Shareholder Sues Henley Over Stock Purchase Program

A dissident Henley Group shareholder on Thursday filed a lawsuit against the company in an attempt to halt a proposed executive stock purchase program, describing it as a $97-million “gift” to Henley’s top executives.

The suit, filed in San Diego Superior Court, also claimed that the stock program--to be voted on at a special shareholders meeting Nov. 21 in Dover, Del.--circumvents a previous court settlement that prohibited Allied Corp. and Signal Cos. from awarding “golden parachute” contracts to top executives of the companies that last year were merged. Henley is a spinoff of the merged Allied-Signal.

The suit, filed by Milberg Weiss Bershad Specthrie & Lerach on behalf of David E. Grabow, a Tenafly, N.J., resident and a Henley shareholder, suggested that the company scheduled its Nov. 21 meeting at an “out-of-the-way” site in order to “discourage shareholder attendance.”

Henley, which on May 20 completed a $1.2-billion public offering, includes 35 diverse businesses that were spun off by Allied and Signal. In a previous court settlement, Allied-Signal agreed to trim back cash payments that Allied and Signal managers would have received after the merger.

The equity program described in Henley’s Oct. 17 proxy statement would give loans to 20 top executives who would then purchase 5.7 million shares of Henley stock at $21.25 per share. The program would let executives pay 10% of the cost and offer them “nonrecourse” loans to be secured by the purchased shares.

The suit is “completely without merit,” according to Henley Chairman Michael Dingman, who described the suit as “an improper attempt to interfere with shareholder democracy.”