Exhibit 10.9

R.R. DONNELLEY & SONS COMPANY

2004 PERFORMANCE INCENTIVE PLAN

(as adopted by the Board of Directors on December 11, 2003 and amended March 25,
2004

and April 2, 2008 and further amended October 29, 2008)

 

I. General

1. Plan. To provide incentives to officers, other employees and other persons
providing services to R.R. Donnelley & Sons Company (the “Company”) through
rewards based upon the ownership or performance of the common stock, par value
$1.25 per share, of the Company (“common stock”) or other performance measures,
the Committee hereinafter designated may grant cash or bonus awards, stock
options, stock appreciation rights (“SARs”), restricted stock, stock units or
combinations thereof, to eligible participants, on the terms and subject to the
conditions stated in this 2004 Performance Incentive Plan (the “Plan”). In
addition, to provide incentives to members of the Board of Directors (the
“Board”) who are not employees of the Company (“non-employee directors”), such
non-employee directors are eligible to receive awards as set forth in Article V
of the Plan. For purposes of the Plan, references to employment by or service to
the Company also means employment by or service to a direct or indirect
majority-owned subsidiary of the Company and employment by or service to any
other entity designated by the Board or the Committee in which the Company has a
direct or indirect equity interest.

2. Eligibility. Officers and other employees of, and other persons providing
services to the Company (“participants”) shall be eligible, upon selection by
the Committee, to receive cash or bonus awards, stock options, SARs, restricted
stock and stock units, either singly or in combination, as the Committee, in its
discretion, shall determine. In addition, non-employee directors shall receive
awards on the terms and subject to the conditions stated in the Plan.

3. Limitation on Shares to be Issued. Subject to adjustment as provided in
Section 5 of this Article I,17,000,000 shares of common stock shall be available
under the Plan, reduced by the aggregate number of shares of common stock which
become subject to outstanding bonus awards, stock options, SARs which are not
granted in tandem with or by reference to a stock option (“free-standing SARs”),
restricted stock awards and stock unit awards. Shares subject to a grant or
award under the Plan which are not issued or delivered, by reason of the
expiration, termination, cancellation or forfeiture of all or a portion of the
grant or award shall again be available for future grants and awards under the
Plan; provided, however, that for purposes of this sentence, stock options and
SARs granted in tandem with or by reference to a stock option granted prior to
the grant of such SARs (“tandem SARs”) shall be treated as one grant. Shares
tendered or withheld upon exercise of an option, vesting of restricted stock or
restricted stock units, settlement of an SAR or upon any other event to pay
exercise price or tax withholding shall not be available for future issuance
under the Plan. In addition, upon exercise of an SAR, the total number of shares
remaining available for issuance under the Plan shall be reduced by the gross
number of shares for which the SAR is exercised.

 

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For the purpose of complying with Section 162(m) of the Internal Revenue Code of
1986, as amended (the “Code”), and the rules and regulations thereunder, the
maximum number of shares of common stock with respect to which options or SARs
or a combination thereof may be granted during any calendar year to any person
shall be 1,000,000, subject to adjustment as provided in Section 5 of this
Article I; provided, however, that for purposes of this sentence, stock options
and tandem SARs shall be treated as one grant. The maximum number of shares of
common stock with respect to which bonus awards, including performance awards or
fixed awards in the form of restricted stock or other form, may be granted
hereunder is 10,000,000 in the aggregate, subject to adjustment as provided in
Section 5 of this Article I and excluding any such awards made pursuant to an
employment agreement with a newly-hired chief executive officer of the Company.
If the Plan becomes effective, no new grants shall be made under any equity plan
of the Company that is in effect as of the date immediately prior to the date of
stockholder approval of the Plan (the “Existing Company Plans”) and all such
Existing Company Plans shall be terminated, provided, however, that such
termination shall have no effect on any outstanding awards granted under any
Existing Company Plan.

Shares of common stock to be issued may be treasury shares reacquired by the
Company or authorized and unissued shares, or a combination of both.

4. Administration of the Plan. The Plan shall be administered by a Committee
designated by the Board (the “Committee”), provided that the Board may designate
a separate committee, also meeting the requirements set forth in the following
sentence, to administer Article V hereof. Each member of the Committee shall be
a director that the Board has determined to be (i) an “outside director” within
the meaning of Section 162(m) of the Code and (ii) a “Non-Employee Director”
within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934, as
amended (the “Exchange Act”). The Committee shall, subject to the terms of the
Plan, select eligible participants for grants and awards; determine the form of
each grant and award, either as cash, bonus awards, stock options, SARs,
restricted stock awards, stock unit awards or a combination thereof; and
determine the number of shares or units subject to the grant or award, the fair
market value of the common stock or units when necessary, the timing and
conditions of vesting, exercise or settlement, whether dividends or dividend
equivalents accrue under any award, and all other terms and conditions of each
grant and award, including, without limitation, the form of instrument
evidencing the grant or award. Notwithstanding the foregoing, all stock option
awards, SARs, restricted stock awards and stock unit awards shall have a minimum
vesting period of at least three years from the date of grant (such vesting may,
in the discretion of the Committee, occur in full at the end of such period or
may occur in specified installments over such period, provided that no more than
40% of any particular award may vest by the end of the first year following the
date of grant and no more than 80% of any particular award may vest by the end
of the second year following the date of grant); provided, however, that the
Committee may provide for early vesting upon the death, permanent and total
disability, retirement or termination of service of the award recipient. The
Committee may also waive this minimum vesting-period requirement (A) with
respect to awards made to newly hired employees, (B) to accelerate vesting of
awards made to existing employees affected by workforce reductions, (C) in
similar circumstances, as determined by the Committee in the exercise of its
discretion and (D) as otherwise required by law or the terms of the Plan. The
Committee may establish rules

 

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and regulations for the administration of the Plan, interpret the Plan, and
impose, incidental to a grant or award, conditions with respect to competitive
employment or other activities not inconsistent with the Plan. All such rules,
regulations, interpretations and conditions shall be conclusive and binding on
all parties. Except to the extent required by Section 5 of this Article I, the
terms of outstanding awards may not be amended to reduce the exercise price of
outstanding Options or SARs or cancel outstanding Options or SARs in exchange
for cash, other awards or Options or SARs with an exercise price that is less
than the exercise price of the original Options or SARs without stockholder
approval.

Each grant and award shall be evidenced by a written instrument and no grant or
award shall be valid until an agreement is executed by the Company and such
grant or award shall be effective as of the effective date set forth in the
agreement. The Committee may delegate some or all of its power and authority
hereunder to the chief executive officer or other executive officer of the
Company as the Committee deems appropriate; provided, however, that the
Committee may not delegate its power and authority with regard to (i) the
selection for participation in the Plan of (A) a person who is a “covered
employee” within the meaning of Section 162(m) of the Code or who, in the
Committee’s judgment, is likely to be a covered employee at any time during the
period a grant or award hereunder to such participant would be outstanding,
(B) an officer or other person subject to Section 16 of the Exchange Act or
(C) a person who is not an employee of the Company or (ii) decisions concerning
the time, pricing or amount of a grant or award to a participant, officer or
other person described in clause (i) above. A majority of the Committee shall
constitute a quorum. The acts of the Committee shall be either (i) acts of a
majority of the members of the Committee present at any meeting at which a
quorum is present or (ii) acts approved in writing by all of the members of the
Committee without a meeting.

5. Adjustments. In the event of any stock split, stock dividend,
recapitalization, reorganization, merger, consolidation, combination, exchange
of shares, liquidation, spin-off or other similar change in capitalization or
event affecting the Company or its common stock, or any distribution to holders
of the Company’s common stock other than a regular cash dividend, the number,
class and kind of securities (including, for this purpose, securities of any
other entity that is a party to such transaction) available under the Plan, the
specific share limitations otherwise set forth in the Plan, the number, class
and kind of securities (including, for this purpose, securities of any other
entity that is a party to such transaction) subject to each outstanding bonus
award, the number, class and kind of securities (including, for this purpose,
securities of any other entity that is a party to such transaction) subject to
each outstanding stock option and the purchase price per security and the terms
of each outstanding SAR shall be appropriately adjusted by the Committee, such
adjustments to be made in the case of outstanding stock options and SARs without
an increase in the aggregate purchase price or base price, provided that no such
adjustment shall be made with respect to the transaction contemplated by the
Combination Agreement, dated as of November 8, 2003, between the Company and
Moore Wallace Incorporated. If any such adjustment would result in a fractional
security being (i) available under the Plan, such fractional security shall be
disregarded, or (ii) subject to an outstanding grant or award under the Plan,
the Company shall pay the holder thereof, in connection with the first vesting,
exercise or settlement of such grant or award, in whole or in part, occurring
after such adjustment, an amount in cash determined by multiplying (i) the
fraction of such security (rounded to the nearest hundredth) by (ii) the excess,
if any, of (A) the

 

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fair market value on the vesting, exercise or settlement date over (B) the
exercise or base price, if any, of such grant or award; provided, however, that
if the fair market value of such fractional security immediately after such
adjustment is less than fair market value of one share of common stock
immediately prior to such adjustment, such fractional security shall be
disregarded and no payment shall be made. For purposes of the Plan, the fair
market value of the common stock on a specified date shall be the closing market
price of the common stock on such date as reported in the New York Stock
Exchange-Composite Transactions, or, if no such trading in the common stock
occurred on such date, then on the next preceding date when such trading
occurred.

6. Effective Date and Term of Plan. The Plan shall be submitted to the
stockholders of the Company for approval at the next meeting of stockholders
held following the Board’s adoption of the Plan and, if approved, shall become
effective on the date of such stockholder approval. The Plan shall terminate on
the date on which shares are no longer available for grants or awards under the
Plan, unless terminated prior thereto by action of the Board; provided, however
that if the Plan itself has not previously terminated, Section 1 of Article V
shall terminate on the date that is [ten years from the date of stockholder
approval of the Plan. No further grants or awards shall be made under the Plan
after termination, but termination shall not affect the rights of any
participant under any grants or awards made prior to termination.

7. Amendments. The Plan may be amended or terminated by the Board in any respect
except that no amendment may be made without stockholder approval if stockholder
approval is required by applicable law, rule or regulation, including
Section 162(m) of the Code, or such amendment would increase (subject to
Section 5 of this Article I) the number of shares available under the Plan or
would amend the prohibition on repricing of awards set forth in Section 4 of
this Article I or otherwise permit the repricing of awards granted hereunder. No
amendment may impair the rights of a holder of an outstanding grant or award
without the consent of such holder.

 

II. Bonus Awards

1. Form of Award. Bonus awards, whether performance awards or fixed awards, may
be made to eligible participants in the form of (i) cash, whether in an absolute
amount or as a percentage of compensation, (ii) stock units, each of which is
substantially the equivalent of a share of common stock but for the power to
vote and, subject to the Committee’s discretion, the entitlement to an amount
equal to dividends or other distributions otherwise payable on a like number of
shares of common stock, (iii) shares of common stock issued to the participant
but forfeitable and with restrictions on transfer in any form as hereinafter
provided or (iv) any combination of the foregoing.

2. Performance Awards. (a) Awards may be made in terms of a stated potential
maximum dollar amount, percentage of compensation or number of units or shares,
with such actual amount, percentage or number to be determined by reference to
the level of achievement of corporate, sector, business unit, division,
individual or other specific performance goals over a performance period of not
less than one nor more than ten years, as determined by the Committee.

 

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(b) In no event shall any participant receive a payment with respect to any
performance award if the minimum threshold performance goals requirement
applicable to the payment is not achieved during the performance period.

(c) If the Committee desires that compensation payable pursuant to performance
awards be “qualified performance-based compensation” within the meaning of
Section 162(m) of the Code, then with respect to such performance awards, for
any calendar year (i) the maximum compensation payable pursuant to any such
performance awards granted during such year, to the extent payment thereunder is
determined by reference to shares of common stock (or the fair market value
thereof), shall not exceed 900,000 shares of common stock (or the fair market
value thereof), subject to adjustment as set forth in Section 5 of Article I,
and (ii) the maximum compensation payable pursuant to any such performance
awards granted during such year, to the extent payment is not determined by
reference to shares of common stock, shall not exceed $5,000,000.

(d) The Committee may provide in any agreement evidencing a performance award
under the Plan that the Committee shall retain sole discretion to reduce the
amount of or eliminate any payment otherwise payable to a participant with
respect to any performance award. If so provided in any agreement evidencing a
performance award, the Committee may exercise such discretion by establishing
conditions for payments in addition to the performance goals, including the
achievement of financial, strategic or individual goals, which may be objective
or subjective, as it deems appropriate.

(e) For purposes of the Plan, “performance goals” means the objectives
established by the Committee which shall be satisfied or met during the
applicable performance period as a condition to a participant’s receipt of all
or a part of a performance-based award under the Plan. The performance goals
shall be tied to one or more of the following business criteria, determined with
respect to the Company or the applicable sector, business unit or division: net
sales, cost of sales, gross profit, earnings from operations, earnings before
interest, taxes, depreciation and amortization, earnings before income taxes,
earnings before interest and taxes, cash flow measures, return on equity, return
on assets, return on net assets employed, net income per common share (basic or
diluted), EVA™ (Economic Value Added, which represents the cash operating
earnings of the Company after deducting a charge for capital employed), cost
reduction objectives, or any other similar criteria established by the Committee
for the applicable performance period. The Committee may provide in any
agreement evidencing a performance award under the Plan that the Committee shall
have the discretion to amend or adjust the performance goals or other terms or
conditions of an outstanding award in recognition of unusual or nonrecurring
events. If the Committee desires that compensation payable pursuant to any award
subject to performance goals be “qualified performance-based compensation”
within the meaning of Section 162(m) of the Code, the performance goals
(i) shall be established by the Committee no later than 90 days after the
beginning of the applicable performance period (or such other time designated by
the Internal Revenue Service) and (ii) shall satisfy all other applicable
requirements imposed under Treasury Regulations promulgated under Section 162(m)
of the Code, including the requirement that such performance goals be stated in
terms of an objective formula or standard.

 

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3. Fixed Awards. Awards may be made which are not contingent on the achievement
of specific objectives, but are contingent on the participant’s continuing in
the Company’s employ for a period specified in the award.

4. Rights with Respect to Restricted Shares. If shares of restricted common
stock are subject to an award, the participant shall have the right, unless and
until such award is forfeited or unless otherwise determined by the Committee at
the time of grant, to vote the shares and to receive dividends thereon from the
date of grant and the right to participate in any capital adjustment applicable
to all holders of common stock; provided, however, that a distribution with
respect to shares of common stock, other than a regular quarterly cash dividend,
shall be deposited with the Company and shall be subject to the same
restrictions as the shares of common stock with respect to which such
distribution was made.

During the restriction period, a certificate or certificates representing
restricted shares shall be registered in the holder’s name or the name of a
nominee of the Company and may bear a legend, in addition to any legend which
may be required under applicable laws, rules or regulations, indicating that the
ownership of the shares of common stock represented by such certificate is
subject to the restrictions, terms and conditions of the Plan and the agreement
relating to the shares of restricted common stock. All such certificates shall
be deposited with the Company, together with stock powers or other instruments
of assignment (including a power of attorney), each endorsed in blank with a
guarantee of signature if deemed necessary or appropriate, which would permit
transfer to the Company of all or a portion of the shares of common stock
subject to the award in the event such award is forfeited in whole or in part.
Upon termination of any applicable restriction period, including, if applicable,
the satisfaction or achievement of applicable objectives, and subject to the
Company’s right to require payment of any taxes, the requisite number of shares
of common stock shall be delivered to the holder of such award.

5. Rights with Respect to Stock Units. If stock units are credited to a
participant pursuant to an award, then, subject to the Committee’s discretion,
amounts equal to dividends and other distributions otherwise payable on a like
number of shares of common stock after the crediting of the units (unless the
record date for such dividends or other distributions precedes the date of grant
of such award) shall be credited to an account for the participant and held
until the award is forfeited or paid out and interest shall be credited on the
account at a rate determined by the Committee.

6. Events Upon Vesting. At the time of vesting of an award made pursuant to this
Article II, (i) the award (and any dividend equivalents, other distributions and
interest which have been credited), if in units, shall be paid to the
participant either in shares of common stock equal to the number of units, in
cash equal to the fair market value of such shares, or in such combination
thereof as the Committee shall determine, (ii) the award, if a cash bonus award,
shall be paid to the participant either in cash, or in shares of common stock
with a then fair market value equal to the amount of such award, or in such
combination thereof as the Committee shall determine and (iii) shares of
restricted common stock issued pursuant to an award shall be released from the
restrictions.

 

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III. Stock Options

1. Options for Eligible Participants. Options to purchase shares of common stock
may be granted to such eligible participants as may be selected by the
Committee. These options may, but need not, constitute “incentive stock options”
under Section 422 of the Code. To the extent that the aggregate fair market
value (determined as of the date of grant) of shares of common stock with
respect to which options designated as incentive stock options are exercisable
for the first time by an optionee during any calendar year (under the Plan or
any other plan of the Company, or any parent or subsidiary) exceeds the amount
(currently $100,000) established by the Code, such options shall not constitute
incentive stock options.

2. Number of Shares and Purchase Price. The number of shares of common stock
subject to an option and the purchase price per share of common stock
purchasable upon exercise of the option shall be determined by the Committee;
provided, however, that the purchase price per share of common stock shall not
be less than 100% of the fair market value of a share of common stock on the
date of grant of the option; provided, further, that if an incentive stock
option shall be granted to any person who, on the date of grant of such option,
owns capital stock possessing more than ten percent of the total combined voting
power of all classes of capital stock of the Company (or of any parent or
subsidiary) (a “Ten Percent Holder”), the purchase price per share of common
stock shall be the price (currently 110% of fair market value) required by the
Code in order to constitute an incentive stock option.

3. Exercise of Options. The period during which options granted hereunder may be
exercised shall be determined by the Committee; provided, however, that no stock
option shall be exercised later than ten years after its date of grant; provided
further, that if an incentive stock option shall be granted to a Ten Percent
Holder, such option shall not be exercisable more than five years after its date
of grant. The Committee may, in its discretion, establish performance measures
which shall be satisfied or met as a condition to the grant of an option or to
the exercisability of all or a portion of an option. The Committee shall
determine whether an option shall become exercisable in cumulative or
non-cumulative installments and in part or in full at any time. An exercisable
option, or portion thereof, may be exercised only with respect to whole shares
of common stock.

An option may be exercised (i) by giving written notice to the Company (or
following other procedures designated by the Company) specifying the number of
whole shares of common stock to be purchased and accompanied by payment therefor
in full (or arrangement made for such payment to the Company’s satisfaction)
either (A) in cash, (B) in previously owned whole shares of common stock (which
the optionee has held for at least six months prior to delivery of such shares
or which the optionee purchased on the open market and for which the optionee
has good title free and clear of all liens and encumbrances) having a fair
market value, determined as of the date of exercise, equal to the aggregate
purchase price payable by reason of such exercise, (C) by authorizing the
Company to withhold whole shares of Common Stock that would otherwise be
delivered having a fair market value, determined as of the date of exercise,
equal to the aggregate purchase price payable by reason of such exercise, (D) in
cash by a broker-dealer acceptable to the Company to whom the optionee has
submitted an irrevocable notice of exercise, (E) to the extent expressly
authorized by the Committee, via a cashless exercise

 

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arrangement with the Company or (F) a combination of (A) and (B), (ii) if
applicable, by surrendering to the Company any SARs which are canceled by reason
of the exercise of the option and (iii) by executing such documents as the
Company may reasonably request. The Committee shall have the sole discretion to
disapprove of an election pursuant to clause (D). Any fraction of a share of
common stock which would be required to pay such purchase price shall be
disregarded and the remaining amount due shall be paid in cash by the optionee.
No shares of common stock shall be delivered until the full purchase price
therefor has been paid.

 

IV. Stock Appreciation Rights

1. Grants. Free-standing SARs entitling the grantee to receive cash or shares of
common stock having a fair market value equal to the appreciation in market
value of a stated number of shares of common stock from the date of grant to the
date of exercise of such SARs, or in the case of tandem SARs, from the date of
grant of the related stock option to the date of exercise of such tandem SARs,
may be granted to such participants as may be selected by the Committee. The
holder of a tandem SAR may elect to exercise either the option or the SAR, but
not both. Tandem SARs shall be automatically canceled upon exercise of the
related stock option.

2. Number of SARs and Base Price. The number of SARs subject to a grant shall be
determined by the Committee. Any tandem SAR related to an incentive stock option
shall be granted at the same time that such incentive stock option is granted.
The base price of a tandem SAR shall be the purchase price per share of common
stock of the related option. The base price of a free-standing SAR shall be
determined by the Committee; provided, however, that such base price shall not
be less than 100% of the fair market value of a share of common stock on the
date of grant of such SAR.

3. Exercise of SARs. The agreement relating to a grant of SARs may specify
whether such grant shall be settled in shares of common stock (including
restricted shares of common stock) or cash or a combination thereof. Upon
exercise of an SAR, the grantee shall be paid the excess of the then fair market
value of the number of shares of common stock to which the SAR relates over the
base price of the SAR. Such excess shall be paid in cash or in shares of common
stock having a fair market value equal to such excess or in such combination
thereof as the Committee shall determine. The period during which SARs granted
hereunder may be exercised shall be determined by the Committee; provided,
however, no SAR shall be exercised later than ten years after the date of its
grant; and provided, further, that no tandem SAR shall be exercised if the
related option has expired or has been canceled or forfeited or has otherwise
terminated. The Committee may, in its discretion, establish performance measures
which shall be satisfied or met as a condition to the grant of an SAR or to the
exercisability of all or a portion of an SAR. The Committee shall determine
whether an SAR may be exercised in cumulative or non-cumulative installments and
in part or in full at any time. An exercisable SAR, or portion thereof, may be
exercised, in the case of a tandem SAR, only with respect to whole shares of
common stock and, in the case of a free-standing SAR, only with respect to a
whole number of SARs. If an SAR is exercised for restricted shares of common
stock, the restricted shares shall be issued in accordance with Section 4 of
Article II and the holder of such restricted shares shall have such rights of a
stockholder of the Company as determined pursuant to such Section. Prior to the
exercise of an SAR for shares of common stock, including restricted shares, the
holder of such SAR shall have no rights as a stockholder of the Company with
respect to the shares of common stock subject to such SAR.

 

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A tandem SAR may be exercised (i) by giving written notice to the Company (or
following other procedures designated by the Company) specifying the number of
whole SARs which are being exercised, (ii) by surrendering to the Company any
options which are canceled by reason of the exercise of such SAR and (iii) by
executing such documents as the Company may reasonably request. A free-standing
SAR may be exercised (i) by giving written notice to the Company specifying the
whole number of SARs which are being exercised and (ii) by executing such
documents as the Company may reasonably request.

 

V. Awards to Non-Employee Directors

1. Annual Grants to Non-Employee Directors. On the date of the Company’s 2004
annual meeting of stockholders, and on the date of each subsequent annual
meeting prior to the termination of this Section 1, the Company shall make an
award under the Plan to each individual who is, immediately following such
annual meeting, a non-employee director. Awards granted pursuant to this
Section 1 of Article V shall be in the form of stock options, restricted stock,
stock units or SARs. The form of such awards, and the number of shares subject
to each such award, shall be determined by a committee meeting the requirements
for the Committee described above in Section 4 of Article I in the exercise of
its sole discretion.

2. Elective Options for Non-Employee Directors. Each non-employee director may
from time to time elect, in accordance with procedures to be specified by the
Committee, to receive in lieu of all or part of (i) any annual base cash
retainer fee for services as a director of the Company, any fees for attendance
at meetings of the Board or any committee of the Board and any fees for serving
as a member or chairman of any committee of the Board that would otherwise be
payable to such non-employee director (“Fees”) or (ii) any annual phantom stock
award granted to such non-employee director pursuant to the Retirement Benefits
and Phantom Stock Grants for Directors Policy (“Retirement Benefit”), an option
to purchase shares of common stock, which option shall have a value (as
determined in accordance with the Black-Scholes stock option valuation method)
as of the date of grant of such option equal to the amount of such Fees or
Retirement Benefit. Notwithstanding anything to the contrary set forth elsewhere
in the Plan, an option granted to a non-employee director pursuant to this
Section 2 of Article V shall become exercisable in full on the first anniversary
of the date of grant.

 

VI. Other

1. Non-Transferability of Options and Stock Appreciation Rights. No option or
SAR shall be transferable other than (i) by will, the laws of descent and
distribution or pursuant to beneficiary designation procedures approved by the
Company or (ii) as otherwise set forth in the agreement relating to such option
or SAR. Each option or SAR may be exercised during the participant’s lifetime
only by the participant or the participant’s guardian, legal representative or
similar person or the permitted transferee of the participant. Except as
permitted by the second preceding sentence, no option or SAR may be sold,
transferred, assigned, pledged, hypothecated, encumbered or otherwise disposed
of (whether by operation of law or otherwise) or be subject to

 

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execution, attachment or similar process. Upon any attempt to so sell, transfer,
assign, pledge, hypothecate, encumber or otherwise dispose of any option or SAR,
such award and all rights thereunder shall immediately become null and void.

2. Tax Withholding. The Company shall have the right to require, prior to the
issuance or delivery of any shares of common stock or the payment of any cash
pursuant to a grant or award hereunder, payment by the holder thereof of any
federal, state, local or other taxes which may be required to be withheld or
paid in connection therewith. An agreement may provide that (i) the Company
shall withhold whole shares of common stock which would otherwise be delivered
to a holder, having an aggregate fair market value determined as of the date the
obligation to withhold or pay taxes arises in connection therewith (the “Tax
Date”), or withhold an amount of cash which would otherwise be payable to a
holder, in the amount necessary to satisfy any such obligation or (ii) the
holder may satisfy any such obligation by any of the following means: (A) a cash
payment to the Company, (B) delivery to the Company of previously owned whole
shares of common stock (which the holder has held for at least six months prior
to the delivery of such shares or which the holder purchased on the open market
and for which the holder has good title, free and clear of all liens and
encumbrances) having an aggregate fair market value determined as of the Tax
Date, equal to the amount necessary to satisfy any such obligation,
(C) authorizing the Company to withhold whole shares of common stock which would
otherwise be delivered having an aggregate fair market value determined as of
the Tax Date or withhold an amount of cash which would otherwise be payable to a
holder, equal to the amount necessary to satisfy any such liability, (D) in the
case of the exercise of an option, a cash payment by a broker-dealer acceptable
to the Company to whom the optionee has submitted an irrevocable notice of
exercise or (E) any combination of (A), (B) and (C); provided, however, that the
Committee shall have sole discretion to disapprove of an election involving
clause (D). An agreement relating to a grant or award hereunder may not provide
for shares of common stock to be withheld having an aggregate fair market value
in excess of the minimum amount of taxes required to be withheld. Any fraction
of a share of common stock which would be required to satisfy such an obligation
shall be disregarded and the remaining amount due shall be paid in cash by the
holder.

3. Acceleration Upon Change in Control. If while (i) any performance award or
fixed award granted under Article II is outstanding, (ii) any stock option
granted under Article III of the Plan or SAR granted under Article IV of the
Plan is outstanding or (iii) any award made to non-employee directors pursuant
to Article V (“nonemployee director awards”) is outstanding:

(a) any “person,” as such term is defined in Section 3(a)(9) of the Exchange
Act, as modified and used in Section 13(d) and 14(d) thereof (but not including
(i) the Company or any of its subsidiaries, (ii) a trustee or other fiduciary
holding securities under an employee benefit plan of the Company or any of its
subsidiaries, (iii) an underwriter temporarily holding securities pursuant to an
offering of such securities, or (iv) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company) (hereinafter a “Person”)
is or becomes the beneficial owner, as defined in Rule 13d-3 of the Exchange
Act, directly or indirectly, of securities of the Company (not including in the
securities beneficially owned by such Person any securities acquired directly
from the Company or its affiliates, excluding an acquisition resulting from the
exercise of a conversion or exchange privilege in respect of outstanding
convertible or exchangeable securities) representing more than 50% of the
combined voting power of the Company’s then outstanding securities; or

 

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(b) during any twelve (12) month period beginning on the date that stockholders
approve the Plan, individuals who at the beginning of such period constitute the
Board and any new director (other than a director designated by a Person who has
entered into any agreement with the Company to effect a transaction described in
Clause (a), (c) or (d) of this Section) whose election by the Board or
nomination for election by the Company’s stockholders was approved by a vote of
at least two-thirds ( 2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority thereof; or

(c) the stockholders of the Company approve a merger or consolidation of the
Company with any other corporation (hereinafter, a “Corporate Transaction”),
other than (i) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving or acquiring entity), in combination with the
ownership of any trustee or other fiduciary holding securities under an employee
benefit plan of the Company, at least 50% of the combined voting power of the
voting securities of the Company or such surviving or acquiring entity
outstanding immediately after such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization of the Company (or
similar transaction) in which no Person acquires more than 50% of the combined
voting power of the Company’s then outstanding securities; or

(d) the stockholders of the Company approve a plan of complete liquidation of
the Company or an agreement for the sale or disposition by the Company of all or
substantially all of the Company’s assets, (any of such events being hereinafter
referred to as a “Change in Control”), then from and after the date on which
public announcement of the acquisition of such percentage shall have been made,
or the date on which the change in the composition of the Board set forth above
shall have occurred, or the date of any such stockholder approval of a merger,
consolidation, plan of complete liquidation or an agreement for the sale of the
Company’s assets as described above occurs (the applicable date being
hereinafter referred to as the “Acceleration Date”), (i) with respect to such
performance awards, the highest level of achievement specified in the award
shall be deemed met and the award shall be immediately and fully vested,
(ii) with respect to such fixed awards, the period of continued employment
specified in the award upon which the award is contingent shall be deemed
completed and the award shall be immediately and fully vested, (iii) with
respect to such options and SARs, all such options and SARs, whether or not then
exercisable in whole or in part, shall be immediately and fully exercisable and
(iv) with respect to such non-employee director awards, all conditions with
respect to vesting or exercisability shall be deemed to be satisfied and such
awards shall be immediately and fully vested and exercisable.

4. Restrictions on Shares. Each grant and award made hereunder shall be subject
to the requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of common stock subject thereto upon
any securities exchange or under any law, or the consent or approval of any
governmental body, or the taking of any other

 

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action is necessary or desirable as a condition of, or in connection with, the
delivery of shares thereunder, such shares shall not be delivered unless such
listing, registration, qualification, consent, approval or other action shall
have been effected or obtained, free of any conditions not acceptable to the
Company. The Company may require that certificates evidencing shares of common
stock delivered pursuant to any grant or award made hereunder bear a legend
indicating that the sale, transfer or other disposition thereof by the holder is
prohibited except in compliance with the Securities Act of 1933, as amended, and
the rules and regulations thereunder.

6. No Right of Participation or Employment. No person (other than non-employee
directors to the extent provided in Article V) shall have any right to
participate in the Plan. Neither the Plan nor any grant or award made hereunder
shall confer upon any person any right to employment or continued employment by
the Company, any subsidiary or any affiliate of the Company or affect in any
manner the right of the Company, any subsidiary or any affiliate of the Company
to terminate the employment of any person at any time without liability
hereunder.

7. Rights as Stockholder. No person shall have any right as a stockholder of the
Company with respect to any shares of common stock or other equity security of
the Company which is subject to a grant or award hereunder unless and until such
person becomes a stockholder of record with respect to such shares of common
stock or equity security.

8. Governing Law. The Plan, each grant and award hereunder and the related
agreement, and all determinations made and actions taken pursuant thereto, to
the extent not otherwise governed by the Code or the laws of the United States,
shall be governed by the laws of the State of Delaware and construed in
accordance therewith without giving effect to principles of conflicts of laws.

9. Foreign Participants. Notwithstanding any provision of the Plan to the
contrary the Committee may, with a view to both promoting achievement of the
purposes of the Plan and complying with (i) provisions of laws in countries
outside the United States in which the Company or its subsidiaries operate or
have employees and (ii) the rules of any foreign stock exchange upon which the
common stock may be listed, determine which persons outside the United States
shall be eligible to participate in the Plan on such terms and conditions
different from those specified in the Plan as may in the judgment of the
Committee be necessary or advisable and, to that end, the Committee may
establish sub-plans, modified option exercise procedures and other terms and
procedures.

10. Insider Limits. Notwithstanding any other provision of the Plan, (i) the
maximum number of shares of common stock which may be reserved for issuance to
insiders (as defined in the Ontario Securities Act) under the Plan, together
with any other previously established or proposed incentive plan, shall not
exceed 10% of the outstanding shares of common stock, (ii) the maximum number of
shares of common stock which may be issued to insiders under the Plan, together
with any other previously established or proposed incentive plan, within any one
year period shall not exceed 10% of the outstanding shares of common stock, and
(iii) the maximum number of shares of common stock which may be issued to any
one insider and his or her associates under the Plan, together with any other
previously established or proposed incentive plan, within a one year period,
shall not exceed 5% of the outstanding shares of common stock.

 

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11. Approval of Plan. The Plan and all grants and awards made hereunder shall be
null and void if the adoption of the Plan is not approved by the affirmative
vote of a majority of the shares of common stock present in person or
represented by proxy at the next meeting of stockholders following the Board’s
adoption of the Plan.

 

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