Remember back when Yahoo was doing everything it could to prevent Microsoft from giving it $31 a share? One of the defenses it implemented was an amazingly rich severance plan that would have made it mind-bogglingly expensive for Microsoft to buy it.
Well, shareholders who wanted Microsoft’s $31 sued. And now Yahoo has settled that suit by significantly weakening the takeover-severance plan.
Internal email below. The bottom line: It would now be easier (and less expensive) to sell the company.
We are reaching out to you today to let you know that we have made some amendments to the change in control severance plans as part of an agreement to settle the Delaware shareholder litigation filed in connection with Microsoft’s unsolicited proposals to acquire all or part of the Company and other related matters. This settlement allows Yahoo! to avoid costly and distracting litigation. The amendments to the plans were agreed upon in negotiations with counsel for the plaintiffs to settle the litigation and not in anticipation of any specific transaction that the Company may consider now or in the future. In making this decision, we carefully considered the potential impact on employees, as well as our business goals and ongoing operations. We believe this settlement strikes the right balance and is ultimately in the best interests of the Company and its shareholders.
Importantly, the amendments do not change the fact that all full-time employees are covered by the plans or the severance payments, continued health insurance benefits, outplacement assistance or acceleration of equity awards previously provided under the plans. The changes are to:
– Shorten the period following a change in control during which the termination of employment would trigger an employee’s eligibility for severance benefits under the severance plans from two years to one year;
– Clarify the circumstances under which an employee may terminate his or her employment for “good reason” and provide that any disputes arising out of an employee’s claim for benefits upon a termination for good reason will be resolved by binding arbitration;
– Provide that if a potential change in control transaction is pending, Yahoo!’s Board of Directors, prior to such change in control, may terminate or amend the severance plans in connection with a negotiated change in control transaction; and
– Provide that the current membership of the Board of Directors ceasing to hold a majority of the seats on the Board by itself will not constitute a change in control.
Some of these changes will not be applicable to employees outside of the U.S. where country specific sub-plans were adopted.
We are pleased to have this settlement behind us as we maintain our undivided focus on the future. Yahoo! remains a vital brand for millions of people around the world because of the hard work, dedication and innovation of our employees.
If you have additional questions regarding the amendments to the change in control severance plans, please refer to the attached Q&A document. Complete copies of the amended plans will be posted on Backyard in a few days.