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interdependent with the Pension Agreement, makes the character of
the payments clear and fully supports respondent’s contention
that the payments functioned as alimony or as a constructive
dividend to Barbara. Although petitioner argues that the Pension
Agreement and the Settlement Agreement are independent and
separate agreements, the record contradicts this claim. Both
agreements were executed on the same day; the Settlement
Agreement makes specific reference to, and attaches as an
exhibit, the Pension Agreement. More significantly, the
Settlement Agreement modifies and supplements the terms of the
Pension Agreement, in one instance providing for a modification
of the amount of the payments (in the event that Walter’s salary
or other benefits from petitioner increased) and in another
supplementing the Pension Agreement’s terms (by providing for
Walter’s personal guaranty of petitioner’s obligation in the
Pension Agreement to make the payments). It also bears
mentioning that the Settlement Agreement effectively imposed
obligations on petitioner, notwithstanding the fact that
petitioner was not a party to the agreement. The Settlement
Agreement does so by having petitioner’s controlling shareholders
“agree” that the payments under the Pension Agreement will be
increased in certain circumstances. Obviously, the Settlement
Agreement contemplated that petitioner’s shareholders would use
their controlling positions to effect petitioner’s implementation
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Last modified: May 25, 2011