Order Stalling Signal’s Pay Plan Is Continued
A judge on Thursday extended indefinitely the temporary restraining order that has stalled the payment of about $106 million in compensation to 150 executives of the Signal Cos.
However, after listening to arguments by a handful of the 14 attorneys representing dissident Signal shareholders and the executives, Superior Court Judge Jack Levitt said he would need more time to rule on the requested preliminary injunction order that would delay payments until after a court determines the validity of the payments.
The temporary restraining order--issued Sept. 18, the same day that La Jolla-based Signal was merged into Allied Corp. of Morristown, N.J.,has kept Signal from distributing executive awards that were scheduled to start automatically after a change in Signal ownership.
Levitt also delayed a ruling on whether or not the suit should be considered as a class action brought on behalf of Signal Cos. shareholders at the time of the merger.
Attorneys for Signal and the shareholders indicated that Levitt could take up to several weeks before making a decision on the temporary injunction and the class-action request.
Levitt stirred interest on both sides of the courtroom when he asked attorneys if “any thought has been given to the issuance of (payment to) some but not all of the (150) parties” who were scheduled to receive the executive compensation awards.
Although Signal attorney Michael W. Schwartz, with the New York firm of Wachtell, Lipton, Rosen & Katz, agreed that there was a “theoretical possibility” of making payments to the majority of Signal’s executives and withholding payments from the top two or three, he stopped short of endorsing the approach.
Although dissident shareholders’ attorney William Lerach argued against distribution of any funds until after shareholders can prove that the payment plan was ill-designed, he suggested that the approach might prove acceptable if it involved “at a minimum the top tier of nine or 11" executives who were scheduled to receive the “lion’s share of the benefits.”
The shareholder lawsuit filed in August alleged that Signal’s executives would receive a “gigantic corporate windfall of almost $100 million” if accelerated stock option plans and so-called “golden parachutes” were to start automatically because of the friendly merger with Allied.
The payments being attacked were adopted to reassure key employees who had grown “very nervous” about takeover attempts, according to Signal officials.