PhillyInc

The saga continues: The No. 2 shareholder in Mace Security International Inc. (NASDAQ: MACE), the beleaguered security products company in Mount Laurel, says in an SEC filing that Mace had asked Richard Barone, who heads its No. 2 shareholder Ancora Capital Inc. of Ohio, to join the board of directors in place of Matthew Paolino - brother of Chief Executive Louis D. Paolino Jr. - as Mace looks to avoid a showdown with the top shareholder Lawndale Capital Management L.L.C.

Barone told PhillyInc he was surprised by the offer. He tells us that hadn't sought the job. And that's not all. "I've never talked to a single person over there. They don't know me," he told PhillyInc.

Either way, Barone is not getting a seat and Paolino isn't getting his support. According to the Ancora filing, Barone was offered the seat during a Sept. 7 telephone call from Mark Alsentzer, who chairs Mace's nominating committee. In exchange for the seat, Barone was expected to back the company's slate to the board of directors at the annual meeting this coming December. But not only did Barone turn down the offer. He also gave his backing to Lawndale Capital's board nominees. Like Lawndale, Ancora has grown frustrated with Mace's poor performance, including the 20 percent decline this year in its stock price.

Says the Ancora filing: "Mr. Barone noted the consistent operating losses over the past five years, a program of failed acquisitions, the inability to achieve operating efficiencies, the incident of fraud at the middle management level, the extraordinary high legal expenses associated with the hiring of alleged illegal aliens, and a compensation structure which rewards failure instead of success."

Lawndale, which has a 9.6 percent stake in Mace, called for Matthew Paolino's ouster from the five-person board in June. The investor also called for the board to be expanded to seven and proposed three people to fill those vacancies. None of the nominees have been contacted by Mace's independent directors, Shapiro said.

"It was actually a very hostile act toward our proposal," Shapiro said, adding that Lawndale was "very gratified" that Barone turned down Mace's offer.

Since Paolino is balking at expanding the board, Shapiro said he would consider a "less desirable alternative" of keeping the board at five instead of expanding it to seven. That's provided that a sufficient number of independent directors are new.

"Under this scenario, four of the five Mace board members would be independent, and three of the five would be new to Mace's Board," Lawndale said in a separate filing. "Lawndale believes, given the operating history and oversight experience of the nominees it submitted, either proposal it has made to Mace's Board would result in an improved board."

- Jonathan Berr