Held by Subscription Receipt Agent.................. 30
   9.4   Actions by Subscription Receipt Agent to Protect Interest........... 31
   9.5   Subscription Receipt Agent not Required to Give Security............ 31
   9.6   Protection of Subscription Receipt Agent............................ 31
   9.7   Replacement of Subscription Receipt Agent; Successor by Merger...... 32
   9.8   Conflict of Interest................................................ 33
   9.9   Acceptance of Appointment........................................... 33
   9.10  Subscription Receipt Agent Not to be Appointed Receiver............. 33

ARTICLE 10 GENERAL........................................................... 33

   10.1  Notice to Zarlink, Subscription Receipt Agent and the
         Lead Underwriter, on behalf of the Underwriters..................... 33
   10.2  Notice to Receiptholders............................................ 35
   10.3  Ownership of Subscription Receipts.................................. 35
   10.4  Evidence of Ownership............................................... 36
   10.5  Satisfaction and Discharge of Agreement............................. 36
   10.6  Provisions of Agreement and Subscription Receipts for
         the Sole Benefit of Parties and Receiptholders...................... 37
   10.7  Subscription Receipts Owned by Zarlink or its
         Subsidiaries Certificate to be Provided............................. 37
   10.8  Effect of Execution................................................. 37
   10.9  Time of Essence..................................................... 37
   10.10 Counterparts........................................................ 37

Schedule A - Form of Subscription Receipt Certificate....................... A-1

Schedule B - Form of Notice................................................. B-1

<PAGE>

                         SUBSCRIPTION RECEIPT AGREEMENT

            THIS  SUBSCRIPTION  RECEIPT  AGREEMENT  made as of the [30th] day of
July, 2007.

AMONG:

            ZARLINK  SEMICONDUCTOR  INC., a company duly incorporated  under the
            laws of Canada (hereinafter referred to as "Zarlink")

                                     - and -

            CIBC WORLD MARKETS INC. on behalf of the  underwriters who are party
            to the Underwriting  Agreement (as defined herein) providing for the
            issue and sale to  investors  of  Subscription  Receipts (as defined
            herein) (hereinafter referred to as the "Lead Underwriter")

                                     - and -

            COMPUTERSHARE  TRUST  COMPANY OF CANADA,  a trust  company  existing
            under  the  laws  of  Canada   (hereinafter   referred   to  as  the
            "Subscription Receipt Agent")

            WHEREAS Zarlink is proposing to issue and sell Subscription Receipts
representing,  among other things, the right to receive  Convertible  Debentures
(as defined herein);

            AND  WHEREAS  Zarlink  and the Lead  Underwriter,  on  behalf of the
Underwriters, (as defined herein), have agreed that:

      (a)   the Proceeds (as defined  herein) are to be delivered to and held by
            the Subscription  Receipt Agent and invested on behalf of Zarlink in
            the manner set forth herein;

      (b)   on the Acquisition  Closing Date (as defined herein),  provided that
            such date occurs on or before the Deadline (as defined herein), each
            Receiptholder  shall  automatically  receive,  without  any  further
            action required by such Receiptholder and without the payment of any
            additional   consideration,   one  Convertible  Debenture  for  each
            Subscription Receipt held by the Receiptholder;

      (c)   if  a  Termination  Event  (as  defined  herein)  occurs,  (i)  this
            Agreement  and all issued  and  outstanding  Subscription  Receipts,
            shall  be   automatically   terminated  and   cancelled,   and  each
            Receiptholder  shall,  on  the  third  Business  Day  following  the
            Termination  Date be entitled to receive a  Termination  Payment (as
            defined herein).

            AND WHEREAS all things  necessary  have been done and  performed  to
make the Subscription Receipts, when certified by the Subscription Receipt Agent
and issued as provided in this Agreement,  legal, valid and binding  obligations
of Zarlink with the benefits and subject to the terms of this Agreement;

<PAGE>
                                       2


            AND WHEREAS the  foregoing  recitals  are made by Zarlink and not by
the Subscription Receipt Agent or the Lead Underwriter;

            NOW THEREFORE  THIS  AGREEMENT  WITNESSES that for good and valuable
consideration  mutually given and received, the receipt and sufficiency of which
is hereby acknowledged, it is hereby agreed and declared as follows:

                                   ARTICLE 1
                                 INTERPRETATION

1.1      Definitions

In this  Agreement  and the  recitals,  unless there is something in the subject
matter or context inconsistent therewith or unless otherwise expressly provided,
the  following  terms  shall  have the  respective  meanings  set out  below and
grammatical variations of such terms shall have corresponding meanings:

      "Acquisition"  means the  acquisition  by  Zarlink  of LHI by means of the
      Merger pursuant to the Acquisition Agreement;

      "Acquisition  Agreement"  means an agreement and plan of merger dated June
      25, 2007,  between Merger Sub, LHI and Navigant Capital Advisors,  LLC, as
      representative  of LHI's  stockholders,  pursuant  to which  Zarlink  will
      indirectly acquire Legerity through the cash merger of Merger Sub with and
      into LHI as the surviving company of such Merger;

      "Acquisition  Closing  Date"  means the closing  date of the  Acquisition,
      which is expected to occur on or about July [30], 2007;

      "Affiliate"  has the meaning  attributed  to it under the Canada  Business
      Corporations Act (Canada);

      "Agreement"  means this agreement,  as amended,  supplemented or otherwise
      modified from time to time in accordance with the provisions hereof;

      "Book-Entry Only System" means the book-based  securities  transfer system
      administered  by CDS in accordance with its operating rules and procedures
      in force from time to time;

      "Business  Day"  means  any day  which  is not  Saturday  or  Sunday  or a
      statutory  holiday  in the  Province  of Ontario or any other day on which
      businesses of the Subscription  Receipt Agent and Canadian chartered banks
      are generally closed;

      "CDS" means CDS Clearing and  Depository  Services Inc. and its successors
      in interest;

      "Convertible   Debenture"  means  $1,000   principal  amount   convertible
      unsecured subordinated debentures of Zarlink bearing interest at a rate of
      6.0% per annum to be issued under and governed by the Trust Indenture;

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                                       3


      "Counsel"  means a  barrister  or  solicitor  or a firm of  barristers  or
      solicitors, who may be counsel for Zarlink, acceptable to the Subscription
      Receipt Agent, acting reasonably;

      "Deadline" means 5:00 p.m. (Toronto time) on September 28, 2007;

      "Debentureholders"  means the holder from time to time of the  Convertible
      Debentures;

      "Designated  Office"  means the  principal  corporate  trust office of the
      Subscription Receipt Agent from time to time in Toronto, Ontario;

      "Earned  Interest"  means  the  interest  or other  income  earned  on the
      investment  of the  Escrowed  Funds  from  the  date  hereof  to,  but not
      including,  the earlier to occur of (i) the  Acquisition  Closing Date and
      (ii) the Termination Date;

      "Escrow Account" has the meaning attributed thereto in Section 2.2(a);

      "Escrowed  Funds"  means an amount  equal to the  Proceeds  minus any fees
      payable to the  Underwriters on the Offering  Closing Date plus the Earned
      Interest thereon at any given time;

      "Global  Subscription  Receipts"  has the  meaning  attributed  thereto in
      Section 2.15;

      "Issue Time" means 5:00 p.m.  (Toronto  time) on the  Acquisition  Closing
      Date, provided that such date occurs on or before the Deadline;

      "Lead Underwriter" means CIBC World Markets Inc.;

      "Legerity" means, collectively, LHI and Legerity Inc.;

      "LHI" means Legerity Holdings Inc;

      "Merger Sub" means ZLE Inc., a wholly-owned subsidiary of Zarlink;

      "NYSE" means the New York Stock Exchange;

      "Offering"  means the offering of  Subscription  Receipts  pursuant to the
      Prospectus;

      "Offering Closing Date" means the date hereof;

      "Optioned Subscription Receipts" means the Subscription Receipts which may
      be issued pursuant to the exercise of the Over-Allotment Option;

      "Original Purchasers" has the meaning attributed thereto in Section 2.18;

      "Over-Allotment   Option"  has  the  meaning   ascribed   thereto  in  the
      Underwriting Agreement;

      "Person"   means   and   includes   individuals,   corporations,   limited
      partnerships,   general  partnerships,   joint  stock  companies,  limited
      liability  companies,  joint ventures,  associations,

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                                       4


      companies,  trusts, banks, trust companies, pension funds, business trusts
      or other  organizations,  whether or not legal  entities and  governments,
      governmental agencies and political subdivisions thereof;

      "Proceeds"  means  the  aggregate   Subscription  Price  of  the  Offering
      (including the Optioned Subscription Receipts, if any);

      "Prospectus"  means the English and French language  versions  (unless the
      context  indicates  otherwise)  of the (final) short form  prospectus  and
      amended  registration  statement in Form F-10 of Zarlink  dated July [23],
      2007,  qualifying,  respectively,  among other things, the distribution of
      the Subscription Receipts in all of the provinces of Canada and the United
      States of America  and  includes  all  documents  incorporated  therein by
      reference and any amendments thereto;

      "Receiptholders"  or  "holders"  means  the  Persons  who are  holders  of
      Subscription Receipts;

      "Receiptholders'  Request"  means  an  instrument  signed  in one or  more
      counterparts by Receiptholders  entitled to acquire,  on exchange of their
      Subscription Receipts, in the aggregate not less than 25% of the aggregate
      number of  Underlying  Convertible  Debentures  which could be acquired on
      exchange of all  Subscription  Receipts then  outstanding,  requesting the
      Subscription  Receipt  Agent to take some action or  proceeding  specified
      therein;

      "Special  Resolution"  shall have the meaning  ascribed thereto in Section
      7.11;

      "Subscription Price" means the sum of $1,000 per Subscription Receipt;

      "Subscription  Receipt Agent" means  Computershare Trust Company of Canada
      or its successors from time to time under this Agreement;

      "Subscription   Receipt   Certificate"  means  a  certificate   evidencing
      Subscription  Receipts  substantially  in the form  attached as Schedule A
      hereto with such  appropriate  insertions,  deletions,  substitutions  and
      variations as may be required or permitted by the terms of this  Agreement
      or as may be  required  to  comply  with  any  law  or  the  rules  of any
      securities  exchange or as may be not inconsistent  with the terms of this
      Agreement  and as Zarlink may deem  necessary or  desirable  and until the
      termination of the Book-Entry Only System such certificate shall be in the
      form of a Global Subscription Receipt;

      "Subscription  Receipts" means the subscription receipts of Zarlink issued
      and certified  hereunder and from time to time outstanding  (including the
      Optioned  Subscription   Receipts,  if  any),  each  Subscription  Receipt
      evidencing the rights provided for herein;

      "Termination Date" means the date on which a Termination Event occurs;

      "Termination  Event" means any one of the following  described events: (i)
      the  Acquisition  Closing  Date does not occur on or before the  Deadline,
      (ii) the other conditions to the exchange of the Subscription Receipts are
      not  satisfied  by  the  Deadline,  (iii)  the  Acquisition

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                                       5


      Agreement is  terminated  at any earlier time, or (iv) Zarlink has advised
      the  Underwriters  or  announced  to the public that it does not intend to
      proceed with the Acquisition;

      "Termination  Payment" means, in respect of each Subscription  Receipt, an
      aggregate amount equal to (i) the Subscription  Price of such Subscription
      Receipt plus (ii) the Termination Premium;

      "Termination  Premium" means, in respect of each Subscription Receipt,  an
      amount  equal to the  amount of  interest  that  would  have  accrued on a
      Convertible  Debenture if such  Convertible  Debenture had been issued and
      outstanding  (and  interest  thereon  had  accrued at the rate of 6.0% per
      annum) from the Offering Closing Date until the Termination Date;

      "Trust  Indenture" means the trust indenture dated July [30], 2007 between
      Zarlink and  Computershare  Trust Company of Canada or its successors from
      time to time  under the Trust  Indenture,  providing  for the issue of the
      Convertible Debentures;

      "TSX" means the Toronto Stock Exchange;

      "Underlying  Convertible  Debentures"  means  the  Convertible  Debentures
      automatically  issuable to Receiptholders on the Acquisition Closing Date,
      provided  that such date  occurs on or before the  Deadline,  without  any
      further action  required by such  Receiptholders  or payment of additional
      consideration;

      "Underwriters" means, collectively, CIBC World Markets Inc., National Bank
      Financial  Inc., RBC Dominion  Securities  Inc. and Scotia Capital Markets
      Inc.;

      "Underwriting  Agreement"  means the  amended  and  restated  underwriting
      agreement  dated July 17, 2007  between  Zarlink and the  Underwriters  in
      respect of the Offering;

      "Zarlink" means Zarlink Semiconductor Inc.

1.2      Headings

The  headings,  the table of contents  and the division of this  Agreement  into
Articles and Sections are for convenience of reference only and shall not affect
the interpretation of this Agreement.

1.3      References

Unless otherwise specified in this Agreement:

      (a)   references  to Articles,  Sections,  and  Schedules are to Articles,
            Sections, and Schedules in this Agreement; and

      (b)   "hereto",  "herein",  "hereby",  "hereunder",  "hereof"  and similar
            expressions,  without reference to a particular provision,  refer to
            this Agreement.

1.4      Certain Rules of Interpretation

Unless otherwise specified in this Agreement:
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                                       6


      (a)   the singular includes the plural and vice versa; and

      (b)   references to any gender shall include references to all genders.

1.5      Day Not a Business Day

In the event that any day on or before  which any action is required to be taken
hereunder is not a Business  Day, then such action shall be required to be taken
at or before the requisite  time on the next  succeeding  day that is a Business
Day.

1.6      Applicable Law

This Agreement and the Subscription  Receipts shall be governed by and construed
in  accordance  with the laws of the Province of Ontario and the federal laws of
Canada applicable therein.

1.7      Conflict

In the event of a conflict or  inconsistency  between a provision in the body of
this Agreement and in the Subscription Receipt Certificate issued hereunder, the
provision  in the body of this  Agreement  shall  prevail  to the  extent of the
inconsistency.

1.8      Currency

All dollar amounts expressed in this Agreement and in the Subscription  Receipts
are in lawful money of Canada and all payments required to be made hereunder and
thereunder shall be made in Canadian dollars.

1.9      Severability

Each of the  provisions  in this  Agreement  is  distinct  and  severable  and a
declaration  of invalidity  or  unenforceability  of any such  provision or part
thereof by a court of  competent  jurisdiction  shall not affect the validity or
enforceability of any of the other provisions hereof.

1.10     Actions by the Underwriters

All steps which must or may be taken by the Underwriters in connection with this
Agreement,  shall be taken by the Lead  Underwriter,  on its own  behalf  and on
behalf  of the  Underwriters.  The  Lead  Underwriter,  shall  consult  with the
Underwriters  as necessary prior to taking any action on their behalf and shall,
in any event, advise the Underwriters of steps taken on their behalf.

                                   ARTICLE 2
                         ISSUE OF SUBSCRIPTION RECEIPTS

2.1      Issue of Subscription Receipts

      (a)   An  aggregate of 75,000  Subscription  Receipts (up to 86,250 if the
            Optioned  Subscription  Receipts are issued prior to the Acquisition
            Closing Date as a result of

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                                       7


            the exercise in full of the Over-Allotment Option) providing for the
            exchange of such Subscription Receipts in certain circumstances,  as
            provided  herein,  to acquire  an  aggregate  of 75,000  Convertible
            Debentures (up to 86,500 if the Optioned  Subscription  Receipts are
            issued  prior to the  Acquisition  Closing  Date as a result  of the
            exercise in full of the  Over-Allotment  Option) are hereby  created
            and authorized to be issued by Zarlink for a price per  Subscription
            Receipt equal to the Subscription Price, and a Subscription  Receipt
            Certificate in the form of one or more Global Subscription  Receipts
            evidencing  such  Subscription  Receipts  shall be executed by or on
            behalf of  Zarlink,  certified  by or on behalf of the  Subscription
            Receipt Agent and delivered to the  Underwriters  in accordance with
            this Agreement.

      (b)   Subject  to the  terms  and  conditions  hereof,  each  Subscription
            Receipt  will  be   automatically   exchanged  for  one   Underlying
            Convertible  Debenture without any further action on the part of the
            holder thereof and without  payment of additional  consideration  at
            the Issue Time.

2.2      Payment Acknowledgement

      (a)   As of  the  date  hereof,  the  Subscription  Receipt  Agent  hereby
            acknowledges   receipt  from  the  Underwriters  of  funds  by  wire
            transfer, in the aggregate amount of $o and confirms that such funds
            have been  deposited in a segregated  account in the name of Zarlink
            (the "Escrow  Account") or as otherwise  directed by Zarlink and the
            Lead Underwriter, on behalf of the Underwriters and will be invested
            in accordance  with Section 4.1 hereof and paid in  accordance  with
            Article 3 hereof;

      (b)   Zarlink hereby:

            (i)   acknowledges  that the amounts  received  by the  Subscription
                  Receipt Agent  pursuant to Section  2.2(a) in accordance  with
                  Zarlink's direction to the Lead Underwriter,  on behalf of the
                  Underwriters,  represents  payment in full by the Underwriters
                  of the aggregate  Subscription  Price for 75,000  Subscription
                  Receipts  less any fees  payable  to the  Underwriters  on the
                  Offering Closing Date;

            (ii)  irrevocably  directs the Subscription  Receipt Agent to retain
                  such amounts in  accordance  with the terms of this  Agreement
                  pending  payment of such amounts in accordance  with the terms
                  of this Agreement; and

            (iii) irrevocably   directs   the   Subscription    Receipt   Agent,
                  immediately  following  the  execution  and  delivery  of this
                  Agreement,  to certify and deliver to CDS, in accordance  with
                  written directions,  one or more Global Subscription  Receipts
                  representing  75,000  Subscription  Receipts registered in the
                  name of CDS (or its nominee).

      (c)   Upon  the  exercise  of  the   Over-Allotment   Option   before  the
            Acquisition  Closing Date,  the  Underwriters  shall transfer to the
            Subscription  Receipt Agent an amount equal to the product  obtained
            when (i) the number of Optioned  Subscription  Receipts  acquired by
            the Underwriters upon the exercise of the  Over-Allotment  Option is

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                                       8


            multiplied by (ii) the Subscription  Price, minus an amount equal to
            1.5%  of  the   aggregate   Subscription   Price  for  the  Optioned
            Subscription  Receipts.  Upon  receipt  thereof by the  Subscription
            Receipt  Agent,  these funds will be deposited in the Escrow Account
            to be dealt with in accordance  with the terms hereof.  Zarlink will
            then direct the Subscription Receipt Agent to certify and deliver to
            CDS or its nominee, a Global Subscription  Receipt  representing the
            Optioned Subscription Receipts acquired by the Underwriters upon the
            exercise of the Over-Allotment Option.

2.3      Terms of Subscription Receipts

Each Subscription  Receipt shall evidence the right of the holder to receive the
securities  and/or the  amounts  specified  in Sections  3.3 and 3.5 hereof,  as
applicable.

2.4      Fractional Subscription Receipts

No fractional  Subscription  Receipts shall be issued or otherwise  provided for
hereunder.

2.5      Register for Subscription Receipts

Zarlink  hereby  appoints the  Subscription  Receipt Agent as transfer agent and
registrar of the  Subscription  Receipts,  and Zarlink shall cause to be kept by
the Subscription  Receipt Agent at the Designated Office, a securities  register
in which shall be entered  the names and  addresses  of holders of  Subscription
Receipts  and the other  particulars,  prescribed  by law,  of the  Subscription
Receipts held by them.  Zarlink shall also cause to be kept by the  Subscription
Receipt Agent at the Designated  Office the register of transfers,  and may also
cause  to be  kept  by the  Subscription  Receipt  Agent,  branch  registers  of
transfers  in which  shall be  recorded  the  particulars  of the  transfers  of
Subscription Receipts, registered in that branch register of transfers.

2.6      Registers Open for Inspection

The registers  hereinbefore  referred to shall be open at all  reasonable  times
during regular business hours of the Subscription  Receipt Agent on any Business
Day for  inspection  by Zarlink,  the  Underwriters  or any  Receiptholder.  The
Subscription  Receipt Agent shall,  from time to time when requested so to do by
Zarlink,   furnish   Zarlink  with  a  list  of  the  names  and   addresses  of
Receiptholders  entered in the registers kept by the Subscription  Receipt Agent
and showing the number of Underlying  Convertible Debentures which might then be
acquired  upon the  exchange  of the  Subscription  Receipts  held by each  such
holder.

2.7      Receiptholder not a Debentureholder or a Shareholder

Holders of  Subscription  Receipts are not  Debentureholders  or shareholders or
creditors of the Corporation. Holders of Subscription Receipts are entitled only
to receive  Convertible  Debentures on exchange of their Subscription  Receipts,
which  will  occur   automatically   on  the   Acquisition   Closing   Date,  or
alternatively,  if the Subscription Receipts terminate,  holders of Subscription
Receipts are entitled only to receive the  Termination  Payment  (including  the
Termination Premium).

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2.8      Subscription Receipts to Rank Pari Passu

Each Subscription Receipt shall rank pari passu with respect to all other issued
and outstanding Subscription Receipts, regardless of the actual date of issue of
same.

2.9      Signing of Subscription Receipt Certificates

The  Subscription  Receipt  Certificates  shall be  signed  by two  officers  of
Zarlink.  The  signature of such  officers  may be  mechanically  reproduced  on
facsimile and Subscription Receipt certificates bearing such facsimile signature
shall,  subject  to  Section  2.10,  be  binding  on Zarlink as if they had been
manually  signed  by  such  officers.  Notwithstanding  that  an  officer  whose
signature appears on any Subscription Receipt Certificate as such officer may no
longer hold such position at the date of such Subscription  Receipt  Certificate
or at the date of certification or delivery  thereof,  any Subscription  Receipt
Certificate  signed as aforesaid  shall,  subject to Section  2.10, be valid and
binding upon Zarlink and the holder thereof shall be entitled to the benefits of
this Agreement.

2.10     Certification by the Subscription Receipt Agent

      (a)   No Subscription  Receipt  Certificate shall be issued or, if issued,
            shall be valid for any purpose or entitle the holder to the benefits
            hereof  until it has been  certified  by manual  signature  by or on
            behalf of the Subscription  Receipt Agent, and such certification by
            the  Subscription   Receipt  Agent  upon  any  Subscription  Receipt
            Certificate shall be conclusive evidence as against Zarlink that the
            Subscription  Receipt  Certificate so certified has been duly issued
            hereunder and that the holder is entitled to the benefits hereof.

      (b)   The certification of the Subscription  Receipt Agent on Subscription
            Receipt  Certificates  issued  hereunder shall not be construed as a
            representation  or warranty by the Subscription  Receipt Agent as to
            the  validity  of  this  Agreement  or  the   Subscription   Receipt
            Certificates   (except  the  due  certification   thereof)  and  the
            Subscription  Receipt  Agent  shall  in  no  respect  be  liable  or
            answerable for the use made of the Subscription Receipt Certificates
            or any of them or of the consideration  therefor except as otherwise
            specified   herein.   The   certificate  by  or  on  behalf  of  the
            Subscription  Receipt  Agent on  Subscription  Receipt  Certificates
            shall constitute a  representation  and warranty by the Subscription
            Receipt Agent that the said Subscription  Receipt  Certificates have
            been duly  certified  by or on behalf  of the  Subscription  Receipt
            Agent pursuant to the provisions of this Agreement.

2.11     Issue in Substitution for Subscription Receipt Certificates Lost, etc.

      (a)   In case any of the Subscription  Receipt  Certificates  shall become
            mutilated  or be lost,  destroyed  or  stolen,  Zarlink,  subject to
            applicable  laws and compliance  with Section  2.11(b) below,  shall
            issue and thereupon the Subscription Receipt Agent shall certify and
            deliver, a new Subscription Receipt Certificate of like tenor as the
            one  mutilated,  lost,  destroyed  or stolen in exchange  for and in
            place  of and  upon  cancellation  of  such  mutilated  Subscription
            Receipt  Certificate,  or in lieu of and in  substitution  for  such
            lost, destroyed or stolen Subscription Receipt Certificate,  and the
            substituted  Subscription  Receipt  Certificate  shall  be in a form
            approved by the

<PAGE>
                                       10


            Subscription  Receipt  Agent and shall be entitled  to the  benefits
            hereof and shall rank equally in accordance  with its terms with all
            other  Subscription  Receipt  Certificates  issued  or to be  issued
            hereunder.

      (b)   The  applicant  for  the  issue  of  a  new   Subscription   Receipt
            Certificate pursuant to this Section 2.11 shall bear the cost of the
            issue thereof and in case of loss,  destruction or theft shall, as a
            condition precedent to the issue thereof,  furnish to Zarlink and to
            the Subscription Receipt Agent such evidence of ownership and of the
            loss,  destruction or theft of the Subscription  Receipt Certificate
            so lost, destroyed or stolen as shall be satisfactory to Zarlink and
            to the Subscription Receipt Agent in their sole discretion, and such
            applicant  may also be required to furnish an  indemnity  and surety
            bond or security in amount and form  satisfactory to Zarlink and the
            Subscription Receipt Agent, in their sole discretion,  and shall pay
            the reasonable charges of Zarlink and the Subscription Receipt Agent
            in connection therewith.

2.12     Exchange of Subscription Receipt Certificates

      (a)   Subscription  Receipt  Certificates  may, upon  compliance  with the
            reasonable  requirements  of  the  Subscription  Receipt  Agent,  be
            exchanged   for  another   Subscription   Receipt   Certificate   or
            Subscription Receipt  Certificates  entitling the holder thereof to,
            in the  aggregate,  the same  number  of  Subscription  Receipts  as
            represented by the Subscription Receipt Certificates so exchanged.

      (b)   Subscription  Receipt  Certificates  may be surrendered for exchange
            only at the  Designated  Office of the  Subscription  Receipt  Agent
            during regular business hours of the Subscription Receipt Agent.

2.13     Charges for Exchange

Except as otherwise herein provided, the Subscription Receipt Agent may charge
to the holder requesting an exchange a reasonable sum for each new Subscription
Receipt Certificate issued in exchange for Subscription Receipt Certificate(s).
Payment of such charges and reimbursement of the Subscription Receipt Agent or
Zarlink for any and all stamp taxes or governmental or other charges required to
be paid shall be made by such holder as a condition precedent to such exchange.

2.14     Transfer and Registration of Subscription Receipts

      (a)   The  Subscription  Receipts may only be  transferred on the register
            kept at the Designated  Office of the Subscription  Receipt Agent by
            the  holder  or  its  legal  representatives  or its  attorney  duly
            appointed  by  an   instrument  in  writing.   Upon   surrender  for
            registration of transfer of Subscription  Receipts at the Designated
            Office of the  Subscription  Receipt Agent,  Zarlink shall issue and
            thereupon the Subscription Receipt Agent shall certify and deliver a
            new  Subscription  Receipt  Certificate of like tenor in the name of
            the  designated  transferee.  If  less  than  all  the  Subscription
            Receipts  evidenced by the Subscription  Receipt  Certificate(s)  so
            surrendered  are  transferred,  the transferor  shall be entitled to
            receive, in the same manner, a new Subscription  Receipt Certificate
            registered  in its name  evidencing  the

<PAGE>
                                       11


            Subscription Receipts not transferred.  However, notwithstanding the
            foregoing, Subscription Receipts shall only be transferred upon:

            (i)   payment to the Subscription  Receipt Agent of a reasonable sum
                  for each new Subscription Receipt Certificate issued upon such
                  transfer,  and reimbursement of the Subscription Receipt Agent
                  or  Zarlink  for any and all stamp  taxes or  governmental  or
                  other charges required to be paid in respect of such transfer;
                  and

            (ii)  such reasonable requirements as the Subscription Receipt Agent
                  may  prescribe  and as required  pursuant to the terms of this
                  Agreement,  and all such transfers shall be duly noted in such
                  register by the Subscription Receipt Agent.

      (b)   Zarlink and the  Subscription  Receipt Agent will deem and treat the
            registered owner of any Subscription Receipt as the beneficial owner
            thereof for all  purposes and neither  Zarlink nor the  Subscription
            Receipt Agent shall be affected by any notice to the contrary.

      (c)   The transfer  register in respect of Subscription  Receipts shall be
            closed at 5:00 p.m. (Toronto time) at the Designated  Office, on the
            earlier to occur of the Acquisition Closing Date and the Termination
            Date.  Trades  settling after the  Acquisition  Closing Date will be
            completed by the delivery of Convertible Debentures.

      (d)   The  Subscription  Receipt Agent will promptly advise Zarlink of any
            requested  transfer  of  Subscription  Receipts.   Zarlink  will  be
            entitled,  and may direct the Subscription  Receipt Agent, to refuse
            to recognize  any transfer,  or enter the name of any  transferee of
            any  Subscription  Receipts  on the  registers  referred  to in this
            Article  if  such  transfer  would  constitute  a  violation  of the
            securities  laws of any  jurisdiction  or the rules,  regulations or
            policies of any regulatory authority having  jurisdiction,  or would
            be contrary to the terms of the  constating  documents of Zarlink or
            this Agreement.

      (e)   Subject to the provisions of this  Agreement and  applicable  law, a
            Receiptholder  shall  be  entitled  to  the  rights  and  privileges
            attaching  to the  Subscription  Receipts.  Either  (a) the issue of
            Convertible  Debentures  as  provided  in  Section  3.3,  or (b) the
            payment of the  Termination  Payment,  less  applicable  withholding
            taxes,  if any, as provided in Section 3.5, all in  accordance  with
            the terms and  conditions  herein  contained,  shall  discharge  all
            responsibilities of Zarlink and the Subscription  Receipt Agent with
            respect to such  Subscription  Receipts and neither  Zarlink nor the
            Subscription  Receipt Agent shall be bound to inquire into the title
            of a Receiptholder.

      (f)   Without  limitation,  signatures must be guaranteed by an authorized
            officer  of a  Canadian  chartered  bank or a major  Canadian  trust
            company or by a  medallion  signature  guarantee  from a member of a
            recognized medallion signature guarantee program.

<PAGE>
                                       12


      (g)   The  Subscription  Receipt  Agent  shall  have no duty to  determine
            compliance of the transferor or transferee of Subscription  Receipts
            with applicable securities laws.

2.15     Global Subscription Receipt

      (a)   Unless  the  Book-Entry  Only  System  is  terminated,  Subscription
            Receipt  Certificates will only be issued in the form of one or more
            global subscription  receipt  certificates (the "Global Subscription
            Receipts")  which will be  registered  in the name of and  deposited
            with CDS or its nominee.

      (b)   Upon the  termination  of the  Book-Entry  Only  System,  owners  of
            beneficial  interests  in the  Subscription  Receipts  shall  not be
            entitled to have  Subscription  Receipts  registered in their names,
            shall not  receive or be entitled  to receive  Subscription  Receipt
            Certificates in definitive  form and shall not be considered  owners
            or  holders  thereof  under  this  Agreement  or  any   supplemental
            agreement   except  in   circumstances   where  (i)  required  under
            applicable  law,  (ii) the  Book-Entry  Only System ceases to exist,
            (iii) Zarlink determines, at its option, to terminate the Book-Entry
            Only  System,  and (iv)  Zarlink  or CDS  advises  the  Subscription
            Receipt  Agent  that CDS is no longer  willing  or able to  properly
            discharge its  responsibilities  as  depository  with respect to the
            Subscription  Receipts  and  Zarlink is unable to locate a qualified
            successor.  Beneficial interests in the Global Subscription Receipts
            will  be  represented  only  through  the  Book-Entry  Only  System.
            Transfers of Subscription  Receipts between CDS  participants  shall
            occur in  accordance  with CDS'  applicable  rules  and  procedures.
            Neither  Zarlink nor the  Subscription  Receipt Agent shall have any
            responsibility  or liability for any aspects of the records relating
            to or  payments  made by CDS,  or its  nominee,  on  account  of the
            beneficial  interests in the Subscription  Receipts.  Nothing herein
            shall prevent the owners of beneficial interests in the Subscription
            Receipts from voting such Subscription  Receipts using duly executed
            proxies.

      (c)   All references  herein to actions by, notices given or payments made
            to  Receiptholders  shall,  where  Subscription  Receipts  are  held
            through CDS, refer to actions taken by, or notices given or payments
            made  to,  CDS  upon   instruction  from  the  CDS  participants  in
            accordance  with its rules and  procedures.  For the purposes of any
            provision hereof requiring or permitting actions with the consent of
            or  at  the  direction  of  Receiptholders  evidencing  a  specified
            percentage of the aggregate Subscription Receipts outstanding,  such
            direction  or  consent  may be  given  by  holders  of  Subscription
            Receipts  acting  through  CDS  and  the  CDS  participants   owning
            Subscription  Receipts  evidencing  the requisite  percentage of the
            Subscription   Receipts.   The  rights  of  a  Receiptholder   whose
            Subscription  Receipts are held through CDS shall be exercised  only
            through CDS and the CDS  participants  and shall be limited to those
            established  by law and  agreements  between  such  holders  and CDS
            and/or  the CDS  participants  or  upon  instructions  from  the CDS
            participants. Each of the Subscription Receipt Agent and Zarlink may
            deal with CDS for all purposes (including the making of payments) as
            the authorized  representative of the respective  Receiptholders and
            such dealing with CDS shall constitute  satisfaction or performance,
            as applicable, of their respective obligations hereunder.

<PAGE>
                                       13


      (d)   For so long as  Subscription  Receipts  are held through CDS, if any
            notice  or  other   communication   is   required  to  be  given  to
            Receiptholders,  the  Subscription  Receipt  Agent  will  give  such
            notices and communications to CDS.

      (e)   Upon the termination of the Book-Entry Only System on the occurrence
            of  one of the  conditions  specified  in  Subsection  2.15(b)  with
            respect to the Subscription Receipts, the Subscription Receipt Agent
            shall notify all  applicable  owners of beneficial  interests in the
            Subscription Receipts (through CDS if available) of the availability
            of definitive  Subscription Receipt Certificates.  Upon surrender by
            CDS of  the  certificate(s)  representing  the  Global  Subscription
            Receipts  and  receipt of new  registration  instructions  from CDS,
            Zarlink shall issue and the Subscription Receipt Agent shall certify
            and deliver  the  aggregate  number of  Subscription  Receipts  then
            outstanding   in  the  form  of  definitive   Subscription   Receipt
            Certificates  to the  holders  thereof  in  accordance  with the new
            registration  instructions  and  thereafter,  the  registration  and
            transfer  of such  Subscription  Receipts  will be  governed  by the
            remaining Sections of this Agreement.

2.16     Proceeds to be Placed in Escrow

Upon the  issuance  of  Subscription  Receipts,  the  Escrowed  Funds in respect
thereof  shall  be  delivered  by  the  Lead  Underwriter,   on  behalf  of  the
Underwriters,  to the Subscription Receipt Agent by electronic transfer of funds
into an Escrow Account as directed by the Subscription  Receipt Agent to be held
pursuant to the terms hereof.  The  Subscription  Receipt Agent hereby agrees to
hold the same as agent on behalf of  Zarlink  and to invest,  disburse  and deal
with the same as provided herein.

2.17     Subscription Receipts and Trading

      (a)   Zarlink confirms that the  Subscription  Receipts will be listed for
            trading on the TSX.

      (b)   Notwithstanding any provision of this Agreement,  in order to comply
            with the policies of the TSX, Zarlink agrees to the following:

            (i)   when  Zarlink  reasonably  expects the  Acquisition  to close,
                  Zarlink  will,  without  delay,  provide the TSX with  written
                  notice to that  effect  specifying  the  expected  Acquisition
                  Closing Date.  At the Issue Time,  the  Subscription  Receipts
                  will  automatically  convert into the  Underlying  Convertible
                  Debentures; and,

            (ii)  in the event of a Termination Event, Zarlink will, on or prior
                  to the Termination Date, give notice to the TSX and holders of
                  Subscription  Receipts on such  Termination  Date will be paid
                  the amounts set forth in Section 3.5 of this  Agreement on the
                  third Business Day following the Termination Date.

      (c)   Zarlink will  request that the TSX halt trading of the  Subscription
            Receipts  at 8:00 a.m.  (Toronto  time) on the  Acquisition  Closing
            Date.

<PAGE>
                                       14


2.18     Right of Rescission

      (a)   If (i) the Prospectus contains a misrepresentation  (as such term is
            defined   in   the   Securities   Act   (Ontario))   and  it  was  a
            misrepresentation  on the date hereof,  purchasers  of  Subscription
            Receipts to whom the  Prospectus  was sent or delivered and who were
            the original purchasers of the Subscription  Receipts (the "Original
            Purchasers"), or (ii) the Prospectus is not delivered to an Original
            Purchaser,  the affected Original Purchaser(s) shall have a right of
            action against Zarlink for rescission,  exerciseable on notice given
            to Zarlink not more than 180 days  subsequent  to the date hereof to
            receive a refund  of the  Subscription  Price  paid by them for each
            Subscription  Receipt  purchased  by them.  The right of action  for
            rescission is only available to an Original  Purchaser  either while
            it is a holder of the Subscription Receipts purchased or while it is
            a holder of the  Underlying  Convertible  Debentures  issuable  upon
            surrender of such Subscription Receipts.

      (b)   In no event shall  Zarlink be liable  under this Section 2.18 if the
            Original   Purchaser   purchased  the  Subscription   Receipts  with
            knowledge of the misrepresentation.

2.19     Cancellation of Surrendered Subscription Receipt Certificates

All Subscription  Receipt  Certificates  surrendered to the Subscription Receipt
Agent pursuant to Sections 2.11,  2.12, 2.14, 3.3, 3.5 and 5.1 shall be returned
to or  received  by the  Subscription  Receipt  Agent for  cancellation  and, if
required by Zarlink, the Subscription Receipt Agent shall furnish Zarlink with a
cancellation  certificate  identifying the Subscription  Receipt Certificates so
cancelled and the number of Subscription Receipts evidenced thereby.

                                   ARTICLE 3
          ISSUANCE OF UNDERLYING CONVERTIBLE DEBENTURES OR TERMINATION
                          OF THE SUBSCRIPTION RECEIPTS

3.1      Notice of Acquisition

If the Acquisition Closing Date occurs on or before the Deadline,  Zarlink:  (a)
shall  forthwith (and in any event no later than the  Acquisition  Closing Date)
cause a notice of the same executed by or on behalf of Zarlink,  to be delivered
to the  Subscription  Receipt  Agent  (substantially  in the  form  attached  as
Schedule  B), and (b) shall issue a press  release  disclosing  the  Acquisition
Closing Date and that the Underlying  Convertible Debentures have been issued to
Receiptholders  through the  facilities of CDS and that  Book-Entry  Only System
customer  confirmations will be entered on the second Business Day following the
Acquisition Closing Date. The notice delivered to the Subscription Receipt Agent
shall specify the amounts to be released pursuant to Section 3.2 and Section 3.3
and to whom such amounts should be released.

3.2      Release of Funds on Acquisition Closing Date

If the Acquisition Closing Date occurs on or before the Deadline, Zarlink shall:
(i) be entitled to receive  from the  Subscription  Receipt  Agent the  Escrowed
Funds;  (ii) pay or cause to be paid to the Lead  Underwriter,  on behalf of the
Underwriters,  an amount equal to 1.5% of the Proceeds. The Subscription Receipt
Agent shall deliver the funds referred to in (i) of this Section 3.2 to Zarlink,
and

<PAGE>
                                       15


Zarlink  shall  deliver or cause to be  delivered  to the Lead  Underwriter,  on
behalf of the Underwriters,  the amount referred to in (ii) of this Section 3.2,
forthwith  upon the  delivery  of the notice and press  release  referred  to in
Section 3.1 and in any event not later than the Issue Time. Any notice delivered
to the Subscription  Receipt Agent shall be received by the Subscription Receipt
Agent no later than 12:00 p.m.  (Toronto time) on the day on which the funds are
to be released.  Any notice  received by the  Subscription  Receipt  Agent after
12:00 p.m. or received on a non-Business  Day shall be deemed to have been given
prior to 12:00 p.m. on the next Business Day.

3.3      Issue of Underlying Convertible Debentures

      (a)   If the  Acquisition  Closing Date occurs on or before the  Deadline,
            the Underlying  Convertible Debentures shall be, and shall be deemed
            to be,  automatically issued at the Issue Time to the Receiptholders
            pursuant to the Trust  Indenture  notwithstanding  that a Book-Entry
            Only System customer  confirmation in a holder's account may not yet
            have been so entered,  and each  Receiptholder  shall  automatically
            receive,  without any further action required by such  Receiptholder
            and  without  the  payment  of  any  additional  consideration,  one
            Convertible  Debenture  for each  Subscription  Receipt held by such
            Receiptholder, and such Receiptholder shall be deemed to have become
            the holder of record of such  Underlying  Convertible  Debentures at
            the Issue Time.

      (b)   Upon the issuance or deemed  issuance of the Underlying  Convertible
            Debentures,   Zarlink,  subject  to  the  provisions  of  the  Trust
            Indenture, shall cause to be entered and issued, as the case may be,
            to the  Person or  Persons  in whose  name or names  the  Underlying
            Convertible  Debentures  have been issued,  a Book-Entry Only System
            customer confirmation.

      (c)   Effective  immediately after the Underlying  Convertible  Debentures
            have been, or have been deemed to be, issued as contemplated by this
            Section 3.3 and Zarlink has caused a Book-Entry Only System customer
            confirmation  to be  entered as  provided  in  Section  3.3(b),  the
            Subscription Receipts relating thereto shall be void and of no value
            or effect.

      (d)   The  Subscription   Receipt  Agent  shall  not  be  responsible  for
            calculating the amounts owing under Section 3.2 and Section 3.3, but
            shall be entitled to rely  absolutely  on the written  direction  of
            Zarlink  specifying  the payments to be made pursuant to Section 3.2
            and Section 3.3.

3.4      Fractions

Notwithstanding  anything herein contained,  Zarlink shall not be required, upon
the  exchange  or  deemed  exchange  of  the  Subscription  Receipts,  to  issue
Convertible  Debentures  in  principal  amounts  other than $ 1,000 and integral
multiples  thereof or to  distribute  certificates  which  evidence  Convertible
Debentures  in  principal  amounts  other  than  $1,000 and  integral  multiples
thereof.

<PAGE>
                                       16


3.5      Payment on Termination

      (a)   If a Termination  Event occurs,  Zarlink shall forthwith  notify the
            Lead   Underwriter,   on  behalf  of  the   Underwriters,   and  the
            Subscription  Receipt Agent and shall issue a press release  setting
            forth the Termination Date.

      (b)   If  a  Termination  Event  occurs,  the  rights  evidenced  by  each
            Subscription Receipt shall be automatically terminated and cancelled
            and each  Receiptholder  shall only be entitled  to receive,  on the
            third  Business Day  following the  Termination  Date, a Termination
            Payment.

      (c)   The  Termination  Payment shall be satisfied by the Escrowed  Funds;
            any amount not satisfied by the Escrowed Funds shall be satisfied by
            Zarlink who shall  deposit an amount equal to such  shortfall in the
            Escrow  Account  prior to the time that the amount is payable to the
            Receiptholders  under this  Section 3.5.  The  Subscription  Receipt
            Agent shall only make payments  under this Section 3.5 to the extent
            that the  Escrowed  Funds and the monies  which have been  deposited
            with it pursuant to this Section 3.5 are sufficient.

      (d)   If a  Termination  Event  occurs,  registers  shall be closed at the
            close of business on the Termination  Date (subject to settlement in
            accordance with this Section 3.5).

      (e)   The  obligation  to make the  payment  of the  amount  specified  in
            Section  3.5(b)  shall be  satisfied  by  mailing  payment by cheque
            payable to the registered holder of the Subscription  Receipt at its
            registered  address or by making a wire  transfer for the account of
            such holder through CDS.

      (f)   Upon the mailing or delivery of any cheque or the making of any wire
            transfer as provided in Section 3.5(e) (and provided any such cheque
            has been honoured for payment,  if presented for payment  within six
            months of the date thereof) all rights evidenced by the Subscription
            Receipts  relating thereto shall be satisfied and such  Subscription
            Receipts shall be void and of no value or effect.

      (g)   Zarlink (i) shall be entitled to deduct and  withhold  from  amounts
            payable  under this  Agreement to holders of  Subscription  Receipts
            that are  non-residents  of Canada (within the meaning of the Income
            Tax Act (Canada) ("Non-Resident  Holders") and any applicable income
            tax  convention),  such amounts  required by law,  whether  foreign,
            federal,  provincial or otherwise, to be deducted or withheld for or
            on account of income tax or other taxes levied, collected,  withheld
            or assessed by any governmental  authority  ("Withholding  Amount"),
            (ii)  shall  remit  the   Withholding   Amount  to  the  appropriate
            governmental authority on a timely basis, and (iii) shall provide to
            Non-Resident  Holders a copy of the receipt of payment or such other
            proof of remittance issued by the authority.  The Withholding Amount
            shall be deemed to have been paid to the Non-Resident Holders on the
            due dates of the amounts payable under this Agreement, provided that
            such amount is remitted to the appropriate governmental authority on
            a timely basis. In particular, Zarlink will

<PAGE>
                                       17


            deduct  and  withhold  from  the  Termination   Payment  payable  to
            Non-Resident  Holders  an  amount  equal  to 25% of the  Termination
            Premium.


                                   ARTICLE 4
              INVESTMENT OF ESCROWED FUNDS AND PAYMENT OF INTEREST

4.1      Investment of Escrowed Funds

Pending disbursement of the Escrowed Funds, the Subscription Receipt Agent shall
hold,  invest and reinvest the Escrowed Funds on behalf of Zarlink in short-term
obligations  of, or  guaranteed  by, the  Government  of Canada,  a province  of
Canada,  or a Canadian  chartered  bank (which may include an  Affiliate  of the
Subscription  Receipt Agent) or corporate  commercial paper,  provided that such
obligation is rated at least R1 (middle) by Dominion Bond Rating Service Limited
or an  equivalent  rating  service,  as  directed  in writing by  Zarlink.  Such
direction  to the  Subscription  Receipt  Agent  shall be provided by Zarlink no
later than 9:00 a.m.  (Toronto time) on the day on which the investment is to be
made. Any direction  received by the Subscription  Receipt Agent after 9:00 a.m.
or on a day which is not a  Business  Day,  shall be  deemed to have been  given
prior to 9:00 a.m. on the next Business  Day. If at any time the Escrowed  Funds
include cash that is not invested and Zarlink has not provided directions to the
Subscription  Receipt Agent to invest such cash, the Subscription  Receipt Agent
shall  deposit  all  such  uninvested  cash in an  account,  a term  deposit  or
guaranteed  investment  certificates  of the  Subscription  Receipt  Agent  or a
Canadian  chartered bank, having either no fixed term or no irrevocable term and
which pays interest on the daily balance.  The Subscription  Receipt Agent shall
have no liability  with respect to any loss in value of investments as permitted
to be made  hereunder.  In making any payment,  the  Subscription  Receipt Agent
shall  not be  liable  for any  loss  sustained  from  early  termination  of an
investment if such termination is required to make a payment hereunder.

4.2      Segregation of Escrowed Funds

The Escrowed Funds received by the Subscription Receipt Agent and any securities
or  other  instruments  received  by the  Subscription  Receipt  Agent  upon the
investment or  reinvestment  of such  Escrowed  Funds shall be received as agent
for, and shall be segregated and kept apart by, the  Subscription  Receipt Agent
as agent for Zarlink.

4.3      Third Party Interest

Zarlink hereby represents to the Subscription  Receipt Agent that any account to
be opened by, or  interest to be held by, the  Subscription  Receipt  Agent,  in
connection with this Agreement, for or to the credit of Zarlink, is not intended
to be used by or on behalf of any third party.

                                   ARTICLE 5
                         RIGHTS AND COVENANTS OF ZARLINK

5.1      Optional Purchases by Zarlink

Subject to applicable laws, Zarlink may, from time to time,  purchase by private
contract or otherwise any of the Subscription Receipts.

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                                       18


5.2      General Covenants

      (a)   Zarlink  covenants with the Subscription  Receipt Agent and the Lead
            Underwriter,  on  behalf  of the  Underwriters,  that so long as any
            Subscription Receipts remain outstanding:

            (i)   it will use its best efforts to maintain its existence;

            (ii)  it will make all requisite  filings under applicable  Canadian
                  and  United  States  securities  legislation  including  those
                  necessary to remain a reporting  issuer not in default in each
                  of  the  provinces  of  Canada  in  which  it is  currently  a
                  reporting issuer;

            (iii) it will announce by press release the Acquisition Closing Date
                  or the Termination Date, and any new Outside Date, as the case
                  may be, in accordance with the provisions hereof; and

            (iv)  it will  perform and carry out all of the acts or things to be
                  done by it as provided in this Agreement.

      (b)   In addition,  Zarlink covenants with the Subscription  Receipt Agent
            and the Lead Underwriter, on behalf of the Underwriters,  that, from
            the date hereof to the earlier of the  Acquisition  Closing  Date or
            Termination Date, it will not do any of the following:

            (i)   subdivide or redivide  its  outstanding  common  shares into a
                  greater number of common shares;

            (ii)  reduce,  combine or consolidate the outstanding  common shares
                  into a smaller number of common shares;

            (iii) issue common shares to holders of all or substantially  all of
                  the  outstanding  common  shares  by  way  of  a  dividend  or
                  distribution (other than the issue of common shares to holders
                  of common shares who have elected to receive  dividends in the
                  form of common  shares in lieu of cash  dividends  paid in the
                  ordinary course on the common shares);

            (iv)  fix a record  date for the  issuance  of  options,  rights  or
                  warrants  to all  or  substantially  all  the  holders  of its
                  outstanding common shares;

            (v)   fix a record date for the making of a  distribution  to all or
                  substantially all the holders of its outstanding common shares
                  of (i) common  shares of any class  other than  common  shares
                  distributed  to holders of common  shares who have  elected to
                  receive dividends in the form of such common shares in lieu of
                  dividends paid in the ordinary course, (ii) rights, options or
                  warrants, (iii) evidences of its indebtedness,  or (iv) assets
                  (excluding  dividends  or  distributions  paid in the ordinary
                  course); or

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                                       19


            (vi)  undertake  a  reorganization  of Zarlink  or a  consolidation,
                  amalgamation,  arrangement or merger of Zarlink with any other
                  Person  or  other  entity,  or a  sale  or  conveyance  of the
                  property and assets of Zarlink as an entirety or substantially
                  as an entirety to any other Person or entity or a liquidation,
                  dissolution or winding-up of Zarlink.

5.3      Subscription Receipt Agent's Remuneration, Expenses and Indemnification

      (a)   Zarlink  covenants  that it  will  pay to the  Subscription  Receipt
            Agent, from time to time,  reasonable  remuneration for its services
            hereunder and will pay or reimburse the  Subscription  Receipt Agent
            upon its  request for all  reasonable  expenses,  disbursements  and
            advances  incurred or made by the Subscription  Receipt Agent in the
            administration  or  execution  of  this  Agreement   (including  the
            reasonable compensation and the disbursements of its counsel and all
            other  advisers  and  assistants  not  regularly in its employ) both
            before any default  hereunder and thereafter until all duties of the
            Subscription  Receipt  Agent  hereunder  shall be finally  and fully
            performed,  except any such expense,  disbursement or advance as may
            arise  out  of or  result  from  the  Subscription  Receipt  Agent's
            negligence,  misconduct or bad faith. Any amount owing hereunder and
            remaining  unpaid  after 30 days  from the  invoice  date  will bear
            interest  at the  then  current  rate  charged  by the  Subscription
            Receipt  Agent  against  unpaid  invoices  and shall be  payable  on
            demand.

      (b)   Zarlink  hereby  indemnifies  and saves  harmless  the  Subscription
            Receipt Agent and its officers, directors, employees and agents from
            and against any and all liabilities,  losses, costs, claims, actions
            or demands  whatsoever which may be brought against the Subscription
            Receipt Agent or which it may suffer or incur as a result or arising
            out of the  performance  of its  duties and  obligations  under this
            Agreement,  save only in the event of the negligence,  misconduct or
            bad faith of the  Subscription  Receipt Agent.  It is understood and
            agreed that this  indemnification  shall survive the  termination or
            the discharge of this Agreement or the resignation or replacement of
            the Subscription Receipt Agent.

5.4      Performance of Covenants by Subscription Receipt Agent

If  Zarlink  shall  fail  to  perform  any of its  covenants  contained  in this
Agreement,  the Subscription Receipt Agent may notify the Receiptholders and the
Lead Underwriter, on behalf of the Underwriters,  of such failure on the part of
Zarlink  or may  itself  perform  any of the  said  covenants  capable  of being
performed by it, but shall be under no obligation  to perform said  covenants or
to notify the  Receiptholders  of such  performance  by it. All sums expended or
advanced by the  Subscription  Receipt  Agent in so doing shall be  repayable as
provided in Section  5.3.  No such  performance,  expenditure  or advance by the
Subscription  Receipt Agent shall relieve Zarlink of any default hereunder or of
its continuing obligations under the covenants contained herein.

5.5      Accounting

The  Subscription  Receipt  Agent shall  maintain  accurate  books,  records and
accounts of the transactions  effected or controlled by the Subscription Receipt
Agent hereunder and the receipt,

<PAGE>
                                       20


investment,  reinvestment  and  disbursement  of the Escrowed  Funds,  and shall
provide  to  Zarlink  and  the  Underwriters   records  and  statements  thereof
periodically  upon written  request.  Zarlink  shall have the right to audit any
such books, records, accounts and statements.

5.6      Payments by Subscription Receipt Agent

In the event that any funds to be disbursed by the Subscription Receipt Agent in
accordance  herewith are received by the Subscription  Receipt Agent in the form
of an uncertified  cheque or cheques,  the  Subscription  Receipt Agent shall be
entitled to delay the time for  disbursement  of such funds hereunder until such
uncertified  cheque or cheques have cleared in the ordinary course the financial
institution upon which the same are drawn.  The Subscription  Receipt Agent will
disburse monies  according to this Agreement only to the extent that monies have
been deposited with it.

5.7      Regulatory Matters

Zarlink shall file all such documents,  notices and  certificates  and take such
steps and do such things as may be necessary under applicable securities laws to
permit  the  issuance  of  the  Convertible   Debentures  in  the  circumstances
contemplated  by Section  3.3 such that (i) such  issuance  will comply with the
prospectus and registration  requirements of applicable  securities laws in each
of the provinces of Canada and in the United  States of America,  (ii) the first
trade in  Convertible  Debentures  other than from the holdings of a Person who,
alone or in combination with others, hold sufficient  Convertible  Debentures to
materially  affect  control of Zarlink will not be subject to, or will be exempt
from, the prospectus or registration  requirements of applicable securities laws
in each of the provinces of Canada and the United  States of America,  and (iii)
the conversion of the Convertible  Debentures into common shares of Zarlink will
not be subject  to, or will be exempt  from,  the  prospectus  and  registration
requirements  of applicable  securities  laws of each of the provinces of Canada
and the United States of America.

5.8      Anti-Money Laundering and Privacy

The  Subscription  Receipt Agent shall retain the right not to act and shall not
be liable for refusing to act if, due to a lack of  information or for any other
reason whatsoever,  the Subscription Receipt Agent, in its sole judgment, acting
reasonably, determines that such act might cause it to be in non-compliance with
any applicable anti-money laundering or anti-terrorist  legislation,  regulation
or  guideline.  Further,  should the  Subscription  Receipt  Agent,  in its sole
judgment,  acting  reasonably,  determine at any time that its acting under this
Agreement  has  resulted  in its  being in  non-compliance  with any  applicable
anti-money  laundering or anti-terrorist  legislation,  regulation or guideline,
then it shall have the right to resign on ten days' prior written notice sent to
all parties  provided that (i) the  Subscription  Receipt Agent's written notice
shall describe the circumstances of such  non-compliance;  and (ii) that if such
circumstances  are rectified to the  Subscription  Receipt Agent's  satisfaction
within such ten day period, then such resignation shall not be effective.

The parties  acknowledge that the Subscription  Receipt Agent may, in the course
of providing services hereunder, collect or receive financial and other personal
information about such parties and/or their representatives,  as individuals, or
about other  individuals  related to the  subject  matter  hereof,  and use such
information for the following purposes:

<PAGE>
                                       21


      (a)   to provide the  services  required  under this  Agreement  and other
            services that may be requested from time to time;

      (b)   to  help  the  Subscription   Receipt  Agent  manage  its  servicing
            relationships with such individuals;

      (c)   to meet  the  Subscription  Receipt  Agent's  legal  and  regulatory
            requirements; and

      (d)   if Social Insurance Numbers or Social Security Numbers are collected
            by the  Subscription  Receipt Agent, to perform tax reporting and to
            assist in  verification  of an  individual's  identity  for security
            purposes.

Each party  acknowledges  and agrees  that the  Subscription  Receipt  Agent may
receive,  collect,  use and  disclose  personal  information  provided  to it or
acquired by it in the course of this Agreement for the purposes  described above
and,  generally,  in the manner and on the terms  described in its privacy code,
which the Subscription Receipt Agent shall make available on its website or upon
request,  including revisions thereto.  Further, each party agrees that it shall
not  provide  or cause to be  provided  to the  Subscription  Receipt  Agent any
personal  information  relating  to an  individual  who is not a  party  to this
Agreement unless that party has assured itself that such individual  understands
and has consented to the aforementioned uses and disclosures.

                                    ARTICLE 6
                                   ENFORCEMENT

6.1      Suits by Receiptholders

Subject to the powers of Receiptholders exercisable by special resolutions,  all
or any of the rights conferred upon any Receiptholder by any of the terms of the
Subscription  Receipts or of this Agreement,  or of both, may be enforced by the
Receiptholder  by  appropriate  proceedings  but without  prejudice to the right
which is hereby conferred upon the Subscription  Receipt Agent to proceed in its
own name to  enforce  each and all of the  provisions  contained  herein for the
benefit of the Receiptholders.

                                   ARTICLE 7
                           MEETINGS OF RECEIPTHOLDERS

7.1      Right to Convene Meetings

The Subscription Receipt Agent may, at any time and from time to time, and shall
on receipt of a written request of Zarlink or of a  Receiptholders'  Request and
upon being funded and  indemnified to its reasonable  satisfaction by Zarlink or
by the  Receiptholders  signing such  Receiptholders'  Request  against the cost
which may be  incurred  in  connection  with the  calling  and  holding  of such
meeting,  convene  a  meeting  of  the  Receiptholders.  In  the  event  of  the
Subscription  Receipt Agent failing to so convene a meeting  within fifteen (15)
days after  receipt of such written  request of Zarlink or such  Receiptholders'
Request  and  funding  and  indemnity  given  as  aforesaid,   Zarlink  or  such
Receiptholders, as the case may be, may convene such meeting. Every such meeting
shall be held in Ottawa,  Ontario or at such other place as may be determined by
the Subscription Receipt Agent and approved by Zarlink.

<PAGE>
                                       22


7.2      Notice

At least ten (10) days' prior notice of any meeting of  Receiptholders  shall be
given to the  Receiptholders  in the manner  provided  for in Section 10.2 and a
copy of such  notice  shall be sent by mail to the  Subscription  Receipt  Agent
(unless the meeting has been called by the  Subscription  Receipt  Agent) and to
Zarlink (unless the meeting has been called by Zarlink). Such notice shall state
the date (which should be a Business Day) and time when, and the place where the
meeting,  is to be held,  and shall  state  briefly  the  general  nature of the
business to be  transacted  thereat and shall  contain  such  information  as is
reasonably necessary to enable the Receiptholders to make a reasoned decision on
the  matter,  but it shall not be  necessary  for any such notice to set out the
terms of any  resolution to be proposed or any of the provisions of this Article
7.

7.3      Chairperson

An  individual  (who need not be a  Receiptholder)  designated in writing by the
Subscription  Receipt  Agent  shall  be  chairperson  of the  meeting  and if no
individual is so  designated,  or if the individual so designated is not present
within  fifteen (15) minutes from the time fixed for the holding of the meeting,
the  Receiptholders  present in person or by proxy shall choose some  individual
present to be chairperson.

7.4      Quorum

Subject to the provisions of Section 7.11, at any meeting of the  Receiptholders
a quorum shall consist of not less than two (2) Receiptholders present in person
or by proxy and holding 25% of the then outstanding  Subscription Receipts. If a
quorum of the  Receiptholders  shall not be present  within  thirty (30) minutes
from the time fixed for holding any  meeting,  the  meeting,  if summoned by the
Receiptholders  or on a Receiptholders'  Request shall be dissolved;  but in any
other  case the  meeting  shall be  adjourned  to the same day in the next  week
(unless  such day is not a Business  Day, in which case it shall be adjourned to
the next following Business Day) at the same time and place and no notice of the
adjournment  need be given.  Any business may be brought before or dealt with at
an adjourned meeting which might have been dealt with at the original meeting in
accordance  with the notice calling the same. No business shall be transacted at
any meeting unless a quorum be present at the commencement of such business.  At
the  adjourned  meeting the  Receiptholders  present in person or by proxy shall
form a quorum and may transact the business for which the meeting was originally
convened  notwithstanding  that  they  may not  hold at  least  25% of the  then
outstanding Subscription Receipts.

7.5      Power to Adjourn

The  chairperson  of any  meeting  at which a quorum  of the  Receiptholders  is
present may, with the consent of the  Receiptholders  present,  adjourn any such
meeting and no notice of such adjournment  need be given except such notice,  if
any, as the meeting may prescribe.

7.6      Show of Hands

Every  question  submitted to a meeting shall be decided in the first place by a
majority  of the votes  given on a show of hands  except that votes on a special
resolution  shall be  given  in the  manner  hereinafter  provided.  At any such
meeting, unless a poll is duly demanded as herein provided, a

<PAGE>
                                       23


declaration  by the  chairperson  that a resolution  has been carried or carried
unanimously  or by a particular  majority or lost or not carried by a particular
majority shall be conclusive evidence of the fact.

7.7      Poll and Voting

On every special  resolution,  and on any other question  submitted to a meeting
and after a vote by show of hands when demanded by the  chairperson or by one or
more of the Receiptholders  acting in person or by proxy and holding at least 5%
of the  Subscription  Receipts then  outstanding,  a poll shall be taken in such
manner as the chairperson  shall direct.  Questions other than those required to
be determined by special  resolution shall be decided by a majority of the votes
cast on the poll.

On a show of hands, every Person who is present and entitled to vote, whether as
a  Receiptholder  or as proxy for one or more  absent  Receiptholders,  or both,
shall  have one  vote.  On a poll,  each  Receiptholder  present  in  person  or
represented by a proxy duly appointed by instrument in writing shall be entitled
to one vote in  respect  of each  Convertible  Debenture  that  such  person  is
entitled  to  receive  pursuant  to the  Subscription  Receipt(s)  then  held or
represented by such person. A proxy need not be a Receiptholder.  In the case of
joint holders,  any one of them present in person or by proxy at the meeting may
vote in the  absence of the other or  others,  but in case more than one of them
shall be present in person or by proxy,  they shall vote  together in respect of
Subscription   Receipts  of  which  they  are  joint  registered  holders.   The
chairperson  of any meeting shall be entitled,  both on a show of hands and on a
poll, to vote in respect of the Subscription  Receipts, if any, that are held or
represented by the chairperson.

7.8      Regulations

The Subscription Receipt Agent, or Zarlink with the approval of the Subscription
Receipt  Agent,  may from  time to time  make and from  time to time  vary  such
regulations as it shall think fit for:

      (a)   the  setting  of  the  record  date  for a  meeting  of  holders  of
            Subscription Receipts for the purpose of determining  Receiptholders
            entitled to receive notice of and vote at such meeting;

      (b)   the issue of voting certificates by any bank, trust company or other
            depositary  satisfactory to the  Subscription  Receipt Agent stating
            that the Subscription  Receipt  Certificates  specified therein have
            been  deposited with it by a named Person and will remain on deposit
            until after the meeting,  which voting certificate shall entitle the
            Persons named therein to be present and vote at any such meeting and
            at any  adjournment  thereof  or to  appoint a proxy or  proxies  to
            represent  them and vote  for  them at any such  meeting  and at any
            adjournment  thereof in the same  manner and with the same effect as
            though the  Persons so named in such  voting  certificates  were the
            actual holders of the Subscription  Receipt  Certificates  specified
            therein;

      (c)   the  deposit  of  voting  certificates  and  instruments  appointing
            proxies at such place and time as the  Subscription  Receipt  Agent,
            Zarlink or the  Receiptholders,  convening the meeting,  as the case
            may be, may in the notice convening the meeting direct;

<PAGE>
                                       24


      (d)   the  deposit  of  voting  certificates  and  instruments  appointing
            proxies  at some  approved  place or places  other than the place at
            which the  meeting is to be held and  enabling  particulars  of such
            instruments appointing proxies to be mailed or telecopied before the
            meeting to Zarlink or to the Subscription Receipt Agent at the place
            where  the  same is to be held  and for the  voting  of  proxies  so
            deposited as though the instruments  themselves were produced at the
            meeting;

      (e)   the form of the  instrument  of proxy  and the  manner  in which the
            instrument of proxy must be executed; and

      (f)   generally  for the  calling of meetings  of  Receiptholders  and the
            conduct of business thereat.

Any  regulations  so made shall be binding and  effective and the votes given in
accordance  therewith  shall  be  valid  and  shall  be  counted.  Save  as such
regulations may provide, the only Persons who shall be recognized at any meeting
as a  Receiptholder,  or be  entitled  to vote or be present  at the  meeting in
respect  thereof  (subject to Section  7.9),  shall be  Receiptholders  or their
counsel, or duly appointed proxies of Receiptholders.

7.9      Zarlink and Subscription Receipt Agent may be Represented

Zarlink and the  Subscription  Receipt  Agent,  by their  respective  authorized
agents,  and the counsel for Zarlink and for the Subscription  Receipt Agent may
attend any meeting of the Receiptholders,  but shall have no vote as such unless
in their capacity as Receiptholder or a proxy holder.

7.10     Powers Exercisable by Special Resolution

In addition to all other powers  conferred upon them by any other  provisions of
this Agreement or by law, the Receiptholders at a meeting shall,  subject to the
provisions of Section 7.11, have the power, subject to all applicable regulatory
and exchange approvals, exercisable from time to time by special resolution:

      (a)   to agree to any modification,  abrogation, alteration, compromise or
            arrangement  of the  rights of  Receiptholders  or the  Subscription
            Receipt Agent  (subject to the consent of the  Subscription  Receipt
            Agent)  against  Zarlink or against its  undertaking,  property  and
            assets or any part  thereof  whether  such  rights  arise under this
            Agreement or the Subscription Receipts or otherwise;

      (b)   to amend, alter or repeal any special  resolution  previously passed
            or sanctioned by the Receiptholders;

      (c)   to direct or to authorize the Subscription  Receipt Agent to enforce
            any of the  covenants  on the  part  of  Zarlink  contained  in this
            Agreement  or the  Subscription  Receipts  or to enforce  any of the
            rights of the Receiptholders in any manner specified in such special
            resolution or to refrain from enforcing any such covenant or right;

      (d)   to waive, and to direct the Subscription Receipt Agent to waive, any
            default on the part of Zarlink in complying  with any  provisions of
            this Agreement or the

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                                       25


            Subscription Receipts either  unconditionally or upon any conditions
            specified in such special resolution;

      (e)   to restrain any  Receiptholder  from taking or instituting any suit,
            action or proceeding  against  Zarlink for the enforcement of any of
            the  covenants  on the  part of  Zarlink  in this  Agreement  or the
            Subscription  Receipts  or to  enforce  any  of  the  rights  of the
            Receiptholders;

      (f)   to direct any  Receiptholder  who,  as such,  has  brought any suit,
            action or proceeding to stay or to  discontinue or otherwise to deal
            with the same  upon  payment  of the  costs,  charges  and  expenses
            reasonably and properly incurred by such Receiptholder in connection
            therewith;

      (g)   to assent to any  modification  of,  change in or omission  from the
            provisions contained in the Subscription Receipts and this Agreement
            or any ancillary or supplemental  instrument  which may be agreed to
            by Zarlink,  and to  authorize  the  Subscription  Receipt  Agent to
            concur  in and  execute  any  ancillary  or  supplemental  agreement
            embodying the change or omission;

      (h)   with the consent of Zarlink  (such  consent  not to be  unreasonably
            withheld), to remove the Subscription Receipt Agent or its successor
            in office and to appoint a new  subscription  receipt  agent to take
            the place of the Subscription Receipt Agent so removed; and

      (i)   to assent to any  compromise  or  arrangement  with any  creditor or
            creditors or any class or classes of creditors,  whether  secured or
            otherwise, and with holders of any common shares or other securities
            of Zarlink.

7.11     Meaning of Special Resolution

      (a)   The  expression  "special  resolution"  when used in this  Agreement
            means,  subject as hereinafter  provided in this Section 7.11 and in
            Section 7.14, a resolution  proposed at a meeting of  Receiptholders
            duly  convened  for that  purpose  and held in  accordance  with the
            provisions of this Agreement at which two (2) or more Receiptholders
            are present in person either holding  personally or  representing as
            proxies not less in aggregate than 25% of the number of Subscription
            Receipts then  outstanding  and passed by the  affirmative  votes of
            Receiptholders  holding more than 66?% of the Subscription  Receipts
            represented at the meeting and voted on a poll upon such resolution.

      (b)   Notwithstanding  Section 7.11(a),  if, at any meeting called for the
            purpose  of  passing  a  special   resolution,   at  least  two  (2)
            Receiptholders  holding not less in  aggregate  than 25% of the then
            outstanding  Subscription  Receipts  are not present in person or by
            proxy within  thirty (30) minutes  after the time  appointed for the
            meeting,  then the meeting,  if convened by  Receiptholders  or on a
            Receiptholders'  Request, shall be dissolved;  but in any other case
            it shall stand adjourned to such day, being not less than twenty-one
            (21) nor more than sixty (60) days later, and to such place and time
            as may be  determined  by the  chairperson.  Not less  than ten (10)
            days'  prior  notice

<PAGE>
                                       26


            shall be given of the time and place of such  adjourned  meeting  in
            the manner  provided  for in Section  10.2.  Such notice shall state
            that at the adjourned meeting the  Receiptholders  present in person
            or by proxy shall form a quorum but it shall not be necessary to set
            forth the  purposes for which the meeting was  originally  called or
            any other particulars. At the adjourned meeting:

            (i)   if the special  resolution  purports  to  exercise  any of the
                  powers  conferred  pursuant  to Sections  7.10(a),  7.10(d) or
                  7.10(i) or purports to change the  provisions  of this Section
                  7.11 or of Section 7.14 or purports to amend,  alter or repeal
                  any special resolution  previously passed or sanctioned by the
                  Receiptholders  in exercise of the powers  referred to in this
                  paragraph,  a quorum for the  transaction  of  business  shall
                  consist of  Receiptholders  holding  more than 25% of the then
                  outstanding  Subscription  Receipts  present  in  person or by
                  proxy; and

            (ii)  in any other case,  a quorum for the  transaction  of business
                  shall consist of such  Receiptholders as are present in person
                  or by proxy.

      (c)   At  any  such  adjourned  meeting,  any  resolution  passed  by  the
            requisite  votes as provided in Section  7.11(a)  shall be a special
            resolution within the meaning of this Agreement notwithstanding that
            Receiptholders  holding  more  than  25%  of  the  then  outstanding
            Subscription  Receipts are not present in person or by proxy at such
            adjourned meeting.

      (d)   Votes on a special resolution shall always be given on a poll and no
            demand for a poll on a special resolution shall be necessary.

7.12     Powers Cumulative

Any one or more of the powers or any combination of the powers in this Agreement
stated  to be  exercisable  by  the  Receiptholders  by  special  resolution  or
otherwise may be exercised from time to time and the exercise of any one or more
of such  powers  or any  combination  of powers  from time to time  shall not be
deemed to exhaust  the right of the  Receiptholders  to  exercise  such power or
powers or combination of powers then or thereafter from time to time.

7.13     Minutes

Minutes of all resolutions  and  proceedings at every meeting of  Receiptholders
shall be made and duly  entered  in books to be  provided  from time to time for
that purpose by the  Subscription  Receipt Agent at the expense of Zarlink,  and
any such minutes as aforesaid,  if signed by the chairperson or the secretary of
the meeting at which such  resolutions  were passed or proceedings had or by the
chairperson  or  secretary  of the next  succeeding  meeting held shall be prima
facie evidence of the matters  therein stated and, until the contrary is proved,
every such meeting in respect of the  proceedings  of which  minutes  shall have
been  made  shall be  deemed  to have  been  duly  convened  and  held,  and all
resolutions  passed  thereat or  proceedings  taken shall be deemed to have been
duly passed and taken.

<PAGE>
                                       27


7.14     Instruments in Writing

All  actions  which may be taken and all  powers  that may be  exercised  by the
Receiptholders at a meeting held as provided in this Article 7 may also be taken
and exercised by an instrument in writing signed in one or more  counterparts by
such  Receiptholders  in person or by attorney  duly  appointed  in writing,  by
Receiptholders  holding  at  least  66?% of the  then  outstanding  Subscription
Receipts  with  respect to a special  resolution,  and the  expression  "special
resolution" when used in this Agreement shall include an instrument so signed by
Receiptholders  holding  at  least  66?% of the  then  outstanding  Subscription
Receipts.

7.15     Binding Effect of Resolutions

Every  resolution  and every special  resolution  passed in accordance  with the
provisions  of this  Article 7 at a meeting of  Receiptholders  shall be binding
upon all the Receiptholders, whether present at or absent from such meeting, and
every instrument in writing signed by  Receiptholders in accordance with Section
7.14 shall be binding upon all the  Receiptholders,  whether signatories thereto
or not, and each and every  Receiptholder  and the  Subscription  Receipt  Agent
(subject to the provisions  for indemnity  herein  contained)  shall be bound to
give effect accordingly to every such resolution and instrument in writing.

7.16     Holdings by Zarlink Disregarded

In determining whether Receiptholders are present at a meeting of Receiptholders
for the  purpose  of  determining  a quorum or have  concurred  in any  consent,
waiver, special resolution,  Receiptholders'  Request or other action under this
Agreement, Subscription Receipts owned legally or beneficially by Zarlink or any
affiliated  entity  of  Zarlink  shall be  disregarded  in  accordance  with the
provisions of Section 10.7.

                                   ARTICLE 8
                             SUPPLEMENTAL AGREEMENTS

8.1      Provision for Supplemental Agreements for Certain Purposes

From time to time Zarlink, the Lead Underwriter,  on behalf of the Underwriters,
and the  Subscription  Receipt Agent may,  subject to the provisions  hereof and
subject to regulatory  approval,  and they shall, when so directed in accordance
with the  provisions  hereof,  execute  and  deliver by their  proper  officers,
agreements supplemental hereto, which thereafter shall form part hereof, for any
one or more or all of the following purposes:

      (a)   adding  to the  provisions  hereof  such  additional  covenants  and
            enforcement  provisions as, in the opinion of Counsel, are necessary
            or advisable in the circumstances, provided that the same are not in
            the opinion of the  Subscription  Receipt  Agent relying on Counsel,
            prejudicial to the interests of the Receiptholders;

      (b)   giving effect to any special  resolution  passed in accordance  with
            Article 7;

      (c)   making such provisions not  inconsistent  with this Agreement as may
            be  necessary  or  desirable  with  respect to matters or  questions
            arising  hereunder,  provided that such

<PAGE>
                                       28


            provisions  are not,  in the  opinion  of the  Subscription  Receipt
            Agent,  relying on  Counsel,  prejudicial  to the  interests  of the
            Receiptholders;

      (d)   adding  to or  altering  the  provisions  hereof in  respect  of the
            transfer of Subscription Receipts, making provision for the exchange
            of Subscription Receipt Certificates, and making any modification in
            the form of the  Subscription  Receipt  Certificates  which does not
            affect the substance thereof;

      (e)   modifying  any  of  the  provisions  of  this  Agreement,  including
            relieving  Zarlink  from  any  of  the  obligations,  conditions  or
            restrictions  herein  contained,  provided that such modification or
            relief shall be or become  operative  or  effective  only if, in the
            opinion of the  Subscription  Receipt Agent,  such  modification  or
            relief in no way prejudices any of the rights of the  Receiptholders
            or of the Subscription  Receipt Agent, and provided further that the
            Subscription  Receipt Agent may, in its sole discretion,  decline to
            enter into any such supplemental  agreement which in its opinion may
            not afford  adequate  protection to the  Subscription  Receipt Agent
            when the same shall become operative; and

      (f)   for any  other  purpose  not  inconsistent  with  the  terms of this
            Agreement,   including  the  correction  or   rectification  of  any
            ambiguities,  defective or inconsistent provisions, errors, mistakes
            or  omissions   herein,   provided   that  in  the  opinion  of  the
            Subscription  Receipt Agent the rights of the  Subscription  Receipt
            Agent and of the Receiptholders are in no way prejudiced thereby.

                                    ARTICLE 9
                    CONCERNING THE SUBSCRIPTION RECEIPT AGENT

9.1      Rights and Duties of Subscription Receipt Agent

      (a)   In the exercise of the rights and duties  prescribed or conferred by
            the terms of this Agreement,  the  Subscription  Receipt Agent shall
            exercise that degree of care,  diligence and skill that a reasonably
            prudent  subscription  receipt  agent would  exercise in  comparable
            circumstances.  No provision of this Agreement shall be construed to
            relieve the  Subscription  Receipt Agent from  liability for its own
            negligent  action,  its own  negligent  failure  to act,  or its own
            misconduct or bad faith.

      (b)   The  obligation  of the  Subscription  Receipt  Agent to commence or
            continue any act,  action or proceeding for the purpose of enforcing
            any rights of the Subscription  Receipt Agent or the  Receiptholders
            hereunder shall be conditional upon the  Receiptholders  furnishing,
            when  required  by  notice  by  the   Subscription   Receipt  Agent,
            sufficient  funds to  commence or to  continue  such act,  action or
            proceeding  and  an  indemnity   reasonably   satisfactory   to  the
            Subscription  Receipt  Agent to  protect  and to hold  harmless  the
            Subscription Receipt Agent against the costs, charges,  expenses and
            liabilities  to be  incurred  thereby and any loss and damage it may
            suffer by reason thereof.  None of the provisions  contained in this
            Agreement shall require the Subscription  Receipt Agent to expend or
            to risk its own funds or otherwise to

<PAGE>
                                       29


            incur financial liability in the performance of any of its duties or
            in the exercise of any of its rights or powers unless indemnified as
            aforesaid.

      (c)   The Subscription Receipt Agent may, before commencing or at any time
            during  the  continuance  of any such  act,  action  or  proceeding,
            require the Receiptholders at whose instance it is acting to deposit
            with the Subscription  Receipt Agent the Subscription  Receipts held
            by them, for which  Subscription  Receipts the Subscription  Receipt
            Agent shall issue receipts.

      (d)   Every  provision of this  Agreement  that by its terms  relieves the
            Subscription  Receipt Agent of liability or entitles it to rely upon
            any evidence  submitted to it is subject to the  provisions  of this
            Section 9.1 and of Section 9.2.

      (e)   The  Subscription  Receipt  Agent shall have no duties  except those
            expressly set forth herein,  and it shall not be bound by any notice
            of a claim or demand with  respect to, or any waiver,  modification,
            amendment,  termination  or rescission  of, this  Agreement,  unless
            received  by it in writing  and signed by the other  parties  hereto
            and, if its duties herein are  affected,  unless it shall have given
            its prior written consent thereto.

      (f)   The Subscription Receipt Agent shall not be responsible for ensuring
            that  the  Proceeds  are  used  in the  manner  contemplated  by the
            Prospectus.

      (g)   The Subscription Receipt Agent shall retain the right not to act and
            shall not be held liable for  refusing to act unless it has received
            clear and reasonable  documentation which complies with the terms of
            this Agreement, which documentation does not require the exercise of
            any discretion or independent judgment.

      (h)   The Subscription  Receipt Agent shall incur no liability  whatsoever
            with respect to the  delivery or  non-delivery  of any  certificates
            whether delivery by hand, mail or any other means;

      (i)   The Subscription Receipt Agent shall not be responsible or liable in
            any manner whatsoever for the deficiency,  correctness,  genuineness
            or validity of any securities deposited with it.

9.2      Evidence, Experts and Advisers

      (a)   In  addition  to  the  reports,  certificates,  opinions  and  other
            evidence  required by this  Agreement,  Zarlink shall furnish to the
            Subscription  Receipt Agent such  additional  evidence of compliance
            with any provision  hereof,  and in such form,  as the  Subscription
            Receipt Agent may reasonably require by written notice to Zarlink.

      (b)   In the exercise of its rights and duties hereunder, the Subscription
            Receipt Agent may, if it is acting in good faith, act and rely as to
            the  truth  of the  statements  and  the  accuracy  of the  opinions
            expressed  in statutory  declarations,  opinions,  reports,  written
            requests, consents, or orders of Zarlink, certificates of Zarlink or
            other

<PAGE>
                                       30


            evidence furnished to the Subscription Receipt Agent pursuant to any
            provision  hereof  or  pursuant  to a  request  of the  Subscription
            Receipt Agent.

      (c)   Whenever it is provided in this Agreement that Zarlink shall deposit
            with  the  Subscription  Receipt  Agent  resolutions,  certificates,
            reports,  opinions,  requests,  orders  or  other  documents,  it is
            intended  that the truth,  accuracy and good faith on the  effective
            date thereof and the facts and opinions stated in all such documents
            so  deposited  shall,  in each and every  such case,  be  conditions
            precedent to the right of Zarlink to have the  Subscription  Receipt
            Agent take the action to be based thereon.

      (d)   Proof of the  execution  of an  instrument  in writing,  including a
            Receiptholders'  Request,  by any  Receiptholder  may be made by the
            certificate  of a notary  public,  or  other  officer  with  similar
            powers, that the Person signing such instrument  acknowledged to him
            the  execution  thereof,  or by an  affidavit  of a witness  to such
            execution  or in any other  manner  which the  Subscription  Receipt
            Agent may consider adequate.

      (e)   The  Subscription  Receipt  Agent  may act and  rely  and  shall  be
            protected  in acting and relying upon any  resolution,  certificate,
            statement,  instrument,  opinion, report, notice, request,  consent,
            order,  letter, or other paper document believed by it to be genuine
            and to have been  signed,  sent or  presented by or on behalf of the
            proper party or parties.

      (f)   The  Subscription  Receipt  Agent may employ or retain such Counsel,
            accountants,  appraisers  or other  experts  or  advisers  as it may
            reasonably  require for the purpose of determining  and  discharging
            its duties  hereunder and may pay  reasonable  remuneration  for all
            services so performed by any of them,  without  taxation of costs of
            any Counsel,  and shall not be  responsible  for any  misconduct  or
            negligence on the part of any such experts or advisers who have been
            appointed with due care by the Subscription Receipt Agent.

      (g)   The  Subscription  Receipt  Agent  may act and  rely  and  shall  be
            protected  in acting and  relying  in good  faith on the  opinion or
            advice of or information  obtained from Counsel,  or any accountant,
            appraiser, or other expert or advisor,  whether retained or employed
            by Zarlink or by the Subscription  Receipt Agent with respect to any
            matter arising in relation to the Agreement.

9.3      Documents, etc. Held by Subscription Receipt Agent

Any securities,  documents of title or other instruments that may at any time be
held by the Subscription  Receipt Agent pursuant to this Agreement may be placed
in the  deposit  vaults of the  Subscription  Receipt  Agent or of any  Canadian
chartered  bank  or  deposited  for  safekeeping  with  any  such  bank.  If the
Subscription  Receipt Agent has not received a direction  under Section 4.1, any
monies  so  held  pending  the  application  or  withdrawal  thereof  under  any
provisions of this  Agreement  may be deposited in the name of the  Subscription
Receipt Agent in any Canadian  chartered  bank, or in the deposit  department of
the Subscription  Receipt Agent or any other loan or

<PAGE>
                                       31


trust  company  authorized  to  accept  deposits  under  the laws of Canada or a
province  thereof,  at the rate of  interest  (if any) then  current  on similar
deposits.

9.4      Actions by Subscription Receipt Agent to Protect Interest

The Subscription Receipt Agent shall have the power to institute and to maintain
such  actions and  proceedings  as it may  consider  necessary  or  expedient to
preserve,   protect  or  enforce  its   interests   and  the  interests  of  the
Receiptholders.

9.5      Subscription Receipt Agent not Required to Give Security

The  Subscription  Receipt  Agent  shall  not be  required  to give  any bond or
security in respect of the  execution of this  Agreement or otherwise in respect
of the premises.

9.6      Protection of Subscription Receipt Agent

By way of supplement to the provisions of any law for the time being relating to
trustees, it is expressly declared and agreed as follows:

      (a)   the Subscription  Receipt Agent shall not be liable for or by reason
            of any  statements  of fact or recitals in this  Agreement or in the
            Subscription   Receipt   Certificates   (except  the  representation
            contained in Section 9.8 or in the  certificate of the  Subscription
            Receipt  Agent  on  the  Subscription  Receipt  Certificates)  or be
            required to verify the same, but all such statements or recitals are
            and shall be deemed to be made by Zarlink;

      (b)   nothing  herein   contained  shall  impose  any  obligation  on  the
            Subscription  Receipt Agent to see to or to require  evidence of the
            registration or filing (or renewal thereof) of this Agreement or any
            instrument ancillary or supplemental hereto;

      (c)   the Subscription  Receipt Agent shall not be bound to give notice to
            any Person or Persons of the execution hereof;

      (d)   the  Subscription  Receipt  Agent shall not incur any  liability  or
            responsibility  whatever  or be  in  any  way  responsible  for  the
            consequence  of any  breach  on the  part of  Zarlink  of any of the
            covenants   herein  contained  or  of  any  acts  of  any  officers,
            employees, agents or servants of Zarlink; and

      (e)   Zarlink shall indemnify and save harmless the  Subscription  Receipt
            Agent and its  officers,  directors,  employees  and agents from and
            against any and all liabilities,  losses, costs, claims,  actions or
            demands  whatsoever  brought against the Subscription  Receipt Agent
            which it may  suffer or incur as a result of or  arising  out of the
            performance  of its duties  and  obligations  under this  Agreement,
            including any and all  reasonable  legal fees and  disbursements  of
            whatever  kind or  nature,  save only in the event of the  negligent
            action, the negligent failure to act, or the misconduct or bad faith
            of the Subscription  Receipt Agent. It is understood and agreed that
            this  indemnification  shall survive the termination or discharge of
            this  Agreement or the  resignation  or removal of the  Subscription
            Receipt Agent.

<PAGE>
                                       32


9.7      Replacement of Subscription Receipt Agent; Successor by Merger

      (a)   The  Subscription  Receipt Agent may resign its  appointment  and be
            discharged from all other duties and liabilities hereunder,  subject
            to this  Section  9.7, by giving to Zarlink not less than sixty (60)
            days'  prior  notice in  writing  or such  shorter  prior  notice as
            Zarlink  may accept as  sufficient.  The  Receiptholders  by special
            resolution  shall  have  power at any time to  remove  the  existing
            Subscription Receipt Agent and to appoint a new subscription receipt
            agent. In the event of the  Subscription  Receipt Agent resigning or
            being removed as aforesaid or being  dissolved,  becoming  bankrupt,
            going into  liquidation  or otherwise  becoming  incapable of acting
            hereunder,  the Lead  Underwriter,  on behalf  of the  Underwriters,
            shall forthwith  appoint a new  subscription  receipt agent unless a
            new  subscription  receipt  agent has already been  appointed by the
            Receiptholders; failing such appointment by the Lead Underwriter, on
            behalf of the Underwriters,  the retiring Subscription Receipt Agent
            (at the expense of Zarlink)  or any  Receiptholder  may apply to the
            Ontario  Superior  Court of Justice on such notice as such court may
            direct, for the appointment of a new subscription receipt agent; but
            any  new  subscription  receipt  agent  so  appointed  by  the  Lead
            Underwriter, on behalf of the Underwriters, or by the Court shall be
            subject to  removal  as  aforesaid  by the  Receiptholders.  Any new
            subscription  receipt  agent  appointed  under any provision of this
            Section  9.7  shall  be a  corporation  authorized  to  carry on the
            business  of a trust  company in the  Province  of Ontario  and,  if
            required by the applicable  legislation for any other provinces,  in
            such other  provinces.  On any such appointment the new subscription
            receipt agent shall be vested with the same powers,  rights,  duties
            and  responsibilities  as if it had been originally  named herein as
            Subscription  Receipt Agent hereunder.  At the request of Zarlink or
            the  new  subscription  receipt  agent,  the  retiring  Subscription
            Receipt  Agent,  upon  payment  of the  amounts,  if any,  due to it
            pursuant to Section 5.3, shall duly assign,  transfer and deliver to
            the new  subscription  receipt agent all property and money held and
            all  records  kept  by  the  retiring   Subscription  Receipt  Agent
            hereunder or in connection herewith.

      (b)   Upon the  appointment  of a successor  subscription  receipt  agent,
            Zarlink  shall  promptly  notify the  Receiptholders  thereof in the
            manner provided for in Article 10 hereof.

      (c)   Any corporation  into or with which the  Subscription  Receipt Agent
            may be merged or  consolidated  or  amalgamated,  or any corporation
            resulting therefrom to which the Subscription Receipt Agent shall be
            a  party,  or any  corporation  succeeding  to the  corporate  trust
            business of the Subscription Receipt Agent shall be the successor to
            the Subscription  Receipt Agent hereunder without any further act on
            its  part  or  any  of  the  parties  hereto,   provided  that  such
            corporation  would  be  eligible  for  appointment  as  a  successor
            subscription receipt agent under Section 9.7(a).

      (d)   Any Subscription Receipt Certificate  certified but not delivered by
            a  predecessor  Subscription  Receipt  Agent may be delivered by the
            successor  subscription receipt agent in the name of the predecessor
            or successor Subscription Receipt Agent.

<PAGE>
                                       33


9.8      Conflict of Interest

      (a)   The  Subscription  Receipt Agent  represents to Zarlink and the Lead
            Underwriter,  on  behalf  of the  Underwriters,  that at the time of
            execution  and  delivery  hereof no  material  conflict  of interest
            exists  between its role as a subscription  receipt agent  hereunder
            and its role in any other capacity and agrees that in the event of a
            material  conflict of interest  arising  hereafter  it will,  within
            thirty  (30)  days  after  ascertaining  that it has  such  material
            conflict  of  interest,  either  eliminate  the same or  assign  its
            appointment as  Subscription  Receipt Agent hereunder to a successor
            subscription  receipt  agent  approved  by Zarlink  and  meeting the
            requirements  set  forth  in  Section  9.7(a).  Notwithstanding  the
            foregoing  provisions of this Section  9.8(a),  if any such material
            conflict of interest exists or hereafter  shall exist,  the validity
            and  enforceability of this Agreement and the Subscription  Receipts
            shall not be affected in any manner whatsoever by reason thereof.

      (b)   Subject to Section 9.8(a),  the  Subscription  Receipt Agent, in its
            personal  or any  other  capacity,  may buy,  lend  upon and deal in
            securities  of Zarlink and  generally  may  contract  and enter into
            financial  transactions  with  Zarlink or any  affiliated  entity of
            Zarlink without being liable to account for any profit made thereby.

9.9      Acceptance of Appointment

The  Subscription  Receipt Agent hereby accepts the  appointment as subscription
receipt agent in this Agreement and agrees to perform its duties  hereunder upon
the terms and conditions herein set forth.

9.10     Subscription Receipt Agent Not to be Appointed Receiver

The  Subscription  Receipt  Agent and any  person  related  to the  Subscription
Receipt  Agent  shall not be  appointed a  receiver,  a receiver  and manager or
liquidator of all or any part of the assets or undertaking of Zarlink.

                                   ARTICLE 10
                                     GENERAL

10.1     Notice to Zarlink, Subscription Receipt Agent and the Lead Underwriter,
         on behalf of the Underwriters

      (a)   Unless herein otherwise expressly  provided,  any notice to be given
            hereunder to Zarlink,  the Underwriters or the Subscription  Receipt
            Agent  shall be  deemed to be  validly  given if  delivered  by hand
            courier or if transmitted by telecopier:

            (i)   if to Zarlink:

                  Zarlink Semiconductor Inc.
                  400 March Road
                  Ottawa, (Ontario) K2K 3H4

                  Fax No.:         (613) 270-7403
<PAGE>
                                       34


                  Attention:       President and Chief Executive Officer

            with a copy to:

                  McCarthy Tetrault LLP
                  Suite 2500
                  1000 De La Gauchetiere Street West
                  Montreal (Quebec)  H3B 0A2

                  Attention: Sonia Struthers
                  Facsimile No.: 514-875-6246

            (ii)  if to the Lead Underwriter, on behalf of the Underwriters:

                  CIBC World Markets
                  BCE Place
                  161 Bay Street
                  6th Floor
                  Toronto (Ontario)
                  M5J 2C8

                  Attention:  Marwan A. Kubursi, Executive Director
                  Facsimile No.:  416-594-7226

            with a copy to:

                  Blake, Cassels & Graydon LLP
                  199 Bay Street, Suite 2800
                  Commerce Court West
                  P.O. Box 25, Station Commerce Court
                  Toronto (Ontario) M5L 1A9

                  Attention:  Frank P. Arnone
                  Facsimile:  416-863-2653

            (iii) if to the Subscription Receipt Agent:

                  Computershare Trust Company of Canada
                  100 University Avenue
                  9th Floor, North Tower
                  Toronto (Ontario)
                  M5J 2Y1

                  Attention:       Manager, Corporate Trust
                  Facsimile:       416-981-9777

<PAGE>
                                       35


            and any such notice delivered in accordance with the foregoing shall
            be deemed  to have  been  received  on the date of  delivery  or, if
            telecopied,  by 4:00 p.m. (Toronto Time), on the day of transmission
            or, if such day is not a Business  Day,  on the first  Business  Day
            following the day of  transmission.  Accidental error or omission in
            giving  notice  or   accidental   failure  to  mail  notice  to  any
            Receiptholder  will not invalidate any action or proceeding  founded
            thereon.

      (b)   Zarlink, the Lead Underwriter, on behalf of the Underwriters, or the
            Subscription  Receipt  Agent,  as the case may be,  may from time to
            time  notify the other  parties in the  manner  provided  in Section
            10.1(a) of a change of address  which,  from the  effective  date of
            such notice and until  changed by like notice,  shall be the address
            of Zarlink, the Lead Underwriter, on behalf of the Underwriters,  or
            the Subscription Receipt Agent, as the case may be, for all purposes
            of this Agreement.

10.2     Notice to Receiptholders

      (a)   Any  notice  to the  Receiptholders  under  the  provisions  of this
            Agreement  shall be valid  and  effective  if  delivered  or sent by
            letter or  circular  through the  ordinary  post  addressed  to such
            holders at their post office  addresses  appearing  on the  register
            hereinbefore  mentioned and shall be deemed to have been effectively
            given on the date of delivery or, if mailed,  five (5) Business Days
            following actual posting of the notice.

      (b)   If, by reason of a strike, lockout or other work stoppage, actual or
            threatened,  involving postal  employees,  any notice to be given to
            the Receiptholders hereunder could reasonably be considered unlikely
            to reach its  destination,  such notice shall be valid and effective
            only if it is  delivered  personally  to such  Receiptholders  or if
            delivered  to the address for such  Receiptholders  contained in the
            register of  Subscription  Receipts  maintained by the  Subscription
            Receipt Agent.

      (c)   All  notices to joint  holders of any  Subscription  Receipt  may be
            given to whichever one of the holders  thereof is named first in the
            appropriate register hereinbefore mentioned, and any notice so given
            shall  be  sufficient  notice  to  all  such  joint  holders  of the
            Subscription Receipt.

10.3     Ownership of Subscription Receipts

Zarlink and the  Subscription  Receipt  Agent may deem and treat the  registered
owner of any  Subscription  Receipt  Certificate or, in the case of a transferee
who has surrendered a Subscription Receipt Certificate in accordance with and as
contemplated in Sections 3.3 and 3.5, such transferee,  as the absolute owner of
the Subscription  Receipt represented thereby for all purposes,  and Zarlink and
the Subscription  Receipt Agent shall not be affected by any notice or knowledge
to the  contrary  except  where  Zarlink or the  Subscription  Receipt  Agent is
required  to  take  notice  by  statute  or by  order  of a court  of  competent
jurisdiction.  A Receiptholder shall be entitled to the rights evidenced by such
Subscription  Receipt Certificate free from all equities or rights of set off or
counterclaim between Zarlink and the original or any intermediate holder thereof
and all Persons may act  accordingly  and the receipt of any such  Receiptholder
for the Convertible Debentures which

<PAGE>
                                       36


may be acquired  pursuant  thereto shall be a good  discharge to Zarlink and the
Subscription Receipt Agent for the same and neither Zarlink nor the Subscription
Receipt Agent shall be bound to inquire into the title of any such holder except
where  Zarlink or the  Subscription  Receipt Agent is required to take notice by
statute or by order of a court of competent jurisdiction.

10.4     Evidence of Ownership

      (a)   Upon receipt of a  certificate  of any bank,  trust company or other
            depositary  satisfactory to the  Subscription  Receipt Agent stating
            that the Subscription Receipts specified therein have been deposited
            by a named Person with such bank,  trust company or other depositary
            and  will  remain  so  deposited  until  the  expiry  of the  period
            specified  therein,  Zarlink and the Subscription  Receipt Agent may
            treat the  Person so named as the  owner,  and such  certificate  as
            sufficient  evidence  of  the  ownership  by  such  Person  of  such
            Subscription  Receipt  during  such  period,  for the purpose of any
            requisition,  direction, consent, instrument or other document to be
            made,  signed or given by the holder of the Subscription  Receipt so
            deposited.

      (b)   Zarlink and the Subscription  Receipt Agent may accept as sufficient
            evidence  of the fact and date of the  signing  of any  requisition,
            direction,  consent,  instrument or other document by any Person (i)
            the signature of any officer of any bank,  trust  company,  or other
            depositary satisfactory to the Subscription Receipt Agent as witness
            of such  execution,  (ii) the  certificate  of any notary  public or
            other  officer  authorized to take  acknowledgements  of deeds to be
            recorded at the place where such certificate is made that the Person
            signing  acknowledged  to him  the  execution  thereof,  or  (iii) a
            statutory declaration of a witness of such execution.

10.5     Satisfaction and Discharge of Agreement

Upon the earliest of:

      (a)   the entering of a Book-Entry  Only System  customer  confirmation of
            Underlying  Convertible  Debentures  in a CDS account for holders of
            Subscription  Receipts  and the payment of monies if any required to
            be paid to Zarlink pursuant to Section 3.2; or

      (b)   the  payment  of all monies  required  where  Termination  occurs as
            provided in Section 3.5(b),

this Agreement shall cease to be of further effect and the Subscription  Receipt
Agent,  on demand of and at the cost and expense of Zarlink and upon delivery to
the  Subscription  Receipt  Agent of a certificate  of Zarlink  stating that all
conditions  precedent to the  satisfaction  and discharge of this Agreement have
been complied with, shall execute proper instruments acknowledging  satisfaction
of  and  discharging  this  Agreement.   Notwithstanding   the  foregoing,   the
indemnities  provided to the  Subscription  Receipt  Agent by Zarlink  hereunder
shall  remain in full force and  effect  and  survive  the  termination  of this
Agreement.

<PAGE>
                                       37


10.6     Provisions of Agreement and Subscription Receipts  for the Sole Benefit
         of Parties and Receiptholders

Nothing in this Agreement or in the Subscription Receipt Certificates, expressed
or  implied,  shall give or be  construed  to give to any Person  other than the
parties hereto, the Receiptholders and the transferees of Subscription  Receipts
as  contemplated  in  Sections  3.3 and 3.5,  as the case may be,  any  legal or
equitable right, remedy or claim under this Agreement,  or under any covenant or
provision herein or therein  contained,  all such covenants and provisions being
for the  sole  benefit  of the  parties  hereto,  the  Receiptholders  and  such
transferees.

10.7     Subscription Receipts Owned by  Zarlink or its Subsidiaries Certificate
         to be Provided

For the purpose of  disregarding  any  Subscription  Receipts  owned  legally or
beneficially  by Zarlink or any affiliated  entity of Zarlink as contemplated in
Section 7.16, Zarlink shall provide to the Subscription Receipt Agent, from time
to  time,  a  certificate  of  Zarlink  setting  forth  as at the  date  of such
certificate the number of Subscription Receipts owned legally or beneficially by
Zarlink or any affiliated entity of Zarlink, and the Subscription Receipt Agent,
in making the  computations  in Section 7.16,  shall be entitled to rely on such
certificate without requiring further evidence thereof.

10.8     Effect of Execution

Notwithstanding any provision of this Agreement, should any Subscription Receipt
Certificates  be issued and certified in accordance  with the terms hereof prior
to  the  actual  time  of  execution  of  this  Agreement  by  Zarlink  and  the
Subscription  Receipt Agent, any such Subscription Receipt Certificates shall be
void and of no value and effect until such actual execution.

10.9     Time of Essence

Time is and shall remain of the essence of this Agreement.

10.10    Counterparts

This Agreement may be executed and delivered in counterparts, each of which when
so  executed  and  delivered  shall  be  deemed  to  be  an  original  and  such
counterparts   together  shall  constitute  one  and  the  same  instrument  and
notwithstanding  their date of execution  they shall be deemed to be dated as of
the date hereof.

                            [Signature page follows]

<PAGE>
                                       38


IN WITNESS  WHEREOF the parties  hereto have executed  this  agreement as of the
date first written above.

                                    ZARLINK SEMICONDUCTOR INC.

                                    By: (s)o
                                        ----------------------------------------
                                        Name: o
                                        Title: o

                                    By: (s)o
                                        ----------------------------------------
                                        Name: o
                                        Title: o

                                    CIBC WORLD MARKETS INC.

                                    By: (s)o
                                        ----------------------------------------
                                        Name: o
                                        Title: o

                                    COMPUTERSHARE TRUST COMPANY OF CANADA

                                    By: (s)o
                                        ----------------------------------------
                                        Name: o
                                        Title: o

                                    By: (s)o
                                        ----------------------------------------
                                        Name: o
                                        Title: o


<PAGE>

                                  SCHEDULE "A"
                    FORM OF SUBSCRIPTION RECEIPT CERTIFICATE

Unless this  Certificate  is presented by an  authorized  representative  of CDS
Clearing and Depository  Services Inc. ("CDS") to ZARLINK  SEMICONDUCTOR INC. or
its agent for registration of transfer, exchange or payment, and any certificate
issued in respect  thereof is  registered  in the name of CDS & Co.,  or in such
other  name as is  requested  by an  authorized  representative  of CDS (and any
payment  is made to CDS & Co.  or to such  other  entity as is  requested  by an
authorized  representative of CDS), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL since the  registered  holder
hereof, CDS & Co., has an interest herein.

                           ZARLINK SEMICONDUCTOR INC.
                     (A corporation duly incorporated under
                               the laws of Canada)

Number: o                                CUSIP:o

            THIS IS TO CERTIFY  THAT ____o_  (the  "Holder")  is the  registered
holder of ______o______________ Subscription Receipts represented hereby.

            The Subscription  Receipts  represented by this Subscription Receipt
certificate  ("Certificate")  are  issued  pursuant  to a  Subscription  Receipt
Agreement ("Agreement") dated July [30], 2007 between ZARLINK SEMICONDUCTOR INC.
("Zarlink"),  COMPUTERSHARE  TRUST COMPANY OF CANADA (the "Subscription  Receipt
Agent"), and CIBC WORLD MARKETS INC. on its own behalf and on behalf of NATIONAL
BANK  FINANCIAL  INC.,  RBC DOMINION  SECURITIES  INC.  and SCOTIA  CAPITAL INC.
(collectively, the "Underwriters").

            Capitalized terms used in the Agreement have the same meaning herein
as therein, unless otherwise defined.

            Each  Subscription  Receipt  entitles  the  holder  to  receive,  in
accordance  with  the  terms  of,  and  subject  to,  the  Subscription  Receipt
Agreement:

      (a)   if the Acquisition Closing Date occurs on or before the Deadline, to
            automatically  receive,  without any further action required by such
            holder and without the payment of any additional consideration,  one
            Convertible  Debenture  for each  Subscription  Receipt  held by the
            Receiptholder; or

      (b)   if the  Acquisition  Closing  Date does not  occur on or before  the
            Deadline or if a Termination Event occurs, to receive,  on the third
            Business Day following the Termination Date, a Termination Payment.

            The Subscription  Receipts  represented  hereby are issued under and
pursuant to the Agreement. Reference is hereby made to the Agreement and any and
all other  instruments  supplemental or ancillary thereto for a full description
of the rights of the  holders  of the  Subscription  Receipts  and the terms and
conditions upon which such  Subscription  Receipts are, or are to be,

<PAGE>
                                       A-2


issued and held,  all to the same effect as if the  provisions  of the Agreement
and all instruments supplemental or ancillary thereto were herein set forth, and
to all of  which  provisions  the  holder  of  these  Subscription  Receipts  by
acceptance hereof assents.  In the event of a conflict or inconsistency  between
the terms of the  Agreement  and this  Certificate,  the terms of the  Agreement
shall prevail.

            The Agreement contains provisions making binding upon all holders of
Subscription Receipts outstanding  thereunder  resolutions passed at meetings of
such holders held in  accordance  with such  provisions  and by  instruments  in
writing  signed  by the  holders  of a  specified  majority  of the  outstanding
Subscription Receipts.

            The  Subscription  Receipts  evidenced  by this  Certificate  may be
transferred  on the  register  kept at the offices of the  Subscription  Receipt
Agent by the  registered  holder  hereof  or his  legal  representatives  or his
attorney  duly  appointed  by an  instrument  in writing  in form and  execution
satisfactory to the Subscription Receipt Agent, only upon payment of the charges
provided  for  in  the  Agreement  and  upon  compliance  with  such  reasonable
requirements  as the  Subscription  Receipt  Agent may  prescribe.  The transfer
register shall be closed at 5:00 p.m. (Toronto time) on the Termination Date.

            This Certificate  shall not be valid for any purpose whatever unless
and until it has been countersigned by or on behalf of the Subscription  Receipt
Agent.

<PAGE>
                                       A-3


            Time shall be of the essence hereof. This Certificate is governed by
the laws of the Province of Ontario and the laws of Canada applicable therein.

            IN WITNESS WHEREOF Zarlink has caused this  Certificate to be signed
by a duly authorized representative as of July o, 2007.

Countersigned by

                                      ZARLINK SEMICONDUCTOR INC.,

                                      By:
                                            ------------------------------------
                                      Name:
                                      Title:

                                      By:
                                            ------------------------------------
                                      Name:
                                      Title:

                                      COMPUTERSHARE TRUST COMPANY OF CANADA
                                      as Subscription Receipt Agent

                                      By:
                                            ------------------------------------
                                      Name:
                                      Title:

                                      By:
                                            ------------------------------------
                                      Name:
                                      Title:

<PAGE>

                                  SCHEDULE "B"
                                 FORM OF NOTICE

TO:   COMPUTERSHARE TRUST COMPANY OF CANADA (the "Subscription Receipt Agent")

Reference is made to the Subscription  Receipt Agreement (the "Agreement") dated
as of July [30], 2007 among the undersigned,  CIBC World Markets Inc., on behalf
of the Underwriters,  and the Subscription Receipt Agent (capitalized terms used
herein without definition having the meanings specified therein).

            In  accordance  with  the  provisions  of the  Subscription  Receipt
Agreement,  Zarlink Semiconductor Inc. ("Zarlink") is writing to advise you that
the Acquisition Closing Date has occurred on or before the Deadline.

            In accordance with Section 3.2 of the Agreement,  the Escrowed Funds
are to be released as follows:

      (a)   as to $o to CIBC World  Markets Inc, on behalf of the  Underwriters;
            and

      (b)   as to the balance to Zarlink.

      Payment is to be made forthwith and to be delivered prior to Issue Time as
            follows:

      (c)   as to the above $_____ : to CIBC World Markets Inc.;

      (d)   as to the balance to Zarlink at:_______ .

            The  Subscription  Receipt  Agent in its  capacity as trustee of the
Convertible  Debentures,  is hereby irrevocably directed and authorized to issue
and deliver on behalf of Zarlink a global certificate  registered in the name of
CDS or its nominee,  representing o Convertible  Debentures  effective as at the
Acquisition  Closing Date,  which is o, 2007,  all as provided in Section 3.3 of
the Agreement.  The Convertible  Debentures  shall be deemed to be issued at the
Acquisition Closing Date  notwithstanding  that the certificate  evidencing such
Convertible  Debentures has not been issued. Zarlink Semiconductor Inc. confirms
that the  allotment  and  issue of these  Convertible  Debentures  has been duly
authorized by all necessary action.

            The foregoing  direction is irrevocable  and shall  constitute  your
good and sufficient authority for making such payments as directed above.

                         [Signatures on following page]

<PAGE>
                                      B-2


DATED the   ________   day of ______________________, 2007.

                                      ZARLINK SEMICONDUCTOR INC.,

                                      By:
                                         ---------------------------------------
                                         Authorized Signing Officer

                                      By:
                                         ---------------------------------------
                                         Authorized Signing Officer