UPDATE 1-Amylin board battle heats up with proxy filing

By Toni Clarke

BOSTON, April 3 (Reuters) - Eastbourne Capital Management filed preliminary proxy materials on Friday in its battle to elect five nominees to the board of Amylin Pharmaceuticals Inc AMLN.O, which makes the diabetes drug Byetta.

San Diego-based Amylin, which makes the drug in partnership with Eli Lilly & Co (LLY.N: Cotización), is at the center of an unusual three-way battle in which two dissident investors have proposed alternative sets of nominees to its 12-person board.

Billionaire investor Carl Icahn has also put up five nominees, meaning investors may be faced with three proxy cards at the company's annual meeting on May 27.

The proxy context is complicated by a provision in the company's debt agreements that would require it to accelerate repayment of more than $900 million if there is change of control of the board. The provision is also known as a "poison put."

"Poison puts" are typically put in place to protect bondholders in the event of a takeover by a company with a lower credit rating. They are similar to "poison pills," which are designed to protect shareholders by giving them the right to buy more stock in the event of an acquisition.

Icahn and Eastbourne would have risked triggering the "poison put" if they had proposed majority slates to the company's board. They risk triggering Amylin's "poison pill" if they act in concert, as together they own more than 20 percent of Amylin's stock, which is above the level at which the pill kicks in.

Recently, the San Antonio Fire & Police Pension Fund, an Amylin shareholder, filed a lawsuit against Amylin and its board seeking to invalidate the "poison put" provisions.

The debt acceleration process would be triggered if six or more directors are elected to Amylin's board who have not been approved by the existing directors.