Delaware Court Interprets Continuing Director “Poison Put” Provision

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Delaware Court Interprets Continuing Director “Poison Put” Provision

Recently, the Delaware Court of Chancery issued a decision,

San Antonio Fire & Police Pension Fund v. Amylin

Pharmaceuticals, Inc. ("Amylin"),

interpreting a "Continuing Director" clause contained in

a change of control provision commonly found in many indentures and

loan agreements. A continuing director provision typically either

requires the company to repurchase outstanding bonds or accelerates

a loan if the majority of the company's board of directors

ceases to be composed of continuing directors.

The Amylin decision interprets a typical formulation of

a continuing director provision that is often included in debt

agreements, but is not generally heavily negotiated by the parties.

The case addresses the implications for a board of directors when

considering these provisions in indentures and the impact of these

provisions on the stockholder franchise. Set forth below are ...

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