By Bill Berkrot and Jessica Toonkel
July 16 A proxy battle between Vivus Inc
and First Manhattan Co, its top investor, intensified
on Tuesday when FMC filed a lawsuit saying the directors of the
obesity drugmaker illegally delayed its shareholder meeting to
keep themselves in office.
In the lawsuit filed in the Delaware Court of Chancery,
First Manhattan said it had the votes to win the proxy fight and
asked the court to stop Vivus and its representatives from
soliciting proxies or votes for the annual meeting, which will
now be on July 18.
It also wants the inspector of elections to immediately
certify results of the election of directors based on votes at
the originally scheduled July 15 annual meeting. That would mean
votes arriving after July 15 would not be counted.
Vivus, however, alleged late on Tuesday that a paid advisor
of FMC made "false and misleading" statements to retail
shareholders through a telephone or "robo-call" campaign.
Vivus said a large number of votes from the retail investors
were cast by proxy on July 12, after over a week of such calls.
The company said it had delayed the annual meeting to ensure
retail investors have sufficient time to consider "accurate
information and make informed decisions."
The company said the calls conveyed that proxy firm
Institutional Shareholder Services (ISS) urged Vivus
shareholders to vote for all nine of FMC's nominees to the
ISS said on July 5 that it had backed three of the proposed
"We have provided a copy of the voicemail in question to the
SEC and have also requested that the SEC require FMC to issue
corrective disclosure so that stockholders can make their voting
decisions based on accurate information," Vivus said in a
FMC said on Tuesday it continues to seek a settlement with
the Vivus board. It added that if all nine of its director
nominees were to be elected, it would invite three current Vivus
directors to join the new board.
A settlement appeared possible over the weekend, when Vivus
said it would invite three of First Manhattan's proposed
directors to join its board.
Settlement discussions by telephone went deep into Saturday
night and negotiations resumed in person on Sunday, according to
a source familiar with the proceedings. But Vivus refused to
cede control of the board to First Manhattan, the source said.
Settlement talks broke down after Vivus moved to delay the
FMC said that on Sunday, it was awaiting a response from
Vivus to a settlement proposal. "Instead, the Vivus board of
directors terminated settlement discussions by responding with a
press release stating its decision to adjourn the (annual
shareholders) meeting, effectively denying shareholders their
right to vote on the future of the company."
Vivus decided on Monday to postpone its shareholder meeting,
saying First Manhattan's advisers had made false statements to
"The reason for the adjournment was to provide our
stockholders the additional time necessary to consider accurate
information and make informed voting decisions that are not
tainted by the false and misleading statements made by FMC,"
Vivus President Peter Tam said in an emailed statement.
In the complaint filed with the Delaware court, FMC said,
"as of Sunday, July 14, 2013, FMC was poised to deliver
sufficient votes at the annual meeting to replace the incumbent
directors with its nominees."
"We have taken legal action against Vivus and the sitting
board after their egregious attempt to disenfranchise Vivus'
stockholders," Sam Colin, senior managing director at First
Manhattan and a proposed Vivus director, said in a statement.
"Vivus didn't like what it saw on the scoreboard so it decided
to move the goal post."
First Manhattan, which holds about 9.9 percent of Vivus
shares and has accused the company of bungling the launch and
marketing of its Qsymia diet pill, has put up a full slate of
nine proposed directors to try to gain control of the board.
FMC even took the unusual step earlier this month of
announcing the name of a former AstraZeneca senior executive,
Anthony Zook, that it planned to install as the next Vivus chief
executive should it prevail in the proxy battle.
Vivus shares closed at $14.40 on Nasdaq on Tuesday.