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hostile takeover, entered into employment agreements (1990
Employment Agreements) with its 18 most senior executives.
For several years prior to the execution of the 1990
Employment Agreements, petitioner’s senior executives had
received an industry-typical executive compensation package,
which included salary, participation in a short-term incentive
compensation plan (STIP), restricted stock (including dividends
on such stock), nonqualified stock options, and perquisites. The
STIP was awarded annually and guaranteed each executive a bonus
if certain company performance objectives were met. Petitioner
also maintained a supplemental retirement plan (SRP) for certain
executives, including the 18 senior executives noted above, who
were also participants in petitioner’s qualified pension plan.
The purpose of the SRP was to provide supplemental retirement
benefits to selected key executives.
B. 1990 Employment Agreements
The 1990 Employment Agreements provided for a 3-year
employment period that was triggered by a “change of control”,
defined in the agreements to include the acquisition of 20
percent or more of the common stock or voting power of
petitioner. The parties have stipulated that a change of
control, both for purposes of triggering the 3-year employment
period provided in the 1990 Employment Agreements and for
purposes of section 280G(b)(2)(A), occurred on May 29, 1991. The
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