Jeff B - thanks for posting the pics of your blade/brake PTO clutch set up. Unfortunately Jeff K's unit needs more than an adjustment.
Jeff K - for everyone's benefit this style PTO clutch assembly is commonly referred to as a Blade Brake style. My understanding was the Lawn Mower standards at this time required the blades to stop within a certain amount of time so IH developed this brake for the PTO. It does work well, but tends to rattle after some usage, and is more costly to repair.
Now, specific to yours, you can see in Jeff B's pic you are missing the "brake disc" from your assembly. It's the round metal disc with 3 fingers on it attached to that center thrust button on the front of the PTO assembly. Also your thrust button is wore down and has no grove for the wave washer and snap ring which are also both missing (and hard to see in Jeff's pic). Also, your brake shoe has almost all the brake lining wore off (as Matt noted), and part of the spring appears to be missing off the screw. You can repair this blade brake PTO clutch assembly but it will involve removing the PTO clutch assembly, then disassembly to replace the thrust button, re-assembly to include the missing brake disc, wave washer and snap ring, and then a new brake disc and screw with spring on the actuating lever. My recommendation is to convert your PTO back to the earlier style used on your series tractor. You still have to remove and disassemble the clutch, and install the old style thrust button, and remove that screw on the lever and install a fiber button, or go with bronze for a life time of wear. You can see a good explosion of the parts if you view the Cub Cadet Parts lookup link at the heading of this page (click it and select Garden Tractor, then select your 109 and then select Engine Driven Power Take-off, You have a serial number brake and yours will be the newer or higher number version but look at the older version for the parts differences). The only thing I don't know is if your actuating lever is the same for both the old and newer style clutches (the parts list calls it a PTO Rockshaft Assbly). I'm certain you can get one of these used if necessary but I really think it's the same and the fiber or bronze button will fit right into it.
Hope this is helpful.