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Exhibit 10.8
PHANTOM SHARE AGREEMENT
PHANTOM SHARE AGREEMENT by and among Monsanto Company, a Delaware
corporation (the "Company"), Pharmacia Corporation, a Delaware corporation
formerly known as Monsanto Company ("Pharmacia"), which is the sole shareholder
of the Company, and Xxxxxxxx X. Xxxxxxxxxx (the "Executive"), dated as of the
1st day of September, 2000.
WHEREAS, the Executive is an executive employee of Pharmacia; and
WHEREAS, Pharmacia and the Executive are parties to an Employment
Agreement dated as of April 25, 1997 (the "Current Employment Agreement"); and
WHEREAS, in connection with the separation of the agricultural
and pharmaceutical businesses of Pharmacia and its subsidiaries, the Executive
has agreed to become an employee of the Company; and
WHEREAS, in that connection, the Company, Pharmacia and the
Executive wish to replace the Current Employment Agreement with the new
arrangement provided for in this Phantom Share Agreement;
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
1. Effect on Current Employment Agreement. (a) Effective as of
the date of the initial public offering of the Shares (the "Effective Date"),
the Current Employment Agreement shall be null and void and of no further force
or effect. If the initial public offering of the Shares does not occur on or
before March 31, 2001, or if the Company publicly announces before that date
that it is no longer contemplating making an initial public offering of the
Shares, then this Agreement shall be null and void and of no further force or
effect, and the Current Employment Agreement shall remain in effect.
(b) Effective no later than the Effective Date, the Executive
shall become the Chief Executive Officer of the Company and shall have the
authority, duties and responsibilities set forth in Exhibit A to this Agreement
and the By-Laws of the Company.
2. Grant of Phantom Shares. Effective as of the Effective Date,
the Company shall establish a bookkeeping account for the Executive (the
"Account"), to which it shall from time to time credit hypothetical shares (the
"Phantom Shares") of the common stock of the Company (the "Shares"). The initial
number of Phantom Shares (which may include a fraction) credited to the Account
shall equal the number of shares and fractions thereof determined by dividing
(x) $7,231,000 (the "Initial Value") by (y) the initial public offering price of
the Shares.
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3. Adjustments to Account. Whenever a dividend or distribution is
declared with respect to the common stock of the Company with a record date
after the Effective Date and at a time when Phantom Shares remain in the
Account, an additional number of Phantom Shares shall be credited to the Account
equal to the number of shares and having a Share Value as of the payment date
for such dividend or distribution equal to the fair market value (as determined
by the Committee) of such dividend. In the event of any change in corporate
capitalization such as a stock split, any corporate transaction such as a
merger, consolidation, separation, spin-off, or other distribution of stock or
property of the Company, any reorganization (whether or not such reorganization
comes within the definition of reorganization in Section 368 of the Code), or
any partial or complete liquidation of the Company, then notwithstanding any
other provision of this Agreement, the Committee shall make such substitution or
adjustments in the aggregate number and kind of shares represented by the
Phantom Shares, if any, as it may determine to be appropriate or necessary to
preserve the value thereof.
4. Vesting, Forfeiture and Payment of Account. (a) Performance
Goal. As soon as reasonably practicable after December 31, 2001, the Committee
shall determine and certify whether or not the Performance Goal has been met,
and if it has not been met, then the Executive shall forfeit all rights to the
Account unless it has previously vested and been paid as provided below in this
Section 4.
(b) Vesting On October 1, 2002. If the Executive remains an
employee of the Company or any member of the Affiliated Group that includes the
Company as of October 1, 2002, and the Committee has certified that the
Performance Goal has been met, then the balance in the Account shall vest as of
October 1, 2002.
(c) Termination of Employment.
(i) The balance in the Account shall vest as of the date
of the termination of the Executive's employment with the Company and the other
members of the Affiliated Group that includes the Company, if such termination
is the result of the Executive's death, Disability, Termination without Cause or
Termination for Good Reason, and
(A) such termination occurs before December 31, 2001; or
(B) such termination occurs on or after December 31, 2001
but before October 1, 2002, and the Committee certifies
that the Performance Goal has been met.
(ii) The balance in the Account shall not vest if the
termination of the Executive's employment with the Company and the other members
of the Affiliated Group that includes the Company,
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(A) occurs before December 31, 2001 for any other reason
than death, Disability, Termination without Cause, or
Termination for Good Reason; or
(B) occurs on or after December 31, 2001 but before
October 1, 2002, and the Committee fails to certify that
the Performance Goal has been met,
and then in either case the Executive shall forfeit all rights to the Account
unless it has previously vested and been paid as provided below in this Section
4.
(d) Change of Control. If there occurs a Monsanto Change of
Control before December 31, 2001 and the Executive remains an employee of the
Company or any member of the Affiliated Group that includes the Company as of
the date of the Monsanto Change of Control, the balance in the Account shall
vest on the date of the Monsanto Change of Control. If there occurs a Pharmacia
Change of Control before December 31, 2001 followed by a Second Trigger, and the
Executive remains an employee of the Company or any member of the Affiliated
Group that includes the Company as of the date of the Second Trigger, the
balance in the Account shall vest on the date of the Second Trigger.
(e) Payment of Account. Whenever the balance in the Account vests
as provided above, the Company shall pay to the Executive, in a single lump sum
cash payment, an amount equal to the number of Phantom Shares credited to the
Account times the Share Value, each determined as of the date of vesting;
provided, that if the Account has vested pursuant to Section 4(c), the amount of
such payment shall in no event be less than the Initial Value. Such payment
shall be made as soon as reasonably practicable, but in any event within 30
days, after the last to occur of (i) the date on which such vesting occurs, (ii)
the date on which the Committee certifies that the Performance Goal has been
met, if such certification is a condition to such vesting, and (iii) the date on
which the Company obtains the shareholder approval required by Section 5, unless
such vesting occurs as a result of a Change of Control before the First Annual
Meeting.
5. Shareholder Approval. Notwithstanding any other provision of
this Agreement, the Executive shall have no right to any payments pursuant to
Section 4 of this Agreement or otherwise with respect to the Phantom Shares and
the Account, unless and until the shareholders of the Company have approved the
material terms and conditions hereof in a manner satisfying the requirements of
Section 162(m)(4)(C) for performance-based compensation; provided, that such
shareholder approval shall not be required if a Change of Control occurs before
the First Annual Meeting. The Company shall seek such approval at the First
Annual Meeting. By its signature below, Pharmacia hereby approves such terms and
conditions and agrees to vote its shares of the Company for such approval at the
First Annual Meeting.
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6. Definitions. For purposes of this Agreement, the following
terms shall have the meanings set forth below:
Account: defined in Section 2.
Affiliated Group: a group of corporations (domestic and
foreign), partnership(s), joint venture(s), and other entities
that would constitute an affiliated group of corporations within
the meaning of Section 1504 of the Code, if each such entity
were a domestic corporation, and for purposes of this agreement,
substituting 30% ownership in Section 1504(a)(2)(A) for 80%
ownership.
Agreement: this Phantom Share Agreement.
Board: the Board of Directors of the Company.
Change of Control: a Monsanto Change of Control or a Pharmacia
Change of Control.
Code: the Internal Revenue Code of 1986, as amended.
Company: defined in the first paragraph of this Agreement.
Committee: the Company's Board People Committee or such other
committee as may be designated by the Board; provided, that the
Committee must consist solely of two or more members of the
Board, each of whom qualifies as an "outside director" for
purposes of Section 162(m) of the Code.
Current Employment Agreement: defined in the second "WHEREAS"
clause of this Agreement.
Disability: Before a Change of Control, "Disability" shall mean
the Executive's long-term disability for purposes of any
reasonable occupation as determined under the Company's
disability plan that is applicable to the Executive. After a
Change of Control, "Disability" shall be as defined in the
Executive's Change-of-Control Employment Security Agreement.
Effective Date: defined in Section 1.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Executive: defined in the first paragraph of this Agreement.
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First Annual Meeting: the first annual meeting of the Company's
shareholders that occurs after the Effective Date.
Initial Value: defined in Section 2.
Monsanto Change of Control: the happening of any of the events
described in subsections (a) through (d) below, if immediately
following such event, Pharmacia does not beneficially own a
majority of the then-outstanding Shares:
(a) the acquisition by any Person of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of either (i) the Requisite Common Percentage of the
then-outstanding Shares (the "Outstanding Company Common Stock")
or (ii) the Requisite Voting Percentage of the combined voting
power of the then-outstanding voting securities of the Company
entitled to vote generally in the election of directors (the
"Outstanding Company Voting Securities"); provided, that for
purposes of this subsection (a), the following acquisitions
shall not constitute a Change of Control: (A) any acquisition
directly from the Company; (B) any acquisition by the Company or
a Subsidiary of the Company; (C) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company, or a Subsidiary of the Company; or (D) any acquisition
by any corporation pursuant to a transaction that complies with
clauses (i), (ii) and (iii) of subsection (c) of this
definition;
(b) individuals who, as of the date of the initial public
offering of the Shares, constitute the Board (the "Incumbent
Board"), cease for any reason to constitute at least a majority
of the Board; provided, that any individual becoming a director
subsequent to the date hereof whose election, or nomination for
election by the Company's stockholders, was approved by a vote
of at least a majority of the directors then comprising the
Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest
with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or
on behalf of a Person other than the Board;
(c) consummation by the Company of a reorganization,
merger or consolidation or sale or other disposition of all or
substantially all of the assets of the Company or the
acquisition of assets or stock of another corporation (a
"Business Combination"), in each case, unless, following such
Business Combination, (i) all or
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substantially all of the individuals and entities who were the
beneficial owners, respectively, of the Outstanding Company
Common Stock and Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own,
directly or indirectly, more than 60% of, respectively, the
then-outstanding shares of common stock and the combined voting
power of the then-outstanding voting securities entitled to vote
generally in the election of directors, as the case may be, of
the corporation resulting from such Business Combination
(including without limitation a corporation that as a result of
such transaction owns the Company or all or substantially all of
the Company's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
owner-ship, immediately prior to such Business Combination of
the Outstanding Company Common Stock and Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding
the Company, a Subsidiary of the Company, any corporation
resulting from a Business Combination or any employee benefit
plan (or related trust) thereof) beneficially owns, directly or
indirectly, the Requisite Common Percentage of the
then-outstanding shares of common stock of the corporation
resulting from such Business Combination or the Requisite Voting
Percentage of the combined voting power of the then-outstanding
voting securities entitled to vote generally in the election of
directors of such corporation, except to the extent that such
ownership existed prior to the Business Combination and (iii) at
least a majority of the members of the board of directors of the
corporation resulting from such Business Combination were
members of the Incumbent Board at the time of the execution of
the initial agreement, or of the action of the Board, providing
for such Business Combination;
(d) approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company.
Monsanto Leadership Team: those individuals who are, immediately
before a Pharmacia Change of Control, members of the Monsanto
Leadership Team or any successor group thereto.
Performance Goal: the Performance Goal is for the Company's net
income, as reported in the Company's audited U.S. financial
statements, but excluding (a) any items that are identified in
the Company's reports filed with the Securities and Exchange
Commission as unusual in nature or nonrecurring (such as
restructuring costs, items related to resolution of litigation,
and items related to mergers, acquisitions and divestitures) and
(b) the cumulative effects of changes
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in accounting methodology made after September 20, 2000, to
exceed zero for the period January 1, 2001 through December 31,
2001.
Person: An individual, entity or group within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act.
Phantom Shares: defined in Section 2.
Pharmacia: defined in the first paragraph of this Agreement.
Pharmacia Change of Control: the happening of any of the events
described in subsections (a) through (d) below, if immediately
following such event, Pharmacia beneficially owns a majority of
the then-outstanding Shares:
(a) the acquisition by any Person of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange
Act) of 20 percent or more of either (1) the then-outstanding
shares of common stock of Pharmacia (the "Outstanding Pharmacia
Common Stock") or (2) the combined voting power of the
then-outstanding voting securities of Pharmacia entitled to vote
generally in the election of directors (the "Outstanding
Pharmacia Voting Securities"); provided, that for purposes of
this subsection (a), the following acquisitions shall not
constitute a Change of Control: (A) any acquisition directly
from Pharmacia; (B) any acquisition by the Company, Pharmacia,
or a Subsidiary of either of them; (C) any acquisition by any
employee benefit plan (or related trust) sponsored or maintained
by the Company, Pharmacia, or a Subsidiary of either of them; or
(D) any acquisition by any corporation pursuant to a transaction
that complies with clauses (1), (2) and (3) of subsection (c) of
this definition;
(b) individuals who, as of the date of the initial public
offering of the Shares, constitute the Board of Directors of
Pharmacia (the "Incumbent Pharmacia Board"), cease for any
reason to constitute at least a majority of the Pharmacia Board;
provided, that any individual becoming a director subsequent to
the date hereof whose election, or nomination for election by
Pharmacia's stockholders, was approved by a vote of at least a
majority of the directors then comprising the Incumbent
Pharmacia Board shall be considered as though such individual
were a member of the Incumbent Pharmacia Board, but excluding,
for this purpose, any such individual whose initial assumption
of office occurs as a result of an actual or threatened election
contest with respect to the election or removal of directors or
other actual or threatened solicitation of proxies or consents
by or on behalf of a Person other than the Board of Directors of
Pharmacia;
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(c) consummation of a reorganization, merger or
consolidation or sale or other disposition of all or
substantially all of the assets of Pharmacia or the acquisition
of assets or stock of another corporation (a "Pharmacia Business
Combination"), in each case, unless, following such Pharmacia
Business Combination, (i) all or substantially all of the
individuals and entities who were the beneficial owners,
respectively, of the Outstanding Pharmacia Common Stock and
Outstanding Pharmacia Voting Securities immediately prior to such
Pharmacia Business Combination beneficially own, directly or
indirectly, more than 60% of, respectively, the then-outstanding
shares of common stock and the combined voting power of the
then-outstanding voting securities entitled to vote generally in
the election of directors, as the case may be, of the corporation
resulting from such Pharmacia Business Combination (including
without limitation a corporation that as a result of such
transaction owns Pharmacia or all or substantially all of
Pharmacia's assets either directly or through one or more
subsidiaries) in substantially the same proportions as their
ownership, immediately prior to such Pharmacia Business
Combination of the Outstanding Pharmacia Common Stock and
Outstanding Pharmacia Voting Securities, as the case may be, (ii)
no Person (excluding the Company, Pharmacia, a Subsidiary of
either of them, any corporation resulting from such Pharmacia
Business Combination or any employee benefit plan (or related
trust) thereof) beneficially owns, directly or indirectly, 20% or
more of, respectively, the then-outstanding shares of common
stock of the corporation resulting from such Pharmacia Business
Combination or the combined voting power of the then-outstanding
voting securities of such corporation except to the extent that
such ownership existed prior to the Pharmacia Business
Combination and (iii) at least a majority of the members of the
board of directors of the corporation resulting from such
Pharmacia Business Combination were members of the Incumbent
Pharmacia Board at the time of the execution of the initial
agreement, or of the action of the Board of Directors of
Pharmacia, providing for such Pharmacia Business Combination;
(d) approval by the stockholders of Pharmacia of a
complete liquidation or dissolution of Pharmacia;
Requisite Common Percentage: as of any given time, a percentage
equal to or greater than the higher of (a) 20 percent and (b)
the percentage of the then-outstanding Shares then beneficially
owned by Pharmacia.
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Requisite Voting Percentage: as of any given time, a percentage
equal to or greater than the higher of (a) 20 percent and (b)
the percentage of the voting power of the then-outstanding
voting securities of the Company entitled to vote generally in
the election of directors then beneficially owned by Pharmacia.
Second Trigger: the occurrence, during the one-year period
immediately following a Pharmacia Change of Control, of one of
the following: (a) more than half of the members of the Monsanto
Leadership Team are terminated by the Company without Cause or
terminate their own employment for Good Reason, as those terms
are defined in their respective Change-of-Control Employment
Security Agreements; (b) the headquarters of the Company is
relocated by more than 35 miles from its location immediately
before the Pharmacia Change of Control, or a plan to effect such
a relocation is publicly announced; (c) it is publicly announced
that Pharmacia intends to take steps that will result in its
ceasing to beneficially own a majority of the then-outstanding
Shares or that would otherwise result in a Monsanto Change of
Control, and such steps have not previously been approved by a
majority of the members of the Monsanto Leadership Team.
Share Value: with respect to any given date, the average of the
daily highest and lowest per-share sales prices for the Shares
during normal business hours on the New York Stock Exchange for
each of the ten consecutive trading days ending with the
immediately preceding date, or if the Shares were not traded on
the New York Stock Exchange on such date, then ending with the
next preceding date on which the Shares were traded, all as
reported by such source as the Committee may select.
Shares: defined in Section 2.
Subsidiary: with respect to any entity, any corporation,
partnership, joint venture, limited liability company, or other
entity or enterprise of which the first entity owns or controls,
directly or indirectly, 50% or more of the outstanding shares of
stock normally entitled to vote for the election of directors,
or of comparable equity participation and voting power.
Termination for Good Reason: Before a Change of Control,
"Termination for Good Reason" shall mean a termination of
employment by the Executive as a result of, and within 90 days
after the occurrence of, any of the following events: (a) the
assignment to the Executive of any duties that are materially
inconsistent in any respect with the Executive's position as
Chief Executive Officer and his
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duties and responsibilities as set forth in Exhibit A and the
By-Laws of the Company, unless such assignment is remedied by
the Company within 30 days after receipt of notice thereof given
by the Executive; (b) any reduction in the amount of, or failure
to pay, the Executive's current annual base salary or any
reduction in the amount of, or failure to pay, the Executive's
other long-term aggregate incentive compensation opportunities,
perquisites or other benefits, unless such reduction or failure
is remedied by the Company within 30 days after receipt of
notice thereof given by the Executive, or occurs as a result of
a reduction that affects all senior executives of the Company
similarly; (c) the Company's requiring the Executive to be based
at any office or location more than 35 miles from the office
where the executive is employed on the Effective Date or to be
based at a location other than the principal executive offices
of the Company. After a Change of Control, "Termination for Good
Reason" shall mean a termination of employment by the Executive
for Good Reason, as that term is defined in the Executive's
Change-of-Control Employment Security Agreement.
Termination Without Cause: Before a Change of Control,
"Termination Without Cause" shall mean termination of the
Executive's employment by the Company other than as a result of:
(a) the willful and continued failure of the Executive to
perform substantially the Executive's duties with the Company or
one of its affiliates (other than any such failure resulting
from incapacity due to physical or mental illness), after a
written demand for substantial performance is delivered to the
Executive by the Board which specifically identifies the manner
in which the Board believes that the Executive has not
substantially performed the Executive's duties; (b) the willful
engaging by the Executive in illegal conduct or gross misconduct
which is materially and demonstrably injurious to the Company;
or (c) the Executive's Disability. For purposes of this
definition, no act or failure to act, on the part of the
Executive, shall be considered "willful" unless it is done, or
omitted to be done, by the Executive in bad faith or without
reasonable belief that the Executive's action or omission was in
the best interests of the Company. Any act, or failure to act,
based upon authority given pursuant to a resolution duly adopted
by the Board or based upon the advice of counsel for the Company
shall be conclusively presumed to be done, or omitted to be
done, by the Executive in good faith and in the best interests
of the Company. Notwithstanding the foregoing, termination as a
result of an event described in clause (a) or (b) above shall be
deemed to be a "Termination Without Cause" unless and until (i)
the Executive has been given the opportunity, on reasonable
advance notice, to be heard
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before the Board, together with counsel to the Executive and
(ii) there shall have been delivered to the Executive a copy of
a resolution thereafter duly adopted by the affirmative vote of
not less than three-quarters of the entire membership of the
Board (excluding the Executive, if the Executive is a member of
the Board), finding that, in the good faith opinion of the
Board, the Executive is guilty of conduct described in either
(a) or (b) above, and specifying the particulars thereof in
detail. After a Change of Control, "Termination Without Cause"
shall mean a termination of the Executive's employment by the
Company other than for Cause or Disability, as those terms are
defined in the Executive's Change-of-Control Employment Security
Agreement.
7. Miscellaneous. (a) This Agreement is personal to the
Executive and without the prior written consent of the Company shall not be
assignable by the Executive otherwise than by will or the laws of descent and
distribution. This Agreement shall inure to the benefit of and be enforceable by
the Executive's legal representatives.
(a) This Agreement shall inure to the benefit of and be binding
upon the Company and its successors and assigns.
(c) The Company shall require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Company to assume
expressly and agree to perform this Agreement in the same manner and to the same
extent that the Company would be required to perform it if no such succession
had taken place. As used in this Agreement, "Company" shall mean the Company as
hereinbefore defined and any successor to its business and/or assets as
aforesaid which assumes and agrees to perform this Agreement by operation of
law, or otherwise.
(d) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to
principles of conflict of laws. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect. This Agreement may not
be amended or modified otherwise than by a written agreement executed by the
parties hereto or their respective successors and legal representatives
(e) All notices and other communications hereunder shall be in
writing and shall be given by hand delivery to the other party or by registered
or certified mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
000 Xxxxx Xxxxxxxxx Xxxxxxxxx
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Xx. Xxxxx, Xxxxxxxx 00000
If to the Company:
000 Xxxxx Xxxxxxxxx Xxxxxxxxx
Xx. Xxxxx, Xxxxxxxx 00000
Attention: General Counsel
or to such other address as either party shall have furnished to the other in
writing in accordance herewith. Notice and communications shall be effective
when actually received by the addressee.
(f) The Company may withhold from any amounts payable under this
Agreement such federal, state, local or foreign taxes as shall be required to be
withheld pursuant to any applicable law or regulation.
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IN WITNESS WHEREOF, the Executive has hereunto set the
Executive's hand and, pursuant to due authorization, the Company and Pharmacia
have each caused these presents to be executed in its name on its behalf, all as
of the day and year first above written.
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Xxxxxxxx X. Xxxxxxxxxx
MONSANTO COMPANY
By
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Xxxx X. Xxxxxxxx,
Senior Vice President-Human Resources
PHARMACIA CORPORATION
By
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Xxxx X. Xxxxxx,
Senior Vice President-Human Resources
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EXHIBIT A
In addition to any other authority granted to the Chief Executive Officer
pursuant to the By-Laws of the Company, the Executive shall have such duties,
authority and responsibilities as are customarily associated with the position
of Chief Executive Officer and such other duties and responsibilities as the
Board of Directors of the Company has assigned to him as of the Effective Date
of this Phantom Share Agreement.
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