In relation to the shareholder proposal submitted by Lucian Bebchuk for an amendment of the CA by-laws to restrict the board's authority to implement a poison pill ("rights plan"), the company's attorneys have submitted a brief dated May 26, 2006 to the court defending management's position that the proposed amendment is inconsistent with the Delaware General Corporation Law ("DGCL").  The brief's arguments focus on the legal issue of whether shareholders can use a by-law amendment to modify a board's responsibility for approving a rights plan.  The company's attorneys otherwise concede the rights of shareholders to propose and vote on binding by-law amendments.

(On pages 1-2 of the brief, CA’s attorneys state that “...unless otherwise provided in the certificate of incorporation, boards have the exclusive right and power to adopt rights plans and to determine their terms and durations.  Although stockholders certainly have a right to amend by-laws under Section 109 of the DGCL, stockholders cannot exercise this right in an area that has been explicitly committed to the discretion of the board of directors, unless otherwise provided in the certificate of incorporation.” [emphasis added])

It was previously reported that CA had sought SEC approval to exclude the poison pill proposal from the company’s proxy statement, and that Grant & Eisenhofer had announced that they were acting on Professor Bebchuk’s behalf to seek a decision from the Delaware court to establish a broad precedent for shareholder proposals.  The brief submitted on behalf of CA by Sullivan & Cromwell and Richards Layton & Finger, however, suggests that any precedent may apply only to the relatively narrow subject of shareholder by-law amendments relating to poison pills.

The issues being addressed in this lawsuit do not appear to have any direct relevance to the other shareholder proposal reported to the Forum, submitted by Amalgamated Bank/Longview for a vote on the removal of two directors.  CA is seeking SEC approval to block shareholder voting on that proposal, too, but based on different arguments.

Copies of the CA brief and its exhibits (109 pages, 4.05 MB in PDF format) relating to Professor Bebchuk’s proposal can be provided upon request.

             - GL

Gary Lutin
Lutin & Company
575 Madison Avenue, 10th Floor
New York, New York 10022
Tel: 212/605-0335
Fax: 212/605-0325
Email: gl@shareholderforum.com