THE VAIL CORPORATION 2005 DEFERRED COMPENSATION PLAN

1.1  

“Account Balance” shall mean, with respect to a Participant, an entry on the records of the Employer equal to the sum of (i) the Participant’s Annual Accounts, and (ii) the Participant’s Transfer Amount, if any, along with related earnings.  The Account Balance shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to a Participant, or his or her designated Beneficiary, pursuant to this Plan.

1.2  

“Annual Account” shall mean, with respect to a Participant, an entry on the records of the Employer equal to the following amount:  (i) the sum of the Participant’s Annual Deferral Amount and Company Contribution Amount for any one Plan Year, plus (ii) amounts credited or debited to such amounts pursuant to this Plan, less (iii) all distributions made to the Participant or his or her Beneficiary pursuant to this Plan that relate to the Annual Account for such Plan Year.  The Annual Account shall be a bookkeeping entry only and shall be utilized solely as a device for the measurement and determination of the amounts to be paid to a Participant, or his or her designated Beneficiary, pursuant to this Plan.

1.3  

“Annual Deferral Amount” shall mean that portion of a Participant’s Base Salary (including any 401(k) Refund Offset, as defined below), Bonus and Director Fees that a Participant defers in accordance with Article 3 for any one Plan Year, without regard to whether such amounts are withheld and credited during such Plan Year.  In the event of a Participant’s Separation from Service, Disability or death prior to the end of a Plan Year, such year’s Annual Deferral Amount shall be the actual amount withheld prior to such event.

1.4  

“Annual Installment Method” shall be an annual installment payment over the number of years selected by the Participant   in accordance with this Plan, calculated as follows:  (i) for the first annual installment, the vested portion of each Annual Account shall be calculated as of the close of business on or around the Participant’s Benefit Distribution Date, as determined by the Committee in its sole discretion,   and (ii) for remaining annual installments, the vested portion of each applicable Annual Account shall be calculated on or around the first business day of each Plan Year following the Plan Year in which the Participant’s first installment payment was distributed.  Each annual installment shall be calculated by multiplying this balance by a fraction, the numerator of which is one and the denominator of which is the remaining number of annual payments due to the Participant.  By way of example, if the Participant elects a ten (10) year Annual Installment Method as the form of Separation Benefit for an Annual Account, the first payment shall be 1/10 of the vested balance of such Annual Account, calculated as described in this definition.  The following year, the payment shall be 1/9 of the vested balance of such Annual Account, calculated as described in this definition.

1.5  

“Base Salary” shall mean the Participant’s base cash compensation for services performed during any Plan Year, which, for purposes of clarity, excludes distributions from nonqualified deferred compensation plans, bonuses, commissions, overtime, fringe benefits, stock options and other equity incentive awards, relocation expenses, incentive payments, non-monetary awards, director fees and other fees, and automobile and other allowances paid to a Participant for employment services rendered (whether or not such allowances are included in the Employee’s gross income).  Base Salary shall be calculated before reduction for compensation voluntarily deferred or contributed by the Participant pursuant to all qualified or nonqualified plans of any Employer and shall be calculated to include amounts not otherwise included in the Participant’s gross income under Code Sections 125, 402(e)(3), 402(h), or 403(b) pursuant to plans established by any Employer; provided, however, that all such amounts will be included in Base Salary only to the extent that had there been no such plan, the amount would have been payable in cash to the Employee.

1.6  

“Beneficiary” shall mean one or more persons, trusts, estates or other entities, designated in accordance with Article 8, that are entitled to receive benefits under this Plan upon the death of a Participant.

1.7  

“Beneficiary Designation Form” shall mean the form, which may be electronic, established from time to time by the Committee, that a Participant completes and returns to the Committee to designate one or more Beneficiaries.

1.8  

“Benefit Distribution Date” shall mean a date that triggers distribution of a Participant’s vested benefits upon Separation from Service, death, or Disability.  A Benefit Distribution Date for a Participant shall be determined upon the occurrence of any one of the following:

(a)  

If the Participant experiences a Separation from Service, the Benefit Distribution Date for his or her vested Account Balance shall be the last day of the six-month period immediately following the date on which the Participant experiences a Separation from Service; provided, however, in the event the Participant either changes the form of payment or postpones the time of payment of the Separation Benefit for one or more Annual Accounts in accordance with Section 5.2(c), the Benefit Distribution Date for such Annual Account(s) shall be postponed in accordance with such section 5.2(c); or

(b)  

If the Participant dies prior to the complete distribution of his or her vested Account Balance, the Participant’s Benefit Distribution Date shall be the date on which the Committee is provided with proof that is satisfactory to the Committee of the Participant’s death; or

(c)  

If the Participant becomes Disabled, the Participant’s Benefit Distribution Date shall be the date on which the Participant becomes Disabled.

1.9  

“Board” shall mean the board of directors of the Company.

1.10  

“Bonus” shall mean compensation earned by a Participant under any Employer’s cash bonus plans, and shall specifically include amounts described in Section 3.1(d), 3.1(e), and 3.1(f).

1.11  

“Change in Control” shall mean any “change in control event” as defined in accordance with Code Section 409A and related Treasury guidance and Regulations.

1.12  

“Claimant” shall have the meaning set forth in Section 13.1.

1.13  

“Class 1 Participant” shall mean a Participant who has a salary grade level of 30 or above.

1.14  

“Class 2 Participant” shall mean a Participant who has a salary grade level of less than 30.

1.15  

“Code” shall mean the Internal Revenue Code of 1986, as it may be amended from time to time.

1.16  

“Committee” shall mean the committee described in Article 11.

1.17  

“Company” shall mean The Vail Corporation, d/b/a Vail Associates, Inc., a Colorado corporation, and any successor to all or substantially all of the Company’s assets or business.

1.18  

“Company Contribution Amount” shall mean, for any one Plan Year, the amount determined in accordance with Section 3.5.

1.19  

“Director” shall mean any member of the board of directors of any Employer.

1.20  

“Director Fees” shall mean the fees otherwise payable in cash to a Director by any Employer, including cash retainer fees and cash meetings fees, as compensation for serving on the board of directors.

1.21  

“Disability” or “Disabled” shall mean that a Participant is (i) unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident or health plan covering employees of the Participant’s Employer.  For purposes of this Plan, a Participant shall be deemed Disabled if determined to be totally disabled by the Social Security Administration, or if determined to be disabled in accordance with the applicable disability insurance program of such Participant’s Employer, provided that the definition of “disability” applied under such disability insurance program complies with the requirements in the preceding sentence.

1.22  

“Disability Benefit” shall mean the benefit set forth in Article 6.

1.23  

“Election Form” shall mean the form, which may be in electronic format, established from time to time by the Committee in its sole discretion, that a Participant completes and returns to the Committee in order to make elections under the Plan.

1.24  

“Employee” shall mean a person who is a common-law employee of any Employer.  Notwithstanding the foregoing, the term Employee shall not include any individual (a) who provides services to the Employer under an agreement, contract, or any other arrangement pursuant to which the individual is initially classified as an independent contractor, or (b) whose remuneration for services has not been treated initially as subject to the withholding of federal income tax pursuant to Code section 3401, even if the individual is subsequently reclassified as a common law employee as a result of a final decree of a court of competent jurisdiction or the settlement of an administrative or judicial proceeding.

1.25  

“Employer(s)” shall mean the Company and/or any of its affiliates or subsidiaries (now in existence or hereafter formed or acquired) that have been selected by the Board to participate in the Plan and have adopted the Plan as a participating employer.

1.26  

“ERISA” shall mean the Employee Retirement Income Security Act of 1974, as it may be amended from time to time.

1.27  

“401(k) Plan” shall mean, with respect to an Employer, a plan qualified under Code Section 401(a) that contains a cash or deferred arrangement described in Code Section 401(k), adopted by the Employer, as it may be amended from time to time, or any successor thereto.

1.28  

“Participant” shall mean any Employee or Director (i) who is selected to participate in the Plan, (ii) who completes the Enrollment Requirements and becomes eligible to participate in the Plan in accordance with Section 2.2, and (iii) whose Plan Agreement (if any) has not terminated.

1.29  

“Plan” shall mean The Vail Corporation 2005 Deferred Compensation Plan, which shall be evidenced by this instrument and by each Plan Agreement, as they may be amended from time to time.

1.30  

“Plan Agreement” shall mean an agreement, which may be amended from time to time, which is entered into by and between an Employer and a Participant.  Each Plan Agreement between a Participant and the Participant’s Employer shall provide for the entire benefit to which such Participant is entitled under the Plan; should there be more than one Plan Agreement, the Plan Agreement bearing the latest date of acceptance by the Employer shall supersede all previous Plan Agreements in their entirety and shall govern such entitlement.  The terms of any Plan Agreement may be different for any Participant, and any Plan Agreement may provide additional benefits or distribution options not set forth in the Plan or limit the benefits or distribution options otherwise provided under the Plan; provided, however, that any such additional benefits or distribution options, or benefit limitations or distribution limitations, shall comply with Code Section 409A and must be agreed to by both the Employer and the Participant.

1.31  

“Plan Year” shall mean a period beginning on January 1 of each calendar year and continuing through December 31 of such calendar year.

1.32  

“Scheduled Distribution” shall mean the distribution set forth in Section 4.1.

1.33  

“Separation Benefit” shall mean the benefit set forth in Article 5.

1.34  

“Separation from Service” shall mean the separation from service with all Employers, voluntarily or involuntarily, for any reason other than Disability or death, as determined in accordance with Code Section 409A and related Treasury guidance and Regulations.  If a Participant is both an Employee and a Director, then, except as otherwise required by Code Section 409A and related Treasury guidance and Regulations, a Separation from Service shall not occur prior to the termination of his or her services as both an Employee and a Director.

1.35  

“Survivor Benefit” shall mean the benefit set forth in Article 7.

1.36  

“Terminate the Plan” or “Termination of the Plan” shall mean a determination by an Employer’s board of directors that (i) all of its Participants shall no longer be eligible to participate in the Plan, (ii) no new deferral elections for such Participants shall be permitted, and (iii) such Participants shall no longer be eligible to receive company contributions under this Plan.

1.37  

“Trust” shall mean one or more trusts established by the Company in accordance with Article 14.

1.38  

“Unforeseeable Emergency” shall mean a severe financial hardship of the Participant resulting from (i) an illness or accident of the Participant, the Participant’s spouse, or the Participant’s dependent (as defined in Code Section 152(a)), (ii) a loss of the Participant’s property due to casualty, or (iii) such other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant, all as determined in the sole discretion of the Committee.

2.1  

Selection by Committee

2.2  

Enrollment and Eligibility Requirements; Commencement of Participation

(a)  

As a condition of participation, each Director or selected Employee who is eligible to participate in the Plan must (i) complete and return to the Committee an Election Form, and (ii) must complete such other enrollment requirements as the Committee determines, in its sole discretion (together the “Enrollment Requirements”), which, on and after January 1, 2007, shall include the completion and return to the Committee of a Plan Agreement and a Beneficiary Designation Form.

(b)  

A Director or selected Employee who is eligible to participate in the Plan effective as of the first day of a Plan Year shall complete the Enrollment Requirements prior to the first day of such Plan Year, or such other earlier deadline as may be established by the Committee in its sole discretion.  Assuming timely completion of the Enrollment Requirements, as determined by the Committee in its sole discretion, the Director or selected Employee shall commence participation in the Plan as of such first day of the Plan Year.

(c)  

A Director or selected Employee who first becomes eligible to participate in this Plan after the first day of a Plan Year must complete the Enrollment Requirements within thirty (30) days after he or she first becomes eligible to participate in the Plan, or within such other earlier deadline as may be established by the Committee, in its sole discretion. The Director or selected Employee shall commence participation in the Plan on the date that the Committee determines, in its sole discretion, that the Director or selected Employee has timely satisfied the Enrollment Requirements.  Notwithstanding the foregoing, the Committee shall process such Participant’s deferral election as soon as administratively practicable after such deferral election is submitted to and accepted by the Committee.

(d)  

If a Director or a selected Employee fails to satisfy timely the Enrollment Requirements within the relevant period required, the Director or selected Employee shall not be eligible to participate in the Plan during such Plan Year and shall not commence participation until the first day of the Plan Year next following the date on which the Director or selected Employee does complete the Enrollment Requirements.

2.3  

Failure of Eligibility

3.1  

Election to Defer; Effect of Election Form

(a)  

First Year of Plan Participation .  In connection with a Participant’s commencement of participation in the Plan, the Participant shall make an irrevocable election to defer Base Salary, Bonus, and/or Director Fees (as applicable) for the Plan Year in which the Participant commences participation in the Plan. For the election to be valid, the Election Form must be completed by the Participant and delivered timely to (and accepted by) the Committee along with the remainder of the Enrollment Requirements in accordance with Section 2.2 above.

(b)  

Subsequent Plan Years .  For each succeeding Plan Year, a Participant may elect to defer Base Salary, Bonus, and/or Director Fees (as applicable), and make such other elections as the Committee deems necessary or desirable under the Plan, by delivering timely a new Election Form to the Committee, in accordance with its rules and procedures, before the December 31 st preceding the Plan Year in which such compensation is earned, or before such earlier deadline established by the Committee in accordance with the requirements of Code Section 409A and related Treasury guidance or Regulations.

(c)  

401(k) Refund Offset .  In connection with each Participant’s deferral election under the Plan for each Plan Year, the Participant shall be permitted to elect to defer an amount of Base Salary equal to the refund, if any, that the Participant receives from the Employer’s 401(k) Plan during such Plan Year (the “401(k) Refund Offset’).

(d)  

Performance-Based Compensation .   Notwithstanding anything to the contrary herein, the Committee may, in its sole discretion, determine that an irrevocable deferral election pertaining to “performance-based compensation” based on services performed over a period of at least twelve (12) months, may be made by delivering timely an Election Form to the Committee, in accordance with its rules and procedures, no later than six (6) months before the end of the performance service period.  “Performance-based compensation” shall be compensation, the payment or amount of which is contingent on pre-established organizational or individual performance criteria, which satisfies the requirements of Code Section 409A and related Treasury guidance or Regulations.  In order to be eligible to make a deferral election for performance-based compensation, a Participant must perform services continuously from a date no later than the date upon which the performance criteria for such compensation are established through the date upon which the Participant makes a deferral election for such compensation.  In no event shall an election to defer performance-based compensation be permitted after such compensation has become both substantially certain to be paid and readily ascertainable.  For purposes of this Plan, including the minimum and maximum deferral limits below, “performance based compensation” deferred pursuant to this Section shall be treated as part of a Participant’s Bonus and Annual Deferral Amount for the Plan Year in which the performance service period ends.

(e)  

Compensation Subject to Risk of Forfeiture .  With respect to compensation (i) to which a Participant has a legally binding right to payment in a subsequent year, and (ii) that is subject to a forfeiture condition requiring the Participant’s continued services for a period of at least twelve (12) months from the date the Participant obtains the legally binding right, the Committee may, in its sole discretion, determine that an irrevocable deferral election for such compensation may be made by delivering timely an Election Form to the Committee in accordance with its rules and procedures, no later than the 30 th day after the Participant obtains the legally binding right to the compensation, provided that the election is made at least twelve (12) months in advance of the earliest date at which the forfeiture condition could lapse.  For purposes of this Plan, including the minimum and maximum deferral limits below, compensation deferred pursuant to this Section shall be treated as part of a Participant’s Bonus and Annual Deferral Amount for the Plan Year in which the forfeiture condition lapses.

(f)  

Fiscal Year Compensation .  With respect to any Participant whose Employer uses a fiscal year other than the calendar year, the Committee may, in its sole discretion, permit the Participant to defer compensation relating to a period of service coextensive with one or more consecutive fiscal years of such Employer (of which no amount is paid or payable during the service period), by delivering timely an Election Form with respect to such compensation to the Committee not later than the close of the Employer’s fiscal year next preceding the first fiscal year in which are performed any services for which such compensation is payable. For purposes of the Plan, including the minimum and maximum deferral limits below, compensation deferred pursuant to this Section shall be treated as part of a Participant’s Bonus and Annual Deferral Amount for the Plan Year during which the payment is earned.

3.2  

Minimum Deferrals

(a)  

Annual Deferral Amount .

(i)  

Effective for Plan Years beginning prior to January 1, 2007, a Participant cannot elect to defer as his or her Annual Deferral Amount less than the following minimum amounts of Base Salary and Bonus:

Base Salary (including any 401(k) Refund Offset) and/or Bonus

$1,000 aggregate

(ii)  

Effective for Plan Years beginning on and after January 1, 2007 through December 31, 2008, a Participant cannot defer as his or her Annual Deferral Amount less than the following minimum amounts of Base Salary, Bonus, and/or Director Fees:

Base Salary (including any 401(k) Refund Offset) and/or Bonus

$2,000 aggregate

Director Fees

$0

(iii)  

If the Committee determines, in its sole discretion, prior to the beginning of a Plan Year that a Participant has made an election for less than the stated minimum amounts, or if no election is made, the amount deferred shall be zero.  If the Committee determines, in its sole discretion, at any time after the beginning of a Plan Year that a Participant has deferred less than the stated minimum amounts for that Plan Year, any amount credited to the Participant’s applicable Annual Account as the Annual Deferral Amount for that Plan Year shall, to the extent permitted by Code Section 409A and related Treasury guidance and Regulations, be distributed to the Participant within sixty (60) days after the last day of the Plan Year in which the Committee determination was made.

(b)  

First Year of Plan Participation .  Notwithstanding the foregoing, if a Participant first becomes a Participant after the first day of a Plan Year beginning on or after January 1, 2007 , the minimum deferral amounts shall be equal to the minimums set forth above, multiplied by a fraction, the numerator of which is the number of complete months remaining in the Plan Year and the denominator of which is 12.

3.3  

Maximum Deferral

(a)  

Annual Deferral Amount .

(i)  

Effective for Plan Years beginning prior to January 1, 2007, a Participant cannot elect to defer as his or her Annual Deferral Amount, compensation in excess of the following maximum amounts/percentages:

401(k) Refund Offset

Base Salary (not including any 401(k) Refund Offset)

Bonus

401(k) Refund Offset

Base Salary (not including any 401(k) Refund Offset)

Bonus

(ii)  

Effective for Plan Years beginning on and after January 1, 2007, a Participant cannot defer as his or her Annual Deferral Amount, compensation in excess of the following maximum percentages:

401(k) Refund Offset

Base Salary (not including any 401(k) Refund Offset)

Bonus

Director Fees

(b)  

First Year of Plan Participation .  Notwithstanding the foregoing, in the Participant’s first year of Plan participation,   the maximum deferral percentages above shall be applied to (i) prospective compensation and (ii) amounts earned prior to the deferral election, as long as (ii) can be permissibly deferred under Code Section 409A (e.g. performance-based compensation).  For compensation that is earned based upon a specified performance period, the portion of such compensation earned with respect to services performed after the date the Participant commences participation in the Plan shall be deemed to include (i) the total amount of compensation for the performance period, multiplied by (ii) a fraction, the numerator of which is the number of days remaining in the service period after the Participant commences participation in the Plan, and the denominator of which is the total number of days in the performance period.

3.4  

Withholding and Crediting of Annual Deferral Amounts

3.5  

Company Contribution Amount

(a)  

For each Plan Year, an Employer may be required to credit amounts to a Participant’s Annual Account in accordance with employment or other agreements entered into between the Participant and the Employer, which amounts shall be part of the Participant’s Company Contribution Amount for that Plan Year.  Such amounts shall be credited to the Participant’s Annual Account for the applicable Plan Year on the date or dates prescribed by such agreements.

(b)  

For each Plan Year, an Employer, in its sole discretion, may, but is not required to, credit any amount it desires to any Participant’s Annual Account under this Plan, which amount shall be part of the Participant’s Company Contribution Amount for that Plan Year.  The amount so credited to a Participant may be smaller or larger than the amount credited to any other Participant, and the amount credited to any Participant for a Plan Year may be zero, even though one or more other Participants receive a Company Contribution Amount for that Plan Year.  The Company Contribution Amount described in this Section 3.5(b), if any, shall be credited to the Participant’s Annual Account for the applicable Plan Year on a date or dates to be determined by the Committee, in its sole discretion.

3.6  

Crediting of Amounts after Benefit Distribution

3.7  

Vesting

(a)  

A Participant shall at all times be 100% vested in his or her deferrals of Base Salary, Bonus and Director Fees.

(b)  

A Participant shall be vested in the portion of his or her Account Balance attributable to any Company Contribution Amounts, plus amounts credited or debited on such amounts (pursuant to Section 3.8), in accordance with the vesting schedule(s) set forth in his or her Plan Agreement, employment agreement or any other agreement entered into between the Participant and his or her Employer.  If not addressed in such agreements, a Participant shall vest in the portion of his or her Account Balance attributable to any Company Contribution Amounts, plus amounts credited or debited on such amounts (pursuant to Section 3.8), in accordance with the vesting schedule declared by the Committee in its sole discretion.  The Employer and the Committee may accelerate the vesting schedules of one or more Participants, at any time and for any reason, in their sole discretion.

(c)  

Notwithstanding anything to the contrary contained in this Section 3.7, in the event of a Change in Control,   or upon a Participant’s death while employed by an Employer, or Disability,   any amounts that are not vested in accordance with the vesting schedules set forth in this Section 3.7, shall immediately become 100% vested (if it is not already vested in accordance with the above vesting schedules).

(d)  

Notwithstanding subsection 3.7(c) above, and