Yahoo changes severance plan in settling lawsuit
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SAN FRANCISCO (Reuters) - Yahoo Inc on Wednesday revised an expensive employee and executive severance plan it had adopted following a takeover bid by Microsoft Corp, settling a lawsuit brought by shareholders.
The new terms cut the potential costs to an acquirer and make clear that the sale of Yahoo's search business -- which Microsoft still covets -- would not invoke severance benefits.
The move comes as Yahoo searches for a new chief executive to replace Jerry Yang, tries to pacify disgruntled shareholders and begins the process of laying off 1,500 employees.
The new provisions of the plan state that any Yahoo employee laid off within a year after an acquisition of Yahoo would be eligible for severance, a reduction from the two years in the original provisions.
The new plan also states that the election of a new board of directors is not considered a change in ownership, nor is the sale of the company's search business. It also clarifies the circumstances for firing for "good reason," and requires binding arbitration for disputes.
"We believe the settlement is in the best interests of our company and the shareholders and the settlement allows the company to avoid costly and distracting litigation," a Yahoo spokeswoman said.
The agreement with pension funds and others who sued changes severance plans Yahoo adopted in February, following Microsoft Corp's unsolicited takeover bid.
The settlement in Delaware's Court of Chancery stemmed from a class action by the police and fire retirement system of Detroit and others.
Microsoft pulled its bid for Yahoo after offering $33 a share. The software company also tried to buy Yahoo's search business but was rebuffed.
Microsoft says it no longer wants to buy Yahoo, but has left open the possibility of a search deal.
Earlier on Wednesday, Ivory Investment Management LP, which owns 1.5 percent of Yahoo's stock, urged the company to sell its search business to Microsoft, saying such a deal could more than double Yahoo's value.
Also on Wednesday, the company began laying off workers as part of job cuts the company previously announced.
Shares of Sunnyvale, California-based Yahoo closed up $1.21 to $13.40 on Wednesday.
(Reporting by David Lawsky and Gabriel Madway; editing by Carol Bishopric)
