Dissident shareholders of Baltimore Bancorp led by Baltimore Blast owner Edwin F. Hale Sr. have apparently whipped management's nominees for six seats on the company's 18-member board and put the fate of the company in the hands of U.S. District Judge J. Frederick Motz.
Mr. Hale's slate won a minimum of 5.51 million votes to fill the six seats that were up for re-election this year, said Daniel H. Burch, executive vice president of Dewe Rogerson Inc. and proxy solicitor for the Hale group. Management's most popular nominee got, at the most, 3.79 million votes, Mr. Burch said.
"To me, it's a clear mandate by the shareholders," Mr. Hale said. "I'd like to think they would take this as a signal to stop all this litigation."
"This is a mandate to ask Robinson to step down," said R. Andrew Larkin, a member of the dissident group, speaking of Baltimore Bancorp Chairman and CEO Harry L. Robinson.
Mr. Hale conceded that his majority was bigger than expected. Mr. Burch said that it was the biggest he has seen a dissident slate win in 18 years as a proxy solicitor. Proxy solicitors are consultants who help companies or dissident shareholders seek support from stockholders.
Management's statement announcing the vote took a somber tone. "A broad spectrum of stockholders has expressed a strong desire for management to improve [profits] and the price of the stock," Mr. Robinson said. "We have kept the bank healthy during a very difficult time, but clearly more must be done."
Electing the six directors was part of the dissidents' two-pronged approach to gaining control of the company, the parent of the Bank of Baltimore, and ousting Mr. Robinson.
The other was to force a shareholder vote on expanding the board of directors to 28 members and to fill the 10 new seats with directors loyal to Mr. Hale. That would give the dissidents a majority of the board.
Mr. Burch said about 5.19 million shares voted to amend the bylaws, and about 3.7 million voted no. That gives the Hale slate a 58.6 percent majority of the votes cast, and that's where Judge Motz comes in.
Baltimore Bancorp has a company bylaw that says it takes an 80 percent vote to amend the bylaws and expand the board of directors. The insurgents say that a similar bylaw was tossed out in a court case in the 1950s involving a Roland Park shopping center and that Maryland law bars bylaws that demand more than a simple majority to make internal changes such as the one the dissidents seek.
If the board is expanded, the Hale slate wins control of the company because management did not field candidates for the seats that may be created.
"Our basic posture is that we [management] won because of the 80 percent issue," said Jerome P. Baroch, executive vice president of Baltimore Bancorp. Mr. Baroch bristled at Mr. Hale's claim of a mandate, saying, "This is a preliminary result. It's going to take two or three days to review the results before anyone can start talking about mandates."
The sides each will try to convince the judge they are right in a
hearing next week. In the meantime, the Hale slate wins at least a minority role on the company's board, a role Mr. Hale has acknowledged "will make for some interesting board meetings."
Management will be challenging the vote count on the issue of expanding the board, Mr. Baroch said. The company contends that Corporation Trust Co., the Delaware firm that counted the votes, incorrectly counted about a million shares as abstentions that should have been counted as votes against expanding the board.
Mr. Baroch said the confusion was caused when companies that cast the votes on behalf of some shareholders used a voting form they designed themselves, rather than a form sent out by management.
"We're emphasizing the preliminary nature of this at this point," Mr. Baroch said. He said that management hasn't conceded that Mr. Hale won a majority vote to expand the board.
The company has 12.8 million shares outstanding, and up to 81 percent of the shares were voted, Mr. Burch said.
The number could be lower because some of the shares were voted after the company's May 22 annual meeting, after management decided to hold the polls open until May 28. The insurgents claim votes cast during the extension shouldn't count.
Elected to the board were Mr. Hale, Charles H. Whittum Jr., J. Richard Leon, Richard E. Fasold, Dr. David S. Hungerford and Charles J. Kelly Jr.