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managerial control of petitioner. V. Eihusen was then the
largest (but neither majority nor controlling) shareholder of
petitioner by virtue of his direct ownership of 364,047 shares of
common stock (4,219 of which were restricted shares) and his
indirect ownership of 8,757.706 shares of common stock held
through the ESOP. The board did not want V. Eihusen to be able
to dictate the course of action with respect to petitioner’s
management and business affairs. V. Eihusen desired to regain
managerial control of petitioner and to protect his lifetime
investment therein.
On April 3, 1993, petitioner and V. Eihusen entered into an
employment agreement (employment agreement). The employment
agreement provided that V. Eihusen could use the title “chairman
of the board emeritus” but could not hold himself out as able to
bind petitioner or to direct, hire, or fire any employee of
petitioner. Petitioner’s obligations under the employment
agreement included continuing to pay V. Eihusen an annual salary
of $120,000, to provide him with health and dental benefits, and
to reimburse him for vehicle and office expenses in specified
monthly amounts. The employment agreement did not have a
definite term but could be terminated by petitioner upon breach
of that agreement by V. Eihusen.
Following the meeting, V. Eihusen met with lawyers and
discussed various courses of action relating to, among other
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Last modified: May 25, 2011