Document:

exhibit10_1.htm

    
      

    

    Exhibit
10.1

    

    FOURTH AMENDMENT
TO

    FOURTH AMENDED
AND RESTATED
CREDIT AGREEMENT

    

               THIS
FOURTH AMENDMENT TO FOURTH AMENDED AND RESTATED CREDIT AGREEMENT (this “Amendment”)
is dated as of April 30, 2008, but effective as of the Effective Date
(hereinafter defined), among THE VAIL CORPORATION, a
Colorado corporation doing business as “Vail Associates, Inc.” (the “Company”),
the LENDERS (as defined
in the Credit Agreement referenced below) party hereto, and BANK OF AMERICA, N.A., as
Administrative Agent (hereinafter defined).

    

    R E C I T A L
S

    

               A.           The
Company has entered into that certain Fourth Amended and Restated Credit
Agreement dated as of January 28, 2005, with Bank of America, N.A., as
Administrative Agent (in such capacity, the “Administrative
Agent”), and certain other agents and lenders party thereto, as amended
by that certain First Amendment to Fourth Amended and Restated Credit Agreement
dated as of June 29, 2005, that certain Second Amendment to Fourth Amended and
Restated Credit Agreement dated as of February 17, 2006, and that certain
Limited Waiver, Release, and Third Amendment to Fourth Amended and Restated
Credit Agreement dated as of March 13, 2007 (as amended, the “Credit
Agreement”).  Unless otherwise indicated herein, all
capitalized terms used herein shall have the meanings set forth in the Credit
Agreement, and all Section references herein shall be references to sections in
the Credit Agreement.

    

    B.           The
Company has requested certain amendments to the Credit Agreement, which, among
other things, (i) modify certain financial covenants, and (ii) clarify certain
calculations under the Credit Agreement as they relate to the Company’s
ownership interest in SSI Venture LLC.    

    

               Subject
to the terms and conditions set forth herein, the Company, the Lenders party
hereto, the Guarantors (by execution of the attached Guarantors’ Consent and
Agreement), and the Administrative Agent agree as follows:

               

    1.           Amendments.

    

    (a)           New
Definition.  Section
1.1 (Definitions) is amended
by inserting the following new definition alphabetically to read as
follows:

    

    “Borrower’s
Ownership Percentage means, for any period, the weighted average
membership interest held directly or indirectly by Borrower in SSI (expressed as
a percentage) during such period.”

     

    (b)           Modification of Definition
of Adjusted EBITDA.  Section
1.1 (Definitions) is amended by modifying the definition of “Adjusted
EBITDA” to read as follows:

     

    “Adjusted
EBITDA means, without duplication, for any period of determination, the
sum of (a) EBITDA of the Restricted Companies (excluding non-recurring gains or
losses), plus (b) Borrower’s Ownership Percentage of the EBITDA of SSI, plus (c)
insurance proceeds (up to a maximum of $10,000,000 in the aggregate in any
fiscal year) received by the Restricted Companies under policies of business
interruption insurance (or under policies of insurance which cover losses or
claims of the same character or type).  Adjusted EBITDA for all
purposes under this Agreement shall (x) include, on a pro forma basis without
duplication, all EBITDA of the Restricted Companies (and if SSI is not a
Restricted Subsidiary, Borrower’s Ownership Percentage of the EBITDA of SSI)
from assets acquired in accordance with this Agreement (including, without
limitation, Restricted Subsidiaries formed or acquired in accordance with Section
9.10 hereof, and Unrestricted Subsidiaries re-designated as Restricted
Subsidiaries in accordance with Section
9.11(b) hereof) during any applicable period, calculated as if such
assets were acquired on the first day of such period, and (y) exclude, on a pro
forma basis, all EBITDA of the Restricted Companies (and if SSI is not a
Restricted Subsidiary, Borrower’s Ownership Percentage of the EBITDA of SSI)
from assets disposed of in accordance with this Agreement during such period
(including, without limitation, Restricted Subsidiaries re-designated as
Unrestricted Subsidiaries in accordance with Section
9.11(a) hereof), calculated as if such assets were disposed of on the
first day of such period.”

     

     (c)           Modification of Definition
of Applicable Margin.  Section
1.1 (Definitions) is amended to reflect the change to the definition of
“Adjusted
EBITDA” by deleting the last sentence of the definition of “Applicable
Margin”.

    

    (d)           Modification of Definition
of EBITDA.  Section
1.1 (Definitions) is amended by replacing the period at the end of the
definition of “EBITDA”
with a semi-colon, and adding the following proviso:

     

    “provided however, that if
cash distributed to a Restricted Company by a Real Estate Joint Venture that is
an Unrestricted Company exceeds the aggregate amount of all cash, and the
Restricted Company’s basis in property and other assets, contributed by such
Restricted Company to such Real Estate Joint Venture, then the amount of such
excess shall be included in the EBITDA of such Restricted Company.”

     

     (e)           Modification of Definition
of Funded Debt.  Section
1.1 (Definitions) is amended by modifying the proviso to the definition
of “Funded
Debt” to read as follows:

     

    “provided, that, for purposes of
calculating the Funded Debt of the Restricted Companies under this Agreement, if
SSI is not a Restricted Subsidiary, then (unless otherwise indicated) Borrower’s
Ownership Percentage of the principal of and interest on SSI’s Funded Debt shall
be included in each such calculation.”

     

    (f)           Modification of Definition
of Net Income.  Section
1.1 (Definitions) is amended by modifying clause
(b) of the
definition of “Net
Income” to read as follows:

     

    “(b)           if
SSI is not a Restricted Subsidiary, then (unless otherwise indicated) Borrower’s
Ownership Percentage of the Net Income of SSI shall be included in each such
calculation; and”.

     

    (g)           Modification of Definition
of Total Assets.  Section
1.1 (Definitions) is amended by modifying the definition of “Total
Assets” to read as follows:

     

    “Total Assets
means, as of any date of determination for the Restricted Companies on a
consolidated basis, the book value of all assets of the Restricted Companies (as
determined in accordance with GAAP), and if SSI is not a Restricted Company,
Borrower’s Ownership Percentage of the book value of all assets of
SSI.”

     

    (h)           Modification of Negative
Covenants.  Clause
(c)(ii) of Section
10.11 is amended to reflect the change to the definition of “Adjusted
EBITDA” by deleting everything after the semicolon therein.

    

    (i)           Modification of Financial
Covenants.  Section
11 (Financial Covenants)
is amended as follows:

    

    (i) The
second sentence of the introductory paragraph of Section 11
is amended to read as follows to reflect the change to the definition of “Adjusted
EBITDA”:

    

    “Borrower
shall calculate each such ratio after giving effect to the provisions of Section 1.3
hereof.”

     

    (ii)           Section
11.3 (Minimum Net Worth) is amended by replacing clause (d) thereof with the
following:

    

    “(c) 100%
of any Net Proceeds received by any Restricted Company from the offering,
issuance, or sale of equity securities of a Restricted Company after October 31,
2004 (other than Net Proceeds received from another Company or from the exercise
of employee stock options).”

    

    (iii)           Section
11.5 (Capital Expenditures) is amended to modify the limit on capital
expenditures as a percentage of Total Assets by replacing “10%” therein with
“15%”.

    

    (j)           Modification of Schedule
8.2.  Schedule
8.2 (Corporate Organization
and Structure) is revised as set forth on Annex A
attached hereto.

    

    (k)           Modification of Compliance
Certificate.   The Compliance
Certificate is modified by revising “Annex A” thereto in its
entirety as set forth on Annex B
hereto.

    

    2.           Representations
and Warranties.  As a material
inducement to the Lenders and the Administrative Agent to execute and deliver
this Amendment, the Company represents and warrants to the Lenders and the
Administrative Agent (with the knowledge and intent that Lenders are relying
upon the same in entering into this Amendment) that: (a) the Company and the
Guarantors have all requisite authority and power to execute, deliver, and
perform their respective obligations under this Amendment and the Guarantors’
Consent and Agreement, as the case may be, which execution, delivery, and
performance have been duly authorized by all necessary action, require no
Governmental Approvals, and do not violate the respective certificates of
incorporation or organization, bylaws, or operating agreement, or other
organizational or formation documents of such Companies; (b) upon execution and
delivery by the Company, the Guarantors, the Administrative Agent, and the
Lenders, this Amendment will constitute the legal and binding obligation of the
Company and each Guarantor, enforceable against such entities in accordance with
the terms of this Amendment, except as that enforceability
may be limited by general principles of equity or by bankruptcy or insolvency
laws or similar laws affecting creditors’ rights generally; (c) all
representations and warranties in the Loan Papers are true and correct in all
material respects as though made on the date hereof, except to the extent that any
of them speak to a specific date or the facts on which any of them are based
have been changed by transactions contemplated or permitted by the Credit
Agreement; and (d) no Default or Potential Default has occurred and is
continuing.

    

    3.           Conditions
Precedent to Effectiveness.  This Amendment
shall be effective on the date (the “Effective
Date”) upon which the Administrative Agent receives each of the following
items:

    

    (a)           counterparts
of this Amendment executed by the Company, the Administrative Agent, and
Required Lenders;

    

    (b)           the
Guarantors’ Consent and Agreement executed by each Guarantor;

    

    (c)           legal
opinions of Fiona E. Arnold, Senior Vice President and General Counsel of Vail
Resorts, Inc., and Hogan & Hartson LLP, each in form and substance
satisfactory to the Administrative Agent;

    

    (d)           an
Officers’ Certificate for the Restricted Companies (i) attaching resolutions
authorizing the transactions contemplated hereby, (ii) certifying that no
changes have been made to the Restricted Companies’ respective articles of
incorporation or organization, bylaws, or operating agreements since the date
such documents were previously provided to the Administrative Agent, as
applicable, (iii) listing the names and titles of the Responsible Officers, and
(iv) providing specimen signatures for such Responsible Officers;
and

    

    (e)           a
certificate signed by a Responsible Officer certifying that as of the Effective
Date (i) all of the representations and warranties of the Companies in the Loan
Papers are true and correct in all material respects (unless they specifically
refer to an earlier date, in which case they shall be true and correct as of
such earlier date, or are based on facts which have changed by transactions
contemplated or permitted by the Credit Agreement), (ii) no Default or Potential
Default exists under the Credit Agreement or would result from the execution and
delivery of this Amendment, (iii) there has been no event or circumstance since
July 31, 2007 that has had or could be reasonably expected to result in, either
individually or in the aggregate, a Material Adverse Event, and (iv) except as
set forth on Schedule
8.7 of the Credit Agreement or as disclosed in VRI’s Annual Report on
Form 10-K for the year ended July 31, 2007, there is no action, suit,
investigation, or proceeding pending or, to the knowledge of the Company,
threatened, in any court or before any arbitrator or Governmental Authority that
is reasonably likely to be determined adversely to any Company and, if so
adversely determined, would result in a Material Adverse Event.

     

    4.           Expenses.  The Company shall
pay all reasonable out-of-pocket fees and expenses paid or incurred by the
Administrative Agent incident to this Amendment, including, without limitation,
the reasonable fees and expenses of the Administrative Agent’s counsel in
connection with the negotiation, preparation, delivery, and execution of this
Amendment and any related documents.

    

    5.           Miscellaneous.  Unless stated
otherwise herein, (a) the singular number includes the plural, and vice versa, and words of any
gender include each other gender, in each case, as appropriate, (b) headings and
captions shall not be construed in interpreting provisions of this Amendment,
(c) this Amendment shall be governed by and construed in accordance with the
laws of the State of New York, (d) if any part of this Amendment is for any
reason found to be unenforceable, all other portions of it shall nevertheless
remain enforceable, (e) this Amendment may be executed in any number of
counterparts with the same effect as if all signatories had signed the same
document, and all of those counterparts shall be construed together to
constitute the same document, (f) this Amendment is a “Loan
Paper” referred to in the Credit Agreement, and the provisions relating
to Loan Papers in Section 14
of the Credit Agreement are incorporated herein by reference, (g) this
Amendment, the Credit Agreement, as amended by this Amendment, and the other
Loan Papers constitute the entire agreement and understanding among the parties
hereto and supercede any and all prior agreements and understandings, oral or
written, relating to the subject matter hereof, and (h) except as provided in
this Amendment, the Credit Agreement, the Notes, and the other Loan Papers are
unchanged and are ratified and confirmed.

    

    6.           Parties.  This Amendment
binds and inures to the benefit of the Company, the Guarantors, the
Administrative Agent, the Lenders, and their respective successors and
assigns.

    

               The
parties hereto have executed this Amendment in multiple counterparts as of the
date first above written.

    Remainder
of Page Intentionally Blank.

    Signature
Pages to Follow.

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    THE VAIL CORPORATION (D/B/A “VAIL
ASSOCIATES, INC.”), as the
Company

    

    

    

    By:           /s/
Jeffrey W. Jones

    Name:             Jeffrey W.
Jones

    Title:               Senior Executive Vice
President

            
 and Chief
Financial Officer

    

    

    
      
        
          Signature
Page to

          Fourth
Amendment to Fourth Amended and Restated Credit Agreement

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    BANK OF AMERICA, N.A., as
Administrative Agent

    

    

    By:           /s/
Ronaldo Naval

    Name:            Ronaldo
Naval

    Title:              Vice
President

    

    
      
        
          Signature
Page to

          Fourth
Amendment to Fourth Amended and Restated Credit Agreement

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    BANK OF AMERICA,
N.A.,

    as a
Lender

    

    

    By:           /s/
David McCauley

    Name:           
David McCauley

    Title:              Senior
Vice President

    

    
      
        
          Signature
Page to

          Fourth
Amendment to Fourth Amended and Restated Credit Agreement

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    LASALLE BANK NATIONAL
ASSOCIATION,

    as a
Lender

    

    

    By:           /s/
David McCauley

    Name:            David
McCauley

    Title:              Senior
Vice President

     

    U.S. BANK NATIONAL
ASSOCIATION,

    as a
Lender

    

    

    By:           /s/
Greg Blanchard

    Name:            Greg
Blanchard

    Title:              Vice
President

    

    

    
      
        
          Signature
Page to

          Fourth
Amendment to Fourth Amended and Restated Credit Agreement

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    

    WELLS FARGO BANK, NATIONAL
ASSOCIATION, as a Lender

    

    

    By:           /s/
Susan K. Petri

    Name:            Susan
K. Petri

    Title:              Vice
President

    

    

    

    

    
      
        
          Signature
Page to

          Fourth
Amendment to Fourth Amended and Restated Credit Agreement

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    DEUTSCHE BANK TRUST COMPANY
AMERICAS, as a Lender

    

    

    By:           /s/
J.T. Johnston Coe

    Name:            J.T.
Johnston Coe

    Title:              Managing
Director

    

    

    By:           /s/
Joanna Soliman

    Name:            Joanna
Soliman

    Title:              Assistant
Vice President

     

     

     

    
      
        Signature
Page to

        Fourth
Amendment to Fourth Amended and Restated Credit Agreement

        

      

    

                                                          

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

    JPMORGAN CHASE BANK,
NA,

    as a
Lender

    

    

    By:           /s/
David L. Ericson

    Name:            David
L. Ericson

    Title:              Senior
Vice President

    
      
        
          Signature
Page to

          Fourth
Amendment to Fourth Amended and Restated Credit Agreement

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    COMPASS BANK,

    as a
Lender

    

    

    By:           

    Name:                      

    Title:                      

    

    
      
        
          Signature
Page to

          Fourth
Amendment to Fourth Amended and Restated Credit Agreement

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    COLORADO STATE BANK &
TRUST,

    as a
Lender

    

    

    By:           

    Name:                      

    Title:                      

    

    
      
        
          Signature
Page to

          Fourth
Amendment to Fourth Amended and Restated Credit Agreement

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    COMERICA WEST
INCORPORATED,

    as a
Lender

    

    

    By:           /s/
Fatima Arshad

    Name:            Fatima
Arshad

    Title:              Corporate
Banking Officer

    

    

    
      
        
          Signature
Page to

          Fourth
Amendment to Fourth Amended and Restated Credit Agreement

          

        

         

      

      
         

        
          

        

      

      
         

      

    

    GUARANTORS’ CONSENT AND
AGREEMENT

     

    As an
inducement to Administrative Agent and Lenders to execute, and in consideration
of and as a condition to Administrative Agent’s and Lenders’ execution of the
foregoing Fourth Amendment to Fourth Amended and Restated Credit Agreement (the
“Fourth
Amendment”), the undersigned hereby consent to the Fourth Amendment, and
agree that (a) the Fourth Amendment shall in no way release, diminish, impair,
reduce or otherwise adversely affect the respective obligations and liabilities
of each of the undersigned under each Guaranty described in the Credit
Agreement, or any agreements, documents or instruments executed by any of the
undersigned to create liens, security interests or charges to secure any of the
indebtedness under the Loan Papers, all of which obligations and liabilities
are, and shall continue to be, in full force and effect, and (b) the Guaranty
executed by each Guarantor is ratified, and the “Guaranteed
Indebtedness” includes, without limitation, the “Obligation”
(as defined in the Credit Agreement).  This consent and agreement
shall be binding upon the undersigned, and the respective successors and assigns
of each, and shall inure to the benefit of Administrative Agent and Lenders, and
the respective successors and assigns of each, and shall be governed by and
construed in accordance with the laws of the State of New York.

     

    Vail
Resorts, Inc.

    Vail
Holdings, Inc.

    Beaver
Creek Associates, Inc.

    Beaver
Creek Consultants, Inc.

    Beaver
Creek Food Services, Inc.

    Breckenridge
Resort Properties, Inc.

    Bryce
Canyon Lodge Company

    Gillett
Broadcasting, Inc.

    Grand
Teton Lodge Company

    Heavenly
Valley, Limited Partnership

    Jackson
Hole Golf and Tennis Club, Inc.

    JHL&S
LLC

    Keystone
Conference Services, Inc.

    Keystone
Development Sales, Inc.

    Keystone
Food and Beverage Company

    Keystone
Resort Property Management Company

    Larkspur
Restaurant & Bar, LLC

    Lodge
Properties, Inc.

    Lodge
Realty, Inc.

    Mesa
Verde Lodge Company

    Mountain
Thunder, Inc.

    National
Park Hospitality Company

    One Ski
Hill Place, LLC

    Property
Management Acquisition Corp., Inc.

    Rockresorts
Arrabelle, LLC

    Rockresorts
International, LLC

    Rockresorts
LLC

    Rockresorts
Cheeca, LLC

    Rockresorts
Eleven Biscayne, LLC

    Rockresorts
Equinox, Inc.

    Rockresorts
Hotel Jerome, LLC

    Rockresorts
LaPosada, LLC

    Rockresorts
(St. Lucia) Inc.

    Rockresorts
Third Turtle, Ltd.

    Rockresorts
Wyoming, LLC

    Rockresorts
Cordillera Lodge Company, LLC

    Rockresorts
Rosario, LLC

    Rockresorts
Ski Tip, LLC

    SOHO
Development, LLC

    SSV
Holdings, Inc.

    Teton
Hospitality Services, Inc.

    Timber
Trail, Inc.

    The
Village at Breckenridge Acquisition Corp., Inc.

    VA Rancho
Mirage I, Inc.

    VA Rancho
Mirage II, Inc.

    VA Rancho
Mirage Resort, L.P.

    Vail/Arrowhead,
Inc.

    Vail
Hotel Management Company, LLC

    Vail
Associates Holdings, Ltd.

    Vail
Associates Investments, Inc.

    Vail
Associates Real Estate, Inc.

    Vail/Beaver
Creek Resort Properties, Inc.

    Vail Food
Services, Inc.

    Vail
Resorts Development Company

    Vail RR,
Inc.

    Vail
Summit Resorts, Inc.

    Vail
Trademarks, Inc.

    VAMHC,
Inc.

    VR
Heavenly I, Inc.

    VR
Heavenly II, Inc.

    VR
Holdings, Inc.

    Zion
Lodge Company

    

    

    
      	
               
      

            	
              By:
      /s/ Jeffrey W. Jones

            

    

    
      	
               
      

            	
              Name:

            	
              Jeffrey W.
      Jones

            

    

    
      	
               
      

            	
              Title:

            	
              Senior Executive Vice
      President

            

    

    and Chief Financial
Officer

    

    

    

    
      
        
          Guarantors’
Consent and Agreement

        

         

      

      
         

        
          

        

      

      
         

      

    

    ANNEX A

    

    Schedule
8.2

    

    (Attached)

    
      
        
          Annex
A to

          Fourth
Amendment

        

         

      

      
         

        
          

        

      

      
         

      

    

    ANNEX B

    

    Annex A to Exhibit
D

    

    CREDIT
FACILITY COVENANTS CALCULATIONS

    

    Subject
Period:  ___________________, 200_

    

    
      	 
      	
              Months

              Ended - -

               

            
	
              10.8(m)                        INVESTMENTS
      IN PERSONS

               

            	 
      
	
              (i)Investments
      during Subject Period in Unrestricted Subsidiaries, Housing Districts and
      Metro Districts not otherwise permitted under Section
      10.8(j)(ii), and other Persons (other than Restricted Subsidiaries)
      involved in Similar Businesses:

               

            	
               

               

               

              $                         

            
	
              (ii)Investments
      during prior Subject Periods in Unrestricted Subsidiaries, Housing
      Districts and Metro Districts not otherwise permitted under Section
      10.8(j)(ii), and other Persons (other than Restricted Subsidiaries)
      involved in Similar Businesses:

               

            	
               

               

               

              $                         

            
	
              (iii)       Investments
      set forth on part
      (b) of Schedule
      10.8:

            	
              $                         

               

            
	
              (iv)(10.8(m)(i)
      plus 10.8(m)(ii)
      plus 10.8(m)(iii)):

            	
              $                         

            
	 
      	 
      
	
              (v)        $75,000,000:

            	
              $75,000,000

               

            
	
              (vi)           Book
      value of Total Assets:

            	
              $                         

            
	 
      	 
      
	
                           (vii)       10%
      of 10.8(m)(vi):

            	
              $                         

               

            
	
              (viii)           Investment
      Limit (10.8(m)(v)
      plus 10.8(m)(vii)):

            	
              $                         

               

            
	
              (ix)       Net
      reductions in investments permitted under Section
      10.8(m) in an aggregate amount not to exceed 10.8(m)(viii):

            	
               

              $                         

               

            
	
              (x)Maximum
      permitted investments in Unrestricted Subsidiaries, Housing Districts and
      Metro Districts not otherwise permitted under Section
      10.8(j)(ii), and other Persons (other than Restricted Subsidiaries)
      involved in Similar Businesses permitted after the Closing Date, and
      investments set forth on part (b)
      of Schedule
      10.8 (10.8(m)(viii)
      plus 10.8(m)(ix)):

               

            	
               

               

               

               

               

              $                         

            
	
              (xi)       Fair
      market value of all assets owned by Restricted Subsidiaries on the Closing
      Date which have been contributed to Unrestricted
Subsidiaries:

               

            	
               

               

              $                         

            
	
              (xii)     Is
      10.8(m)(xi)
      less than $75,000,000?

            	
              Yes/No

            
	 
      	 
      
	
              (xiii)Are
      investments in Unrestricted Subsidiaries, Housing Districts and Metro
      Districts not otherwise permitted under Section
      10.8(j)(ii), and other Persons (other than Restricted Subsidiaries)
      involved in Similar Businesses, and investments set forth on part
      (b) of Schedule
      10.8 (10.8(m)(iv)), less
      than or equal to the maximum amount permitted (10.8(m)(x))?

               

            	
               

               

               

               

               

              Yes/No

            
	
              10.9(d)                      DISTRIBUTIONS,
      LOANS, ADVANCES, AND INVESTMENTS

               

            	 
      
	
              (i)Distributions
      under Section
      10.9(d), and loans, advances, and investments made, which are not
      otherwise permitted under Section
      10.8 during Subject Period:

            	
               

               

              $                         

               

            
	
              (ii)Distributions
      under Section
      10.9(d), and loans, advances, and investments made, which are not
      otherwise permitted under Section
      10.8 during prior Subject Periods:

            	
               

               

              $                         

               

            
	
              (iii)Aggregate
      Distributions under Section
      10.9(d), and loans, advances, and investments made, which are not
      otherwise permitted under Section
      10.8 (the sum of 10.9(d)(i)
      plus 10.9(d)(ii)):

               

            	
               

               

              $                         

            
	
              (iv)Aggregate
      amount of Restricted Payments (as defined in the VRI Indenture) that VRI
      and its Restricted Subsidiaries are permitted to make under, and in
      accordance with, Section
      4.10 of the VRI
      Indenture, as set forth in detail on Schedule I
      attached hereto:

               

            	
               

               

               

              $                         

            
	
              (v)        Are
      aggregate Distributions under Section
      10.9(d), and loans, advances, and investments made, which are not
      otherwise permitted under Section
      10.8 (10.9(d)(iii))
      less than the maximum amount of Restricted Payments permitted (10.9(d)(iv))?

            	
               

               

               

              Yes/No

               

            
	
              11.1           RATIO
      OF NET FUNDED DEBT TO ADJUSTED EBITDA:

            	 
      
	
              (i)All
      obligations of the Companies for borrowed money:

            	
              $                         

            
	
              (ii)Minus all obligations of the Unrestricted
      Subsidiaries for borrowed money (the sum of items
      11.1(ii)(A) through 11.1(ii)(AA)
      below):

               

            	
               

               

              ($_____________ )

            
	
              (A)SSI
      Venture LLC (weighted average of the membership interest not held by a
      Company) (if SSI is not a Restricted Subsidiary)

            	
               

               

              ($_____________ )

            
	
              (B)Colter
      Bay Café Court, LLC

            	
              ($_____________ )

            
	
              (C)Colter
      Bay Convenience Store, LLC

            	
              ($_____________ )

            
	
              (E)Colter
      Bay Corporation

            	
              ($_____________ )

            
	
              (E)Colter
      Bay General Store, LLC

            	
              ($_____________ )

            
	
              (F)Colter
      Bay Marina, LLC

            	
              ($_____________ )

            
	
              (G)Crystal
      Peak Lodge of Breckenridge, Inc.

            	
              ($_____________ )

            
	
              (H)Gross
      Ventre Utility Company

            	
              ($_____________ )

            
	
              (I)Jackson
      Hole Golf & Tennis Club Snack Shack, LLC

            	
              ($_____________ )

            
	
              (J)Jackson
      Lake Lodge Corporation

            	
              ($_____________ )

            
	
              (K)Jenny
      Lake Lodge, Inc.

            	
              ($_____________ )

            
	
              (L)Jenny
      Lake Store, LLC

            	
              ($_____________ )

            
	
              (M)Stampede
      Canteen, LLC

            	
              ($_____________ )

            
	
              (N)Eagle
      Park Reservoir Company

            	
              ($_____________ )

            
	
              (O)Rockresorts
      International Management Company

            	
              ($_____________ )

            
	
              (P)Forest
      Ridge Holdings, Inc.

            	
              ($_____________ )

            
	
              (Q)Arrabelle
      at Vail Square, LLC

            	
              ($_____________ )

            
	
              (R)Gore
      Creek Place, LLC

            	
              ($_____________ )

            
	
              (S)The
      Chalets at the Lodge at Vail, LLC

            	
              ($_____________ )

            
	
              (T)RCR
      Vail, LLC

            	
              ($_____________ )

            
	
              (U)Hunkidori
      Land Company, LLC

            	
              ($_____________ )

            
	
              (V)TCRM
      Company

            	
              ($_____________ )

            
	
              (W)VR
      Heavenly Concessions, Inc.

            	
              ($_____________ )

            
	
              (X)Stagecoach
      Development, LLC

            	
              ($_____________ )

            
	
              (Y)           Vail
      Resorts Lodging Company

            	
              ($_____________ )

            
	
              (Z)           La
      Posada Beverage Service, LLC

            	
              ($_____________ )

            
	
              (AA)                      Other
      Unrestricted Subsidiaries not listed above

            	
              ($_____________ )

               

            
	
              (iii)Plus the principal portion of all Capital
      Lease obligations of the Companies:

            	
               

              $_____________

            
	
               

              (iv)Minus the principal portion of the Capital
      Lease obligations for the following Unrestricted Subsidiaries (the sum of
      items 11.1(iv)(A)
      through 11.1(iv)(AA)
      below):

               

            	
               

               

               

              ($____________)

            
	
              (A)SSI
      Venture LLC (weighted average of the membership interest not held by a
      Company) (if SSI is not a Restricted Subsidiary)

            	
               

               

              ($_____________ )

            
	
              (B)Colter
      Bay Café Court, LLC

            	
              ($_____________ )

            
	
              (C)Colter
      Bay Convenience Store, LLC

            	
              ($_____________ )

            
	
              (E)Colter
      Bay Corporation

            	
              ($_____________ )

            
	
              (E)Colter
      Bay General Store, LLC

            	
              ($_____________ )

            
	
              (F)Colter
      Bay Marina, LLC

            	
              ($_____________ )

            
	
              (G)Crystal
      Peak Lodge of Breckenridge, Inc.

            	
              ($_____________ )

            
	
              (H)Gross
      Ventre Utility Company

            	
              ($_____________ )

            
	
              (I)Jackson
      Hole Golf & Tennis Club Snack Shack, LLC

            	
              ($_____________ )

            
	
              (J)Jackson
      Lake Lodge Corporation

            	
              ($_____________ )

            
	
              (K)Jenny
      Lake Lodge, Inc.

            	
              ($_____________ )

            
	
              (L)Jenny
      Lake Store, LLC

            	
              ($_____________ )

            
	
              (M)Stampede
      Canteen, LLC

            	
              ($_____________ )

            
	
              (N)Eagle
      Park Reservoir Company

            	
              ($_____________ )

            
	
              (O)Rockresorts
      International Management Company

            	
              ($_____________ )

            
	
              (P)Forest
      Ridge Holdings, Inc.

            	
              ($_____________ )

            
	
              (Q)Arrabelle
      at Vail Square, LLC

            	
              ($_____________ )

            
	
              (R)Gore
      Creek Place, LLC

            	
              ($_____________ )

            
	
              (S)The
      Chalets at the Lodge at Vail, LLC

            	
              ($_____________ )

            
	
              (T)RCR
      Vail, LLC

            	
              ($_____________ )

            
	
              (U)Hunkidori
      Land Company, LLC

            	
              ($_____________ )

            
	
              (V)TCRM
      Company

            	
              ($_____________ )

            
	
              (W)VR
      Heavenly Concessions, Inc.

            	
              ($_____________ )

            
	
              (X)Stagecoach
      Development, LLC

            	
              ($_____________ )

            
	
              (Y)           Vail
      Resorts Lodging Company

            	
              ($_____________ )

            
	
              (Z)           La
      Posada Beverage Service, LLC

            	
              ($_____________ )

            
	
              (AA)                      Other
      Unrestricted Subsidiaries not listed above

            	
              ($_____________ )

               

            
	
                           (v)        Plus reimbursement obligations and undrawn
      amounts under Bond

                                       L/Cs
      supporting Bonds (other than Existing Housing Bonds) issued

                                       by
      Unrestricted Subsidiaries:

            	
               

               

              $                         

               

            
	
              (vi)Minus Debt under Existing Housing
      Bonds:

            	
              $                         

            
	 
      	 
      
	
              (vii)Funded
      Debt of the Restricted Companies (11.1(i)
      minus 11.1(ii)
      plus 11.1(iii)
      minus 11.1(iv)
      plus 11.1(v)
      minus 11.1(vi)):

               

            	
               

              $                         

               

            
	
              (viii) Cash
      of the Companies:

               

            	
              $                         

            
	
              (ix) Minus cash of the Unrestricted Subsidiaries
      (the sum of items
      11.1(ix)(A) through 11.1(ix)(AA)
      below):

            	
              ($_____________ )

            
	 
      	 
      
	
              (A)SSI
      Venture LLC (weighted average of the membership interest not held by a
      Company) (if SSI is not a Restricted Subsidiary)

            	
               

               

              ($_____________ )

            
	
              (B)Colter
      Bay Café Court, LLC

            	
              ($_____________ )

            
	
              (C)Colter
      Bay Convenience Store, LLC

            	
              ($_____________ )

            
	
              (E)Colter
      Bay Corporation

            	
              ($_____________ )

            
	
              (E)Colter
      Bay General Store, LLC

            	
              ($_____________ )

            
	
              (F)Colter
      Bay Marina, LLC

            	
              ($_____________ )

            
	
              (G)Crystal
      Peak Lodge of Breckenridge, Inc.

            	
              ($_____________ )

            
	
              (H)Gross
      Ventre Utility Company

            	
              ($_____________ )

            
	
              (I)Jackson
      Hole Golf & Tennis Club Snack Shack, LLC

            	
              ($_____________ )

            
	
              (J)Jackson
      Lake Lodge Corporation

            	
              ($_____________ )

            
	
              (K)Jenny
      Lake Lodge, Inc.

            	
              ($_____________ )

            
	
              (L)Jenny
      Lake Store, LLC

            	
              ($_____________ )

            
	
              (M)Stampede
      Canteen, LLC

            	
              ($_____________ )

            
	
              (N)Eagle
      Park Reservoir Company

            	
              ($_____________ )

            
	
              (O)Rockresorts
      International Management Company

            	
              ($_____________ )

            
	
              (P)Forest
      Ridge Holdings, Inc.

            	
              ($_____________ )

            
	
              (Q)Arrabelle
      at Vail Square, LLC

            	
              ($_____________ )

            
	
              (R)Gore
      Creek Place, LLC

            	
              ($_____________ )

            
	
              (S)The
      Chalets at the Lodge at Vail, LLC

            	
              ($_____________ )

            
	
              (T)RCR
      Vail, LLC

            	
              ($_____________ )

            
	
              (U)Hunkidori
      Land Company, LLC

            	
              ($_____________ )

            
	
              (V)TCRM
      Company

            	
              ($_____________ )

            
	
              (W)VR
      Heavenly Concessions, Inc.

            	
              ($_____________ )

            
	
              (X)Stagecoach
      Development, LLC

            	
              ($_____________ )

            
	
              (Y)           Vail
      Resorts Lodging Company

            	
              ($_____________ )

            
	
              (Z)           La
      Posada Beverage Service, LLC

            	
              ($_____________ )

            
	
              (AA)                      Other
      Unrestricted Subsidiaries not listed above

            	
              ($_____________ )

               

            
	
              (x) Investments
      of the Companies in marketable obligations issued or unconditionally
      guaranteed by the U.S. or issued by any of its agencies and backed by the
      full faith and credit of the U.S., in each case maturing within one year
      from the date of acquisition:

               

            	
               

               

               

              $                         

            
	
              (xi) Investments
      of the Companies in short-term
      investment grade domestic and eurodollar certificates of deposit or time
      deposits that are fully insured by the Federal Deposit Insurance
      Corporation or are issued by commercial banks organized under the Laws of
      the U.S. or any of its states having combined capital, surplus, and
      undivided profits of not less than $100,000,000 (as shown on its most
      recently published statement of condition):

               

            	
               

               

               

              $                         

            
	
              (xii) Investments
      of the Companies in commercial paper and similar obligations rated “P-1” by Moody’s or
      “A-1” by
      S&P:

               

            	
               

               

              $                         

            
	
              (xiii)Investments
      of the Companies in readily marketable Tax-free municipal bonds of a
      domestic issuer rated “A-2” or better by
      Moody’s or “A” or
      better by S&P, and maturing within one year from the date of
      issuance:

            	
               

               

               

              $                         

               

            
	
              (xiv)            Investments
      of the Companies in mutual funds or money marketaccounts investing
      primarily in items described in items
      11.1(x)through (xiii)
      above:

               

            	
               

              $                         

               

            
	
              (xv)Investments
      of the Companies in demand deposit accounts maintained in the ordinary
      course of business:

            	
               

              $                         

               

            
	
              (xvi)Investments
      of the Companies in short-term repurchase agreements with major banks and
      authorized dealers, fully collateralized to at least 100% of market value
      by marketable obligations issued or unconditionally guaranteed by the U.S.
      or issued by any of its agencies and backed by the full faith and credit
      of the U.S.:

               

            	
               

               

               

               

              $                         

               

            
	
              (xvii)Investments
      of the Companies in short-term variable rate demand notes that invest in
      tax-free municipal bonds of domestic issuers rated “A-2” or better by
      Moody’s or “A” or
      better by S&P that are supported by irrevocable letters of credit
      issued by commercial banks organized under the laws of the U.S. or any of
      its states having combined capital, surplus, and undivided profits of not
      less than $100,000,000:

               

            	
               

               

               

               

               

               

              $                         

               

            
	
              (xviii)Temporary
      Cash Investments of the Companies (11.1(x)
      plus 11.1(xi)
      plus 11.1(xii)
      plus 11.1(xiii)
      plus 11.1(xiv)
      plus 11.1(xv) plus 11.1(xvi)
      plus 11.1(xvii)):

            	
               

               

              $                         

               

            
	
              (xix)           Minus Temporary Cash Investments of the
      UnrestrictedSubsidiaries (the sum of items
      11.1(xix)(A) through 11.1(xix)(AA)below):

               

            	
               

               

              ($_____________ )

            
	
              (A)SSI
      Venture LLC (weighted average of the membership interest not held by a
      Company) (if SSI is not a Restricted Subsidiary)

            	
               

               

              ($_____________ )

            
	
              (B)Colter
      Bay Café Court, LLC

            	
              ($_____________ )

            
	
              (C)Colter
      Bay Convenience Store, LLC

            	
              ($_____________ )

            
	
              (E)Colter
      Bay Corporation

            	
              ($_____________ )

            
	
              (E)Colter
      Bay General Store, LLC

            	
              ($_____________ )

            
	
              (F)Colter
      Bay Marina, LLC

            	
              ($_____________ )

            
	
              (G)Crystal
      Peak Lodge of Breckenridge, Inc.

            	
              ($_____________ )

            
	
              (H)Gross
      Ventre Utility Company

            	
              ($_____________ )

            
	
              (I)Jackson
      Hole Golf & Tennis Club Snack Shack, LLC

            	
              ($_____________ )

            
	
              (J)Jackson
      Lake Lodge Corporation

            	
              ($_____________ )

            
	
              (K)Jenny
      Lake Lodge, Inc.

            	
              ($_____________ )

            
	
              (L)Jenny
      Lake Store, LLC

            	
              ($_____________ )

            
	
              (M)Stampede
      Canteen, LLC

            	
              ($_____________ )

            
	
              (N)Eagle
      Park Reservoir Company

            	
              ($_____________ )

            
	
              (O)Rockresorts
      International Management Company

            	
              ($_____________ )

            
	
              (P)Forest
      Ridge Holdings, Inc.

            	
              ($_____________ )

            
	
              (Q)Arrabelle
      at Vail Square, LLC

            	
              ($_____________ )

            
	
              (R)Gore
      Creek Place, LLC

            	
              ($_____________ )

            
	
              (S)The
      Chalets at the Lodge at Vail, LLC

            	
              ($_____________ )

            
	
              (T)RCR
      Vail, LLC

            	
              ($_____________ )

            
	
              (U)Hunkidori
      Land Company, LLC

            	
              ($_____________ )

            
	
              (V)TCRM
      Company

            	
              ($_____________ )

            
	
              (W)VR
      Heavenly Concessions, Inc.

            	
              ($_____________ )

            
	
              (X)Stagecoach
      Development, LLC

            	
              ($_____________ )

            
	
              (Y)           Vail
      Resorts Lodging Company

            	
              ($_____________ )

            
	
              (Z)           La
      Posada Beverage Service, LLC

            	
              ($_____________ )

            
	
              (AA)                      Other
      Unrestricted Subsidiaries not listed above

               

            	
              ($_____________ )

            
	
              (xx)           Unrestricted
      Cash of the Restricted Companies (11.1(viii)
      minus11.1(ix)
      plus 11.1(xviii)
      minus 11.1(xix)):

            	
               

              $                         

               

            
	
              (xxi)           Unrestricted
      Cash of the Restricted Companies in excess of$10,000,000:

               

            	
               

              $                         

            
	
              (xxii)                      Net
      Funded Debt (11.1(vii)
      minus 11.1(xxi)):

               

            	
              $                         

            
	
              (xxiii)EBITDA
      of the Companies for the last four fiscal quarters:

            	
              $                         

               

            
	
              (xxiv)Plus insurance proceeds (up to a maximum of
      $10,000,000 in the aggregate for any fiscal year) received by the
      Restricted Companies under policies of business interruption insurance (or
      under policies of insurance which cover losses or claims of the same
      character or type):

            	
               

               

               

               

              $                         

            
	
               

              (xxv)Plus pro forma EBITDA of the
      Restricted Companies (and if SSI is not a Restricted Company, Borrower’s
      Ownership Percentage of the EBITDA of SSI) for assets acquired during such
      period (excluding EBITDA of Restricted Companies from cash distributions
      from Real Estate Joint Ventures that are Unrestricted Subsidiaries, to the
      extent such amounts are included in 11.1
      (xxii)):

            	
               

               

               

              $                         

            
	
               

              (xxvi)Minus pro forma EBITDA of the
      Restricted Companies (and if SSI is not a Restricted Company, Borrower’s
      Ownership Percentage of the EBITDA of SSI) for assets disposed of during
      such period:

            	
               

               

               

              ($_____________ )

            
	
               

              (xxvii)Minus EBITDA for such period attributable
      to the following Unrestricted Subsidiaries (sum of items 11.1(xxvii)(A)
      through 11.1(xxvii)(AA)
      below):

               

            	
               

               

               

              ($_____________ )

            
	
              (A)SSI
      Venture LLC (weighted average of the membership interest not held by a
      Company) (if SSI is not a Restricted Subsidiary)

            	
               

               

              ($_____________ )

            
	
              (B)Colter
      Bay Café Court, LLC

            	
              ($_____________ )

            
	
              (C)Colter
      Bay Convenience Store, LLC

            	
              ($_____________ )

            
	
              (E)Colter
      Bay Corporation

            	
              ($_____________ )

            
	
              (E)Colter
      Bay General Store, LLC

            	
              ($_____________ )

            
	
              (F)Colter
      Bay Marina, LLC

            	
              ($_____________ )

            
	
              (G)Crystal
      Peak Lodge of Breckenridge, Inc.

            	
              ($_____________ )

            
	
              (H)Gross
      Ventre Utility Company

            	
              ($_____________ )

            
	
              (I)Jackson
      Hole Golf & Tennis Club Snack Shack, LLC

            	
              ($_____________ )

            
	
              (J)Jackson
      Lake Lodge Corporation

            	
              ($_____________ )

            
	
              (K)Jenny
      Lake Lodge, Inc.

            	
              ($_____________ )

            
	
              (L)Jenny
      Lake Store, LLC

            	
              ($_____________ )

            
	
              (M)Stampede
      Canteen, LLC

            	
              ($_____________ )

            
	
              (N)Eagle
      Park Reservoir Company

            	
              ($_____________ )

            
	
              (O)Rockresorts
      International Management Company

            	
              ($_____________ )

            
	
              (P)Forest
      Ridge Holdings, Inc.

            	
              ($_____________ )

            
	
              (Q)Arrabelle
      at Vail Square, LLC

            	
              ($_____________ )

            
	
              (R)Gore
      Creek Place, LLC

            	
              ($_____________ )

            
	
              (S)The
      Chalets at the Lodge at Vail, LLC

            	
              ($_____________ )

            
	
              (T)RCR
      Vail, LLC

            	
              ($_____________ )

            
	
              (U)Hunkidori
      Land Company, LLC

            	
              ($_____________ )

            
	
              (V)TCRM
      Company

            	
              ($_____________ )

            
	
              (W)VR
      Heavenly Concessions, Inc.

            	
              ($_____________ )

            
	
              (X)Stagecoach
      Development, LLC

            	
              ($_____________ )

            
	
              (Y)           Vail
      Resorts Lodging Company

            	
              ($_____________ )

            
	
              (Z)           La
      Posada Beverage Service, LLC

            	
              ($_____________ )

            
	
              (AA)                      Other
      Unrestricted Subsidiaries not listed above

            	
              ($_____________ )

               

            
	
              (xxviii)Adjusted
      EBITDA (11.1(xxiii)
      plus 11.1(xxiv)
      plus 11.1(xxv)
      minus 11.1(xxvi)
      minus 11.1(xxvii)):

               

            	
               

              $                         

            
	
              (xxix)Ratio
      of Net Funded Debt to Adjusted EBITDA

              (Ratio of 11.1(xxii)
      to 11.1(xxviii)):

            	 
      
	
               

              (xxx)Maximum
      ratio of Net Funded Debt to Adjusted EBITDA permitted:

            	
               

              4.50
      : 1.00

               

            
	
               

              (xxxi)Is
      the ratio of Net Funded Debt to Adjusted EBITDA less than the maximum
      ratio permitted?

            	
               

              Yes/No

            
	
               

              11.2           [RESERVED]

            	 
      
	 
      	 
      
	
              11.3           MINIMUM
      NET WORTH:

               

            	 
      
	
              (a)Shareholders’
      Equity determined in accordance with GAAP:

               

            	
              $                         

            
	
              (b)$414,505,800:

               

            	
              $414,505,800

            
	
              (c)Restricted
      Companies’ Net Income, if positive, for each fiscal year completed after
      October 31, 2004:

               

            	
               

              $                         

            
	
              (d)75%
      of the total from 11.3(c):

               

            	
              $                         

            
	
              (e)Net
      Proceeds received by any Restricted Company from the offering, issuance,
      or sale of equity securities of a Restricted Company after October 31,
      2004 (other than Net Proceeds received from another Company or from the
      exercise of employee stock options):

               

            	
               

               

               

              $                         

            
	
              (f)Minimum
      shareholders’ equity permitted

              (11.3(b)
      plus 11.3(d)
      plus 11.3(e)):

               

            	
               

              $                         

            
	
              (g)Does
      Shareholders’ Equity exceed the minimum permitted?

            	
              Yes/No

            
	
              11.4           INTEREST
      COVERAGE RATIO

            	 
      
	
              (a)Adjusted
      EBITDA for the last four fiscal quarters (11.1(xxviii)):

            	
              $                         

            
	
               

              (b)Interest
      expense on Funded Debt for the last four fiscal quarters:

            	
               

              $                         

               

            
	
              (c)Amortization
      of deferred financing costs and original issue discounts:

            	
               

              $                         

            
	
               

              (d)11.4(b)
      minus 11.4(c):

            	
               

              $                         

            
	
               

              (e)           Interest
      Coverage Ratio (Ratio of 11.4(a)
      to 11.4(d)):

            	 
      
	
               

              (f)           Minimum
      Interest Coverage Ratio permitted:

            	
               

              2.50
      : 1.00

            
	
               

              (g)Does
      the Interest Coverage Ratio exceed the minimum ratio
      permitted?

            	
               

               

              Yes/No

            
	
               

              11.5           CAPITAL
      EXPENDITURES

            	 
      
	
               

              (a)Aggregate
      capital expenditures of the Restricted Companies in the ordinary course of
      the business during each fiscal year (excluding (i) normal replacements
      and maintenance which are properly charged to current operations, and (ii)
      expenditures relating to real estate held for resale):

            	
               

               

               

               

               

               

              $                         

            
	
               

              (b)Total
      Assets of the Restricted Companies (and, if SSI is not a Restricted
      Company, Borrower’s Ownership Percentage of the total assets of SSI) as of
      the last day of the fiscal year:

            	
               

               

              $                         

            
	
               

              (c)Maximum
      capital expenditures permitted (15% of Total Assets of the Restricted
      Companies (and, if SSI is not a Restricted Company, Borrower’s Ownership
      Percentage of the total assets of SSI) set forth in 11.5(b)):

               

            	
               

               

              $                         

            
	
              (d)Are
      aggregate capital expenditures less than the maximum amount
      permitted?

            	
               

              Yes/No

            
	 
      	 
      
	
              LETTERS
      OF CREDIT

            	 
      
	 
      	 
      
	
              Set
      forth on Schedule
      1 attached hereto is a list of all issued and outstanding letters
      of credit issued for the account of any of the Companies, and the drawn
      and undrawn amounts thereunderExhibit 4.6

                          [LOGO] ZARLINK SEMICONDUCTOR

                           ZARLINK SEMICONDUCTOR INC.
                    1991 STOCK OPTION PLAN FOR KEY EMPLOYEES
                           AND NON-EMPLOYEE DIRECTORS

                  AS AMENDED DECEMBER 7, 2001 AND JULY 24, 2007

      1. Purpose. The Zarlink  Semiconductor Inc. 1991 Stock Option Plan for Key
Employees  and  Non-Employee  Directors  (the "Plan") is intended to attract and
retain  highly  qualified  employees  and  non-employee  directors  who  will be
motivated toward the success of Zarlink  Semiconductor  Inc. (the "Company") and
to  encourage  share  ownership  in the  Company by certain  key  employees  and
non-employee directors of the Company and its subsidiaries.

      2.  Number of Common  Shares to be  Offered.  The  shares  subject  to the
options to be granted  under  this Plan  shall be Common  Shares of the  Company
("Common Shares").  The maximum number of Common Shares that may be issued under
this Plan shall not exceed  20,227,033 Common Shares and no employee (as defined
below) shall hold options to purchase more than 5% of the total number of Common
Shares issued and outstanding from time to time. In addition, the maximum number
of Common  Shares in respect  of which  options  may be granted to  non-employee
directors  during any fiscal year of the Company  shall be 20,000 per  director.
Upon the  expiration,  surrender  or  termination,  in  whole or in part,  of an
unexercised  option, the Common Shares subject to such option shall be available
for other options to be granted from time to time under this Plan.

      3. Limits with Respect to Insiders.

      (a) The maximum  number of Common Shares  issuable to insiders (as defined
in the Securities Act (Ontario) and the rules of any applicable  stock exchange)
("insiders" and each an "insider"),  at any time,  under this Plan and any other
security based  compensation  arrangement of the Company is 10% of the number of
Common Shares outstanding.

      (b) The maximum number of Common Shares issued to insiders under this Plan
and any other security based compensation arrangement of the Company, within any
one-year period, is 10% of the number of Common Shares outstanding.

      4. Terms and Conditions of Option.

      (a) Employees  Eligible to Receive  Options.  The individuals who shall be
eligible  to receive  options  under this Plan shall be such key  employees  and
non-employee  directors  of the Company and its  subsidiaries  as the  Committee
("Committee"  described  in  Section 6 of this  Plan)  from  time to time  shall
determine.  Any reference  herein to "employee(s)"  shall include  "director(s)"
except to the extent

                                       1
<PAGE>

that specific terms of the Plan apply to directors.  More than one option may be
granted to the same employee.

      (b) Option Price.  The price at which Common Shares may be purchased under
the Plan shall be as  determined  by the  Committee  on the date of grant of the
option (the "Grant  Date"),  provided  however,  that such price may not be less
than the average of the market price of the Common  Shares on The Toronto  Stock
Exchange for the five trading day period  immediately  preceding the Grant Date.
For the purpose hereof, "market price" shall mean:

            (i) the  average of the high and low prices of the Common  Shares on
The Toronto Stock Exchange on a trading day, or

            (ii) if there was no trade  for the  Common  Shares  on the  Toronto
Stock  Exchange on any  particular  relevant  trading day, then the market price
shall be the average of the bid and ask quotations for the Common Shares on such
relevant trading day on the exchange.

      (c) Option  Period.  Subject to Section 4(h) and 6, each option for Common
Shares granted under the Plan (the "Option Shares") may be exercised at any time
or from time to time as follows:

            (i) in the case of  employees  (except for  executive  officers  and
non-employee  directors)  to whom an  option is  granted  under the Plan for the
first time,  25% of the Option  Shares  become vested and may be exercised as of
and  following  the first  anniversary  of the date of grant of such option and,
thereafter,  2.08% of the Option  Shares become vested and may be exercised on a
monthly basis as of the last day of each month  following the first  anniversary
of the date of grant of such option until the 48th month after the date of grant
of such option, and

            (ii) in the case of  employees  (except for  executive  officers and
non-employee directors) who are already optionholders at the time of grant of an
additional  option under the Plan,  2.08% of the Option Shares become vested and
may be exercised on a monthly basis as the last day of each month  following the
date of grant of such  option  until the 48th  month  after the date of grant of
such  option,  or at  such  other  time or  times  as may be  determined  by the
Committee at the time of grant.

On the date determined by the Committee at the time of grant which occurs within
a maximum  of six years  following  the date of grant of an  option,  the option
shall expire and terminate and be of no further force or effect whatsoever.

      (d) Methods of Payment.  The employee  from time to time during the option
period may elect to purchase all or part of the Option Shares which the employee
is  entitled to  purchase  by lump sum  payment by  delivering  to the Company a
completed  stock option  purchase  form.  Such form shall  specify the number of
Option  Shares the  employee  desires to purchase  and shall be  accompanied  by
payment in full of the

                                       2
<PAGE>

purchase  price for such Option Shares.  Payment can be made by cash,  certified
cheque, bank draft or money order payable to the Company.

      (e)  Withholding.  No Option  Shares  shall be issued by the Company to an
employee until  appropriate  arrangements  have been made for the payment of any
amounts which may be required under any law, regulation, rule or otherwise to be
withheld  or  paid by the  Company  with  respect  thereto,  including,  without
limitation, withholding the transfer of a portion of the shares of the Company's
stock  otherwise  issuable in order to satisfy all or a portion of the  required
withholdings or payments.

      (f) Termination of Employment of an Employee. Subject to Sections 4(g) and
4(j),  in the  event  that an  employee's  employment  with the  Company  or any
subsidiary is terminated prior to the expiry date of the employee's  option, the
employee's  option may be  exercised,  at anytime  during the period which is no
more than 90 days  following  the date the  employee's  employment is terminated
(but in no event after the expiry date of such option), as to such of the Option
Shares in respect of which such option has not previously  been  exercised,  but
only to the  extent  that  the  employee  was  entitled  at his  termination  of
employment to purchase such Option Shares then  exercisable  pursuant to Section
4(c) above;  provided,  however, that in the event the employment of an employee
who has received an option under the Plan is terminated as set forth above,  the
Board of Directors of the Company may, in its own discretion, amend the terms of
any option to permit the employee to exercise such options as if such employee's
employment  had not been  terminated  (provided  that the exercise  period shall
terminate on the earlier of (i) three years  following  the date the  employee's
employment is terminated and (ii) the expiry date of such option).  For purposes
of this Plan, the transfer of an employee's  employment to the Company or to any
subsidiary of the Company shall not be considered a termination of employment.

      (g)  Termination  of Employment of an Employee for Cause.  Notwithstanding
any other  term or  condition  of the  Plan,  in the  event  that an  employee's
employment  with the Company or any  subsidiary  is  terminated  for cause,  the
employee's  option  shall be  immediately  terminated  and such  employee  shall
forfeit  all rights  thereto as of the date of  personal  delivery  of a written
notice  confirming such  termination and the requirement to exercise options and
not after,  as to such of the Option  Shares in respect of which such option has
not previously been exercised.

      (h) Automatic  Acceleration of Exercise Periods for Non-Employee Directors
Upon Change of Control.  In the event of a change of control (whether in fact or
in law) of the Company which results in a non-employee  director being replaced,
the  periods set forth under  Section  4(c) shall be waived with  respect to the
options  then held by such  non-employee  director  in order to permit  the full
exercise of all outstanding options then held by such person.

      (i) Resignation of a Director.  In the event that a non-employee  director
ceases  to  act  as a  director  of  the  Company,  all  options  held  by  such
non-employee  director,  which are then exercisable  pursuant to Section 4(c) or
4(h),  as the case may

                                       3
<PAGE>

be, may be exercised within 180 days following the announcement of the quarterly
results next  following the date of  resignation of such person (but in no event
after the expiry date of such option).

      (j) Rights in the Event of an Employee's  Death. In the event of the death
or the  permanent  disability  of an  employee  while in the  employment  of the
Company or any  subsidiary  and on or prior to the expiry date of the employee's
option and  provided  such  employee  shall have been in the  employment  of the
Company or any  subsidiary  for at least  five  years  prior to the date of such
employee's  death  or  permanent  disability,  the  exercise  date of 50% of the
employee's  option which is not exercisable on the date of such employee's death
or permanent disability,  shall be accelerated so that the employee's option may
be exercised by the employee's legal personal representative(s) or the employee,
as applicable,  at any time after the date of the employee's  death or permanent
disability  up to and  including  (but  not  after)  a date  which  is one  year
following the date of the employee's  death or permanent  disability  (but in no
event  after the  expiry  date of such  option),  as to any or all of the Option
Shares in respect of which such option has not previously been exercised. In the
event that such employee shall have been in the employment of the Company or any
subsidiary for at least ten years prior to the date of such employee's  death or
permanent  disability,  the exercise date of 100% of the employee's option which
is not  exercisable  on such  date  shall be so  accelerated.  For the  purposes
hereof,  "permanent  disability"  has the  meaning  assigned to that term in the
Zarlink Employee Canadian Benefits Plan, as amended from time to time.

      (k) No  Employment  Right.  Nothing  in this Plan  shall  confer  upon the
employee  the right to continue in the employ of the Company or interfere in any
way with the right of the Company to terminate the employee's  employment at any
time and for any reason.

      (l)  No  Shareholder  Rights.  An  employee  shall  have  no  rights  as a
shareholder  with respect to any Option Shares covered by the employee's  option
until the date of the valid  issuance  of such shares to the  employee  and only
after such shares are fully paid for. No  adjustment  will be made for dividends
or other  distributions or rights for which the record date is prior to the date
of such issuance.

      (m) Transfer and Assignment. The employee's rights with respect to options
granted  under the Plan are not  assignable or  transferable  by the employee or
subject to any other  alienation,  sale,  pledge or encumbrance by such employee
other than by will or by the laws of descent and  distribution  or pursuant to a
qualified domestic relations order as defined by the U.S. Internal Revenue Code.
Therefore the options are exercisable during the employee's lifetime only by the
employee.  The  obligations  of each  employee  shall be  binding  on his heirs,
executors and administrators.

      (n) Compliance with United States Securities and Other Laws. Option Shares
may be purchased  only if the Company  determines  to and obtains the  necessary

                                       4
<PAGE>

approvals  to sell its Common  Shares to  employees  who are  citizens of or are
employed in the United  States under  applicable  United States  securities  and
other laws.

      5.  Adjustments.  Upon the  happening of any of the following  events,  an
employee's  rights  with  respect  to  options  granted  under the Plan shall be
adjusted as hereinafter provided.

      (a) In the event of any  subdivision,  redivision  or change of the Common
Shares into a greater  number of shares at any time, or in the case of the issue
of shares of the Company to the holders of its outstanding  Common Shares by way
of stock  dividend  or  stock  dividends  (other  than an  issue  of  shares  to
shareholders  pursuant to their exercise of options to receive  dividends in the
form of shares of the Company in lieu of cash dividends  declared payable in the
ordinary  course by the  Company  on its  Common  Shares),  the number of Common
Shares  deliverable  by the  Company  upon the  exercise  of an option  shall be
appropriately  increased  proportionately,  and appropriate adjustments shall be
made in the purchase price per share to reflect such subdivision,  redivision or
change.

      (b) In the event of any  consolidation or change of the Common Shares into
a lesser number of shares at any time,  the number of Common Shares  deliverable
by the Company upon the exercise of an option shall be  appropriately  decreased
proportionately, and appropriate adjustments shall be made in the purchase price
per share to reflect such consolidation.

      (c) In the  event  of any  reclassification  or  reclassifications  of the
Common Shares,  at any time an employee shall accept, at the time of purchase of
Option  Shares,  in lieu of the number of Common  Shares in respect of which the
option to  purchase is being  exercised,  the number of shares of the Company of
the  appropriate  class or classes as the employee would have been entitled as a
result  of  such  reclassification  or  reclassifications  had the  option  been
exercised before such reclassification or reclassifications.

      (d) If the Company is to be amalgamated with or acquired by another entity
in a  merger,  sale  of all or  substantially  all of the  Company's  assets  or
otherwise  (an  "Acquisition"),  the  Committee or the Board of Directors of any
entity  assuming the  obligations of the Company under the Plan (the  "Successor
Board"), shall, as to outstanding options, either (i) make appropriate provision
for the  continuation  of such options by substituting on an equitable basis for
the shares then subject to such options the  consideration  payable with respect
to the outstanding  Common Shares in conjunction with the  Acquisition;  or (ii)
upon  written  notice  to the  employees,  provide  that  all  options  must  be
exercised, to the extent then exercisable,  within a specified number of days of
the date of such notice, at the end of which period the options shall terminate;
or (iii)  terminate  all options in  exchange  for a cash  payment  equal to the
excess of the fair market  value of the shares  subject to such  options (to the
extent then exercisable) over the exercise price thereof.

                                       5
<PAGE>

      (e) In the  event  of  the  proposed  dissolution  or  liquidation  of the
Company,  each option will terminate  immediately  prior to the  consummation of
such proposed action or at such other time and subject to such other  conditions
as shall be determined by the Committee.

      (f) Except as  expressly  provided  herein,  no issuance by the Company of
shares of any class, or securities  convertible into shares of any class,  shall
affect,  and no adjustment by reason  thereof shall be made with respect to, the
number or price of shares subject to options.  No adjustments  shall be made for
dividends paid in cash or in property other than securities of the Company.

      (g) No  fractional  shares shall be issued under the Plan and the employee
shall receive from the Company cash in lieu of such fractional shares.

      (h)  Upon  the  happening  of any of the  foregoing  events  described  in
subparagraphs  (a),  (b), (c) or (d) above,  the class and  aggregate  number of
shares set forth in  paragraph  2 that are subject to options  which  previously
have  been  or  subsequently  may be  granted  under  the  Plan  shall  also  be
appropriately  adjusted to reflect the events  described in such  subparagraphs.
The Committee or the Successor Board shall determine the specific adjustments to
be made under this  paragraph 5 and,  subject to paragraph 6, its  determination
shall be conclusive.

      6. Administration. This Plan shall be administered by the Compensation and
Human  Resources  Development  Committee  (the  "Committee").   Members  of  the
Committee  shall be appointed by the Board of Directors of the Company and shall
serve as such at the pleasure of the Board of  Directors.  The  Committee  shall
have full power and  authority to designate  those key  employees of the Company
and its  subsidiaries  who are to be granted options under this Plan, the number
of options to be granted to each such key  employee  and  otherwise to interpret
and construe the terms and  conditions  of the options  granted under this Plan.
Without  limiting the  generality of the powers and  discretions  granted to the
Committee herein,  the Committee may determine that any option granted under the
Plan shall include provisions which accelerate the date on which an option shall
become  exercisable  upon the  happening  of such  events as the  Committee  may
determine and as may be prescribed in the applicable options agreement.  Without
limiting the  generality of the foregoing the Committee may determine  that such
acceleration  should  occur in the event of an actual or  anticipated  change of
effective control of the Company,  or in the event of other fundamental  changes
to the Company or its business or affairs.  Any  determination  by the Committee
shall be final  and  conclusive  unless  otherwise  determined  by the  Board of
Directors of the Company,  and in any such event such determination of the Board
of Directors shall be final and  conclusive.  The day-to-day  administration  of
this Plan may be delegated to such  officers and  employees of the Company or of
any  subsidiary  of the Company as the  Committee in its sole  discretion  shall
determine.

                                       6
<PAGE>

      7.  Variation  of  Grant,  Amendment  and  Discontinuance.  The  Board  of
Directors  shall have the right to amend,  modify or terminate  this Plan or any
option granted under this Plan at any time without  notice;  provided,  however,
that

      (a) any such amendment or  modification  of this Plan which  increases the
total  number of Common  Shares which are to be offered  under this Plan,  as so
amended or modified, shall be approved by the shareholders of the Company,

      (b) any such  amendment  or  modification  of this Plan may not modify the
rights of employees with respect to options granted under the Plan without their
previous consent and any required regulatory approvals,

      (c) any  program  implemented  by the Company at any time and from time to
time to provide for the exchange of any option granted under this Plan for other
options under this Plan shall be approved by the shareholders of the Company,

      (d) any  reduction  in the price at which  Common  Shares may be purchased
under the Plan (except in connection  with an adjustment to the share capital in
accordance with Section 5 hereof) or any  cancellation and reissuance of options
shall be approved by the shareholders of the Company,

      (e) an  extension  of the  original  expiry  date of an  option  shall  be
approved by the shareholders of the Company,

      (f) any  increase  of the  maximum  number of Common  Shares  issuable  to
insiders of the Company  pursuant to the exercise of options  under the Plan and
any  other  security-based  compensation  arrangement  of the  Company  shall be
approved by the shareholders of the Company,

      (g) any  amendment  to the maximum  number of Common  Shares in respect of
which options may be granted to non-employee directors during any fiscal year of
the Company shall be approved by shareholders of the Company,

      (h) any amendment to the terms of this Plan which would permit  options to
be transferable or assignable (other than in the limited circumstances described
in Section 4(m) hereof) shall be approved by shareholders of the Company, and

      (i) any  amendment  or  modification  of this Plan will be  subject to the
prior approval of the Toronto Stock  Exchange and any regulatory  body requiring
similar approval.

The Board of Directors of the Company shall have the full power and authority to
approve  any other  amendments  relating  to the Plan or any  option  previously
granted without further approval of the  shareholders of the Company,  including
if such amendments relate to, among other things:

                                       7
<PAGE>

      (a) any amendment to the  eligibility  for, and  limitations or conditions
on, participation in the Plan;

      (b) any  amendment  to any  terms  relating  to the grant or  exercise  of
options,  including,  but not limited  to, the terms  relating to the amount and
payment of the exercise  price (other than a reduction in the price of an option
(except in connection with an adjustment to the share capital in accordance with
Section 5 hereof)),  vesting, expiry,  adjustment of options, or the addition or
amendment  of  terms  relating  to the  provision  of  financial  assistance  to
employees or of any cashless exercise features;

      (c)  any  amendment  to the  Plan to  permit  the  grant  of  deferred  or
restricted  share units  under the Plan or to add or amend any other  provisions
which  result in employees  receiving  securities  of the Company  while no cash
consideration is received by the Company;

      (d) any change that is necessary  or  desirable to comply with  applicable
laws, rules or regulations of any  governmental  entity,  agency,  department or
authority or any applicable stock exchange;

      (e) any correction or rectification of any ambiguity, defective provision,
error or omission in the Plan or in any option; and

      (f) any amendment of the terms relating to the administration of the Plan,

provided such amendment does not result in significant or unreasonable  dilution
in the  Company's  outstanding  securities,  or in any  additional  benefits  to
employees,  particularly  insiders,  at the expense of the Company and its other
shareholders.

      8.  Termination  of the  Plan.  The  Plan  shall  remain  effective  until
terminated  by  the  Board  of  Directors  of  the  Company  provided  that  the
termination of the Plan shall have no effect on outstanding options, which shall
remain  in  accordance  with  their  terms  and  conditions  and the  terms  and
conditions of the Plan.

      9. No Corporate Action Restriction. Nothing contained in the Plan shall be
construed to prevent or preclude the Company  from taking any  corporate  action
which is  deemed  by the  Company  to be  appropriate  or in its best  interest,
whether  or not such  action  would  have an  adverse  effect on the Plan or any
option award made under the Plan. No employee, beneficiary or other person shall
have any claim against the Company as a result of such corporate action.

      10.  Governing Law. The Plan and the options  granted under the Plan shall
be construed in  accordance  with and be governed by the laws of the Province of
Ontario and the laws of Canada applicable therein.

Dated this 24th day of July, 2007.

                                       8

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