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Schneider affiliates or with executives recruited from other U.S.
companies in the electrical equipment industry.
D. Negotiations Between Retained Executives and Schneider
Over New Employment Agreements
Schneider’s chairman was aware from petitioner’s SEC filings
that the 1990 Employment Agreements provided for substantial
lump-sum payments for several of petitioner’s executives if they
decided to terminate their employment with petitioner following
the 1-year anniversary of petitioner’s acquisition by Schneider.
He feared that the 1990 Employment Agreements provided incentives
for the executives to leave and wanted to devise alternative
compensation arrangements that would create incentives for the
executives to remain employed by petitioner beyond the first year
after the acquisition.
The departure of the Retained Executives during June 1992
would have posed substantial risks to petitioner’s continued
successful business operations, and Schneider’s chairman was
prepared to pay a premium in order to keep the Retained
Executives.
The 1990 Employment Agreements had a significant impact on
Schneider’s negotiations with the Retained Executives over new
Employment Agreements. An executive compensation consultant
retained by Schneider advised it regarding compensation proposals
that would “preserve the present value of the parachute payments”
to which the Retained Executives were entitled under the 1990
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