<PAGE> 1
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant /X/
Filed by a party other than the registrant |_|
Check the appropriate box:
|_| Preliminary proxy statement
|_| Confidential, for use of the Commission only (as permitted by Rule
14a-6(e)(2))
/X/ Definitive proxy statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
Lenox Bancorp, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
Lenox Bancorp, Inc.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/X/ No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
N/A
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transactions applies:
N/A
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11:
N/A
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
N/A
- --------------------------------------------------------------------------------
(5) Total fee paid:
N/A
- ------------------------------------------------------------------------------
|_| Fee paid previously with preliminary materials.
|_| Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
(1) Amount previously paid:
N/A
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
N/A
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(3) Filing party:
N/A
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(4) Date filed:
N/A
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<PAGE> 2
LENOX BANCORP, INC.
4730 Montgomery Road
Norwood, Ohio 45212
(513) 531-8655
April 29, 2000
Dear Stockholder:
You are cordially invited to attend the annual meeting of stockholders of
Lenox Bancorp, Inc., the holding company for Lenox Savings Bank. The meeting
will be held at the Bank's executive offices at 4730 Montgomery Road, Norwood,
Ohio on Wednesday, May 24, 2000 at 2:30 p.m., local time.
The notice of annual meeting and proxy statement appearing on the
following pages describe the formal business to be transacted at the meeting.
During the meeting, we will also report on the operations of the Company.
Directors and officers of the Company, as well as a representative of Clark,
Schaefer, Hackett & Co., the Company's independent auditors, will be present to
respond to appropriate questions of stockholders.
It is important that your shares are represented at this meeting, whether
or not you attend the meeting in person and regardless of the number of shares
you own. To make sure your shares are represented, we urge you to complete and
mail the enclosed proxy card. If you attend the meeting, you may vote in person
even if you have previously mailed a proxy card.
We look forward to seeing you at the meeting.
Sincerely,
/s/ Virginia M. Deisch
Virginia M. Deisch
PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR
<PAGE> 3
LENOX BANCORP, INC.
4730 MONTGOMERY ROAD
NORWOOD, OHIO 45212
(513) 531-8655
- --------------------------------------------------------------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
- --------------------------------------------------------------------------------
The annual meeting of stockholders of Lenox Bancorp, Inc. (the "Company")
will be held at the Bank's executive offices at 4730 Montgomery Road, Norwood,
Ohio, on Wednesday, May 24, 2000, at 2:30 p.m., local time, for the following
purposes:
1. To ratify the appointment of Clark, Schaefer, Hackett & Co. as
independent auditors for the Company for the fiscal year ending
December 31, 2000;
2. To vote upon the stockholder proposal, if presented at the meeting;
and
3. To transact any other business that may properly come before the
meeting.
NOTE: The Board of Directors is not aware of any other business to come
before the meeting.
Stockholders of record at the close of business on April 21, 2000 are
entitled to receive notice of and to vote at the meeting and any adjournment or
postponement of the meeting.
Please complete and sign the enclosed form of proxy, which is solicited by
the Board of Directors, and mail it promptly in the enclosed envelope. The proxy
will not be used if you attend the meeting and vote in person.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Diane P. Hunt
Diane P. Hunt
CORPORATE SECRETARY
Norwood, Ohio
April 29, 2000
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE THE COMPANY THE EXPENSE OF
FURTHER REQUESTS FOR PROXIES IN ORDER TO ENSURE A QUORUM. A SELF-ADDRESSED
ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED IN
THE UNITED STATES.
<PAGE> 4
PROXY STATEMENT
OF
LENOX BANCORP, INC.
- --------------------------------------------------------------------------------
ANNUAL MEETING OF STOCKHOLDERS
MAY 24, 2000
- --------------------------------------------------------------------------------
This proxy statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Lenox Bancorp, Inc. ("Lenox Bancorp" or the
"Company") to be used at the annual meeting of stockholders of the Company. The
Company is the holding company for Lenox Savings Bank (the "Bank"). The annual
meeting will be held at the Bank's executive offices at 4730 Montgomery Road,
Norwood, Ohio on Wednesday, May 24, 2000, at 2:30 p.m., local time. This proxy
statement and the enclosed proxy card are being first mailed to stockholders on
or about April 29, 2000.
- --------------------------------------------------------------------------------
VOTING AND PROXY PROCEDURE
- --------------------------------------------------------------------------------
WHO CAN VOTE AT THE MEETING
You are entitled to vote your Lenox Bancorp common stock if the records of
the Company showed that you held your shares as of the close of business on
April 21, 2000. As of the close of business on that date, a total of 285,028
shares of Lenox Bancorp common stock were outstanding. Each share of common
stock has one vote. As provided in the Company's Articles of Incorporation, in
no event shall any record owner of the Company's common stock which is
beneficially owned, either directly or indirectly, by a person who beneficially
owns in excess of 10% of the Company's outstanding shares, be entitled to any
vote in respect of the shares held in excess of the 10% limit.
ATTENDING THE MEETING
If you are a beneficial owner of Lenox Bancorp common stock held by a
broker, bank or other nominee (I.E., in "street name"), you will need proof of
ownership to be admitted to the meeting. A recent brokerage statement or letter
from a bank or broker are examples of proof of ownership. If you want to vote
your shares of Lenox Bancorp common stock held in street name in person at the
meeting, you will have to get a written proxy in your name from the broker, bank
or other nominee who holds your shares.
VOTE REQUIRED
The annual meeting will be held if a majority of the outstanding shares of
common stock entitled to vote is represented at the meeting. If you return valid
proxy instructions or attend the meeting in person, your shares will be counted
for purposes of determining whether there is a quorum, even if you abstain from
voting. Broker non-votes also will be counted for purposes for determining the
existence of a quorum. A broker non-vote occurs when a broker, bank or other
nominee holding shares for a beneficial owner does not vote on a particular
proposal because the nominee does not have discretionary voting power with
respect to that item and has not received voting instructions from the
beneficial owner.
<PAGE> 5
In voting on the approval of the ratification of the appointment of Clark,
Schaefer, Hackett & Co. as independent auditors and in voting on the stockholder
proposal, if presented at the meeting, you may vote in favor of the proposals,
vote against the proposals or abstain from voting. These matters will be decided
by the affirmative vote of a majority of the votes represented at the meeting
and entitled to vote. Abstentions will have the same effect as a negative vote,
while broker non-votes will have no effect on the outcome of the voting.
VOTING BY PROXY
This proxy statement is being sent to you by the Board of Directors of
Lenox Bancorp for the purpose of requesting that you allow your shares of Lenox
Bancorp common stock to be represented at the annual meeting by the persons
named in the enclosed proxy card. All shares of Lenox Bancorp common stock
represented at the meeting by properly executed proxies will be voted in
accordance with the instructions indicated on the proxy card. If you sign and
return a proxy card without giving voting instructions, your shares will be
voted as recommended by the Company's Board of Directors. THE BOARD OF DIRECTORS
RECOMMENDS A VOTE "FOR" RATIFICATION OF CLARK, SCHAEFER, HACKETT & CO. AS
INDEPENDENT AUDITORS AND "AGAINST" APPROVAL OF THE STOCKHOLDER PROPOSAL.
If any matters not described in this proxy statement are properly
presented at the annual meeting, the persons named in the proxy card will use
their own judgment to determine how to vote your shares. This includes a motion
to adjourn or postpone the meeting in order to solicit additional proxies. If
the annual meeting is postponed or adjourned, your Lenox Bancorp common stock
may be voted by the persons named in the proxy card on the new meeting date as
well, unless you have revoked your proxy. The Company does not know of any other
matters to be presented at the meeting.
You may revoke your proxy at any time before the vote is taken at the
meeting. To revoke your proxy you must either advise the Secretary of the
Company in writing before your shares have been voted at the annual meeting,
deliver a later dated proxy, or attend the meeting and vote your shares in
person. Attendance at the annual meeting will not in itself constitute
revocation of your proxy.
If your Lenox Bancorp common stock is held in street name, you will
receive instructions from your broker, bank or other nominee that you must
follow in order to have your shares voted. Your broker or bank may allow you to
deliver your voting instructions via the telephone or the Internet. Please see
the instruction form that accompanies this proxy statement.
The Company will pay the cost of this proxy solicitation. The Company will
reimburse brokerage firms and other custodians, nominees and fiduciaries for
reasonable expenses incurred by them in sending proxy materials to the
beneficial owners of Lenox Bancorp common stock. In addition to soliciting
proxies by mail, directors, officers and regular employees of the Company may
solicit proxies personally or by telephone. None of these persons will receive
additional compensation for these activities.
2
<PAGE> 6
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STOCK OWNERSHIP
- --------------------------------------------------------------------------------
The following table provides information as of April 21, 2000 with respect
to persons believed by the Company to be the beneficial owners of more than 5%
of the Company's outstanding common stock. A person may be considered to own any
shares of common stock over which he or she has, directly or indirectly, sole or
shared voting or investment power.
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF COMMON STOCK
NAME AND ADDRES SHARES OWNED OUTSTANDING
- --------------- ------------ -------------
<S> <C> <C>
Lenox Savings Bank Employee 33,317(1) 11.7%
Stock Ownership Plan
4730 Montgomery Road
Norwood, Ohio 45212
John C. Lame 21,839(2) 7.7%
1260 Hayward Avenue
Cincinnati, Ohio 45208
Virginia M. Deisch 16,342 5.7%
4730 Montgomery Road
Norwood, Ohio 45212
</TABLE>
- ----------------------------------
(1) Under the terms of the employee stock ownership plan, the employee stock
ownership plan trustee, subject to its fiduciary responsibilities, will vote
unallocated and allocated shares for which no timely voting instructions are
received in the same proportion as shares for which the trustee has received
voting instructions from participants. As of April 21, 2000, 12,470 shares
have been allocated to participants' accounts and 20,847 shares remain
unallocated.
(2) Based on information filed in a Schedule 13D on February 10, 2000, John C.
Lame may be deemed to be the beneficial owner of 21,839 shares.
3
<PAGE> 7
The following table provides information about the shares of Lenox Bancorp
common stock that may be considered to be owned by each director of the Company,
by the executive officer named in the Summary Compensation Table and by all
directors and executive officers of the Company as a group as of April 21, 2000.
A person may be considered to beneficially own any shares of common stock over
which he or she has, directly or indirectly, sole or shared voting or investing
power. Unless otherwise indicated, each of the named individuals has sole voting
power and sole investment power with respect to the shares shown.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NUMBER OF THAT MAY BE PERCENT OF
SHARES OWNED ACQUIRED WITHIN 60 COMMON
(EXCLUDING DAYS BY EXERCISING STOCK
NAME OPTIONS) OPTIONS OUTSTANDING(1)
---------------------------------------- ------------- -------------------- -----------------
<S> <C> <C> <C>
Gail R. Behymer....................... 3,321 512 1.3%
Henry E. Brown........................ 3,739 512 1.5
Virginia M. Deisch.................... 12,936(2) 3,406 5.7
Curtis L. Jackson..................... 801 512 0.5
Robert R. Keller...................... 2,926(3) 512 1.2
John C. Lame.......................... 21,583 -- 7.7
Reba St. Clair........................ 1,206(4) 512 0.6
All directors and executive officers
as a group (8 persons).............. 53,304 7,670 20.8%
</TABLE>
- --------------------------------
(1) Based on 285,028 shares of Lenox Bancorp common stock outstanding and
entitled to vote as of April 21, 2000, plus the number of shares that may be
acquired within 60 days by each individual (or group of individuals) by
exercising stock options.
(2) Includes 5,500 shares held under the Bank's employee stock ownership plan in
trust for the benefit of Ms. Deisch.
(3) Includes 728 shares owned by Mr. Keller's spouse's individual retirement
account.
(4) Includes 100 shares owned by Ms. St. Clair's spouse.
4
<PAGE> 8
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DIRECTORS
- --------------------------------------------------------------------------------
The Company's Board of Directors currently consists of seven members;
however, the Board has accepted the resignations of two directors (Messrs.
Robert R. Keller and Curtis L. Jackson), which resignations will be effective
immediately prior to the annual meeting. As a result, the Board resolved to
reduce the size of the Board from seven to five members effective immediately
prior to the annual meeting. Four of the remaining directors are independent and
one is a member of management. Both Messrs. Keller and Jackson's terms were to
expire at the 2000 annual meeting. The remaining directors are currently serving
terms expiring in either 2001 or 2002. Under the Company governing documents,
directors are to serve three year terms. In addition, under Ohio law, no
reduction in the size of the Board shall cause a reduction in a director's term.
Consequently, there is not a director running for election at this year's annual
meeting.
The following table sets forth certain information regarding the current
directors.
<TABLE>
<CAPTION>
YEAR FIRST
ELECTED TERM TO
AGE(1) DIRECTOR (2) EXPIRE
------ ------------- -------
<S> <C> <C> <C>
Gail R. Behymer.................... 60 1993 2002
Henry E. Brown..................... 54 1995 2001
Virginia M. Deisch................. 42 1996 2002
Curtis L. Jackson.................. 36 1995 2000(3)
Robert R. Keller................... 59 1987 2000(3)
John C. Lame....................... 43 1998 2001
Reba St. Clair..................... 40 1995 2002
</TABLE>
- -------------------------
(1) As of April 21, 2000.
(2) Includes prior service on the Board of Directors of the Bank.
(3) Have declined to stand for reelection.
The present principal occupation and other business experience during the
last five years of each director is set forth below:
GAIL R. BEHYMER holds a B.S. in Industrial Management and a M.B.A. from
the University of Cincinnati. He worked at Procter & Gamble for 34 years with a
background in construction and facilities management. He held the position of
Operations Manager prior to his retirement.
HENRY E. BROWN holds a B.S. degree in Civil Engineering from the
University of Missouri-Rolla. He retired after being employed with Procter &
Gamble for 31 years. Mr. Brown is Chairman of the Greater Cincinnati
Metropolitan YMCA Board of Directors.
VIRGINIA M. DEISCH joined the Bank in 1986 and has served as President and
Chief Executive Officer since 1994 and Executive Managing Officer since 1989.
Ms. Deisch has over 19 years experience in the banking industry.
5
<PAGE> 9
CURTIS L. JACKSON holds a B.S. degree in Accounting from Northern Kentucky
University. He has worked at Procter & Gamble for over 12 years and holds the
position of Group Manager Regional Cost Accounting. Mr. Jackson also served as a
Trustee and Treasurer for the Hamilton Christian Center.
ROBERT R. KELLER retired from Procter & Gamble after 36 years of service.
He was the Manager of Railroad Services. Mr. Keller is also a board member of
the Twin Tower Retirement Community Auxiliary.
JOHN C. LAME is currently a partner with J.C. Bradford & Co., a financial
planning investment advisory and brokerage firm located in Cincinnati. Prior to
joining J.C. Bradford in 1997, Mr. Lame served six years as a vice president
with Merrill Lynch. Mr. Lame also worked at Procter & Gamble for 12 years from
1979 to 1991.
REBA ST. CLAIR holds a B.A. in Political Science from Knox College.
Previously an officer in the military, she is currently a Finance Manager at
Procter & Gamble. Ms. St. Clair is a board member for Leadership Cincinnati,
Hamilton County Youth Conference, Lighthouse Youth Services, Playhouse in the
Park, The Cincinnati Art Museum and the Cincinnati Ballet.
MEETING AND COMMITTEES OF THE BOARD OF DIRECTORS
The business of the Company is conducted through meetings and activities
of its Board of Directors and its committees. The Board of Directors of the
Company meets as needed. During the year ended December 31, 1999, the Board of
Directors of the Company held 18 meetings. All of the directors of the Company
attended at least 75% of the total number of the Company's Board meetings and
committee meetings on which such directors served during 1999. The Board of
Directors of the Company maintains committees, the nature and composition of
which are described below:
AUDIT COMMITTEE. The Audit Committee, currently consisting of Messrs.
Behymer, Lame and Ms. St. Clair, provides assurance that financial disclosures
made by management portray the Company's financial condition and results of
operations. The Committee also maintains a liaison with outside auditors and
reviews the adequacy of internal controls. The Audit Committee of the Company
met two times during 1999.
COMPENSATION COMMITTEE. The Compensation Committee, currently consisting
of Mr. Behymer, Ms. Deisch and Ms. St. Clair, is responsible for all matters
regarding compensation and fringe benefits for officers and employees. The
Compensation Committee met once during 1999.
NOMINATING COMMITTEE. The Company's Nominating Committee for the 2000
annual meeting consisted of Messrs. Behymer, Brown, Jackson, Keller, Lame, Ms.
Deisch and Ms. St. Clair. The Committee considered various options for nominees
for director to stand for election at the Company's annual meeting of
stockholders. However, the Nominating Committee declined to nominate anyone for
director for a term expiring in 2003, and instead, recommended to the Board that
the Board be decreased in size and that, at this time, the Board should consist
of only two classes of directors. The Company's Articles of Incorporation and
Code of Regulations provide for stockholder nominations of directors. These
provisions require such nominations to be made pursuant to timely notice in
writing to the Secretary of the Company. The stockholder's notice of nomination
must contain all information relating to the nominee which is required to be
disclosed by the Company's Code of Regulations and by the Securities Exchange
Act of 1934. The Nominating Committee met on March 27, 2000.
The Company also maintains an Executive Committee and a Strategic Planning
Committee.
6
<PAGE> 10
DIRECTORS' FEES. Members of the Company's Board of Directors do not
receive Board fees from the Company. Currently, non-employee directors of the
Bank who have served as directors of the Bank for one year or more receive a
retainer of $1,200 per year, plus $370 per meeting attended. The Bank maintains
a Director Emeritus Program whereby retired members of the Board of Directors
may serve as Directors Emeritus.
- --------------------------------------------------------------------------------
EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
SUMMARY COMPENSATION TABLE
The following information is furnished for Ms. Deisch. No other executive
officer of Lenox Bancorp received salary and bonus of $100,000 or more during
the year ended December 31, 1999.
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------
ANNUAL COMPENSATION AWARDS
----------------------------------------- --------------
OTHER RESTRICTED SECURITIES
ANNUAL STOCK UNDERLYING ALL OTHER
NAME AND FISCAL COMPENSATION AWARDS OPTIONS COMPENSATION
PRINCIPAL POSITIONS YEAR SALARY($) BONUS($) ($)(1) ($) (#) ($)
- ----------------------------- ------ ---------- -------- ------------- --------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Virginia M. Deisch 1999 $84,250(2) $ -- $ -- $ -- -- $32,079(3)
President, Chief Executive 1998 74,250 -- -- -- -- 33,341
Officer and Director 1997 68,000 -- -- 37,672 8,513 26,665
(1) Does not include the aggregate amount of perquisites and other personal benefits, which was less than 10% of the total
annual salary and bonus reported.
(2) Includes directors' fees of $5,600. Beginning in 2000, Ms. Deisch will no longer receive directors' fees.
(3) Consists of employer contribution to the Bank's 401(k) plan of $3,850 and employee stock ownership plan allocations with
a market value of $28,229.
</TABLE>
OPTION VALUE AT FISCAL YEAR END
The following table provides information regarding unexercised stock
options for Ms. Deisch as of December 31, 1999. Ms. Deisch did not exercise any
stock options during the year ended December 31, 1999.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS IN-THE-MONEY OPTIONS
NAME AT FISCAL YEAR-END (#) AT FISCAL YEAR-END ($)(1)
- -------------------- --------------------------- ---------------------------
EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Virginia M. Deisch 3,406 5,107 $2,555 $3,830
- ------------------------
(1) Value of unexercised in-the-money stock options equals the market value of
shares covered by in-the-money options on December 31, 1999 less the option
exercise price. Options are in-the-money if the market value of shares
covered by the options is greater than the exercise price.
</TABLE>
7
<PAGE> 11
EMPLOYMENT AGREEMENTS
The Bank and the Company entered into employment agreements with Ms.
Deisch. The employment agreements provide for a three-year term for Ms. Deisch.
The Bank employment agreement provides that, commencing on the first anniversary
date and continuing each anniversary date thereafter, the Board of Directors of
the Bank may extend the agreement for an additional year so that the remaining
term shall be three years, unless written notice of non-renewal is given by the
Board of Directors of the Bank after conducting a performance evaluation of Ms.
Deisch. The term of the Company employment agreement may be extended on a daily
basis unless written notice of non-renewal is given by the Board of Directors of
the Company. The agreements provide that Ms. Deisch's base salary will be
reviewed annually. The current base salary for Ms. Deisch is $84,250. In
addition to the base salary, the agreements provide for, among other things,
participation in stock benefit plans and other fringe benefits applicable to
executive personnel.
The agreements provide for termination by the Bank or the Company for
cause as defined in the agreements, at any time. In the event the Bank or the
Company chooses to terminate Ms. Deisch's employment for reasons other than for
cause, or in the event Ms. Deisch resigns from the Bank and the Company after
specified circumstances that would constitute constructive termination, Ms.
Deisch or, in the event of her death, her beneficiary, would be entitled to
receive an amount equal to the remaining base salary payments due to Ms. Deisch
and the contributions that would have been made on her behalf to any employee
benefit plans of the Bank or the Company during the remaining term of the
agreement; PROVIDED, HOWEVER, that in the case of the Bank's agreement, the
payment shall not, in the aggregate, exceed three times the average of Ms.
Deisch's five preceding taxable years' annual compensation. The Bank and the
Company would also continue and pay for her health and disability coverage for
the remaining term of the agreement.
Under the agreements, if voluntary (after specified circumstances that
would constitute constructive termination) or involuntary termination follows a
change in control of the Bank or the Company (as defined in the employment
agreement), Ms. Deisch or, in the event of her death, her beneficiary, would be
entitled to a severance payment equal to the greater of: (i) the payments due
for the remaining term of the agreement; or (ii) three times the average of the
five preceding taxable years' annual compensation. The Bank and the Company
would also continue her life, health, and disability coverage for thirty-six
months. Notwithstanding that both agreements provide for a severance payment in
the event of a change in control, Ms. Deisch would only be entitled to receive a
severance payment under one agreement.
Payments under the agreements in the event of a change in control may
constitute some portion of an excess parachute payment under Section 280G of the
Internal Revenue Code resulting in the imposition of an excise tax on the
recipient and denial of the deduction for such excess amounts to the Company and
the Bank. Under certain circumstances, severance payments to Ms. Deisch under
the agreements may be subject to prior approval by the Federal Deposit Insurance
Corporation.
Payments under the Bank's agreement will be guaranteed by the Company in
the event that payments or benefits are not paid by the Bank. Payment under the
Company's agreement would be made by the Company. All reasonable costs and legal
fees paid or incurred by Ms. Deisch pursuant to any dispute or question of
interpretation relating to the agreements shall be paid by the Bank or Company,
respectively, if Ms. Deisch is successful on the merits pursuant to a legal
judgment, arbitration or settlement. The employment agreements also provide that
the Bank and Company shall indemnify the Executive to the fullest extent
allowable under Ohio law.
8
<PAGE> 12
- ------------------------------------------------------------------------------
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
- ------------------------------------------------------------------------------
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's executive officers and directors, and persons who own more than 10% of
any registered class of the Company's equity securities, to file reports of
ownership and changes in ownership with the Securities and Exchange Commission.
Executive officers, directors and greater than 10% stockholders are required by
regulation to furnish the Company with copies of all Section 16(a) reports they
file.
Based solely on its review of the copies of the reports it has received
and written representations provided to the Company from the individuals
required to file the reports, the Company believes that each of the Company's
executive officers and directors has complied with applicable reporting
requirements for transactions in Lenox Bancorp common stock during the fiscal
year ended December 31, 1999.
- ------------------------------------------------------------------------------
TRANSACTIONS WITH MANAGEMENT
- ------------------------------------------------------------------------------
It is the policy of the Bank to make loans to executive officers and
directors on their principal residences. The Bank's policy provides that all
loans made by the Bank, including lines of credit, to its directors be made in
the ordinary course of business, on substantially the same terms, including
interest rates and collateral, as those prevailing at the time for comparable
transactions with other persons and may not involve more than the normal risk of
collectibility or present other unfavorable features; provided, however the Bank
may offer loans to executive officers on terms not available to the public, but
available to other full- time employees, in accordance with recently modified
federal regulations. All such loans, however, did not involve more than the
normal risk of collectibility or present other unfavorable features. Any loan
made to an executive officer or director must be approved by the Board of
Directors prior to its being committed. As of December 31, 1999, seven of the
Bank's executive officers or directors had a total of fifteen loans outstanding
totaling approximately $1.0 million in the aggregate.
- ------------------------------------------------------------------------------
PROPOSAL 1 -- RATIFICATION OF AUDITORS
- ------------------------------------------------------------------------------
The Board of Directors has appointed Clark, Schaefer, Hackett & Co. to be
its auditors for the 2000 fiscal year, subject to the ratification by
stockholders. A representative of Clark, Schaefer, Hackett & Co. is expected to
be present at the annual meeting to respond to appropriate questions from
stockholders and will have the opportunity to make a statement should he or she
desire to do so.
If the ratification of the appointment of the auditors is not approved by
a majority of the votes cast by stockholders at the annual meeting, other
independent public accountants will be considered by the Board of Directors. THE
BOARD OF DIRECTORS RECOMMENDS THAT STOCKHOLDERS VOTE "FOR" THE RATIFICATION OF
THE APPOINTMENT OF AUDITORS.
9
<PAGE> 13
- ------------------------------------------------------------------------------
PROPOSAL 2 -- STOCKHOLDER PROPOSAL
- ------------------------------------------------------------------------------
The Company has been notified that a stockholder intends to present the
following proposal for consideration at the annual meeting. The address and
stock ownership of the proponent will be furnished upon request to the Secretary
of the Company.
RESOLVED, that Lenox Bancorp, Inc. ("Lenox" or the "Company") immediately
retain an investment banking firm to explore all strategic alternatives to
maximize shareholder value including, but not limited to, the sale of one or
both of the branches of Lenox Savings Bank or a merger of the Company and with
such investment banking firm to be instructed to report to the entire Board of
Directors.
STOCKHOLDER'S STATEMENT IN SUPPORT OF PROPOSAL
John C. Lame, a member of the Board of Directors who owns 21,839 shares of
Lenox Common Stock, believes that there is significant inherent value in Lenox
that has been unrealized by the Company's current management. Mr Lame believes
that Lenox's current management has not provided the Company with the
disciplined business management and focus that it needs. There is little
evidence of achievement by the Company, and the shareholders are being punished
by a decrease in the value of their Lenox shares.
Specifically, Lenox has failed to perform satisfactorily in the following
areas critical to its long term success and future independence:
o Lenox management has failed to grow core deposits at acceptable rates.
o Lenox has failed to grow net interest margin and non-interest income.
o Lenox has failed to meet economic objectives required to reinvest in
either its Ivorydale headquarters or other proposed branch locations.
o Lenox has failed to grow earnings per share and return on equity at
a rate acceptable to shareholders.
o Lenox has failed to generate adequate profits to fund an attractive
and growing dividend.
o Lenox has failed to provide a liquid and attractively priced market
for its shares relative to its liquidation value.
o Lenox has failed to attract and maintain management capable of
developing plans and achieving its business objectives.
o Lenox management has failed to create and maintain a favorable
working relationship with several of its Board of Directors.
Mr. Lame believes Lenox's Board of Directors should take active measures
to maximize the value of shareholders' investment in the Company by retaining an
independent investment banking firm for the purpose of analyzing and reporting
to the entire Board of Directors on strategic alternatives that may be
appropriate in order to maximize the value of Lenox's common stock. Such
alternatives may include but are not limited to the sale of substantially all of
Lenox's assets or a merger or other business combination of Lenox. Mr. Lame also
notes that a proposal to maximize shareholder value which was included in last
year's proxy statement received approval from 48% of Lenox's outstanding shares.
A VOTE FOR THIS PROPOSAL would best serve the interest of Lenox
shareholders.
UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY THE ENCLOSED
PROXY WILL BE VOTED "AGAINST" THE STOCKHOLDER PROPOSAL.
10
<PAGE> 14
OPPOSING STATEMENT OF THE LENOX BANCORP, INC.
BOARD OF DIRECTORS TO STOCKHOLDER PROPOSAL
The Board of Directors is opposed to the Proposal because the Board
believes the Proposal is false and misleading. Mr. Lame suggests that no
investment banker has been retained by the Company. However, the Company has
been working with an investment banker since April 1998 and has explored with
the investment banker all strategic alternatives, including the alternatives
proposed by Mr. Lame. A proposal very similar to Mr. Lame's proposal was
submitted at the Company's last annual meeting of stockholders, and, the Board
unanimously approved the opposition statement specifically acknowledging that it
was the opinion of the Board that "the Company is best able to serve the
interest of our stockholders if it is prepared to focus its energies on the
pursuit of improved corporate performance" and that the most important thing is
"to make sure the Bank operates in the most efficient way possible and that
profits are maximized." Mr. Lame not only approved the Board's opposition
statement, but voted his own shares against the stockholder proposal. This year,
however, notwithstanding the Board's historical use of an investment banker, Mr.
Lame submitted his own stockholder proposal to the Board on December 15, 1999.
Thereafter, on December 27, 1999, the Board again resolved unanimously to again
hire an investment banker to consider the Company's strategic options, including
the possible sale of the Company. Mr. Lame was in attendance at that meeting and
not only voted in favor of the hiring of an investment banker, but also the
investment banker that the Board chose to work with. However, 15 days later,
instead of withdrawing his proposal, which at that time was moot, Mr. Lame made
a public filing with the Securities and Exchange Commission wherein he made his
stockholder proposal publicly available.
Mr. Lame attacks management and states stockholders are being "punished by
a decrease in the value of their Lenox shares." However, the Company's per share
market price fell following the Company's most recent stock repurchase program,
which was approved by Mr. Lame, and has thereafter remained relatively stable.
The Board believes there is no evidence that lack of performance caused the
decrease in the value of the Company's shares referenced by Mr. Lame.
As for Mr. Lame's statements regarding the Company's performance:
o Mr. Lame claims Lenox failed to grow core deposits at "acceptable
rates." HOWEVER, MANAGEMENT EXCEEDED THE BOARD APPROVED DEPOSIT
GROWTH GOALS SET FOR 1999. SPECIFICALLY, DEPOSITS INCREASED OVER 19%
FOR THE YEAR ENDED DECEMBER 31, 1999.
o Mr. Lame claims Lenox failed to grow net interest margin and
non-interest income. IN FACT, LENOX HAS WORKED TO DIVERSIFY THE LOAN
PORTFOLIO IN AN EFFORT TO IMPROVE NET INTEREST MARGIN. THIS
DIVERSIFICATION INCLUDES THE ADDING OF MULTI-FAMILY REAL ESTATE
LOANS, WHICH HAVE THE EFFECT OF ENHANCING NET INTEREST MARGIN
WITHOUT A SIGNIFICANT INCREASE IN CREDIT RISK. MULTI-FAMILY LOANS
INCREASED OVER 290% FROM $1.6 MILLION FOR YEAR ENDED DECEMBER 31,
1998 TO $6.3 MILLION FOR THE YEAR ENDED DECEMBER 31, 1999.
FURTHERMORE, LENOX HAS ALSO SIGNIFICANTLY IMPROVED ITS NON-INTEREST
INCOME FROM $102,356, $153,555 AND $130,988 FOR THE YEARS ENDED
1995, 1996 AND 1997 RESPECTIVELY TO $291,513 AND $235,719 FOR THE
YEARS ENDED 1998 AND 1999.
o Mr. Lame claims Lenox has failed to meet "economic objectives"
required to reinvest in either its Ivorydale headquarters or other
proposed branch locations. IN FACT, NO "ECONOMIC OBJECTIVES" WERE
SET BY THE BOARD. CONSEQUENTLY, THE BOARD BELIEVES MR. LAME HAS NO
REASONABLE BASIS FOR MAKING THIS STATEMENT.
11
<PAGE> 15
o Mr. Lame claims Lenox has failed to grow earnings per share and
return on equity at a rate "acceptable to shareholders." IN FACT, IN
MAY 1999, DIRECTOR LAME WAS COMMITTED TO SETTING CERTAIN ROE TARGETS
TO BE ACHIEVED OVER THE NEXT THREE YEARS.
-----
o Mr. Lame claims Lenox has failed to generate adequate profits to
"fund an attractive and growing dividend." MR. LAME HAS FAILED AS A
DIRECTOR TO SET ANY GUIDELINES FOR WHAT AN "ATTRACTIVE" DIVIDEND
WOULD BE AND FAILS TO IDENTIFY HIS VIEWS ON THAT POINT IN HIS
SUPPORTING STATEMENT.
o Mr. Lame claims Lenox has failed to provide a liquid and
attractively priced market for its shares relative to its
liquidation value. THE BOARD BELIEVES THAT GIVEN THE LIMITED NUMBER
OF SHARES OUTSTANDING, MR. LAME SHOULD UNDERSTAND THAT A "LIQUID"
MARKET FOR THE COMPANY'S COMMON STOCK IS NOT LIKELY ACHIEVABLE
REGARDLESS OF THE COMPANY'S PERFORMANCE. ALSO, ALL THRIFT AND BANK
STOCKS HAVE SUFFERED TREMENDOUSLY IN THIS MARKET. THE MARCH 20, 2000
ISSUE OF TIME MAGAZINE SAID "INTEREST-RATE FEARS HAVE PUMMELED
FINANCIAL STOCKS." A MARCH 13, 2000 ARTICLE IN BARRONS NOTED THAT
THRIFT STOCKS "WERE NOT ONLY THE WORST PERFORMERS AMONG THE BATTERED
FINANCIAL SECTOR IN 1998 AND 1999, BUT ALSO SUBSTANTIALLY
UNDERPERFORMED ALL MAJOR MARKET INDICES." THE BOARD BELIEVES THE
COMPANY'S STOCK IS NOT TRADING AT A DISPROPORTIONATE DISADVANTAGE TO
THE STOCK OF OTHER SIMILARLY SITUATED COMPANIES.
o Mr. Lame claims Lenox has failed to attract and maintain management
capable of developing plans and achieving its business objectives.
IN FACT, DIRECTOR LAME PREPARED A MEMORANDUM AND PRESENTED IT TO THE
STRATEGIC PLANNING COMMITTEE IN FEBRUARY 1999 WHEREIN HE STATED THAT
LENOX HAD A "COMMITTED AND EXPERIENCED SENIOR MANAGEMENT TEAM" AND A
"FULLY FUNCTIONING BOARD OF DIRECTORS." BASED ON THE "REASONS FOR
CONVERSION" IN THE COMPANY'S PROSPECTUS, WHICH WAS DISTRIBUTED IN
CONNECTION WITH THE COMPANY'S INITIAL PUBLIC OFFERING, LENOX HAS
BEEN ACHIEVING ITS BUSINESS OBJECTIVES, WHICH WERE TO ENHANCE THE
BANK'S ABILITY TO: ATTRACT CUSTOMERS NOT AFFILIATED WITH PROCTER &
GAMBLE; ACCESS CAPITAL MARKETS; INCREASE ITS PRESENCE IN THE
COMMUNITIES IT SERVES THROUGH THE ACQUISITION OR ESTABLISHMENT OF
BRANCH OFFICES, ETC. LENOX HAS DONE THIS WITH ITS HYDE PARK BRANCH
AND NOW WITH THE RELOCATION OF THE BANK'S MAIN OFFICE FACILITY INTO
NORWOOD. ADDITIONALLY, THE COMPANY'S ASSETS HAVE GROWN 62% FROM
$47.0 MILLION IN 1996 FOLLOWING THE CONVERSION TO $76.0 MILLION FOR
THE YEAR ENDED 1999.
o Mr. Lame claims Lenox management has failed to create and maintain a
favorable working relationship with several of its Board of
Directors. IN FACT, THE BOARD AND MANAGEMENT WERE FULLY FUNCTIONAL
AND HELD FAVORABLE WORKING RELATIONSHIPS AS STATED BY MR. LAME IN
HIS OWN MEMORANDUM TO THE STRATEGIC PLANNING COMMITTEE UNTIL SHORTLY
AFTER THE BOARD REFUSED TO PURCHASE SHARES FROM MR. LAME AT A PRICE
WELL ABOVE THE THEN CURRENT MARKET VALUE AND REFUSED TO ADD HIS
PARTNER AS A BOARD MEMBER TO CARRY OUT MR. LAME'S PLEA THAT THE
INTERESTS OF HIS OWN PARTNERSHIP AND HIS FAMILY AND CLIENTS RECEIVE
GREATER REPRESENTATION. AT THAT POINT, MR. LAME BEGAN TAKING ACTIONS
THAT THE BOARD REGARDS AS ADVERSE TO THE COMPANY AND MANAGEMENT.
UNLESS MARKED TO THE CONTRARY, THE SHARES REPRESENTED BY THE ENCLOSED
PROXY WILL BE VOTED "AGAINST" THE STOCKHOLDER PROPOSAL. FOR THE REASONS STATED
ABOVE, THE COMPANY'S BOARD OF DIRECTORS RECOMMENDS YOU VOTE "AGAINST" ADOPTION
OF THIS PROPOSAL.
12
<PAGE> 16
- ------------------------------------------------------------------------------
MISCELLANEOUS
- ------------------------------------------------------------------------------
The Company's Annual Report to Stockholders has been mailed to
stockholders of record as of the close of business on April 21, 2000. Any
stockholder who has not received a copy of the Annual Report may obtain a copy
by writing to the Secretary of the Company. The Annual Report is not to be
treated as part of the proxy solicitation material or as having been
incorporated herein by reference.
A COPY OF THE COMPANY'S FORM 10-KSB FOR THE FISCAL YEAR ENDED DECEMBER 31,
1999, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION, WILL BE FURNISHED
WITHOUT CHARGE TO STOCKHOLDERS AS OF THE CLOSE OF BUSINESS ON APRIL 21, 2000
UPON WRITTEN REQUEST TO DIANE P. HUNT, CORPORATE SECRETARY, LENOX BANCORP, INC.,
4730 MONTGOMERY ROAD, NORWOOD, OHIO 45212.
- ------------------------------------------------------------------------------
STOCKHOLDER PROPOSALS
- ------------------------------------------------------------------------------
To be considered for inclusion in the Company's proxy statement and form
of proxy relating to the 2001 annual meeting of stockholders, a stockholder
proposal must be received by the Secretary of the Company at the address set
forth on the notice of annual meeting of stockholders not later than December
30, 2000. If such annual meeting is held on a date more than 30 calendar days
from May 24, 2001, a stockholder proposal must be received by a reasonable time
before the proxy solicitation for such annual meeting is made. Any such proposal
will be subject to 17 C.F.R. ss. 240.14a-8 of the Rules and Regulations under
the Securities Exchange Act of 1934.
The Code of Regulations provide an advance notice procedure for a
stockholder to properly bring business before an annual meeting. The stockholder
must give written advance notice to the Secretary of the Company not less than
thirty (30) days prior to the meeting; PROVIDED, HOWEVER, that in the event that
less than forty (40) days notice or prior public disclosure of the date of the
meeting is given or made to stockholders, notice by the stockholder must be
received not later than the close of business on the fifth day following the
date on which the Company's notice to stockholders of the annual meeting date
was mailed or such public disclosure was made. In order for the notice of a
stockholder proposal for consideration at the Company's 2001 annual meeting of
stockholders to be timely, the Company would have to receive such notice not
later than April 24, 2001 assuming the 2001 annual meeting is held on May 24,
2001 and that the Company provides at least 40 days notice or public disclosure
of the date of the meeting. The advance notice by stockholders must include the
stockholder's name and address, as they appear on the Company's record of
stockholders, a brief description of the proposed business, the reason for
conducting such business at the annual meeting, the class and number of shares
of the Company's capital stock that are beneficially owned by such stockholder
and any material interest of such stockholder in the proposed business. Nothing
in this paragraph shall be deemed to require the Company to include in its proxy
statement or the proxy relating to any annual meeting any stockholder proposal
which does not meet all of the requirements for inclusion established by the SEC
in effect at the time such proposal is received.
BY ORDER OF THE BOARD OF DIRECTORS
/s/ Diane P. Hunt
Diane P. Hunt
CORPORATE SECRETARY
Norwood, Ohio
April 29, 2000
13
<PAGE> 17
[FRONT SIDE]
REVOCABLE PROXY
LENOX BANCORP, INC.
ANNUAL MEETING OF STOCKHOLDERS
May 24, 2000
2:30 p.m. Eastern Time
-------------------------------
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints the official proxy committee of the Board
of Directors of Lenox Bancorp, Inc. (the "Company"), consisting of Henry E.
Brown, Virginia M. Deisch and Reba St. Clair, with full power of substitution,
to act as proxies for the undersigned and to vote all shares of Common Stock of
the Company which the undersigned is entitled to vote only at the Annual Meeting
of Stockholders, to be held on May 24, 2000, at 2:30 p.m. Eastern Time, at the
Company's administrative office, 4730 Montgomery Road, Norwood, Ohio, and at any
and all adjournments thereof, as follows:
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1.
1. The ratification of the appointment of Clark, Schaefer, Hackett & Co.
as independent auditors of Lenox Bancorp, Inc. for the fiscal year
ending December 31, 2000.
FOR AGAINST ABSTAIN
--- ------- -------
/_/ /_/ /_/
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "AGAINST" PROPOSAL 2.
2. The stockholder proposal as set forth in the proxy statement, if
presented at the meeting.
FOR AGAINST ABSTAIN
--- ------- -------
/_/ /_/ /_/
<PAGE> 18
[BACK SIDE]
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
THIS PROXY IS REVOCABLE AND WILL BE VOTED AS DIRECTED, BUT IF NO
INSTRUCTIONS ARE SPECIFIED, THIS PROXY WILL BE VOTED "FOR" PROPOSAL 1 AND
"AGAINST" PROPOSAL 2. IF ANY OTHER BUSINESS IS PRESENTED AT THE ANNUAL MEETING,
INCLUDING WHETHER OR NOT TO ADJOURN THE MEETING, THIS PROXY WILL BE VOTED BY
THOSE NAMED IN THIS PROXY IN THEIR BEST JUDGMENT. AT THE PRESENT TIME, THE BOARD
OF DIRECTORS KNOWS OF NO OTHER BUSINESS TO BE PRESENTED AT THE ANNUAL MEETING.
The undersigned acknowledges receipt from the Company prior to the
execution of this proxy of a Notice of Annual Meeting of Stockholders and of a
Proxy Statement dated April 29, 2000 and of the Annual Report to Stockholders.
Please sign exactly as your name appears on this card. When signing as
attorney, executor, administrator, trustee or guardian, please give your full
title. If shares are held jointly, each holder may sign but only one signature
is required.
Dated:___________________________
--------------------------------
SIGNATURE OF STOCKHOLDER
--------------------------------
SIGNATURE OF STOCKHOLDER
-----------------------------
PLEASE COMPLETE, DATE, SIGN AND PROMPTLY MAIL THIS PROXY
IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
