Corporate & Securities Law

Delaware Chancery Court: "Continuing Director" CIC Provision

By broc

Delaware Chancery Court: "Continuing Director" CIC Provision

A few weeks ago, Delaware Vice Chancellor Lamb issued his opinion in San Antonio Fire & Police Pension Fund v. Amylin Pharmaceuticals that had challenged "poison puts" in debt agreements. The Court interpreted the fairly common "continuing director" provision in the indenture in a way that could have been expected, stating the board may approve as continuing directors persons nominated by dissident stockholders.

However, the Court did not rule - as not yet ripe - on the duty of good faith and fair dealing claim alleging the directors agreed to approve the dissidents here for purely self-interested reasons, but the Court suggested that the board must be fully informed about the inclusion of such provisions in debt instruments and might face a fairly high hurdle in justifying their agreeing to them. We have posted memos analyzing the opinion in our "Change-in-Control" Practice Area.

At Amylin's annual meeting last week, dissident shareholders Carl Icahn and Eastbourne Capital each elected one director from their slate - thus avoiding triggering of the CIC provision at issue, as noted in this DealBook blog. We previously blogged about Icahn and Eastbourne's unique no-action letters from the SEC to "round out" a short slate with other dissident's nominees.

Full post as published by DealLawyers.com Blog on June 01, 2009 (boomark / email).