Company Name: First Mariner Bancorp
Public Availability Date: January 10, 2005
Document Sections:
INQUIRY LETTER
INQUIRY LETTER
STAFF REPLY LETTER
[INQUIRY LETTER]
December 3, 2004
VIA FEDERAL EXPRESS
U.S. Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Shareholder Proposal Submitted by John F. Maas for Inclusion in the 2005
Proxy Statement of First Mariner Bancorp
Ladies and Gentlemen:
This letter is submitted on behalf of our client, First Mariner Bancorp (the
"Company"), which has received a shareholder proposal (the "Proposal") and
supporting statement (the "Supporting Statement") submitted by John F. Maas
("Proponent") for inclusion in the proxy statement and form of proxy to be
distributed to the Company's shareholders in connection with its annual meeting
of shareholders to be held in May 2005 (the "2005 Proxy Materials"). The Company
hereby notifies the Securities and Exchange Commission (the "Commission") and
the Proponent of the Company's intention to exclude the Proposal and Supporting
Statement from its 2005 Proxy Materials for the reasons set forth below. The
Company respectfully requests that the staff of the Division of Corporation
Finance of the Commission (the "Staff") confirm that it will not recommend any
enforcement action to the Commission if the Company excludes the Proposal and
Supporting Statement from its 2005 Proxy Materials, or, in the alternative,
excludes the objectionable portions of the Supporting Statement. To the extent
the reasons for excluding the Proposal and Supporting Statement are based on
matters of law, this letter constitutes the supporting opinion required by Rule
14a-8(j)(2).
Pursuant to Rule 14a-8(j) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), we have enclosed six copies of (i) this letter, which
includes an explanation of why the Company believes that it may exclude the
Proposal and Supporting Statement, and (ii) the Proposal and Supporting
Statement.
I. The Proposal
A copy of the Proposal and Supporting Statement is attached hereto as Exhibit 1.
For your convenience, the text of the Proposal and Supporting Statement is set
forth below:
RESOLVED:
That the shareholders of First Mariner Bancorp (FMB) urge the Board of Directors
to adopt a policy that the Chairman of the Board and Chief Executive Officer
(CEO) be two different individuals and that the Chairman be an independent
director, elected by the directors.
SUPPORTING STATEMENT
At last year's Annual Meeting this proposal received 21.8% of the votes cast.
In my opinion, the primary purpose of the Board of Directors is to protect
shareholders' interests by providing independent oversight of management,
including the CEO. I believe that a separation of the roles of Chairman and CEO
will promote greater management accountability to shareholders and having an
independent Chairman will strengthen the Board's integrity and improve its
oversight of management.
Corporate governance experts have questioned how one person serving as both
Chairman and CEO can effectively monitor and evaluate his or her own
performance. The National Association of Corporate Directors Blue Ribbon
Commission on Director Professionalism has recommended that an independent
director should be charged with "organizing the board's evaluation of the CEO
and providing continuous ongoing feedback; chairing executive sessions of the
board; setting the agenda with the CEO, and leading the board in anticipating
and responding to crises." (Report of the NACD Blue Ribbon Commission on
Director Professionalism. Washington, D.C.: National Association of Corporate
Directors, 1996, reissued 2001)[.]
Institutional investors have found that a strong objective board leader can best
provide the necessary oversight of Management. For example, CalPERS' Corporate
Govemance Core Principles and Guidelines states that "the independence of a
majority of the Board is not enough" and that "the leadership of the board must
embrace independence, and it must ultimately change the way in which directors
interact with management." (CalPERS' Corporate Governance Core Principles &
Guidelines: The United States April 13, 1998, III.A)[.]
The Baltimore Business Journal reported
"When companies do business with firms owned by an officer or board member, it
is known as a "related party transaction." The practice isn't uncommon, but it
is receiving increased scrutiny from shareholder advocates who feel it may serve
management's interests, not those of shareholders.
Institutional Shareholder Services said in a report last year that Hale's
involvement in "related party transactions" negatively affected First Mariner's
corporate governance ranking. The service studies the governance practices of
thousands of public companies - from anti-takeover provisions to the number of
independent directors - and gives companies an overall ranking.
Last year, First Mariner, founded in 1995, ranked in the lowest third of about
22,000 public companies ISS surveyed on their corporate governance practices"
(Baltimore Business Journal 4/9/2004)[.]
Andrew Grove, chairman of Intel Corporation, stated "The separation of the two
jobs goes to the heart of the conception of a corporation. Is a company a
sandbox for the CEO, or is the CEO an employee? If he's an employee, he needs a
boss, and that boss is the board. The chairman runs the board. How can the CEO
be his own boss? (Business Week, November 11, 2002).
II. The Proposal May Be Excluded Because The Company Would Lack The Power And
Authority To Implement The Proposal
Rule 14a-8(i)(6) provides that a public company may omit a shareholder proposal
"if the company would lack the power and authority to implement the proposal."
The Proposal urges the Board of Directors of the Company (the "Board") to adopt
a "policy" that the Chairman of the Board and the Chief Executive Officer be two
separate people and that the Chairman be an independent director, elected by the
directors. The Company is without the power or authority to implement the policy
described in the Proposal, because such a policy is prohibited by applicable law
and the Company's Bylaws.
The Company is a Maryland corporation and is subject to the Maryland General
Corporation Law ("MGCL"). Section 2-403 of the MGCL provides that "[e]ach
director of a corporation shall have the qualifications required by the charter
or bylaws of the corporation." Section 1 of Article III of the Company's Bylaws
(a copy of which is enclosed as Exhibit 2) provides that the "Chairman of the
Board shall be [a] director[.]" Section 2 of Article III of the Company's Bylaws
provides that the "Chairman of the Board shall be the Chief Executive Officer of
the Corporation[.]" (Emphasis added). Thus, these provisions make it clear that
a person cannot be qualified to serve as Chairman of the Company unless that
person also serves as the Company's Chief Executive Officer, and vice versa.
Additionally, Section 1 of Article III of the Company's Bylaws specifically
provide that the Chairman of the Board is an "officer" of the Company. The
Marketplace Rules of the Nasdaq Stock Market, Inc. (the "Nasdaq Rules") to which
the Company is subject exclude an officer from the definition of "independent
director". Nasdaq Rule 4200(a)(15).
Accordingly, unless and until the Company's Bylaws are amended to separate the
positions of Chairman and Chief Executive Officer, the policy described in the
Proposal, although arguably adoptable by the Board, would be meaningless and
could not be implemented by the Company. Any other conclusion would require the
Company to violate the Bylaws and, thus, the MGCL.
In Walt Disney Co. (November 24, 2004), the Staff refused to concur with the
company's position that it could exclude a shareholder proposal urging the board
of directors to "amend the Corporate Governance Guidelines and to take whatever
other actions are necessary to set as a company policy that the chairman of the
board of directors will always be an independent member of the board ..." on the
basis that the company was without authority or power to implement the proposal.
We believe that the Disney proposal is distinguishable from and, thus, not
instructive with respect to the Proposal. First, the Disney proposal did not ask
the board of directors to separate the positions of chairman and chief executive
officerit merely asked the board of directors to ensure that the chairman be
and remain independent. Second, contrary to the Company's Bylaws, Disney's
bylaws neither (i) characterized the chairman of the board as an "officer" nor
(ii) named the chairman as the chief executive officer. Therefore, the proposed
amendment to Disney's corporate governance guidelines did not ask the board to
adopt a policy that would violate the company's bylaws or applicable law if
implemented.
Accordingly, based upon Rule 14a-8(i)(6), the Company intends to exclude the
Proposal and Supporting Statement from the 2005 Proxy Materials. The Company
respectfully requests confirmation from the Staff that it will not recommend
enforcement action if the Company omits the Proposal and Supporting Statement
from the 2005 Proxy Materials pursuant to Rule 14a-8(i)(6).
III. The Proposal May Be Excluded Because It Would Result In A Violation Of
Maryland Law
The Proposal and Supporting Statement may be properly omitted pursuant to Rule
14a-8(i)(2), which permits the exclusion of shareholder proposals that, if
implemented, would require the issuer to violate state, federal or foreign law.
The Proposal, if implemented, would require the Company to violate Maryland law.
First, a discussed above in Item II, the implementation of the policy described
in the Proposal would require the Company to violate its Bylaws and, thus,
Section 2-403 of the MGCL. Second, a Board policy that "the Chairman be an
independent director, elected by the directors[]" (emphasis added), if
implemented, would violate Section 2-404 of the MGCL, which dictates that the
Company's directors shall be elected by its shareholders at each annual meeting
thereof.1 Although vacancies on the Board may be filled by the affirmative vote
of a majority of the remaining directors, see MGCL 2-407(b), a person who is
elected by the Board to fill a vacancy must stand for election at the next
annual meeting of shareholders. See MGCL 2-407(c). Thus, ultimately, the
Company's shareholders determine who serves as the Company's directors, not the
directors. Maryland law simply does not permit incumbent directors to elect a
director, except to fill a vacancy.
Accordingly, based upon Rule 14a-8(i)(2), the Company intends to exclude the
Proposal and Supporting Statement from the 2005 Proxy Materials. The Company
respectfully requests confirmation from the Staff that it will not recommend
enforcement action if the Company omits the Proposal and Supporting Statement
from the 2005 Proxy Materials pursuant to Rule 14a-8(i)(2).
IV. The Proposal May Be Excluded Because It Deals With The Company's Ordinary
Business Operations
The Proposal and Supporting Statement may properly be omitted under Rule
14a-8(i)(7), which states that a public company may omit a shareholder proposal
if it "deals with a matter relating to the company's ordinary business
operations." The Staff's no-action letter in U.S. Air, Inc. (February 1, 1980)
is directly on point. In U.S. Air, the shareholder proposal urged the company to
"take the necessary steps" to ensure the separation of the position of chairman
from the position of president and chief executive officer. The Staff concurred
in the company's view that the proposal could be excluded under Rule 14a-8(i)(7)
because it dealt with "a matter relating to the conduct of the ordinary business
operations of the company." The Staff's conclusion in U.S. Air was based on its
view that "the relevant statutory and by-law provisions appear to render the
allocation of corporate offices and responsibilities among the Company's
employees a matter of ordinary business operation."
The Proposal is fundamentally identical to the proposal held excludable by the
Staff in U.S. Air. As was the case in U.S. Air, the corporate laws applicable to
the Company and the Company's governing documents dictate that the separation of
the positions of Chairman of the Board and Chief Executive Officer is an
ordinary business matter. The corporate laws applicable to the Company and the
Company's governing documents likewise dictate that the determination as to
whether the Chairman of the Board should be independent is an ordinary business
matter. Section 2-401 of the MGCL provides as follows:
The business and affairs of a corporation shall be managed under the direction
of a board of directors [and] [a]ll powers of the corporation may be exercised
by or under authority of the board of directors except as conferred on or
reserved to the stockholders by law or by the charter or bylaws of the
corporation.
Section 2-413 of the MGCL provides that "[u]nless the bylaws provide otherwise,
the board of directors shall elect the officers." Section 2-414 of the MGCL
provides as follows:
[A]n officer ... has the authority and shall perform the duties in the
management of the assets and affairs of the corporation as: (1) [p]rovided in
the bylaws; and (2) [d]etermined from time to time by resolution of the board of
directors not inconsistent with the bylaws.
Section 1 of Article III of the Company's Bylaws provides as follows:
The officers of the Corporation shall be a President ... and also such other
officers including a Chairman of the Board ... as the Board of Directors from
time to time may consider necessary for the proper conduct of the business of
the Corporation. The officers shall be elected annually by the Board of
Directors at its first meeting following the annual meeting of the stockholders
except where a longer term is expressly provided in an employment contract duly
authorized and approved by the Board of Directors.
(Emphasis added). Finally, Section 2 of Article III of the Company's Bylaws
provides that the "Chairman of the Board shall be the Chief Executive Officer of
the Corporation[.]" (Emphasis added).
The Company's Bylaws make it clear that the Chairman of the Board is an officer
of the Company. Maryland law and the Company's Bylaws make it clear that
officers are elected, and their duties are established, by the Board. The
Proposal seeks not only to affect the duties and qualifications of an officer
(i.e., the Chairman of the Board), but to actually re-characterize that officer
as a non-officer, which are matters of ordinary business operation (and which
would require a Bylaw amendment). No provision of the Company's Articles of
Incorporation or Bylaws give shareholders the right or power to elect, or
dictate the election of, officers, determine the nature or number of officers
that the Company should have, prescribe the duties or qualifications of any such
officer, or otherwise manage the business and affairs of the Company.
Exclusion of the Proposal for the foregoing reasons is consistent with the
Staff's position in several other no-action letters as well, all of which
involved shareholder proposals that sought to affect the qualifications of
company officers. See, e.g., United Indus. Corp. (December 7, 1977) (permitting
exclusion of proposal requesting the separation of the positions of chairman and
chief executive officer because such a proposal related to the ordinary business
operations of the company); Reliance Group, Inc. (March 1, 1977) (same); Gen.
Motors Corp. (April 1, 1988) (permitting exclusion of proposal that sought the
imposition of qualifications on the chairman, CEO, COO and president, that such
positions be held by only one person and that no other officer positions be
established "since it appears to deal with a matter relating to the conduct of
the Company's ordinary business operations (i.e., determination of the
appropriate number of Company officers and the qualifications of Company
officers)").
Accordingly, based upon Rule 14a-8(i)(7), the Company intends to exclude the
Proposal and Supporting Statement from the 2005 Proxy Materials. The Company
respectfully requests confirmation from the Staff that it will not recommend
enforcement action if the Company omits the Proposal and Supporting Statement
from the 2005 Proxy Materials pursuant to Rule 14a-8(i)(7).
V. The Proposal and Supporting Statement May Be Excluded Because They Are
Contrary To The Commission's Proxy Rules
Rule 14a-8(i)(3) states that a shareholder proposal may be omitted if the
proposal or its supporting statement is contrary to the proxy rules, including
Rule 14a-9, which prohibits materially false or misleading statements in proxy
soliciting materials. Indeed, while the Staff, in Staff Legal Bulletin 14B
(September 15, 2004) ("SLB 14B"), clarified the circumstances in which public
companies will be permitted to exclude proposals pursuant to 14a-8(i)(3), it
expressly reaffirmed that exclusion pursuant to Rule 14a-8(i)(3) remains
available to public companies where:
statements [in the proposal or supporting statement] directly or indirectly
impugn character, integrity, or personal reputation, or directly or indirectly
make charges concerning improper, illegal, or immoral conduct or association,
without factual foundation;
the company demonstrates objectively that a factual statement [in the proposal
or supporting statement] is materially false or misleading;
the resolution contained in the proposal is so inherently vague or indefinite
that neither the stockholders voting on the proposal, nor the company in
implementing the proposal (if adopted), would be able to determine with any
reasonable certainty exactly what actions or measures the proposal requiresthis
objection also may be appropriate where the proposal and the supporting
statement, when read together, have the same result; and
substantial portions of the supporting statement are irrelevant to a
consideration of the subject matter of the proposal, such that there is a strong
likelihood that a reasonable shareholder would be uncertain as to the matter on
which she is being asked to vote.
SLB 14B, 4.
The Proposal and Supporting Statement implicate all of the foregoing concerns
and are, therefore, properly excludable.
1. A significant portion of the Supporting Statement is irrelevant to a
consideration of the subject matter of the Proposal and was inserted by
Proponent simply to impugn the character, integrity, an personal reputation of
the Chairman and Chief Executive Officer and to directly or indirectly make
unfounded charges concerning his improper, illegal, or immoral conduct or
association with the Company.
The Supporting Statement contains the following excerpt from the Baltimore
Business Journal (April 9, 2004) (the "Excerpt"):
When companies do business with firms owned by an officer or board member, it is
known as a "related party transaction". The practice isn't uncommon, but it is
receiving increased scrutiny from shareholder advocates who feel it may serve
management's interests, not those of shareholders.
Institutional Shareholder Services said in a report last year that Hale's [the
Chairman and Chief Executive Officer of First Mariner Bancorp] involvement in
"related party transactions" negatively affected First Mariner's corporate
governance ranking. The service studies the governance practices of thousands of
public companiesfrom anti-takeover provisions to the number of independent
directorsand gives companies an overall ranking.
Last year, First Mariner, founded in 1995, ranked in the lowest third of about
22,000 public companies ISS surveyed on their corporate governance practices.
All transactions between the Company and its Chairman and Chief Executive
Officer are subject to rigorous review, approval and disclosure requirements
imposed not only under Maryland law, see, e.g., MGCL 2-419 (regulating
interested director transactions), but also several other laws and regulations,
such as Regulation O promulgated by the Board of Governors of the Federal
Reserve System (loans by an issuer's bank subsidiary), Exchange Act Regulation
14A (regulation of proxy statements) and Nasdaq Rule 4350(h) (requiring Audit
Committee to review and approve all relatedparty transactions). These review,
approval and disclosure requirements would apply regardless of whether the
positions of Chairman and Chief Executive Officer are held by the same person or
different persons and regardless of whether the Chairman is "independent". There
can be no guarantee that the Proposal, if implemented, would result in (i) a
higher "corporate governance ranking" or (ii) limitations or closer scrutiny by
the Company with respect to its transactions with its Chairman and/or Chief
Executive Officer. Assuming arguendo that the Proposal could be implemented, the
Company could still engage in transactions with its Chairman and with its Chief
Executive Officer, and, if it did so, some of those transactions could still be
characterized as "related party transactions" (depending on the standards for
"independence" and "related party transactions") and, thus, would still be
subject to the review, approval and disclosure standards to which these
transactions are currently subject under applicable law.
Moreover, the issue of the Baltimore Business Journal from which the Excerpt was
taken was published in April 2004. The ISS report cited in the article was
issued in 2003. The Proponent seeks to include the Supporting Statement in the
2005 Proxy Materials for the annual meeting of shareholders to be held in May
2005. Thus, by the time the Company's shareholders vote on the Proposal
(assuming it is not omitted), the material information contained in the
Supporting Statement (i.e., the Excerpt) would be at least two years old.
The Company believes, therefore, that the Excerpt clearly is irrelevant to the
subject matter of the Proposal and that it serves only to confuse the issues
surrounding the appropriateness of (i) an independent Chairman and (ii) a
Chairman who is not the same person as the Chief Executive Officer. Accordingly,
Proponent's only reasonable basis for including the Excerpt in the Supporting
Statement is to highlight a relationship between the Company and its Chairman
and Chief Executive Officer that Proponent incorrectly believes to be improper
and to, thereby, impugn his character, integrity and personal reputation. The
Proponent has submitted an identical proposal in each of the last two years,
both of which were defeated by shareholders, and there is a long history of
discord between the Proponent and the Chairman and Chief Executive Officer,
particularly with respect to the propriety of transactions with the Company.
2. The Proposal and Supporting Statement are inherently vague or indefinite.
Assuming arguendo that the Proposal could be implemented, the Board and
management, as well as the Company's stockholders, would be placed in the
position of not knowing who would be eligible to serve as the Company's
Chairman, because the Proposal does not include a definition of "independent".
The Supporting Statement identifies one relationshipChief Executive
Officerthat would disqualify an individual from serving as the "independent"
Chairman, but there are differing views on what other relationships a director
may have that would result in that director not being deemed "independent". In
fact, a review of the Excerpt evidences this point and the confusion that it
causes. Specifically, it appears that the Proponent also seeks to disqualify a
director or officer if the Company does "business with firms owned by" that
director or officer. Under the Nasdaq Rules, however, a director may, directly
and indirectly, do business with the Company and retain his or her independence,
subject to certain restrictions. See Nasdaq Rule 4200(a)(15)(B) and (D). So,
should the Company define "independence" (i) by looking to the Nasdaq Rules, or
(ii) as a person other than the Chief Executive Officer whose firms do not
engage in business with the Company, or (iii) by looking to some other standard,
such as the definition provided by the Council of Institutional Investors? The
Proposal and the Supporting Statement simply do not provide the Board with any
indication as to the independence standard acceptable under the Proposal.
3. The Excerpt is materially false and misleading.
The portion of the Excerpt that provides "[w]hen companies do business with
firms owned by an officer or board member, it is known as a `related party
transaction'" is materially false and/or misleading. For purposes of the review,
approval and disclosure standards applicable to the Company, a "related party
transaction" is not simply "any transaction" between the Company and one of its
officers or directors. Instead, the term "related party transaction" is a term
of art used to describe the types of transactions that are described in Item 404
of the Commission's Regulation S-K. See Nasdaq Rule 4350(h); accord In re Enron
Corp. Sec., 235 F. Supp. 2d 549, 619-20 (S.D. Texas 2002) ("Item 404 of SEC
Regulation S-K imposes requirements for disclosure of related-party transactions
in non-financial statement portions of SEC filings"); see also Western Dist.
Council of Lumber Prod. & Indus. Workers v. Louisiana Pac. Corp.,
892 F.2d 1412, 1417 n.2 (9\th/ Cir. 1989) (for purposes of Rule 14a-3, "related party
transactions" are those required to be disclosed pursuant to Item 404(a) of
Regulation S-K). To be covered by Item 404 of Regulation S-K, a transaction must
have certain characteristics (for the most part, the transaction, alone or
together with a series of similar transactions, must involve an amount that
exceeds $60,000).
Furthermore, the Supporting Statement does not provide any details with respect
to the "corporate governance ranking" issued by Institutional Shareholder
Services ("ISS") and how it relates to the Proposal. Specifically, the Company's
shareholders would have no idea after reading the Excerpt as to what, exactly,
goes into a corporate governance ranking issued by ISS, what factors are
considered, including the "independence" of a corporation's chairman (and what
standard of "independence" was considered), what transactions ISS considers to
be "related party transactions", or what a "low" ranking or a "high" ranking
means to a corporation.
For the foregoing reasons, the Company believes that any reasonable shareholder
who reads the Supporting Statement will likely conclude that (i) all
transactions with management are "related party transactions" and all related
party transactions are improper, immoral and/or serve only the interests of the
insiders, and (ii) a higher corporate governance ranking equates to a more
ethical, proper corporation. In fact, however, many classes of transactions with
insiders, if properly reviewed, approved, and disclosed as discussed above, are
perfectly legal and proper, and a higher corporate governance ranking likely has
no bearing on a corporation's ethics or on whether its business and affairs,
including transactions with insiders, are legal, proper or self-serving. The
Company believes, therefore, that shareholders would likely misinterpret the
significance of the Excerpt and its relationship to the Proposal and would base
their votes regarding the Proposal on that misinterpretation.
Additionally, the statements by Andrew Grove quoted in the Supporting Statement
do not accurately represent the powers of the Chairman of the Company's Board
and, therefore, cause the Supporting Statement to be false and/or misleading.
Specifically, to support the Proposal, Proponent has included statements by Mr.
Grove that "[t]he chairman runs the board. How can the CEO [who is also the
chairman] be his own boss?" Proponent's inclusion of these statements in his
Supporting Statement is tantamount to an assertion that the voice of the
Company's Chairman is the voice of the entire Board and that, therefore, a Chief
Executive Officer who also serves as the Company's Chairman is not accountable
to the Company or the Board. Such an assertion is antithetical to the concept of
and need for a board of directors and simply is contrary to reality. As
discussed above, Section 1 of Article III of the Company's Bylaws provides that
the Company's officers shall be elected by the Board each year. That section
further provides that, except where an employment contract provides otherwise,
"all officers ... shall be subject to removal at any time by the affirmative
vote of a majority of the whole Board of Directors, and all officers ... shall
hold office at the discretion of the Board of Directors[.]" 2 (Emphasis added).
Likewise, Section 2-408 of the MGCL and Section 8 of Article II of the Company's
Bylaws generally provide that the action of a majority of the directors present
at a meeting at which a quorum3 is present is the action of the Board. Although
the MGCL permits the board of a corporation to appoint a committee composed of
one member and delegate to that committee most powers of the board, this ability
is subject to the corporation's bylaws. See MGCL 2-411. Section 10 of Article
II of the Company's Bylaws authorize the Board to appoint a committee, but it
also provides that any such committee must have at least two members. There
simply is no basis for Proponent's assertion.
For the reasons set forth in Item V of this letter, the Company intends to
exclude the Proposal and Supporting Statement, or, in the alternative, exclude
the objectionable portions of the Supporting Statement, from the 2005 Proxy
Materials pursuant to Rule 14a-8(i)(3). The Company respectfully requests
confirmation from the Staff that it will not recommend enforcement action if the
Company excludes the Proposal and Supporting Statement from the 2005 Proxy
Materials pursuant to Rule 14a-8(i)(3).
VI. Conclusion
If you have any questions, or if the Staff is unable to concur with the
Company's conclusions without additional information or discussions, the Company
respectfully requests the opportunity to confer with members of the Staff prior
to the issuance of any written response to this letter. Please do not hesitate
to contact the undersigned at (410) 576-4067.
Please acknowledge receipt of this letter and its attachments by stamping the
enclosed copy of the first page of this letter and returning it in the
self-addressed stamped envelope provided for your convenience.
Sincerely,
/s/
Abba David Poliakoff
Enclosures
cc: Eugene A. Friedman, Esquire
John F. Maas (under separate cover)
-----FOOTNOTES-----
1 Pursuant to the Company's Articles of Incorporation and Bylaws, the Company's
directors are divided into three classes and directors of each class serve
three-year terms. Thus, only one class of directors is elected by shareholders
at each annual meeting thereof.
2 The Chairman and Chief Executive Officer of the Company is not a party to any
employment agreement with the Company.
3 Pursuant to Section 7 of Article II of the Company's Bylaws, a majority of the
whole number of directors constitutes a quorum except in the case of meeting
adjournments.
[INQUIRY LETTER]
December 12, 2004
U. S Securities and Exchange Commission
Division of Corporation Finance
Office of Chief Counsel
450 Fifth Street, N.W
Washington, DC 20549
Re: Letter Dated December 3, 2004 submitted by Gordon Feinblatt regarding
opposition to Shareholder Proposal Submitted for inclusion in the 2005 Proxy
Statement of First Mariner Bank
Ladies and Gentleman,
In the above referenced, First Mariner Bancorp (Company) seeks to exclude the
Proposal which I submitted for inclusion in the 2005 Proxy Statement. The
Company outlines various reasons for its position. I would like to address
several issues raised.
This is the exact same proposal which I submitted last year and which the SEC
refused to concur with the Company's position at that time. The proposal
received 21.8% of the votes last year.
The proposal does not mandate that the Board do anything. The proposal merely
"urges" the Board to adopt a policy.
The Proposal in no way violates Maryland Law because the Company argues that
it is not in accordance with the By-laws. What the Company has failed to tell
you is that the Board can unilaterally change the By-laws at any time without
shareholder approval. The following is the portion of the By-laws covering that.
AMENDED AND RESTATED BYLAWS
As of September 17, 2002
ARTICLE IX
Amendments
SECTION 1. Amendment of By-Laws.
The Board of Directors shall have the power and authority to amend, alter or
repeal these By-Laws or any provision thereof, and may from time to time make
additional By-Laws.
It seems strange that all of the sudden, the Company is concerned with
following the By-laws. In the past, this was not the case. For years, the
Company has ignored provisions of the By-laws. It wasn't until I pointed this
out to the Company on several occasions that they took action. But the action
that they took was not to comply with the By-laws but rather they changed the
By-laws and the matter was never submitted to the shareholders. By examining the
By-laws this point will be very obvious.
Below are two sections of the By-laws which the Company clearly did not follow.
BYLAWS
(Amended and Restated as of October 1996)
SECTION 2. Powers and Duties of the Chairman of the Board. The Chairman of the
Board shall preside at all meetings of the Board of Directors unless the Board
of Directors shall be a majority vote of a quorum thereof elect a chairman other
than the Chairman of the Board to preside at meetings of the Board of Directors.
He may sign and execute all authorized bonds, contracts or other obligations in
the name of the Corporation; and he shall be ex-officio a member of all standing
committees.
SECTION 3. Powers and Duties of the President. The President shall be the chief
executive officer of the Corporation and shall have general charge and control
of all its business affairs and properties. He shall preside at all meetings of
the stockholders.
You will note that according to Section 3, The President is the CEO and also the
President is to preside at the all meetings of the shareholders. For years Mr.
Hale was held out to be the CEO and he also presided over the shareholders'
meetings. Mr. Hale was not the President.
When the Company was called to task for this they changed the By-laws as
follows:
FIRST MARINER BANCORP
AMENDED AND RESTATED BYLAWS
As of September 17, 2002
SECTION 2. Powers and Duties of the Chairman of the Board. The Chairman of the
Board shall preside at all meetings of the Board of Directors unless the Board
of Directors shall by a majority vote of a quorum thereof elect a chairman other
than the Chairman of the Board to preside at meetings of the Board of Directors.
The Chairman of the Board shall be the Chief Executive Officer of the
Corporation and shall have general charge and control of all its business
affairs and properties. He shall preside at all meetings of the stockholders. He
may sign and execute all authorized bonds, contracts or other obligations in the
name of the Corporation; and he shall be ex-officio a member of all standing
committees.
SECTION 3. Powers and Duties of the President. The President shall have the
general powers and duties of supervision and management usually vested in the
office of president of a corporation, subject to the direction and review of the
Chairman and the Board of Directors. He may sign and execute all authorized
bonds, contracts or other obligations in the name of the Corporation. The
President shall be ex-officio a member of all the standing committees. He shall
do and perform such other duties as may, from time to time, be assigned to him
by the Chairman and the Board of Directors.
I think you can see why one would be led to believe that this was a self-serving
change in the By-laws which essentially created the situation which my proposal
seeks to address. By examining the disclosures made in various proxy statements,
it is clear that the Company did not follow the By-laws. The By-laws clearly
required the President to be the CEO yet in the proxy statements the Company
states that Mr. Hale is the CEO even though he was not President. Of course they
changed the By-laws for some reason which I believe has something to do with
Sarbanes-Oxley. But for years, the Company operated outside of the By-laws.
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD TUESDAY, MAY 4, 1999 JOSEPH A. CICERO
is the President of the Company EDWIN F. HALE, SR. is Chairman and Chief
Executive Officer of the Company
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON TUESDAY, MAY 2, 2000 JOSEPH A.
CICERO is the President of the Company EDWIN F. HALE, SR. is Chairman and Chief
Executive Officer of the Company
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD TUESDAY, MAY 1, 2001 JOSEPH A. CICERO
is the President of the Company EDWIN F. HALE, SR. is Chairman and Chief
Executive Officer of the Company
ANNUAL MEETING OF STOCKHOLDERS To Be Held Tuesday, May 7, 2002, Joseph A. Cicero
is the President of the Company Edwin F. Hale, Sr. is Chairman and Chief
Executive Officer of the Company
ANNUAL MEETING OF STOCKHOLDERS To Be Held Tuesday, May 6, 2003 Joseph A. Cicero
is the President of the Company Edwin F. Hale, Sr. is Chairman and Chief
Executive Officer of the Company
ANNUAL MEETING OF STOCKHOLDERS To Be Held Tuesday, May 4, 2004 Joseph A. Cicero
is the President of the Company Edwin F. Hale, Sr. is Chairman and Chief
Executive Officer of the Company
The Company also raises several issues with regard to the supporting
statement. With the exception of the quote from the Baltimore Business Journal,
the supporting statement is identical to statement approved last year with the
addition of the statistic of last years result of the vote.
Regarding the excerpt from the BBJ, I find it strange that the Company objects.
I have proper attribution. If the statement in whole or part is "materially
false and misleading "as claimed by the Company then why did the Company not
demand a retraction or a correction. To the best of my knowledge, the Company
has not made such a request to the BBJ.
The Company also has a problem with the mention in the excerpt of the ISS
survey. The Company claims that it provides no details about the Survey.
Apparently it is alright for the Company to cite a survey in its Proxy Statement
and provide little details. Consider the following statement which has appeared
in the Company's Proxy.
Mr. Hale has been an integral part of the Company's sales and marketing efforts,
actively participating in the Company's marketing strategies and serving as
spokesman in the Company's radio and television advertising. Through Mr. Hale's
efforts, the Company now enjoys name recognition of 94% in the Baltimore
Metropolitan area based on an independent market research study conducted in
January 2003
The Company offers no indication of who conducted the research study. You don't
know what it means by name recognition. I would venture to say that Enron,
Martha Stuart and any other range of characters might in fact have a high name
recognition. In other words, all of the arguments put forth by the Company in
objecting to the mention of the ISS survey could be applied to the Company's own
use of an unkown survey which they have repeatedly referred to over the past
years.
I respectfully request that you do not honor the Company's request as outlined
in their letter of December 3, 2004. I also would request that you consider if
any action should be taken regarding the failure of the Company to follow the
Bylaws.
If you have any questions or would like additional information, please do not
hesitate to call me at 609-937-6147 or you can reach me by e-mail at
Jmaas@princeton.edu
Sincerely
/s/
John F. Maas
[STAFF REPLY LETTER]
January 10, 2005
Response of the Office of Chief Counsel Division of Corporation Finance
Re: First Mariner Bancorp Incoming letter dated December 3, 2004
The proposal urges the board of directors to adopt a policy that the chairman of
the board and the chief executive officer be two different individuals and that
the chairman be an independent director elected by the directors.
We are unable to concur in your view that First Mariner may exclude the proposal
under rule 14a-8(i)(2). Accordingly, we do not believe that First Mariner may
omit the proposal from its proxy materials in reliance on rule 14a-8(i)(2).
We are unable to concur in your view that First Mariner may exclude the proposal
under rule 14a-8(i)(3). Accordingly, we do not believe that First Mariner may
omit the proposal from its proxy materials in reliance on rule 14a-8(i)(3).
We are unable to concur in your view that First Mariner may exclude the proposal
under rule 14a-8(i)(6). Accordingly, we do not believe that First Mariner may
omit the proposal from its proxy materials in reliance on rule 14a-8(i)(6).
We are unable to concur in your view that First Mariner may exclude the proposal
under rule 14a-8(i)(7). Accordingly, we do not believe that First Mariner may
omit the proposal from its proxy materials in reliance on rule 14a-8(i)(7).
Sincerely,
/s/
Heather L. Maples
Special Counsel
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