Document:

exv10w6

 

Exhibit
10.6

INCO LIMITED

2001 Key Employees Incentive Plan

	1.	 	Purpose. The 2001 Key Employees Incentive Plan of Inco Limited (the “Plan”) is designed to
provide additional incentive for selected employees (including Officers who are full-time
employees, whether or not Directors) of the Company and its current or future subsidiaries by
the grant of options to purchase Common Shares of the Company and/or by the making of awards
of incentive compensation. It is intended that the share options and awards of incentive
compensation will be awarded in a way calculated to be most effective to retain or attract and
to provide additional incentive to these selected employees, having regard to their individual
potential, location, contributions to the Company and other applicable considerations.

	2.	 	Administration. The Plan shall be administered by a Committee of three or more Directors,
appointed annually by the Board of Directors of the Company from those of its members who, at
the time they act, are not, and for at least one year prior thereto have not been, eligible to
participate under the Plan or any other plans of the Company or any of its subsidiaries or
other affiliates entitling the participants therein to acquire shares, share options or share
appreciation rights of the Company or any of its subsidiaries or other affiliates. The
Committee shall have full authority to establish regulations for the administration of the
Plan and to interpret the Plan.

	3.	 	Share Options and Share Appreciation Rights.

	 	(a)	 	The Board of Directors of the Company, may from time to time, as and if recommended by
the Committee, grant to selected employees of the Company and its subsidiaries options to
purchase not exceeding in the aggregate 6,000,000 Common Shares of the Company, provided
that the Committee, subject to ratification by the Board of Directors of the Company, may
make adjustments in the number and kind of shares available for or subject to option, and in
the purchase price of shares subject to option, as it may deem appropriate in the event of a
share subdivision, share consolidation, share dividend (other than an optional share
dividend in lieu of a cash dividend), amalgamation, merger, consolidation, share
reclassification or other change in the capital structure of the Company. The Company may
issue shares or may acquire outstanding shares for the purpose of satisfying the exercise of
an option or of a share appreciation right.

	 	(b)	 	The purchase price of the shares purchasable upon exercise of each option, which shall
not be less than 100% of their fair market value on the date the option is granted, and all
other terms and conditions of each option, shall be fixed by the Board of Directors of the
Company or of the subsidiary, as the case may be, in each case on recommendation of the
Committee, provided that (i) no shares subject to option shall be purchasable after the
expiration date fixed in the option, which date shall not be later than ten years after the
date the option is granted, and (ii) no person shall have any of the rights of a Shareholder
in respect of shares subject to an option until such shares have been paid for in full and
issued to such person. In the case of option grants in U.S. dollars, the “fair market value”
of the shares subject to option shall be the average of the high and the low sales prices of
the Company’s Common Shares as reported as New York Stock Exchange — Composite Transactions
on the date of the grant, provided however, if there is no trading in such shares on such
Exchange on the date of grant, then the average of the high and low sales prices for such
shares on the next preceding date on which there is trading shall be used for such
calculation. In the case of option grants in Canadian dollars, the “fair market value” of
the shares subject to option shall be the average of the high and low sales prices of the
Company’s Common Shares, as reported on The Toronto Stock Exchange on the date of the grant,
provided however, if there is no trading in such shares on such Exchange on the date of
grant, then the average of the high and low sales prices for such shares on the next
preceding date on which there is trading shall be used for such calculation. If the Board of
Directors of the Company shall so authorize, the purchase price of shares payable upon
exercise of options covering Common Shares granted under the Plan, or Common Shares under
the Key Employees Incentive Plans approved by the Shareholders of the Company on April 23,
1997 and April 21, 1993 may, subject to applicable law, be paid in lieu of cash, by the
delivery to the Company of certificates for Common Shares of the Company already owned by
the optionee having a fair market value equal to the purchase price of the shares (or any
part thereof) for which the option is exercised, or by any combination of cash and shares.
In Canada, the purchase price shall be paid only in cash, but at the request of the
optionee, the Company may sell on the optionee’s behalf Common Shares already owned by the
optionee and apply the proceeds of the sale to the optionee’s purchase of the same type or
class of shares pursuant to the exercise of the share option. An option may provide that the
optionee may exercise the option by delivering to the Company an exercise notice and
irrevocable instructions for the Company to deliver directly to a broker named in the
exercise notice the number of Common Shares set forth in the notice in exchange for payment
of the purchase price of the same type or class of shares. Any share subject to an option
which shall have terminated or expired (other than to the extent surrendered upon the
exercise of a share

 

 

	 	 	 	appreciation right) may thereafter be reoptioned. In the case of options intended to qualify
for the tax treatment provided by Section 422 of the U.S. Internal Revenue Code of 1986, as
amended (“ISOs”), the aggregate fair market value (determined at the time of the grant of such
ISOs) of the shares with respect to which ISOs granted after December 31, 1986 are exercisable
for the first time by any selected employee during any calendar year shall not exceed
$100,000.

	 	(c)	 	Any option may include a share appreciation right at the time of grant, if recommended by
the Committee and authorized by the Board of Directors of the Company. Any option previously
granted under the Plan or under the Key Employees Incentive Plans approved by the
Shareholders of the Company on April 23, 1997 and April 21, 1993 and remaining unexercised
may be amended to include a share appreciation right, if recommended by the Committee and
authorized by the Board of Directors of the Company. Subject to such terms and conditions as
the authorizing Board may provide, such right shall entitle the optionee to surrender
unexercised the option to which the right relates, or any portion thereof, but only to the
extent such option is then exercisable, and to receive upon such surrender that number of
shares having an aggregate value equal to the amount of the excess of the then market value
of one share over the purchase price per share specified in the option multiplied by the
number of shares purchasable upon exercise of the option, or portion of option, so
surrendered; provided that, at the election of the Company or the subsidiary which granted
such right, it may deliver cash, or a combination of cash and shares, equal in value to the
amount of such excess.

	 	(d)	 	An employee of the Company that has been granted an option shall have the right, at any
time, but subject to the discretion of the Board of Directors of the Company to suspend this
right at any time upon the determination of the Board of Directors of the Company that it is
in the best interests of the Company to do so, in lieu of the exercise of such option, to
elect to surrender to the Company for cancellation any option which is then exercisable for
Common Shares in return for the payment by the Company of an amount (the “Cancellation
Amount”) equal to the excess of the fair market value of the Common Shares subject to such
surrendered option (such fair market value being determined to be (i) for options with a
purchase price in U.S. dollars, the simple average of the high and low prices at which the
Company’s Common Shares were traded in one or more board lots on the New York Stock Exchange
for the five days on which the Common Shares were traded prior to the date on which the
options were surrendered for cancellation, and for options with a purchase price in Canadian
dollars, the simple average of the high and low prices at which the Common Shares were
traded in one or more board lots on the Toronto Stock Exchange for the five days on which
the Common Shares were so traded prior to the date on which the options were surrendered for
cancellation or (ii) with the prior consent of the Toronto Stock Exchange, such other price
as may be determined by the Board of Directors of the Company to be appropriate in the
circumstances) over the aggregate exercise price for the Common Shares of the Company
subject to such option (as of the date of surrender). The Company shall have the right to
withhold from any payment in respect of the Cancellation Amount any applicable withholding
taxes or other withholding liabilities. Any option surrendered for cancellation pursuant to
this subsection 3(d) shall be deemed to be terminated and of no further force or effect as
of the time of surrender or effective time of surrender, if later, and the total number of
Common Shares of the Company that may be issued pursuant to the exercise of options under
this Plan, as set forth in subsection 3(a), shall be reduced by the number of Common Shares
that were issuable upon the exercise of such option as of the time of surrender or effective
time of surrender, if later, unless payment of the Cancellation Amount is not made by the
Company in accordance with this subsection 3(d). Payment of the Cancellation Amount shall
be made by the Company within ten business days after the time of surrender or effective
time of surrender, if later, of an option pursuant to this subsection 3(d).

	4.	 	Incentive Compensation Awards of incentive compensation under the Plan may be made in
respect of each fiscal year, beginning with 2001, in accordance with the provisions of this
Section 4. Such awards may be made in, or in commitments to deliver, cash, shares of the
Company, incentive units evidencing commitments to pay or deliver at some future date or dates
cash or shares in amounts measured by or otherwise dependent upon earnings or other
performance criteria, or share units evidencing commitments to deliver or pay at some future
date or dates shares or cash equal to the market value of shares at such date or dates,
together, in each case, if so provided, with amounts equal to dividends and other
distributions paid on an equivalent number of shares, or such other kind or form of
compensation as may, in the judgment of the Committee, be best calculated to further the
purposes of the Plan, all on such terms and subject to such conditions as the Committee may
determine. In Canada, because of certain tax rules that might adversely affect the recipient
of a deferred award, each award shall be paid not later than the end of the third year
following the end of the year in which the award to an employee is declared.
	 
	 	 	In respect of each year, the Committee, subject to ratification by the Board of Directors of the
Company, shall from time to time, but not later than the end of the year immediately following
such year, fix the extent, if any, to which, within the limits of the “Incentive Fund” for such
year, awards of incentive compensation shall be made in respect of such year by the Company, and,
subject to ratification by the Board of Directors of the Company, determine the participants for
the year, the award to be made to each participant and the time when such award is to be paid.
The maximum amount of the Incentive Fund in respect of any year

 

 

	 	 	shall be equal to (i) 2% of the sum of (a) the consolidated net earnings of the Company and (b)
the related provisions for income and mining taxes (the “Award Pool”) in such year, as confirmed
by the Company’s independent auditors for such year, and the Award Pool for each of the two
immediately preceding years (the “Preceding Years”) less (ii) the aggregate amount of awards
actually made from the Award Pool in respect of each of the Preceding Years under the Plan or, as
the case may be, under the Key Employees Incentive Plan approved by the Shareholders of the
Company on April 23, 1997. Awards made under this Section 4 shall be deemed for the purpose only
of determining the amount to be charged therefor against an Incentive Fund or Funds to have the
value of the cash or shares or incentive units or share units or other kind or form of
compensation awarded that is determined by the Committee, as of the time the award is made and
disregarding the effect of any restrictions or delayed delivery provisions which would otherwise
reduce such value, on such basis as the Committee shall deem reasonable. The value of any award
made under this Section 4 shall be charged against the Incentive Fund for the year in respect of
which such award is made, except that, in the case of any award the amount of which is measured
by or otherwise dependent upon future consolidated earnings of the Company, the Committee may, at
the time such award is made, elect that there shall be charged against the Incentive Fund for the
year in respect of which such award is made or as otherwise determined by the Committee. No
awards shall be made under this Section 4 in respect of any year unless and until the total value
of all awards made under this Section 4 in respect of prior years shall have been charged against
the Incentive Fund or Funds for such year or prior years.

	 	 	If awards are made in shares (or amounts of cash equal to the value of shares) or share units, or
other forms measured by shares and in the valuation thereof, to be delivered or paid in the
future, appropriate adjustments in the number and kind of shares or units measured by shares
shall be made in the same way as is provided for share options in Section 3(a) in the event of a
change in the capital structure of the Company. The Company may issue shares or may acquire
outstanding shares for such purpose.

	5.	 	Other Compensation; No Right To Employment; Transferability of Options. Nothing in the Plan
shall prevent a participant from being included in any other employee plan of the Company or
any of its subsidiaries or other affiliates or from receiving any compensation (whether
regular, special, supplemental, incentive, current, deferred or otherwise) now or hereafter
provided by the Company or any of its subsidiaries or other affiliates. Neither the Plan nor
any action taken thereunder shall be understood as giving to any person any right to be
retained in the employ of the Company or any subsidiary or other affiliate, nor shall any
person (including persons selected as participants for a prior year) be entitled as of right
to be selected as a participant in the Plan for any year. Any option or similar right
(including any share appreciation right, whether or not included in an option granted under
the Plan) granted or awarded under the Plan shall be nontransferable other than by will or the
laws of descent and distribution and, during the lifetime of the participant to whom such
option or right shall have been granted or awarded, shall be exercisable only by such
participant or by his guardian or legal representative, in the case of options not intended to
qualify as ISOs, or by such participant, in the case of options intended to qualify as ISOs.

	6.	 	Amendment, Suspension and Termination of the Plan. The Board of Directors of the Company may
amend, suspend or terminate the Plan in whole or in part at any time, provided that the rights
and interests of participants to whom unexpired share options or awards of incentive
compensation have theretofore been granted or made shall not thereby be adversely affected
without their consent and no amendment which would increase the number of shares which may be
made subject to share options or otherwise materially increase the cost of the Plan shall be
made effective unless approved at a meeting of the holders of the shares of the Company
carrying general voting rights. The Plan shall become effective on the date of its approval by
the Company’s Shareholders. Unless the Plan is sooner terminated by the Board of Directors, no
share options or share appreciation rights may be granted after the day before the fifth
anniversary of the date that the Plan is approved by the Company’s Shareholders, and no awards
of incentive compensation may be made in respect of any fiscal year ending after December 31,
2006, provided that the provisions of the Plan shall continue with respect to any options,
rights or awards theretofore granted or made.

	7.	 	Change of Control.

	 	(a)	 	In the event of a Change in Control (as defined in (b) below), all options and related
share appreciation rights shall become vested and exercisable in full.

	 	(b)	 	For purposes of the Plan, “Change in Control” means the occurrence of any of the
following events:

	 	(i)	 	individuals who, as of the close of business on April 25, 2001, constitute the Board of
Directors of the Company (the “Incumbent Directors”) cease for any reason to constitute at
least a majority of the Board of Directors for at least one full year, provided that any
person becoming a Director subsequent to the close of business on April 25, 2001, whose
election or nomination for election was approved by a vote of at least two-thirds of the
Incumbent Directors then on the Board of Directors (either by a specific vote or by approval
of the proxy statement and circular of the Company in which such person is named as

 

 

	 	 	 	a nominee for Director, without objection to such nomination) shall be an Incumbent Director;
provided, however, that no individual elected or nominated as a Director of the Company
initially as a result of an actual or threatened election contest with respect to Directors or
as a result of any other actual or threatened solicitation of proxies or consents by or on
behalf of any person other than the Board of Directors shall be deemed to be an Incumbent
Director;

	 	(ii)	 	any “person” (as such term is defined in Section 3(a)(9) of the U.S. Securities Exchange
Act of 1934 (the “Exchange Act”) and as used in Section 13(d)(3) and 14(d)(2) of the
Exchange Act) is or becomes a “beneficial owner” (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, of securities of the Company representing 25% or more
of the combined voting power of the Company’s then outstanding securities eligible to vote
for the election of the Board of Directors (the “Company Voting Securities”); provided,
however, that the event described in this paragraph (ii) shall not be deemed to be a Change
in Control by virtue of any of the following acquisitions: (A) by the Company or any
subsidiary, (B) by any employee benefit plan sponsored or maintained by the Company or any
Subsidiary, (C) by any underwriter temporarily holding securities pursuant to an offering of
such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in paragraph
(iii), or (E) a transaction (other than one described in (iii) below) in which Company
Voting Securities are acquired from the Company, if a majority of the Incumbent Directors
approve a resolution providing expressly that the acquisition pursuant to this clause (E)
shall not constitute a Change in Control under this paragraph (ii);

	 	(iii)	 	shareholder approval of a merger, consolidation, share exchange or similar form of
corporate transaction involving the Company or any of its subsidiaries, whether for such
transaction or for the issuance of securities in the transaction (a “Business Combination”),
unless immediately following such Business Combination: (A) more than 50% of the total
voting power of (x) the corporation resulting from such Business Combination (the “Surviving
Corporation”), or (y) if applicable, the ultimate parent corporation that directly or
indirectly has beneficial ownership of 100% of the voting securities eligible to elect
directors of the Surviving Corporation (the “Parent Corporation”), would be represented by
Company Voting Securities that were outstanding immediately prior to the consummation of
such Business Combination (or, if applicable, would be represented by shares into which such
Company Voting Securities were converted pursuant to such Business Combination), and such
voting power among the holders thereof is in substantially the same proportion as the voting
power of such Company Voting Securities among the holders thereof immediately prior to the
Business Combination, (B) no person (other than any employee benefit plan sponsored or
maintained by the Surviving Corporation or the Parent Corporation) would be or becomes the
beneficial owner, directly or indirectly, of 25% or more of the total voting power of the
outstanding voting securities eligible to elect directors of the Parent Corporation (or, if
there is no Parent Corporation, the Surviving Corporation), and (C) at least a majority of
the members of the board of directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) will have been Incumbent Directors at the time of
the Board’s approval of the execution of the initial agreement providing for such Business
Combination (any Business Combination which satisfies all of the criteria specified in (A),
(B) and (C) above shall be deemed to be a “Non-Qualifying Transaction”);

	 	(iv)	 	shareholder approval of a plan of complete liquidation or dissolution of the Company or a
sale or other disposition of all or substantially all of the Company’s assets; or

	 	(v)	 	in the case of any employee of the Company or any subsidiary who is party to an agreement
which provides such employee with certain rights in the event of a change of control, as
defined in such agreement, any event that constitutes a change of control as set forth in
such agreement.

	 	 	 	Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur
solely because any person acquires beneficial ownership of more than 25% of Company Voting
Securities as a result of the acquisition of Company Voting Securities by the Company which
reduces the number of Company Voting Securities outstanding; provided, that if after such
acquisition by the Company such person becomes the beneficial owner of additional Company Voting
Securities that increases the percentage of outstanding Company Voting Securities beneficially
owned by such person, a Change in Control of the Company shall then occur.

	8.	 	Breach of Conduct. Notwithstanding anything in the Plan to the contrary, the Committee may,
in its sole discretion, in the event of a serious breach of conduct by an employee or former
employee (including, without limitation, any conduct prejudicial to or in conflict with the
Company or its subsidiaries), or any activity of any employee or former employee in
competition with any of the businesses of the Company or any subsidiary, (a) cancel any
outstanding award granted to such employee or former employee, in whole or in part, whether or
not vested or deferred, and/or (b) if such conduct or activity occurs within one year
following the exercise or payment of an award, require such employee or former employee to
repay to the Company any gain realized or payment received upon the exercise or payment of
such award (with such gain or payment valued as of the date of exercise or payment).

 

 

	 	 	Such cancellation or repayment obligation shall be effective as of the date specified by the
Committee. Any repayment obligation may be satisfied in Common Shares or cash or a combination
thereof (based upon the fair market value of Common Shares, determined pursuant to Section 3(b),
on the day prior to the date of payment), and the Committee may provide for an offset to any
future payments owed by the Company or any subsidiary to the employee or former employee if
necessary to satisfy the repayment obligation. The determination of whether an employee or former
employee has engaged in a serious breach of conduct or any activity in competition with any of
the businesses of the Company or any subsidiary shall be determined by the Committee in good
faith and in its sole discretion. This Section 8 shall have no application following a Change in
Control.exv10w7

 

Exhibit
10.7

1997 Key Employees Incentive Plan

	1.	 	The Plan is designed to provide additional incentive for selected employees (including
Officers who are full-time employees, whether or not Directors) of the Company and its current
or future subsidiaries by the grant of options to purchase Common Shares or Class VBN Shares
of the Company and/or by the making of awards of incentive compensation. It is intended that
the share options and awards of incentive compensation will be awarded in a way calculated to
be most effective to retain or attract and to provide additional incentive to these selected
employees, having regard to their individual potential, location, contributions to the Company
and other applicable considerations.

	2.	 	The Plan shall be administered by a Committee of three or more Directors, appointed annually
by the Board of Directors of the Company from those of its members who, at the time they act,
are not, and for at least one year prior thereto have not been, eligible to participate under
the Plan or any other plans of the Company or any of its subsidiaries or other affiliates
entitling the participants therein to acquire shares, share options or share appreciation
rights of the Company or any of its subsidiaries or other affiliates. The Committee shall have
full authority to establish regulations for the administration of the Plan and to interpret
the Plan.

	3.	 	Share Options and Share Appreciation Rights

	 	(a)	 	The Board of Directors of the Company and, with the consent of that Board, the
Board of Directors of any subsidiary of the Company, may from time to time, as and if
recommended by the Committee, grant to selected employees of the Company and its
subsidiaries, or of such subsidiary, as the case may be, options to purchase not
exceeding in the aggregate (i) 6,000,000 Common Shares and (ii) 1,000,000 Class VBN
Shares of the Company, from the Company, or from such subsidiary, as the case may be,
provided that the Committee, subject to ratification by the Board of Directors of the
Company, shall make adjustments in the number and kind of shares available for or
subject to option, and in the purchase price of shares subject to option, as it may
deem appropriate in the event of a share subdivision, share consolidation, share
dividend (other than an optional share dividend in lieu of a cash dividend),
amalgamation, merger, consolidation, share reclassification or other change in the
capital structure of the Company. The Company may issue shares or may acquire
outstanding shares for the purpose of satisfying the exercise of an option or of a
share appreciation right. If shares are to be delivered by a subsidiary, the Company
may issue the shares required or the subsidiary may acquire outstanding shares for such
purpose.

	 	(b)	 	The purchase price of the shares purchasable upon exercise of each option,
which shall not be less than 100% of their fair market value on the date the option is
granted, and all other terms and conditions of each option, shall be fixed by the Board
of Directors of the Company or of the subsidiary, as the case may be, in each case on
recommendation of the Committee, provided that (i) no shares subject to option shall be
purchasable after the expiration date fixed in the option, which date shall not be
later than ten years after the date the option is granted, and (ii) no person shall
have any of the rights of a Shareholder in respect of shares subject to an option until
such shares have been paid for in full in cash and issued

 

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	 	 	 	to such person. In the case of option grants in U.S. dollars, the “fair market
value” of the shares subject to option shall be the average of the high and the low
sales prices of the Company’s Common Shares or Class VBN Shares, as the case may be,
as reported on The New York Stock Exchange on the date of the grant, provided
however, if there is no trading in such shares on such Exchange on the date of
grant, then the average of the high and low sales prices for such shares on the next
preceding date on which there is trading shall be used for such calculation. In the
case of option grants in Canadian dollars, the “fair market value” of the shares
subject to option shall be the average of the high and low sales prices of the
Company’s Common Shares or Class VBN Shares, as the case may be, as reported on The
Toronto Stock Exchange on the date of the grant, provided however, if there is no
trading in such shares on such Exchange on the date of grant, then the average of
the high and low sales prices for such shares on the next preceding date on which
there is trading shall be used for such calculation. If the Board of Directors of
the Company shall so authorize, the purchase price of shares payable upon exercise
of options covering Common Shares or Class VBN Shares granted under the Plan, or
Common Shares under the Key Employees Incentive Plans approved by the Shareholders
of the Company on April 21, 1993, December 9, 1988 and April 18, 1984, may, subject
to applicable law, be paid in lieu of cash, by the delivery to the Company of
certificates for Common Shares of the Company already owned by the optionee having a
fair market value equal to the purchase price of the shares (or any part thereof)
for which the option is exercised, or by any combination of cash and shares. In
Canada, the purchase price shall be paid only in cash, but at the request of the
optionee, the Company may sell on the optionee’s behalf Common Shares or Class VBN
Shares, as the case may be, already owned by the optionee and apply the proceeds of
the sale to the optionee’s purchase of the same type or class of shares pursuant to
the exercise of the share option covering Common Shares or Class VBN Shares, as the
case may be. An option may provide that the optionee may exercise the option by
delivering to the Company an exercise notice and irrevocable instructions for the
Company to deliver directly to a broker named in the exercise notice the number of
Common Shares or Class VBN Shares, as the case may be, set forth in the notice in
exchange for payment of the purchase price of the same type or class of shares. Any
share subject to an option which shall have terminated or expired (other than to the
extent surrendered upon the exercise of a share appreciation right) may thereafter
be reoptioned. In the case of options intended to qualify for the tax treatment
provided by Section 422 of the U.S. Internal Revenue Code of 1986, as amended
(“ISOs”), the aggregate fair market value (determined at the time of the grant of
such ISOs) of the shares with respect to which ISOs granted after December 31, 1986
are exercisable for the first time by any selected employee during any calendar year
shall not exceed $100,000.

	 	(c)	 	Any option may include a share appreciation right at the time of grant, if
recommended by the Committee and authorized by the Board of Directors of the Company
or, with the consent of that Board, the Board of Directors of the subsidiary of the
Company granting such option. Any option previously granted under the Plan or under the
Key Employees Incentive Plans approved by the Shareholders of the Company on April 21,
1993, December 9, 1988 and April 18,

 

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	 	 	 	1984 and remaining unexercised may be amended to include a share appreciation right,
if recommended by the Committee and authorized by the Board of Directors of the
Company or, with the consent of that Board, the Board of Directors of the subsidiary
of the Company which granted such option. Subject to such terms and conditions as
the authorizing Board may provide, such right shall entitle the optionee to
surrender unexercised the option to which the right relates, or any portion thereof,
but only to the extent such option is then exercisable, and to receive upon such
surrender that number of shares having an aggregate value equal to the amount of the
excess of the then market value of one share over the purchase price per share
specified in the option multiplied by the number of shares purchasable upon exercise
of the option, or portion of option, so surrendered; provided that, at the election
of the Company or the subsidiary which granted such right, it may deliver cash, or a
combination of cash and shares, equal in value to the amount of such excess.

	 	(d)	 	An employee of the Company that has been granted an option shall have the
right, at any time, but subject to the discretion of the Board of Directors of the
Company to suspend this right at any time upon the determination of the Board of
Directors of the Company that it is in the best interests of the Company to do so, in
lieu of the exercise of such option, to elect to surrender to the Company for
cancellation any option which is then exercisable for Common Shares in return for the
payment by the Company of an amount (the “Cancellation Amount”) equal to the excess of
the fair market value of the Common Shares subject to such surrendered option (such
fair market value being determined to be (i) for options with a purchase price in U.S.
dollars, the simple average of the high and low prices at which the Company’s Common
Shares were traded in one or more board lots on the New York Stock Exchange for the
five days on which the Common Shares were traded prior to the date on which the options
were surrendered for cancellation, and for options with a purchase price in Canadian
dollars, the simple average of the high and low prices at which the Common Shares were
traded in one or more board lots on the Toronto Stock Exchange for the five days on
which the Common Shares were so traded prior to the date on which the options were
surrendered for cancellation or (ii) with the prior consent of the Toronto Stock
Exchange, such other price as may be determined by the Board of Directors of the
Company to be appropriate in the circumstances) over the aggregate exercise price for
the Common Shares of the Company subject to such option (as of the date of surrender).
The Company shall have the right to withhold from any payment in respect of the
Cancellation Amount any applicable withholding taxes or other withholding liabilities.
Any option surrendered for cancellation pursuant to this subsection 3(d) shall be
deemed to be terminated and of no further force or effect as of the time of surrender
or effective time of surrender, if later, and the total number of Common Shares of the
Company that may be issued pursuant to the exercise of options under this Plan, as set
forth in subsection 3(a), shall be reduced by the number of Common Shares that were
issuable upon the exercise of such option as of the time of surrender or effective time
of surrender, if later, unless payment of the Cancellation Amount is not made by the
Company in accordance with this subsection 3(d). Payment of the Cancellation Amount
shall

 

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	 	 	 	be made by the Company within ten business days after the time of surrender or
effective time of surrender, if later, of an option pursuant to this subsection
3(d).

	4.	 	Incentive Compensation

          Awards of incentive compensation under the Plan may be made in respect of each fiscal year,
beginning with 1997, in accordance with the provisions of this Section 4. Such awards may be made
in, or in commitments to deliver, cash, shares of the Company, incentive units evidencing
commitments to pay or deliver at some future date or dates cash or shares in amounts measured by or
otherwise dependent upon earnings or other performance criteria, or share units evidencing
commitments to deliver or pay at some future date or dates shares or cash equal to the market value
of shares at such date or dates, together, in each case, if so provided, with amounts equal to
dividends and other distributions paid on an equivalent number of shares, or such other kind or
form of compensation as may, in the judgment of the Committee, be best calculated to further the
purposes of the Plan, all on such terms and subject to such conditions as the Committee may
determine. In Canada, because of certain tax rules that might adversely affect the recipient of a
deferred award, each award shall be paid not later than the end of the third year following the end
of the year in which the award to an employee is declared.

          In respect of each year, the Committee, subject to ratification by the Board of Directors of
the Company, shall from time to time, but not later than the end of the year immediately following
such year, fix the extent, if any, to which, within the limits of the “Incentive Fund” for such
year, awards of incentive compensation shall be made in respect of such year by the Company and by
its subsidiaries, and, subject to ratification by the Board of Directors of the Company or of the
subsidiary making the award, as the case may be, determine the participants for the year, the award
to be made to each participant and the time when such award is to be paid. The maximum amount of
the Incentive Fund in respect of any year shall be equal to (i) 2% of the sum of (a) the
consolidated net earnings of the Company and (b) the related provisions for income and mining taxes
(the “Award Pool”) in such year, as confirmed by the Company’s independent auditors for such year,
and the Award Pool for each of the two immediately preceding years (the “Preceding Years”) less
(ii) the aggregate amount of awards actually made from the Award Pool in respect of each of the
Preceding Years under the Plan or, as the case may be, under the Key Employees Incentive Plan
approved by the Shareholders of the Company on April 21, 1993. Awards made under this Section 4
shall be deemed for the purpose only of determining the amount to be charged therefor against an
Incentive Fund or Funds to have the value of the cash or shares or incentive units or share units
or other kind or form of compensation awarded that is determined by the Committee, as of the time
the award is made and disregarding the effect of any restrictions or delayed delivery provisions
which would otherwise reduce such value, on such basis as the Committee shall deem reasonable. The
value of any award made under this Section 4 shall be charged against the Incentive Fund for the
year in respect of which such award is made, except that, in the case of any award the amount of
which is measured by or otherwise dependent upon future consolidated earnings of the Company, the
Committee may, at the time such award is made, elect that there shall be charged against the
Incentive Fund for the year in respect of which such award is made and the Incentive Fund or Funds
for each succeeding year or years such amount or amounts, as may be determined by the Committee,
but not less than the lesser of (i) the value of such award divided by the number of years in the
period from the beginning of the year in respect of which such award is made to the earlier of the
end of the year in which such award is to be paid or delivered in full or the end of 2002, or (ii)

 

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the portion of the value of such award which shall not have been previously charged against an
Incentive Fund, provided, however, that the Committee may at any time increase the amount to be
charged for such award against the Incentive Fund for any year by all or part of the amounts to be
charged for such award against the Incentive Fund or Funds for a subsequent year or years, and
provided, further, that any excess of amounts to be charged against the Incentive Fund for any year
for awards made in respect of prior years over the amount of such Incentive Fund shall be charged
against the Incentive Fund or Funds for the succeeding year or years. No awards shall be made under
this Section 4 in respect of any year unless and until the total value of all awards made under
this Section 4 in respect of prior years shall have been charged against the Incentive Fund or
Funds for such year or prior years.

          If awards are made in shares (or amounts of cash equal to the value of shares) or share units,
or other forms measured by shares and in the valuation thereof, to be delivered or paid in the
future, appropriate adjustments in the number and kind of shares or units measured by shares shall
be made in the same way as is provided for share options in Section 3(a) in the event of a change
in the capital structure of the Company. If awards of shares are made by the Company, the Company
may issue shares or may acquire outstanding shares for such purpose. If awards of shares are made
by a subsidiary, the Company may issue the shares required or the subsidiary may acquire
outstanding shares for such purpose.

	5.	 	Nothing in the Plan shall prevent a participant from being included in any other employee
plan of the Company or any of its subsidiaries or other affiliates or from receiving any
compensation (whether regular, special, supplemental, incentive, current, deferred or
otherwise) now or hereafter provided by the Company or any of its subsidiaries or other
affiliates. Neither the Plan nor any action taken thereunder shall be understood as giving to
any person any right to be retained in the employ of the Company or any subsidiary or other
affiliate, nor shall any person (including persons selected as participants for a prior year)
be entitled as of right to be selected as a participant in the Plan for any year. Any option
or similar right (including any share appreciation right, whether or not included in an option
granted under the Plan) granted or awarded under the Plan shall be nontransferable other than
by will or the laws of descent and distribution and, during the lifetime of the participant to
whom such option or right shall have been granted or awarded, shall be exercisable only by
such participant or by his guardian or legal representative, in the case of options not
intended to qualify as ISOs, or by such participant, in the case of options intended to
qualify as ISOs.

	6.	 	The Board of Directors of the Company may amend, suspend or terminate the Plan in whole or in
part at any time, provided that the rights and interests of participants to whom unexpired
share options or awards of incentive compensation have theretofore been granted or made shall
not thereby be adversely affected without their consent and no amendment which would increase
the number of shares which may be made subject to share options or otherwise materially
increase the cost of the Plan shall be made effective unless approved at a meeting of the
holders of the shares of the Company carrying general voting rights. The Plan shall become
effective on the date of its approval by the Company’s Shareholders. Unless the Plan is sooner
terminated by the Board of Directors, no share options or share appreciation rights may be
granted after the day before the fifth anniversary of the date that the Plan is approved by
the Company’s Shareholders, and no awards of incentive compensation may be made in respect of
any fiscal year ending after

 

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	 	 	December 31, 2002, provided that the provisions of the Plan shall continue with
respect to any options, rights or awards theretofore granted or made.

	7.	(a)	 	In the event of a Change in Control (as
defined in (b) below), all options shall
become vested and exercisable in full.

	 	(b)	 	For purposes of the Plan, “Change in Control” means the occurrence of any of
the following events:

	 	(i)	 	individuals who, as of the close of business on April 23, 1997,
constitute the Board of Directors of the Company (the “Incumbent Directors”)
cease for any reason to constitute at least a majority of the Board of
Directors for at least one full year, provided that any person becoming a
Director subsequent to the close of business on April 23, 1997, whose election
or nomination for election was approved by a vote of at least two-thirds of the
Incumbent Directors then on the Board of Directors (either by a specific vote
or by approval of the proxy statement of the Company in which such person is
named as a nominee for Director, without objection to such nomination) shall be
an Incumbent Director; provided, however, that no individual elected or
nominated as a Director of the Company initially as a result of an actual or
threatened election contest with respect to Directors or as a result of any
other actual or threatened solicitation of proxies or consents by or on behalf
of any person other than the Board of Directors shall be deemed to be an
Incumbent Director;

	 	(ii)	 	any “person” (as such term is defined in Section 3(a)(9) of the
U.S. Securities Exchange Act of 1934 (the “Exchange Act”) and as used in
Section 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial
owner” (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, of securities of the Company representing 25% or more of the
combined voting power of the Company’s then outstanding securities eligible to
vote for the election of the Board of Directors (the “Company Voting
Securities”); provided, however, that the event described in this paragraph
(ii) shall not be deemed to be a Change in Control by virtue of any of the
following acquisitions: (A) by the Company or any Subsidiary, (B) by any
employee benefit plan sponsored or maintained by the Company or any Subsidiary,
(C) by any underwriter temporarily holding securities pursuant to an offering
of such securities, (D) pursuant to a Non-Qualifying Transaction (as defined in
paragraph (iii)) or (E) a transaction (other than one described in (iii) below)
in which Company Voting Securities are acquired from the Company, if a majority
of the Incumbent Directors approve a resolution providing expressly that the
acquisition pursuant to this clause (E) shall not constitute a Change in
Control under this paragraph (ii);

	 	(iii)	 	shareholder approval of a merger, consolidation, share
exchange or similar form of corporate transaction involving the Company or any
of its subsidiaries, whether for such transaction or for the issuance of
securities in the transaction (a “Business Combination”), unless immediately

 

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	 	 	 	following such Business Combination: (A) more than 50% of the total voting
power of (x) the corporation resulting from such Business Combination (the
“Surviving Corporation”), or (y) if applicable, the ultimate parent
corporation that directly or indirectly has beneficial ownership of 100% of
the voting securities eligible to elect directors of the Surviving
Corporation (the “Parent Corporation”), would be represented by Company
Voting Securities that were outstanding immediately prior to the
consummation of such Business Combination (or, if applicable, would be
represented by shares into which such Company Voting Securities were
converted pursuant to such Business Combination), and such voting power
among the holders thereof is in substantially the same proportion as the
voting power of such Company Voting Securities among the holders thereof
immediately prior to the Business Combination, (B) no person (other than any
employee benefit plan sponsored or maintained by the Surviving Corporation
or the Parent Corporation) would be or becomes the beneficial owner,
directly or indirectly, of 25% or more of the total voting power of the
outstanding voting securities eligible to elect directors of the Parent
Corporation (or, if there is no Parent Corporation, the Surviving
Corporation) and (C) at least a majority of the members of the board of
directors of the Parent Corporation (or, if there is no Parent Corporation,
the Surviving Corporation) will have been Incumbent Directors at the time of
the Board’s approval of the execution of the initial agreement providing for
such Business Combination (any Business Combination which satisfies all of
the criteria specified in (A), (B) and (C) above shall be deemed to be a
“Non-Qualifying Transaction”);

	 	(iv)	 	shareholder approval of a plan of complete liquidation or
dissolution of the Company or a sale or other disposition of all or
substantially all of the Company’s assets; or

	 	(v)	 	for any employee of the Company or any subsidiary who is party
to an agreement which provides such employee with certain rights in the event
of a change of control, as defined in such agreement, any event that
constitutes a change of control as set forth in such agreement.

          Notwithstanding the foregoing, a Change in Control of the Company shall not be deemed to occur
solely because any person acquires beneficial ownership of more than 25% of the Company Voting
Securities as a result of the acquisition of Company Voting Securities by the Company which reduces
the number of Company Voting Securities outstanding; provided, that if after such acquisition by
the Company such person becomes the beneficial owner of additional Company Voting Securities that
increase the percentage of outstanding Company Voting Securities beneficially owned by such person,
a Change in Control of the Company shall then occur.

	8.	 	Notwithstanding anything in the Plan to the contrary, the Committee may, in its sole
discretion, in the event of a serious breach of conduct by an employee or former employee
(including, without limitation, any conduct prejudicial to or in conflict with the Company or
its subsidiaries), or any activity of any employee or former employee in competition with any
of the businesses of the Company or any subsidiary, (a) cancel any

 

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	 	 	outstanding award granted to such employee or former employee, in whole or in part, whether
or not vested or deferred, and/or (b) if such conduct or activity occurs within one year
following the exercise or payment of an award, require such employee or former employee to
repay to the Company any gain realized or payment received upon the exercise or payment of
such award (with such gain or payment valued as of the date of exercise or payment). Such
cancellation or repayment obligation shall be effective as of the date specified by the
Committee. Any repayment obligation may be satisfied in Common Shares or cash or a
combination thereof (based upon the fair market value of Common Shares, determined pursuant
to Section 3(b), on the day prior to the date of payment), and the Committee may provide for
an offset to any future payments owed by the Company or any subsidiary to the employee or
former employee if necessary to satisfy the repayment obligation. The determination of
whether an employee or former employee has engaged in a serious breach of conduct or any
activity in competition with any of the businesses of the Company or any subsidiary shall be
determined by the Committee in good faith and in its sole discretion. This Section 8 shall
have no application following a Change in Control.

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