Yahoo settles shareholder suit; Partially removes severance roadblock

Yahoo said Wednesday that it has settled a shareholder suit and altered a severance plan that was viewed as an obstacle to a takeover.

In a filing with the Securities and Exchange Commission (Techmeme), Yahoo said it amended a generous severance plan that would have been triggered under a change in control. The previous plan, which was adopted in the thick of the Microsoft takeover saga, allowed any employee to garner severance pay if he was terminated (or left for good reason) within two years of a change in control. The lawsuit against Yahoo was brought by two Detroit pension funds.

Yahoo detailed the following changes:

• The severance period was lowered to one year from two in the event of a change in control;
• The definition of termination for good reason was altered;
• The board of directors can alter the current plan or terminate it during a "potential change of control period";
• Any dispute between Yahoo and an employee over severance goes to arbitration;
• Overturning Yahoo's board doesn't result in a change in control.

Add it up and it appears Yahoo is removing its severance roadblock to a potential deal. Also see:

• Yang: Layoffs ‘very hard,’ ‘very necessary’
• Yahoo shareholder pushes for MS search