Square D Company and Subsidiaries - Page 7

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          280G(b)(4)(A).  We hold that petitioner has established that a              
          portion of the payments was reasonable compensation.                        
                                  FINDINGS OF FACT                                    
          I.   Background                                                             
               Some of the facts have been stipulated and are so found.  We           
          incorporate by this reference the stipulation of facts, the first           
          and second supplemental stipulation of facts, and accompanying              
          exhibits.                                                                   
               Square D Co., a Delaware corporation with its principal                
          executive offices in Palatine, Illinois, is the common parent of            
          an affiliated group of corporations making a consolidated return            
          (collectively, petitioner).                                                 
               Prior to its 1991 acquisition by Schneider S.A. (Schneider),           
          discussed below, petitioner was a publicly held company whose               
          stock was traded on the New York Stock Exchange.  During the                
          years in issue, petitioner was engaged in the United States and             
          abroad in the manufacture and sale of electrical distribution and           
          industrial control products.  Electrical distribution products              
          included items such as circuit breakers, safety switches,                   
          transformers, and surge suppressors; industrial control products            
          included push buttons, relays, control switches, voltage                    
          controls, data communication systems, power protection systems,             
          and computerized control and data gathering systems.  By 1990,              








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