Cases

Amylin Pharmaceuticals, Inc. Shareholder Litigation

Court: Delaware Court of Chancery
Case Number: C.A. No. 4446-VCL
Judge: Vice Chancellor Stephen P. Lamb
Case Contacts: Mark Lebovitch

This is a shareholder class action against the biopharmaceutical company, Amylin Pharmaceuticals, Inc. (“Amylin” or “the Company”), and its board of directors (the “Board”) (collectively, the "Amylin Defendants") for violations of their fiduciary duty of care arising from their adoption of defensive measures in two debt instruments, which are currently depriving shareholders of the opportunity to freely exercise their fundamental franchise rights to elect a new board majority (the “Proxy Puts”). The action also names Bank of America, N.A. and the Bank of New York Trust Company, N.A. as defendants solely for the purpose of obtaining declaratory relief concerning the Proxy Puts.

In 2007, Amylin embedded the Proxy Puts in its indenture agreement for $575 million of convertible notes and its $140 million credit agreement.  The Proxy Puts expose the Company to immediate repayment and repurchase obligations if Amylin shareholders elect a board of directors that does not include a majority of the incumbent directors, or directors approved by the incumbent directors.  These obligations could require Amylin to remit more than $900 million – an amount exceeding one-half of the Company’s current $1.7 billion market value.

The possibility of triggering the Proxy Puts only recently became an issue.  In January 2009, two shareholders, Icahn Capital LP and affiliated funds (“Icahn”) and Eastbourne Capital Management (“Eastbourne”), separately announced their intention to nominate five-person slates for election at Amylin’s next annual meeting, which was tentatively scheduled for May 27, 2009. 

On March 24, 2009, BLB&G filed a Complaint against Amylin and the Board on behalf of Plaintiff The San Antonio Fire and Police Pension Fund, and other Amylin shareholders (the “Complaint”).  The Complaint sought to invalidate the Proxy Puts, and require the Board to approve the nomination of the Icahn and Eastbourne slates for shareholder consideration at the Company’s 2009 annual meeting. 

On March 26, 2009, Plaintiff sought expedited discovery and an expedited trial schedule.  The Court granted, in part, Plaintiff's Motion for Expedited Proceeding, and set a trial date for May 4-5, 2009.  On April 10, 2009, Plaintiff filed a Motion for Partial Summary Judgment concerning the Board's ability to "approve" the Icahn and Eastbourne director nominees under the indenture agreement, and seeking a declaration that the Proxy Puts are invalid as a matter of Delaware law.  On April 13, 2009, the Amylin Defendants also moved for partial summary judgment concerning the Board's ability to approve the insurgent nominees under the indenture agreement.  The Amylin Defendants and Plaintiff also reached a partial settlement on April 13, 2009.

On May 4, 2009, a trial was held and oral arguments were heard on all outstanding motions for summary judgment regarding the Indenture. On May 12, 2009, the Court issued its decision.  BLB&G has since filed its opening appellate brief on June 5, 2009, further fueling the national debate on poison puts and shareholder rights as exemplified in the recent article, "Poison Puts, Shareholder Voting Rights and the Need for an Even Stronger Shareholder Bill of Rights: San Antonio Fire & Police v. Amylin Pharmaceuticals (Amending the Shareholder Bill of Rights)." Click here to read the article. On September 30, 2009, the Delaware Supreme Court sitting en banc heard Plaintiff’s appeal, and then reaffirmed the Vice Chancellor’s decision. The day before the en banc hearing, the bank lenders executed a complete and cost-free waiver of the proxy put in Amylin’s credit agreement. In November 2009, Amylin’s Board approved the two shareholder-nominated directors, who were elected at its 2009 annual meeting, under the terms of the proxy put in Amylin’s indenture agreement. Consequently, Amylin stockholders are free to re-elect those directors and elect five new directors (a new board majority) without fear of triggering the Proxy Put in Amylin’s indenture agreement. On February 16, 2010, Plaintiff submitted an application for an award of attorneys’ fees and expenses.

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