Document: San Antonio Fire & Police Pension Fund v. Amylin Pharmaceuticals, Inc., et al., C.A. No. 4446-VCL, Lamb, V.C. (Del. Ch. May 12, 2009)
An indenture trustee claimed that incumbent directors were precluded from approving as “continuing directors” persons whose election they opposed, pursuant to the terms of a trust indenture governing publicly traded notes. The indenture provided that if at any time a majority of the board was not composed of “continuing directors,” holders of the notes could put their notes to the corporation at face value. Both the corporation and stockholders claimed the board had the power to give its approval, thereby avoiding the put right at a time when the notes were trading at a deep discount. The Court of Chancery held that the provisions could not be read as narrowly as urged by the indenture trustee and the incumbent directors had the power to approve any person as a continuing director so long as such approval was in accordance with the implied covenant of good faith and fair dealing. To follow the indenture trustee’s reading, the indenture would prohibit any change in the majority of the board as a result of contested elections for the life of the notes. As the record was underdeveloped with regard to the propriety of the board’s decision to “approve” the insurgent slate, the challenge to such decision was dismissed without prejudice.