SAN FRANCISCO -- Shareholders who have filed a lawsuit against
for allegedly sabotaging a merger deal with
are calling for a Delaware judge to set a trial date ahead of the company's Aug. 1 annual meeting.
Lawyers for the shareholders argue that the severance plans being offered by Yahoo! to employees if they decide to leave the company -- which were introduced in February, shortly after Microsoft made an unsolicited bid --would be unduly burdensome in the event of a takeover. They further point out that Yahoo! has rejected a demand by billionaire investor Carl Icahn, who is attempting to unseat the tech giant's board of directors, to rescind the severance plans.
"A prompt trial on the validity of the Severance Plans is now essential and appropriate, not least because Yahoo's Board disabled itself from rescinding the Severance Plans during the pendency of a proxy fight, even if doing so is essential to realizing a favorable deal, and because Icahn's slate is barred from rescinding the Severance Plans if it prevails in its proxy contest," the lawyers wrote in an opening brief filed on Tuesday.
Yahoo! has defended the plans, referring to them instead as an employee retention program. Chairman Roy Bostock noted in a recent letter to Icahn that "in order for an employee to be eligible for benefits under our plan, there would need to be a change of control AND the employee would need to be terminated 'Without Cause' or resign for 'Good Reason.'"
The shareholders' lawyers, however, claim that under the provisions, Yahoo! would be able to fire and reorganize its workforce without any fear of triggering employee benefits.
"Yet if Icahn's slate prevails, Yahoo shareholders will be funding huge cash severance and equity acceleration over the following two years for every employee who is either terminated or who resigns with 'good reason' as that phrase is loosely defined in the Severance Plans," the lawyers maintain. "This discriminatory application of the Severance Plans coerces the stockholder vote."
Icahn has been relying heavily on the arguments laid out by the shareholder lawsuit, quoting generously from it when making his own arguments against Yahoo!, which he criticizes for not being able to reach a merger agreement with Microsoft.
He has cited evidence by the lawsuit that severance expenses at Yahoo! would total $2.4 billion if Microsoft puts in a bid of $35 a share for the company.
Shares of Yahoo! were down 13 cents to $26.45 in recent trading.