M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

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Tuesday, June 23, 2009

Yahoo Shareholder Litigation Settled

In anticipation of a potential hostile approach by Microsoft last year, Yahoo adopted a "tin parachute" severance plan.  The "tin parachute" is a company-wide severance plan that makes payments to employees who lose their job following a change in control.  If part of the motivation for an acquisition is cost-reduction and if layoffs are part of the post-closing integration plan, then such a plan could be a deal-killer.  The Deal Professor discussed Yahoo's tin parachute in a post at the time.  In any event, the plan generated a lawsuit that, according to NY Times, was settled today.   Here's a copy of the proposed settlement agreement and amended severance plan.  The agreement modifies the plan to make it less onerous for a potential acquirer, but doesn't get rid of it altogether.  This watered-down plan must stay in place for at least 18 months from the date the settlement plan is approved, thus making it hard for the Yahoo board to lean on it, should Microsoft come knocking again. A new Section 5.1 also permits the board to amend or terminate the plan at any time.

-bjmq



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