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agreement with MGC governing his employment status with MGC and
his ISOs (the 1999 employment agreement). Pursuant to the 1999
employment agreement: (1) Petitioner resigned as president, chief
executive officer, and director of MGC, and he resigned as an
officer and director of MGC’s subsidiaries; (2) petitioner agreed
to assist MGC’s new chief executive officer “in order to provide
for a smooth transition for the Company”; (3) MGC agreed to make
a lump-sum payment of $360,000 to petitioner; (4) MGC and
petitioner agreed to accelerate the vesting dates of petitioner’s
ISOs; and (5) petitioner and MGC agreed that petitioner would
continue to be employed by MGC through April 1, 2001, for the
purpose of providing advice regarding regulatory developments,
testimony at legal, regulatory, and administrative proceedings as
necessary, and other mutually agreed duties.
After November 1, 1999, MGC never requested petitioner to
prepare any formal reports for the company, and petitioner did
not prepare any formal reports for MGC.
Table 2 sets forth (1) the fair market value of MGC shares
as of the dates petitioner’s ISOs were granted, and (2) the total
fair market value of all shares as to which petitioner’s ISOs
were exercisable for the first time during each of the years 1997
to 2001 (taking into account the accelerated vesting schedule
that MGC and petitioner agreed to on November 1, 1999):
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