<PAGE>1
LNB BANCORP, INC.
LORAIN, OHIO
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO THE SHAREHOLDERS OF
LNB BANCORP, INC. March 20, 2000
The Annual Meeting of Shareholders of LNB Bancorp, Inc. (hereinafter
called the "Corporation") will be held at 521 Broadway, Lorain, Ohio
44052, on Tuesday, April 18, 2000 at 10:00 a.m., Eastern Daylight Savings
Time, for the purpose of considering and voting upon the following matters
as more fully-described in the Proxy Statement.
PROPOSALS:
1. ELECTION OF DIRECTORS To elect four (4) directors to hold
office until their term expires (April 22, 2003) or until their
successors are elected and qualified.
2. AMEND ARTICLES OF INCORPORATION AND CODE OF REGULATIONS AS MORE
FULLY DESCRIBED UNDER THE FOLLOWING SUBHEADINGS AND IN THE PROXY
STATEMENT:
a) Amend and restate Articles of Incorporation to simplify and
update language as authorized by Ohio law; which amendments
would not affect shareholders' rights;
b) State in the Articles of Incorporation that one of the
purposes for which the Corporation is formed is to qualify
and act as a "financial holding company" as defined by the
Gramm-Leach-Bliley Act of 1999;
c) Removal of fair price and super majority vote provisions
as currently stated in Articles XIII and XIV of the Articles
of Incorporation and relocate such provisions to the Code of
Regulations;
d) Amend and restate Code of Regulations to simplify and update
language as authorized by Ohio law; which amendments would
not affect shareholders' rights;
e) Provide that the number of directors on the Board of
Directors may periodically be changed and authorize the Board
of Directors to fill terms of directorships created by the
Board of Directors;
<PAGE>2
f) Provide that directors and members of board committees may be
entitled to compensation and reimbursement for additional
expenses as the Board of Directors periodically determines in
its sole discretion; and
g) Provide for indemnification of shareholders, directors,
officers, employees and agents from claims arising from acts
of the Corporation or others acting on behalf of the
Corporation.
AN AFFIRMATIVE VOTE FOR PROPOSAL 2 TO AMEND THE ARTICLES OF
INCORPORATION AND THE CODE OF REGULATIONS WILL BE AN AFFIRMATIVE VOTE
FOR ALL SUBHEADINGS UNDER PROPOSAL 2-SUBHEADINGS 2(a) THROUGH 2(g).
3. OTHER BUSINESS To transact any other business that may
properly come before the Meeting or any adjournment thereof.
Shareholders of record at the close of business on March 6, 2000,
will be entitled to vote the number of shares held of record in their
names on that date. The transfer books will not be closed.
We urge you to sign and return the enclosed proxy as promptly as
possible, whether or not you plan to attend the meeting in person. This
proxy may be revoked prior to its exercise.
By Order of the Board of Directors
/s/Thomas P. Ryan
Thomas P. Ryan
Executive Vice President
and Secretary/Treasurer
YOUR VOTE IS IMPORTANT. PLEASE MARK, SIGN, DATE AND MAIL THE ENCLOSED
PROXY FORM(S) WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING. A
RETURN ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE.
2
<PAGE>3
LNB BANCORP, INC.
457 BROADWAY
LORAIN, OHIO 44052
PROXY STATEMENT
MARCH 20, 2000
This proxy solicitation is made on behalf of the Board of Directors of
LNB Bancorp, Inc. (hereinafter called the "Corporation") being a one-bank
holding company owning all of the stock of The Lorain National Bank
(hereinafter called the "Bank"). As of this date, the number of shares of
Common Stock outstanding and entitled to vote at the Annual Meeting of
Shareholders to be held on April 18, 2000, is 4,127,161. Only those
shareholders of record at the close of business on March 6, 2000 shall be
entitled to vote. This proxy may be revoked prior to its exercise. This
Proxy Statement and the related Proxy Card are being mailed to
shareholders of the Corporation on or about March 16, 2000. The cost of
this solicitation is being paid by the Corporation.
VOTING
Each shareholder shall be entitled to one (1) vote for each share of
stock standing in their name on the books of the Corporation. No holder
of shares of any class shall have the right to vote cumulatively in the
election of directors.
Shares held in accounts by the Bank's Investment Management and Trust
Services Division will be voted by the trustee in accordance with written
instructions from account administrators or account plan participants, and
where no instructions are received, as the trustee deems proper.
Shares of Common Stock represented by proxies in the accompanying form
which are properly executed and returned to the Corporation will be voted
at the Annual Meeting of Shareholders in accordance with the shareholders'
instructions contained in such proxies. Where no such instructions are
given, the shares will be voted for the election of directors as described
herein, and in support of proposal two (2), and at the discretion of the
proxies on such other matters as may come before the meeting. The
Board of Directors has no reason to believe that any of the nominees will
be unable to serve as a director. In the event, however, of the death or
unavailability of any nominee or nominees, the proxy to that extent will
be voted for such other person or persons as the Board of Directors may
recommend.
The results of votes taken at the Annual Meeting will be disclosed in
the Corporation's First Quarterly Report for 2000 on Form 10-Q, as filed
with the Securities and Exchange Commission (SEC). The disclosure will
include for each proposal the number of votes for, the number of votes
against, and the number of abstentions. In addition, the disclosure will
set forth the number of votes received by each candidate running for a
directorship and the percentage of these votes as to the total shares
outstanding.
3
<PAGE>4
ELECTION OF DIRECTORS
Article III of the Code of Regulations of the Corporation provides that
directors are to be divided into three (3) classes. Each class serves a
term of three (3) years, or until their respective successors are elected
and qualified. In that the term of office for five (5) members of the
present Board of Directors will expire on April 18, 2000, the Board of
Directors has nominated the hereinafter-named four (4) individuals for
election to serve until April 22, 2003, or until their successors are
elected and qualified. The Board of Directors does not have a nominee to
replace the director position that will be vacated by Mr. Paul T. Stack.
Due to personal reasons, Mr. Stack has decided not to stand for
reelection. At some future time the vacancy may be filled in accordance
with the provisions of the Code of Regulations.
The affirmative vote of the holders of at least a majority of a quorum
is required in order to elect each director. Under the Code of
Regulations of the Corporation, a quorum is constituted by the presence,
in person or by proxy, of a majority of the voting power of the
Corporation.
Other nominations may be made only in accordance with the notice
procedures set forth in Article III of the Code of Regulations of the
Corporation. The procedure states that nominations for election to the
Board of Directors may be made by the Board of Directors or by any
shareholder of any outstanding class of capital stock of the Corporation
entitled to vote for the election of directors. Nominations, other than
those made by or on behalf of the existing Board of Directors of the
Corporation, shall be made in writing and shall be delivered or mailed to
the President of the Corporation not less than fourteen (14) days nor more
than fifty (50) days prior to any meeting of shareholders called for the
election of directors; provided, however, that if less than twenty-one
(21) days' notice of the meeting is given to shareholders, such nomination
shall be mailed or delivered to the President of the Corporation no later
than the close of business on the seventh (7th) day following the day on
which the notice of the meeting was mailed. Such notification shall
contain the following information as to the extent known to the notifying
shareholder: (a) the name and address of each proposed nominee; (b) the
principal occupation of each proposed nominee; (c) the total number of
shares of common stock of the Corporation that will be voted for each
proposed nominee; (d) the name and resident address of the notifying
shareholder; and (e) the number of shares of common stock of the
Corporation owned by the notifying shareholder. Nominations not made in
accordance herewith may, at his discretion, be disregarded by the Chairman
of the meeting, and upon his instructions, the vote teller may disregard
all votes cast for each such nominee.
Unless otherwise instructed, it is the intention of the persons named in
the proxy to vote for the election of the following four (4) nominees:
1) Robert M. Campana
2) James F. Kidd
3) Jeffrey F. Riddell
4) Thomas P. Ryan
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF EACH
NOMINEE.
4
<PAGE>5
The following individuals are directors whose term of office is scheduled
to expire on April 17, 200l:
1) Daniel P. Batista
2) David M. Koethe
3) Stanley G. Pijor
4) Eugene M. Sofranko
5) Leo Weingarten
The following individuals are directors whose term of office is scheduled
to expire on April 23, 2002:
1) Terry D. Goode
2) Wellsley O. Gray
3) James R. Herrick
4) Benjamin G. Norton
5) John W. Schaeffer, M.D.
6) Gary C. Smith
DIRECTORS' COMMITTEES
The Bank has six (6) standing committees upon which members of the Board
of Directors serve. They are:
1) The Audit Committee 4) The Pension/Fringe Benefit Committee
2) The Executive Committee 5) The Incentive Stock Option Committee
3) The Trust Committee 6) The Compensation Committee
Membership of each of these committees is indicated below.
The Audit Committee met three (3) times during the last fiscal year.
It establishes policies for the administration of the Bank's Audit
Division. The Executive Committee met twelve (12) times during the last
fiscal year. This committee is authorized to approve matters relating to
loans, the purchase of bills, notes, and other evidence of debt. The
Trust Committee reviews the various trusts accepted by the Bank's Trust
and Investment Management Division. It held six (6) meetings during the
last fiscal year. The Pension/Fringe Benefit Committee reviews indirect
compensation of officers and employees. It did not meet during the last
fiscal year. The Incentive Stock Option Committee determines who will
receive stock options and the number of shares to be granted under the
terms of the Incentive Stock Option Plan. The actions of the Incentive
Stock Option Committee are subject to the approval of the Compensation
Committee. It did not meet during the last fiscal year. The Compensation
Committee meets to review all officers' salaries. It held one (1) meeting
during the last fiscal year. The Bank does not have a designated
Nominating Committee. Nominees for the Board of Directors are determined
by a vote of the total Board of Directors.
5
<PAGE>6
The Bank held fifteen (15) Board of Directors meetings during the
last fiscal year. Of the directors who served during 1999, Leo Weingarten
attended fewer than 75% of the total number of meetings of the Board of
Directors and all committee meetings of which the aforementioned director
was a member.
The Corporation held fifteen (15) Board of Directors meetings during
the last fiscal year. Of the directors who served during 1999, Leo
Weingarten attended fewer than 75% of the total of fifteen (15) meetings
held.
DIRECTOR'S COMPENSATION
Each outside director of the Bank is entitled to receive an annual
retainer fee of $5,000. Bank officers, who are also directors of the
Bank, do not receive an annual retainer fee.
All of the directors of the Corporation are also directors of the Bank.
A director's fee of $500 is paid to outside directors for each meeting
attended. Directors, who are also officers of the Corporation, receive a
fee of $250 for their attendance at the Corporation's board meetings and
receive no director's fees for their attendance at the meetings of the
Bank's board.
Mr. Stanley G. Pijor entered into a Consulting Agreement with the Bank
and the Corporation dated March 15, 1994. The Consulting Agreement
provides that Mr. Pijor shall receive a consulting fee of $85,000 each
year for a period of five (5) years commencing January 1, 1996. The
Consulting Agreement also stipulates that Mr. Pijor will be provided with
an automobile and will be reimbursed for reasonable expenses relative to
his duties as a consultant during the term of the Consulting Agreement.
Termination of the Consulting Agreement (by either party) would not
prejudice Mr. Pijor's right to receive the benefits referred to above for
a period of up to two (2) years. Mr. Pijor was also a party to a
Supplemental Retirement Agreement entered into with the Bank on December
31, 1987. Under the terms of this Supplemental Retirement Agreement, Mr.
Pijor shall receive an annual supplemental retirement benefit in the
amount of $50,000 for a period of ten (10) years. The payment of these
supplemental retirement benefits commenced in January of 1996.
BANK CORPORATION
PRINCIPAL OCCUPATION DIRECTOR DIRECTOR
NAME AND AGE FOR THE PAST FIVE YEARS SINCE SINCE
DANIEL P. BATISTA ATTORNEY/SHAREHOLDER 1976 1983
Age 65 Cook and Batista Co., L.P.A.(A)
(2-3-5-6)
ROBERT M. CAMPANA MANAGING DIRECTOR 1996 1996
Age 40 P.C. Campana Inc.
(1-3-5-7)
TERRY D. GOODE VICE PRESIDENT 1997 1997
Age 45 Lorain County Title Company
(1-7)
6
<PAGE>7
BANK CORPORATION
PRINCIPAL OCCUPATION DIRECTOR DIRECTOR
NAME AND AGE FOR THE PAST FIVE YEARS SINCE SINCE
WELLSLEY O. GRAY RETIRED 1973 1983
Age 66
(1-3)
JAMES R. HERRICK PRESIDENT 1999 1999
Age 48 Liberty Auto Group, Inc.
(1)
JAMES F. KIDD VICE CHAIRMAN OF THE BOARD 1989 1989
Age 60 LNB Bancorp, Inc. and
(2-3-4) The Lorain National Bank
DAVID M. KOETHE RETIRED, FORMER CHAIRMAN 1975 1983
Age 64 The Lorain Printing Company(B)
(2-3-4-5-6)
BENJAMIN G. NORTON HUMAN RESOURCE CONSULTANT 1983 1983
Age 60 LTI Power Systems
(1-2-3-7)
STANLEY G. PIJOR CHAIRMAN OF THE BOARD 1969 1983
Age 69 LNB Bancorp, Inc. and
(2-3-4-5-6) The Lorain National Bank
JEFFREY F. RIDDELL PRESIDENT AND 1995 1995
Age 48 CHIEF EXECUTIVE OFFICER
(1-2-4-5-6) Consumeracq, Inc.
Consumers Builders Supply Company
THOMAS P. RYAN EXECUTIVE VICE PRESIDENT 1989 1989
Age 61 AND SECRETARY/TREASURER
LNB Bancorp, Inc.
EXECUTIVE VICE PRESIDENT
AND SECRETARY
The Lorain National Bank
JOHN W. SCHAEFFER, PRESIDENT 1999 1999
M.D. North Ohio Heart Center, Inc.
Age 54
(3)
GARY C. SMITH PRESIDENT AND 1999 1999
Age 52 CHIEF EXECUTIVE OFFICER
(2-3-4) LNB Bancorp, Inc. and
The Lorain National Bank
7
<PAGE>8
BANK CORPORATION
PRINCIPAL OCCUPATION DIRECTOR DIRECTOR
NAME AND AGE FOR THE PAST FIVE YEARS SINCE SINCE
EUGENE M. SOFRANKO PRESIDENT AND 1974 1983
Age 69 CHIEF EXECUTIVE OFFICER
(1-2-4-5-6) Lorain Glass Company, Inc.
PAUL T. STACK* RETIRED 1974 1983
Age 70
(1-3)
LEO WEINGARTEN RETIRED 1964 1983
Age 80
(2-4-5-6)
(1) Member of Audit Committee (5) Member of Incentive Stock Option
(2) Member of Executive Committee Committee
(3) Member of Trust Committee (6) Member of Compensation Committee
(4) Member of Pension/Fringe Benefit (7) Alternate Member of Executive
Committee and Compensation Committees
(A) The Bank has retained the law firm of Cook and Batista Co., L.P.A. as
legal counsel for the last several years. During the last fiscal
year, the Bank has paid to Cook and Batista, Co., L.P.A., an amount
of $165,069. It is anticipated that this relationship will continue
during the current fiscal year.
(B) During the last fiscal year, the Bank has paid to The Lorain Printing
Company an amount of $110,501 for printing services and supplies. It
is anticipated that such business relationship will continue during
the current fiscal year.
*In February of 2000, Mr. Paul T. Stack advised the Corporation and Bank
that due to personal reasons he decided not to stand for reelection to the
Board of Directors. Mr. Stack has served as a member of the Board of
Directors of the Bank since 1974 - a period of 26 years. The Management
of the Bank, as well as the Board of Directors, wish to take this
opportunity to formally acknowledge and thank Mr. Stack for his faithful
and meritorious service which has contributed much to the Corporation and
Bank's progress and success.
EXECUTIVE COMPENSATION
LNB Bancorp, Inc. did not pay any separate compensation, other than
the Corporation's directors' fees, to its executive officers during 1999,
1998 and 1997. All executive compensation was paid by the Bank. The
information which follows discloses the annual and long-term compensation
for services in all capacities to the Corporation and the Bank for the
fiscal years
8
<PAGE>9
ended December 31, 1999, 1998 and 1997, for each person who served as the
chief executive officer during 1999, and the four most highly-compensated
executive officers who made in excess of $100,000 during 1999 (the "Named
Executive Officers").
SUMMARY COMPENSATION TABLE
The Named Executive Officers disclosure requirements affect the Chief
Executive Officer and those four (4) executive officers earning more than
$100,000 in salary and bonuses. In 1999, 1998 and 1997, Mr. James F.
Kidd, President and Chief Executive Officer*, Mr. Thomas P. Ryan,
Executive Vice President and Secretary/Treasurer, and Gregory D. Friedman,
Executive Vice President and Chief Financial Officer, met the criteria for
disclosure. In 1999, Mr. Gary C. Smith, President and Chief Executive
Officer*, Ms. Emma N. Mason, Senior Vice President and Senior Trust
Officer and Ms. Sandra L. Dubell, Senior Vice President and Senior Lending
Officer, met the criteria for disclosure.
The following table discloses the annual salary, bonuses and all other
compensation awards and payouts for services in all capacities to the
Corporation and the Bank for the fiscal years ended December 31, 1999,
1998 and 1997.
Compensation (1)
---------------------------------------------------
Annual
Name and ------------------------------------ All
Principal Position Year Salary Bonuses Other (2)
- -------------------------------------------------------------------------
James F. Kidd 1999 $229,336 $33,750 $25,444
President and 1998 $207,661 $ 0 $16,887
Chief Executive Officer* 1997 $180,962 $42,000 $22,441
Gary C. Smith** 1999 $124,094 $31,188 $ 817
President and
Chief Executive Officer*
Thomas P. Ryan 1999 $124,521 $18,225 $21,809
Executive Vice President and 1998 $119,226 $ 0 $15,213
Secretary/Treasurer 1997 $109,250 $16,350 $18,752
Gregory D. Friedman 1999 $114,109 $15,900 $12,031
Executive Vice President and 1998 $102,485 $ 0 $ 7,000
Chief Financial Officer 1997 $ 91,021 $13,365 $11,078
Emma N. Mason 1999 $102,093 $14,820 $12,681
Senior Vice President and
Senior Trust Officer
Sandra L. Dubell 1999 $ 89,301 $13,125 $ 9,324
Senior Vice President and
Senior Lending Officer
9
<PAGE>10
(1) The aggregate of other annual compensation is less than 10% of the
total of annual salary and bonus for all individuals for all years
presented and, therefore, is not required to be reported under the
SEC rules.
(2) All other compensation consisted of the following:
James F. Kidd: 1999 1998 1997
Contribution, in Mr. Kidd's behalf to:
The Bank's Stock Purchase Plan $5,000 $5,000 $ 4,800
The Bank's Employee Stock Ownership Plan $9,384 $5,137 $11,141
Mr. Kidd's Supplemental Life Insurance $2,600 $2,250 $ 2,250
Corporation director's fees $6,750 $4,500 $ 4,250
Anniversary Stock Award $1,710
Gary C. Smith** 1999
Contribution, in Mr. Smith's behalf to:
Mr. Smith's Supplemental Life Insurance $ 567
Corporation director's fees $ 250
Thomas P. Ryan: 1999 1998 1997
Contribution, in Mr. Ryan's behalf to:
The Bank's Stock Purchase Plan $4,192 $3,472 $ 3,768
The Bank's Employee Stock Ownership Plan $8,372 $3,828 $ 8,746
Mr. Ryan's Supplemental Life Insurance $2,745 $3,413 $ 2,238
Corporation director's fees $6,500 $4,500 $ 4,000
Gregory D. Friedman: 1999 1998 1997
Contribution, in Mr. Friedman's behalf to:
The Bank's Stock Purchase Plan $3,779 $2,981 $ 3,132
The Bank's Employee Stock Ownership Plan $7,625 $3,290 $ 7,269
Mr. Friedman's Supplemental Life Insurance $ 627 $ 729 $ 677
Emma N. Mason: 1999
Contribution, in Ms. Mason's behalf to:
The Bank's Stock Purchase Plan $3,409
The Bank's Employee Stock Ownership Plan $6,857
Ms. Mason's Supplemental Life Insurance $2,415
Sandra L. Dubell: 1999
Contribution, in Ms. Dubell's behalf to:
The Bank's Stock Purchase Plan $2,516
The Bank's Employee Stock Ownership Plan $6,007
Ms. Dubell's Supplemental Life Insurance $ 801
10
<PAGE>11
*On December 21, 1999, Gary C. Smith was appointed to succeed retiring
President and Chief Executive Officer, James F. Kidd.
**Hired May 3, 1999
STOCK OPTIONS GRANTED IN 1999
Individual Grants
- --------------------------------------------------------------------------
Number of % of Total
Securities Underlying Options/Stock
Options/Stock Appreciation Rights
Appreciation Rights Granted to Employees Exercise
Name Granted (#)* in 1999 Price
- --------------------------------------------------------------------------
Gary C. Smith 10,000 options 100% $30.00
President and
Chief Executive
Officer
LNB Bancorp, Inc.
Potential Realized Value at
Assumed Annual Rates of
Stock Price Appreciation
For Option Term
- --------------------------------------------------------------------------
Expiration
Date 5% 10%
- --------------------------------------------------------------------------
May 3, 2009 $115,400 $348,400
In 1999, the Corporation entered into a non-qualified incentive stock
option agreement with Gary C. Smith. Under this non-qualified incentive
stock option agreement, 10,000 shares were granted May 3, 1999. The
incentive stock options must be exercised within 10 years from the grant
date with 100% vesting from the grant date.
LONG-TERM INCENTIVE PLAN AWARD TABLE (last fiscal year)
There were no long-term incentive plans or plan awards in 1999.
OPTION EXERCISES AND YEAR-END VALUE TABLE (last fiscal year)
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUE
Value of
Number of Unexercised
Unexercised In-the-Money
Shares Option Shares Option Shares
Acquired Value at FY-End (#) at FY-End ($)
on Realized Exercisable/ Exercisable/
Name Exercise (#) ($) (1) Unexercisable Unexercisable (1)
- --------------------------------------------------------------------------
James F. Kidd 2,143 $13,187 0/0 $0/$0
Gary C. Smith 0 0 10,000/0 $0/$0
Thomas P. Ryan 2,143 $13,187 0/0 $0/$0
Gregory D. Friedman 0 0 2,985/0 $3,668/$0
Emma N. Mason 0 0 0/0 $0/$0
Sandra L. Dubell 0 0 971/0 $2,334/$0
11
<PAGE>12
(1) Market value of underlying securities at exercise date or year end,
as the case may be, minus the exercise or price of "in-the-money"
options.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of: Daniel P. Batista, David M.
Koethe, Benjamin G. Norton, Stanley G. Pijor, Jeffrey F. Riddell, Eugene
M. Sofranko, and Leo Weingarten. Mr. Batista is a shareholder of the law
firm of Wickens, Herzer, Panza, Cook & Batista, formerly known as Cook and
Batista Co., L.P.A., which performs legal services for the Bank. During
1999, the Bank paid to Cook and Batista Co., L.P.A. legal fees in the
amount of $165,069. The amount of Mr. Batista's interest in such fees
cannot be practicably determined. Mr. Koethe is the former Chairman of
the Board of The Lorain Printing Company. During 1999, the Bank paid to
The Lorain Printing Company an amount of $110,501 for printing services
and supplies. The amount of Mr. Koethe's interest in such payments cannot
be practicably determined. Mr. Stanley G. Pijor entered into a Consulting
Agreement with the Bank dated March 15, 1994. The Consulting Agreement
provides that Mr. Pijor shall receive a consulting fee of $85,000 each
year for a period of five (5) years, commencing on January 1, 1996. The
Consulting Agreement also stipulates that Mr. Pijor will be provided with
an automobile and will be reimbursed for reasonable expenses relative to
his duties as a consultant during the term of the Consulting Agreement.
Mr. Pijor was also a party to a Supplemental Retirement Agreement entered
into with the Bank on December 31, 1987. Under the terms of this
Supplemental Retirement Agreement, Mr. Pijor shall receive supplemental
retirement benefits in the amount of $50,000 per year, for a period of ten
(10) years. The payment of these supplemental retirement benefits
commenced in January of 1996.
COMPENSATION COMMITTEE REPORT
The Bank's Compensation Committee has the responsibility of evaluating
and recommending to the Board of Directors, for its approval, the amount
of compensation, including salary, bonus, and other benefits, for all
officers of the Bank, including the Named Executive Officers and the Chief
Executive Officer.
It is the philosophy and policy of the Compensation Committee to
establish a compensation program for Bank officers to attract, motivate
and retain a highly qualified management team. The criteria used to
determine the recommended compensation of Bank officers includes their
level of responsibility, performance, experience, the Committee's judgment
as to the past performance and expected further contribution. A
comparison to the industry peer group as well as national and regional
surveys is also used. In addition, Messrs. James F. Kidd and Gary C.
Smith, as the Bank's Chief Executive Officers, evaluate the performance of
the other officers and present their evaluations and salary
recommendations for all officers, other than themselves and the Bank's
Internal Auditor (whose compensation is determined by the Bank's Audit
Committee), to the Compensation Committee. The Compensation Committee is
also advised by independent compensation consultants concerning
compensation of Bank officers. Based upon the foregoing, the Compensation
Committee prepares a report on recommended base salaries for all officers.
In addition, in some cases, the
12
<PAGE>13
Compensation Committee recommends bonuses for certain officers of the Bank
based upon the attainment of preestablished performance goals. The
recommendations of the Compensation Committee regarding base salaries and
bonuses for all officers are subject to approval by the Board of
Directors.
As to each person who served as the Chief Executive Officer during 1999,
Messrs. James F. Kidd's and Gary C. Smith's compensations including
salary, bonus, and other benefits is also based upon a recommendation of
the Compensation Committee, which is then approved by the Board of
Directors. The factors and criteria considered by the Compensation
Committee included the pay level for CEOs of comparable banks, the
financial performance of the Bank, and the individual performance and
leadership of Messrs. Kidd and Smith. Based upon the foregoing, and based
upon the attainment of preestablished performance goals established by the
Compensation Committee, the Compensation Committee recommended a base
salary and bonus for Messrs. Kidd and Smith for 1999, in the amounts set
forth in the Summary Compensation Table, which amounts were approved by
the Board of Directors.
The members of the Compensation Committee are:
Daniel P. Batista Jeffrey F. Riddell
David M. Koethe Eugene M. Sofranko
Benjamin G. Norton Leo Weingarten
Stanley G. Pijor
EMPLOYMENT AGREEMENTS
As of September 1, 1995, Mr. James F. Kidd entered into an Employment
Agreement with the Corporation and the Bank. The Employment Agreement
provides for Mr. Kidd's employment until he reaches the age of 65 as
President. Mr. Kidd shall be compensated at the initial rate of $124,000
with an annual compensation review each year thereafter. Mr. Kidd will
continue to receive his present fringe benefits and such additional
benefits as are set forth in the Bank's Employee Benefit Program. Mr.
Kidd's Employment Agreement was subsequently amended on March 3, 1999. In
addition to other revisions, the amended Employment Agreement provides for
termination by Mr. Kidd without cause at any time by giving the Board of
Directors of the Corporation at least ninety (90) days written notice of
his decision to terminate his Employment Agreement. In August of 1999, Mr.
Kidd provided notification to the Board of Directors of LNB Bancorp, Inc.
and The Lorain National Bank to terminate his Employment Agreement and
that on or about January 1, 2000, he would no longer remain as an active
employee of either of the two entities. Mr. James F. Kidd will remain an
active Director in the position as Vice Chairman of LNB Bancorp, Inc. and
The Lorain National Bank after December 31, 1999.
As of March 16, 1999, Mr. Gary C. Smith entered into an Employment
Agreement with the Corporation and the Bank. The Employment Agreement
provides the conditions for Mr. Smith's employment as Senior Executive
Vice President and subsequent appointment, on or about January 1, 2000, to
President and Chief Executive Officer. Mr. Smith shall be compensated at
the initial annual rate of $185,000 and increased to $200,000 upon
appointment to President and Chief Executive Officer, with an annual
compensation review each year
13
<PAGE>14
thereafter. Mr. Smith will participate in all other Corporate and Bank
employee benefits applicable to executive personnel. The Employment
Agreement provides Mr. Smith with the opportunity to purchase 10,000
shares of common stock of the Corporation under the provisions of an
Incentive Stock Option Agreement entered into on March 16, 1999.
The Employment Agreement provides for termination by the Corporation:
upon death of the employee, for cause, or through its Board of Directors
without cause at any time upon ninety (90) days prior written notice to
employee. The Employment Agreement may be terminated by Mr. Smith: for
cause, without cause by giving the Board of Directors of the Corporation
at least ninety (90) days written notice, or upon "Change in control of
the Corporation". If a "Change in control of the Corporation" occurs, the
Employment Agreement further provides that the Corporation shall pay to
Mr. Smith compensation for a period of two (2) years in an amount equal to
annual wages paid to Mr. Smith in the prior year. Assuming a change in
control were to have taken place at December 31, 1999, the amount payable
to Mr. Smith during the next two (2) years would be approximately
$311,694. Upon the termination of the Employment Agreement by Mr. Smith
due to breach of Employment Agreement by the Corporation, or termination
of the Employment Agreement by the Corporation without cause, the
Corporation shall pay Mr. Smith compensation for a period of one (1) year
in an amount equal to the annual wages paid to Mr. Smith in the prior
year. If the Employment Agreement had been terminated by the Corporation
as of December 31, 1999 due to breach or without cause, Mr. Smith would
have been entitled to compensation for one (1) year in the amount of
approximately $155,847. Upon the termination of the Employment Agreement
by Mr. Smith without cause, Mr. Smith and the Corporation shall be
released of all liabilities.
As of September 1, 1995, Mr. Thomas P. Ryan entered into an Employment
Agreement with the Corporation and the Bank. The Employment Agreement
provides for Mr. Ryan's employment until he reaches the age of 65 as
Executive Vice President. Mr. Ryan shall be compensated at the initial
rate of $97,500 with an annual compensation review each year thereafter.
Mr. Ryan will continue to receive his present fringe benefits and such
additional benefits as are set forth in the Bank's Employee Benefit
Program.
Mr. Ryan's Employment Agreement was subsequently amended on March 3,
1999. The following aspects of the Employment Agreement were amended.
The Employment Agreement provides for termination by the Corporation:
upon death of the employee, for cause, or through its Board of Directors
without cause at any time upon ninety (90) days prior written notice to
employee, and upon disability of the employee. The Employment Agreement
may be terminated by Mr. Ryan: for cause, upon "Change in control of the
Corporation" and upon a material and adverse change of employees: duties
or responsibilities, titles or offices, or membership on the Board of
Directors, with the Corporation as in effect at the date of said amendment
to Employment Agreement. Upon the termination of the Employment Agreement
by the Corporation without cause, or upon the termination of the
Employment Agreement by Mr. Ryan due to: breach of the Employment
Agreement by the Corporation, or a "Change in control of the Corporation",
or upon a material and adverse change of employees: duties or
responsibilities, titles or offices, or membership on the Board of
Directors of the Corporation, the Corporation shall pay Mr. Ryan, provided
he has not yet reached his sixty-third (63) birthday, compensation for a
period of two (2) years in an amount equal to the annual wages paid to Mr.
Ryan in the prior year. Assuming a "Change in control of the Corporation"
were to have taken place at December 31, 1999, or if the Employment
Agreement had been terminated by the
14
<PAGE>15
Corporation or Mr. Ryan for any of the above, the amount payable to Mr.
Ryan during the next two (2) years would be approximately $285,492. During
this two (2) year period, the Corporation shall continue to provide Mr.
Ryan with fringe benefits as described above. If Mr. Ryan is over the age
of sixty-three (63) at the time of termination, annual compensation and
fringe benefits as set forth above shall continue to be paid by the
Corporation to Mr. Ryan until Mr. Ryan reaches the age of sixty-five (65).
Mr. Ryan may elect, at his discretion, to be paid annual compensation
under this provision in a lump sum upon termination. Upon the termination
of the Employment Agreement by Mr. Ryan without cause, Mr. Ryan and the
Corporation shall be released from all liabilities.
PENSION PLAN
The Bank sponsors The Lorain National Bank Retirement Pension Plan (the
"Plan") covering substantially all employees of the Bank. An employee is
eligible to participate on January 1 or July 1 after the attainment of age
twenty-one (21) and completion of one (1) year of service, as defined in
the Plan. For the Plan year ended December 31, 1999, the Bank was not
required to make any contributions to the Plan.
Participants are eligible for normal retirement upon reaching age
sixty-five (65). Annual benefit payments are determined as a percentage
for the five (5) consecutive plan years that yield the highest average
salary. Participants in the Plan prior to January 1, 1989 will have
annual benefits reduced if they have less than fifteen (15) years of
continuous employment upon retirement. Participants who join the Plan
after January 1, 1989 will have benefit payments reduced if they have less
than twenty-five (25) years of continuous employment upon retirement. The
normal form of benefit payment is a joint and survivor annuity. Benefits
become fully vested after a participant has completed five (5) years of
service. The Plan also provides for the payment of early retirement,
death, disability, and deferred vested benefits in the form of a lump sum
distribution, or a monthly annuity.
Annual benefit payments under the provisions of the Plan are computed by
a formula, the factors of which include annual compensation, years of
service and the Social Security taxable wage base.
The Plan was amended, effective January 1, 1995, to allow the payment of
accrued benefits in the form of a lump sum distribution upon retirement at
normal retirement age. The estimated present value of the accrued benefit
using the Plan's actuarial equivalence assumptions for the Named Executive
Officers ranged from $496,000 to $540,000 as of December 31, 1999.
Assuming the participant selects the benefit payable in a ten (10) year
Certain and Life Annuity at normal retirement date, the following table
reflects annual benefits payable to the employee based upon average annual
compensation levels and twenty-five (25) years of service.
15
<PAGE>16
Employee's Annual Estimated Pension
Final Average Payments Assuming Minimum of
Annual Compensation 25 Years of Service
$250,000* $80,628
200,000* 80,628
160,000 80,628
100,000 48,372
*The current annual compensation limit with respect to determining an
employee's annual pension payment is currently limited by the Internal
Revenue Code to $160,000. The Plan reflects the annual compensation limit
and this results in a maximum annual pension payment of $80,628.
Therefore, an employee's annual estimated pension payment for final
average compensation levels of $160,000 and above remains at the $80,628
level. Pension benefits accrued prior to 1995 are grandfathered, if their
calculated benefit is greater than $80,628. These pension payments do not
reflect any additional retirement benefits which the employee may receive
in the form of Social Security and other forms of supplemental retirement
benefits. Messrs. James F. Kidd, Gary C. Smith, Thomas P. Ryan, Gregory
D. Friedman and Ms. Emma N. Mason and Ms. Sandra L. Dubell have
thirty-five (35), zero (0), thirty-eight (38), fourteen (14), twenty-one
(21) and twenty-eight (28) years of service respectively, under the
provisions of the Plan.
Benefit payments under the provisions of the Plan are computed using
formulas, the factors of which include annual compensation, years of
service, social security taxable wage base, and, in the case of a lump sum
distribution, current interest rates are also taken into consideration.
On July 30, 1996, the Bank entered into Supplemental Retirement
Agreements (SRA) with Mr. Thomas P. Ryan and Mr. Gregory D. Friedman. The
purpose of the SRA is to provide supplemental retirement benefits to
Messrs. Ryan and Friedman in addition to the benefits provided by the
Plan, to assist the Bank in retaining their services through their normal
retirement dates. The SRA provides for payments, monthly or annually, at
Messrs. Ryan and Friedman's election, in the event of: (a) normal
retirement;** (b) reduced supplemental retirement benefits in the event of
early retirement; (c) disability prior to retirement; (d) death; or (e)
discharge "without cause."
Under the terms of their SRA, Messrs. Ryan and Friedman will receive
supplemental retirement benefits for a period of ten (10) years. The full
benefit amount is equal to 70% of the compensation paid in the final year
of employment, less the Bank's pension benefit and Social Security
benefits. Messrs. Ryan and Friedman are entitled to the full benefit
amount if they retire on their normal retirement date;** 75% of the full
benefit amount if they retire at age 64; 50% of the full benefit amount if
they retire at age 63; 25% of the full benefit amount if they retire at
age 62; and no SRA benefit if they retire prior to age 62. In the event
of disability prior to retirement, the disabled individual would receive
their full SRA benefit amount beginning at age 65. In the event of death
prior to retirement, after meeting the eligibility and employment
requirements, the applicable benefit (based upon the decedent's age) is
payable to his designated beneficiary. In the event of discharge "without
cause", the discharged individual would receive
16
<PAGE>17
their full SRA benefit amount, as if he retired at age 65, commencing at
the recipient's discretion. The SRA is a non-qualified defined benefit
agreement. As of December 31, 1999, the monthly benefits that would be
paid at normal retirement age, would be $2,260 and $7,321 for Messrs. Ryan
and Friedman respectively.
Mr. Ryan's SRA was subsequently amended on March 3, 1999. In the event
Mr. Ryan resigns due to a "Change in control of the Corporation" or a
material and adverse change in duties or responsibilities, titles or
offices, or membership on the Board of Directors of the Corporation, Mr.
Ryan would receive his full SRA benefit amount, as if he retired at age
sixty-five (65), commencing at his discretion.
**Mr. Ryan's normal retirement date is April 1, 2003
**Mr. Friedman's normal retirement date is August 1, 2015
On June 15, 1999, the Bank entered into a new and restated Supplemental
Retirement Agreement (SRA) with Mr. James F. Kidd. The purpose of the SRA
is to provide for an increase in supplemental retirement benefits to Mr.
Kidd for his continued service to the Corporation and the Bank. The SRA
provides for payments to Mr. Kidd in the event of: (a) retirement; (b)
death; (c) discharge "without cause"; or (d) resignation due to change in
control.
The SRA provides that Mr. Kidd shall receive an annual benefit of
$53,474 each year for a period of ten (10) years commencing on March 1,
2000, provided that Mr. Kidd remains in continuous employ of the Bank and
retires from active employment with the Bank on or after January 1, 2000.
In the event of death prior to retirement, after meeting the employment
requirements, the benefit is payable to his designated beneficiary. In
the event of discharge "without cause", the discharged employee would
receive the annual benefit amount of $53,474 for ten (10) years. In the
event Mr. Kidd resigns due to a "Change in control of the Corporation",
the benefit amount shall be the total amount payable for the 10-year
period ($53,474 annually for ten (10) years) reduced by a 6% "present
value" discount and payable to Mr. Kidd within sixty (60) days of his
resignation. The SRA is a non-qualified defined benefit agreement. As of
December 31, 1999, the annual benefit that would be paid at retirement
would be $53,474 for Mr. Kidd.
PERFORMANCE GRAPH
The graph which follows compares the five (5) year cumulative total
return from investing $100 on December 31, 1994 in each of Corporation's
common stock, the Standard & Poor's 500 Index (S&P 500 Index) of
companies, and the National Association of Securities Dealers Association
Quotation System Bank Index (NASDAQ Bank Index) of companies, with
dividends assumed to be reinvested when received.
17
<PAGE>18
Comparison of Five Year Cumulative Total Return*
AMONG LNB BANCORP, INC., THE S & P 500 INDEX AND NASDAQ BANK INDEX
(PERFORMANCE GRAPH FOLLOWS IN PRINTED VERSION WITH YEARS 1994 THROUGH
1999 ON THE X-AXIS AND CUMULATIVE INVESTMENT ON THE Y-AXIS IN $100
INCREMENTS RANGING FROM $0 TO $400. THE CO-ORDINATES, BY YEAR, WHICH
ARE PRESENTED IN THE TABLE BELOW ARE PLOTTED ON THE PREVIOUSLY DESCRIBED
GRID ALONG WITH AN ACCOMPANYING LEGEND FOR IDENTIFICATION PURPOSES.)
*$100 INVESTED ON 12/31/94 IN STOCK OR INDEX INCLUDING REINVESTMENT OF
DIVIDENDS.
- --------------------------------------------------------------------------
December 31, 1994 1995 1996 1997 1998 1999
- --------------------------------------------------------------------------
LNB Bancorp, Inc. $100 $118 $129 $129 $133 $110
- --------------------------------------------------------------------------
S&P 500 Index $100 $138 $169 $226 $290 $351
- --------------------------------------------------------------------------
NASDAQ Bank Index $100 $149 $197 $329 $327 $314
- --------------------------------------------------------------------------
The following table sets forth the beneficial ownership of the
Corporation's Common Stock by each of the Corporation's directors and the
Corporation's Named Executive Officers, and the directors and executive
officers as a group as of January 31, 2000.
Shares of Common
Name of Beneficial Owner Stock Owned (1) Percent of Class
Daniel P. Batista (2) 61,976 1.5%
Robert M. Campana (3) 11,578 *
Terry D. Goode (4) 30,255 *
Wellsley O. Gray (5) 10,509 *
James R. Herrick 10,522 *
James F. Kidd (6) 54,307 1.3
David M. Koethe (7) 53,695 1.3
Benjamin G. Norton (8) 92,851 2.2
Stanley G. Pijor (9) 87,280 2.1
Jeffrey F. Riddell (10) 63,583 1.5
Thomas P. Ryan (11) 35,533 *
John W. Schaeffer (12) 6,948 *
Gary C. Smith 3,274 *
Eugene M. Sofranko (13) 29,849 *
Paul T. Stack (14) 10,303 *
18
<PAGE>19
Shares of Common
Name of Beneficial Owner Stock Owned (1) Percent of Class
Leo Weingarten (15) 111,100 2.7
All Directors and Executive
Officers as a Group
(23 in group) 748,192 18.1%
*Ownership is less than 1% of ------- ------
the class
(1)Except as otherwise noted, none of the named individuals shares with
another person either voting or investment power as to the shares
reported.
(2)Includes 39,863 shares subject to shared voting and investment power.
(3)Includes 11,310 shares subject to shared voting and investment power.
(4)Includes 6,858 shares subject to shared voting and investment power.
(5)Includes 3,393 shares subject to shared voting and investment power.
(6)Includes 13,674 shares subject to shared voting and investment power.
(7)Includes 195 shares subject to shared voting and investment power.
(8)Includes 46,370 shares subject to shared voting and investment power.
(9)Includes 32,982 shares subject to shared voting and investment power.
(10)Includes 30,762 shares subject to shared voting and investment power.
(11)Includes 14,856 shares subject to shared voting and investment power.
(12)Includes 3,640 shares subject to shared voting and investment power.
(13)Includes 22,631 shares subject to shared voting and investment power.
(14)Includes 1,275 shares subject to shared voting and investment power.
(15)Includes 9,277 shares subject to shared voting and investment power.
FIVE PERCENT (5%) BENEFICIAL OWNERSHIP OF COMMON STOCK
As of December 31, 1999, no person was known by the Corporation to be
the beneficial owner of more than 5% of the outstanding shares of Common
Stock of the Corporation except as follows:
NAME AND ADDRESS OF SHARES OF COMMON PERCENT OF
BENEFICIAL OWNER STOCK OWNED CLASS
The Lorain National Bank 443,965(1) 10.8%
457 Broadway
Lorain, Ohio 44052
(1)These shares are held in various fiduciary capacities in the ordinary
course of business under numerous trust relationships by The Lorain
National Bank. As fiduciary, The Lorain National Bank has sole power to
dispose of 411,959 of these shares, shared power to dispose of 32,006 of
these shares, shared power to vote 141,034 of these shares, and sole
power to vote 32,006 of these shares.
19
<PAGE>20
INTEREST OF MANAGEMENT AND OTHERS IN CERTAIN TRANSACTIONS
Some of the directors of the Corporation, and companies with which they
are associated, are customers of and had banking transactions with the
Bank in the ordinary course of the Bank's business during 1999. Loans and
commitments to loans included in such transactions were made on
substantially the same terms, including interest rates and collateral, as
were those prevailing at the time for comparable transactions with other
persons, and in the opinion of the Management of the Bank, do not involve
more than a normal risk of collectibility or present other unfavorable
features.
PROPOSED AMENDMENTS TO ARTICLES OF INCORPORATION AND CODE OF REGULATIONS
General:
The Board of Directors of Corporation has approved certain amendments
(the "Proposed Amendments") to the Corporation's Articles of Incorporation
and to its Code of Regulations, and has voted unanimously to recommend to
the shareholders that they approve and adopt the Proposed Amendments.
The Proposed Amendments are adopted by the Board of Directors for the
purposes discussed below. The Proposed Amendments would amend the
Articles of Incorporation and the Code of Regulations to:
a)Amend and restate Articles of Incorporation to simplify and update
language as authorized by Ohio law; which amendments would not
affect shareholders' rights;
b)State in the Articles of Incorporation that one of the purposes for
which the Corporation is formed is to qualify and act as a
"financial holding company" as defined by the Gramm-Leach-Bliley Act
of 1999;
c)Removal of fair price and super majority vote provisions as
currently stated in Articles XIII and Articles XIV of the Articles
of Incorporation and relocate such provisions to the Code of
Regulations;
d)Amend and restate Code of Regulations to simplify and update
language as authorized by Ohio law; which amendments would not
affect shareholders' rights;
e)Provide that the number of directors on the Board of Directors may
periodically be changed and authorize the Board of Directors to fill
terms of directorships created by the Board of Directors;
f)Provide that directors and members of board committees may be
entitled to compensation and reimbursement for additional expenses
as the Board of Directors periodically determines in its sole
discretion; and
20
<PAGE>21
g)Provide for indemnification of shareholders, directors, officers,
employees and agents from claims arising from acts of the
Corporation or others acting on behalf of the Corporation.
The general purposes of the Proposed Amendments are to: promote
conditions of continuity and stability in the Corporation's business,
management and policies; enable the Corporation to qualify as a "financial
holding company" under the recently enacted Gramm-Leach-Bliley Act of 1999
and, therefore, permit the Corporation to take advantage of opportunities
afforded by this new Act; insure that its shareholders, directors,
officers, employees and agents are indemnified for, and released and held
harmless from and against, liabilities when they or other individuals act
in good faith on behalf of the Corporation. Enactment of the Proposed
Amendments will facilitate membership of the Corporation in the NASDAQ
stock market.
Before voting on the Proposed Amendments, shareholders are urged to read
carefully the following sections of this Proxy Statement and Appendices A
and B, which, respectively, set forth the full texts of the proposed
amended and restated Articles of Incorporation and Code of Regulations.
The Board of Directors has considered the advantages and disadvantages
of adopting the Proposed Amendments and has determined that such adoption
is in the best interests of the shareholders of the Corporation. However,
the shareholders may find that the Proposed Amendments are disadvantageous
to the extent that they allow the Board of Directors discretion in
changing the number of directors on the Board and filling the remaining
terms of office of directorships created by the Board of Directors.
Further, the provisions of the Proposed Amendments that provide to the
Board of Directors additional discretion over compensation of directors
and members of committees of the Board of Directors and that provide for
indemnification of shareholders, directors, officer, employees and agents
may add to the expenses of the Corporation.
Adoption of the Proposed Amendments requires the affirmative vote of the
holders of two-thirds (2/3) of the shares of the Corporation's common
stock entitled to notice of and to vote at the annual shareholder meeting.
The Board of Directors unanimously recommends a vote in favor of the
Proposed Amendments which are presented as Proposal 2 below.
The following summary descriptions of the Proposed Amendments are not
intended to be complete and are qualified in their entirety by reference
to the complete texts of the Proposed Amendments which are attached hereto
as Appendices A and B.
Purpose and Effect of Proposal 2:
(a)AMEND AND RESTATE ARTICLES OF INCORPORATION TO SIMPLIFY AND UPDATE
LANGUAGE AS AUTHORIZED BY OHIO LAW, WHICH AMENDMENTS WOULD NOT AFFECT
SHAREHOLDERS' RIGHTS
21
<PAGE>22
The proposed Articles of Incorporation simplify the language of the
current Articles of Incorporation without affecting shareholder's rights.
The proposed Articles of Incorporation are substantially the same as the
current Articles of Incorporation with two exceptions: (a) the proposed
amended and restated Articles of Incorporation add a purpose clause that
states that one purpose of the Corporation is to qualify and act as a
"financial holding company" as defined by the Gramm-Leach-Bliley Act of
1999 (the "Act"); and (b) the removal of fair price and super majority
vote provisions contained in Articles XIII and XIV of the Corporation's
current Articles of Incorporation; it is proposed that such provisions be
relocated to the Code of Regulations.
(b)STATE IN THE ARTICLES OF INCORPORATION THAT ONE OF THE PURPOSES FOR
WHICH THE CORPORATION IS FORMED IS TO QUALIFY AND ACT AS A "FINANCIAL
HOLDING COMPANY" AS DEFINED BY THE GRAMM-LEACH-BLILEY ACT OF 1999
The proposed Articles of Incorporation adopt language which states
that one purpose of the Corporation is to quality and act as a "financial
holding company" as defined by the Act. The Act authorizes a new type of
bank holding company called a "financial holding company", and generally
(with certain restrictions) permits a financial holding company or its
subsidiary to engage in any activity that is financial in nature,
including any type of insurance and securities activity, or become
affiliated with any type of financial company. New activities that now
are permissible include securities underwriting and dealing activities,
insurance underwriting and sales activities, merchant banking/equity
investment activities, and "complementary" nonfinancial activities. A
financial holding company also may engage in future activities that the
Federal Reserve determines to be financial in nature or incidental to
financial activities.
By enacting an amendment to the Articles of Incorporation that
states that one of the purposes for which the Corporation is formed is to
act as a "financial holding company", the Corporation will have the
ability to take advantage of the opportunities afforded by the new Act.
The Corporation, therefore, will be able to broaden the types of services
that it provides, and remain competitive.
(c)REMOVAL OF FAIR PRICE AND SUPER MAJORITY VOTE PROVISIONS AS CURRENTLY
STATED IN ARTICLES XIII AND XIV OF THE ARTICLES OF INCORPORATION AND
RELOCATE SUCH PROVISIONS TO THE CODE OF REGULATIONS
The removal of Articles XIII and XIV, the fair price and super
majority vote provisions, from the current Articles of Incorporation is
proposed as part of an effort to simplify and streamline the Corporation's
Articles of Incorporation. Articles of Incorporation, under present Ohio
law, generally are required to set forth only the name of the corporation,
its principal place of business, the purposes for which it is formed, and
its authorized number of shares and par value per share. Codes of
Regulations, on the other hand, are more detailed, and contain language
about voting requirements and requirements for effecting business
combinations. The Proposed Amendments keep the Articles of Incorporation
as simple and plain as possible. Because the fair price and super majority
vote provisions are not required to be included in the Corporation's
Articles of Incorporation and, in fact, more appropriately should be set
forth in its Code of Regulations, these provisions should be relocated to
the Code of Regulations. The
22
<PAGE>23
proposed amended and restated Code of Regulations contains provisions
(Article IX) substantively identical to Articles XIII and XIV of the
current Articles of Incorporation.
(d)AMEND AND RESTATE CODE OF REGULATIONS TO SIMPLIFY AND UPDATE
LANGUAGE AS AUTHORIZED BY OHIO LAW, WHICH AMENDMENTS WOULD NOT AFFECT
SHAREHOLDERS' RIGHTS
Many of the proposed revisions to the existing Code of Regulations
are nonsubstantive simplifications of provisions of the current Code of
Regulations. The proposed revisions do not affect substantive
shareholders' rights but are made in order to update and simplify the Code
of Regulations. The proposed revisions include the following:
The proposed Code of Regulations simplifies the proxy provisions of the
current Code of Regulations. The proposed revision simply states that a
shareholder may vote by written proxy submitted to the
Secretary/Treasurer or the President of the Corporation at or before a
shareholder meeting, and that the proxy is only valid for the
shareholder meeting designated therein. The current Code of Regulations
contains rather cumbersome provisions about powers of substitution and
voting and consenting authority if more than one (1) proxy is appointed,
and the media (telegram, cablegram, etc.) by which a proxy may be given.
It also states that no appointment of proxy shall be valid after the
expiration of eleven (11) months after it is made. The proposed amended
Code of Regulations substantially simplifies the lengthy language of the
current Code of Regulations regarding proxy voting.
The proposed Code of Regulations clarifies that Robert's Rules of Order
will be the parliamentary procedure for shareholders' meetings and for
directors' meetings. The current Code of Regulations does not describe
the parliamentary procedures that are to be followed.
The Proposed Amendments simplify the current Code of Regulations by
eliminating detail set forth in the current Code of Regulations
regarding the type of financial statement that will be considered during
shareholder meetings. The proposed Code of Regulations simply states
that financial statements shall be provided as required by law. Because
federal and state law contain explicit, detailed requirements regarding
the content of financial statements and opinions to be rendered
regarding the same, the detail set forth in the current Code of
Regulations is not necessary.
The proposed Code of Regulations expressly states that when acting on
the Corporation's behalf, no shareholder, director, officer, employee or
other agent of the Corporation shall discriminate against any person
because of race, religion, creed, sex, national origin, or handicap.
The current Code of Regulations does not contain this provision,
although the Corporation has a nondiscrimination policy.
The Proposed Amendments provide that the annual shareholder meeting must
be held each year no later than six (6)months after the close of the
Corporation 's
23
<PAGE>24
fiscal year; the current Code of Regulations does not set forth this six
(6)-month requirement, although the Corporation follows this practice.
The proposed Code of Regulations provides that a director may not vote
by proxy. The current Code of Regulations is silent with respect to
directors voting by proxy. This provision was added because it is
important for directors to interact when meeting about the Corporation's
business.
The proposed Code of Regulations states that the annual meeting of the
Board of Directors will be held following the annual shareholder
meeting. The current Code of Regulations states that the meeting will
be held "immediately" after adjournment of the shareholder meeting.
This provision will allow the directors more flexibility with respect to
their annual meeting.
The proposed Code of Regulations states that special meetings of the
Board of Directors may be called by any two (2)directors, the Chairman
of the Board or the President; the current Code of Regulations states
that special meetings may be held upon call of the Chairman of the Board
of Directors, the President, a Vice President, Secretary/Treasurer or
two (2) members of the Board of Directors. This amendment would
eliminate the ability of a Vice President or the Secretary/Treasurer to
call a special meeting of the Board of Directors.
The proposed Code of Regulations states that special meetings will be
held within seven (7) days of call as the Board, Chairman of the Board,
or President determines. It also provides that, at least two (2) days
before each Board Meeting (or a shorter time as the Chairman of the
Board or President determines reasonably necessary), the
Secretary/Treasurer of the Corporation or another officer shall
personally deliver notice to each director. The current Code of
Regulations states that any notice of a special meeting will be mailed
at least two (2) days before the date of the meeting and that the
determination of whether a meeting may be held in less than two (2) days
is at the discretion of the individual(s) calling the meeting. If less
than two (2) days 'notice is given, the purpose of the meeting must be
set forth in the notice. The proposed Code of Regulations does not
require that such a purpose be set forth in the notice of meeting.
The current Code of Regulations states that the Board of Directors of
the Bank (a subsidiary of the Corporation)may hold as directors a
minimum of One Thousand Dollars ($1,000.00) of value (market value) of
shares of the Corporation. The proposed Code of Regulations does not
contain this provision. Because this requirement deals with the Board
of Directors of the Bank, not the Corporation, such qualifications
should not be contained in the Code of Regulations of the Corporation.
The proposed Code of Regulations requires that action taken by the
executive committee of the Corporation shall be reported to the Board at
its first meeting thereafter, and that a majority of any members of the
committee shall constitute a
24
<PAGE>25
quorum at any meeting. The current Code of Regulations does not set
forth these provisions, which clarify the procedures of this committee.
The current Code of Regulations provides for a Director Emeritus-
Consultant who will have no vote at meetings of the Board of Directors.
The proposed Code of Regulations does not describe this office.
With respect to lost, mutilated or destroyed certificates, the current
Code of Regulations states that if any certificate is lost, mutilated or
destroyed, the Board of Directors may authorize the issuance of a new
certificate in place thereof upon such terms and conditions as it may
deem advisable. The proposed Code of Regulations states that, in its
sole discretion, the Board first may require a registered shareholder to
indemnify the Corporation and/or furnish a bond to the Corporation.
This provision would protect the Corporation from damages due to the
issuance of the new share certificate.
The proposed amended Code of Regulations sets forth definitions of terms
used in the Code of Regulations and, therefore, clarifies the meaning of
terms used therein.
The current Code of Regulations specifies Vice Presidents as officers
and describes their authority; the proposed Code of Regulations provides
for Executive and Senior Vice Presidents, and sets forth their duties;
these officers are in line with officers who currently are appointed by
the Board of Directors.
(e)PROVIDE THAT THE NUMBER OF DIRECTORS ON THE BOARD OF DIRECTORS MAY
PERIODICALLY BE CHANGED AND AUTHORIZE THE BOARD OF DIRECTORS TO FILL TERMS
OF DIRECTORSHIP'S CREATED BY THE BOARD OF DIRECTORS
The proposal to amend the Code of Regulations to provide that the number
of directors may periodically be changed, and vacancies filled, by the
Board of Directors is motivated by the enactment of the Gramm-Leach-Bliley
Act of 1999. As stated above, this Act allows the Corporation to acquire
companies that engage in non-banking financial activities or activities
incidental to financial activities. The Proposed Amendments allow the
Corporation to take advantage of opportunities afforded by this new Act.
Typically, an about-to-be-acquired company demands that it have
representation on the board of directors of the acquiring company. This
provision would allow the Board of Directors of the Corporation to
increase the number of its members to accommodate this typical demand.
Currently, the Code of Regulations states that the number of members of
the Board of Directors constituting the entire Board of Directors shall be
determined by a two-thirds (2/3) majority vote of continuing directors
(or, if there is no interested shareholder, a majority vote of the entire
Board of Directors of the Corporation), and the exact number shall be
fifteen (15) unless otherwise so determined; provided, however, that in no
event shall a change be made to the number of directors elected greater
than one (1) position in any one (1) year. The terms
25
<PAGE>26
"continuing directors" and "interested shareholder" are not defined in the
current Code of Regulations.
The proposed Code of Regulations states that the number of directors on
the Board of Directors may periodically be changed by the Board of
Directors (in its sole discretion) either: (a) by a two-thirds (2/3)
majority vote of the Continuing Directors, if the Corporation has an
Interested Shareholder; or (b) by a majority vote of the whole of Board of
Directors, if the Corporation has no Interested Shareholder. Should the
Board of Directors see fit to increase the number of Directors, then in
such an event, the Board shall (at any time in its sole discretion) elect
an individual to serve. The individual so elected shall be assigned to a
Director's class and shall serve the remaining term of the class to which
said individual was named. The term "Continuing Director" is defined
generally as a director not affiliated with an "Interested Shareholder",
who is defined as a beneficial owner of ten percent (10%) or more of the
voting shares of the Corporation. The proposed provisions are set forth
in their entirety on Appendix B. (See Article IV, Subsection l.d,
regarding appointment of directors, and Article IX, Section 1, which
defines "Continuing Director" and "Interested Shareholder".)
(f)PROVIDE THAT DIRECTORS AND MEMBERS OF BOARD COMMITTEES MAY BE
ENTITLED TO COMPENSATION AND REIMBURSEMENT FOR ADDITIONAL EXPENSES AS THE
BOARD OF DIRECTORS PERIODICALLY DETERMINES IN ITS SOLE DISCRETION
The proposed amended Code of Regulations also states that the directors
shall be entitled to such compensation in their capacity as directors and
to reimbursement for such expenses as the Board of Directors periodically
determines in its sole discretion, and also states that members of the
committees of the Board of Directors shall be entitled to additional
compensation in their capacities as committee members and to reimbursement
for such additional expenses, all as the Board of Directors periodically
determines in its sole discretion. This provision gives more discretion
to the Board of Directors with respect to their compensation than does the
current Code of Regulations. The current Code of Regulations states that
directors may receive a fixed sum and expenses for attendance at each
meeting, and members of the executive and any standing or special
committee may, by resolution of the Board of Directors, be allowed
compensation as the Board of Directors may deem reasonable. The purpose
of this provision is to promote conditions for continuity and stability
within the Board of Directors by ensuring that they have a say in how they
are compensated and reimbursed for expenses. The proposed provision is
set forth in its entirety on Appendix B. (See Article IV, Section 6.)
(g)PROVIDE FOR INDEMNIFICATION OF SHAREHOLDERS, DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS FROM CLAIMS ARISING FROM ACTS OF THE CORPORATION OR
OTHERS ACTING ON BEHALF OF THE CORPORATION
The proposed amended Code of Regulations also contains broad
indemnification and release provisions that are protective of shareholders,
directors, officers, employees and agents. Currently, the
Corporation's corporate documents contain rather vague language relating
to the protection of officers and directors with respect to acts performed
on behalf of the Corporation. For example, Article VII of the Articles of
Incorporation states that each officer, director, or member of any
committee designated by the Board of Directors shall, in the performance
of his duties, be "fully protected" in relying in good faith upon the
books of accounts or records made
26
<PAGE>27
by the Corporation by any of its officers, employees, or committees, or by
an independent public accountant or appraiser selected with reasonable
care by the Board of Directors.
The proposed amended Code of Regulations states that, to the fullest
extent permitted by law, the Corporation shall indemnify and hold harmless
any and all past and present shareholders, directors, officers, employees
and other agents from and against all liabilities arising or resulting
from any claim under which the indemnified individual is a party or
participant because of actions or omissions of the Corporation or of the
indemnified individual or of any shareholder, director, officer, employee,
agent or other person acting in any capacity at the request of or on
behalf of the Corporation. This indemnification applies if the
indemnified individual has acted in good faith and in the best interests
of the Corporation and, with respect to any criminal action or proceeding,
if the indemnified individual had no reasonable cause to believe the
indemnified individual's conduct was unlawful.
The proposed amended Code of Regulations also contains a release
provision. It states that, to the fullest extent authorized or permitted
by law, no indemnified individual shall be liable to the Corporation
because of any action or omission of such indemnified individual at the
request of or on behalf of the Corporation.
To the extent of any payment by the Corporation with respect to its
obligations under these proposed new provisions, the Corporation will be
subrogated to all the indemnified individual's rights of recovery from any
other person. Further, the Corporation is expressly authorized to
purchase and maintain insurance (and/or have similar protection, such as a
trust fund, letter of credit or self-insurance) covering liabilities
incurred due to activities performed on behalf of Corporation.
The purpose of these Proposed Amendments is to promote conditions of
continuity and stability in the Corporation 's business, management and
policies. In order to protect shareholders, and to attract and maintain
qualified officers, employees, and members of the Board of Directors, it
is of utmost importance that they be protected for actions that they take
in good faith when performing the business of the Corporation. The
proposed provisions are set forth in their entirety on Appendix B. (See
Article VI.)
POSSIBLE ANTI-TAKEOVER EFFECTS OF PROPOSAL 2
The Board of Directors does not believe that any of the Proposed
Amendments to either the Articles of Incorporation or the Code of
Regulations will have a significant impact on any attempt to gain control
of the Corporation. It is possible, however, that the amendment to the
Code of Regulations that enables the Board to periodically change the
number of directors could discourage third parties from attempting to gain
such control since the Board could appoint individuals who would oppose a
hostile attempt to gain control. Accordingly, such an amendment could
dissuade a person attempting to acquire control of the Corporation,
increase the cost of acquiring such control or otherwise hinder such
efforts.
The Corporation's Articles of Incorporation and Code of Regulations as
presently drafted already contain certain provisions that may be viewed as
having anti-takeover effects. These provisions remain unchanged in the
Proposed Amendments. The Corporation's Board of Directors is still
divided into three (3) classes with approximately one-third (1/3) of the
members of the Board nominated for election each year. An affirmative vote
of at least 75% of the 27
<PAGE>28
Corporation's outstanding voting power and advance notice is still
required from shareholders nominating a director. In addition, an
affirmative vote of 75% of the Corporation's outstanding voting power is
still required in order to approve certain business transactions (such as
mergers or disposition of substantially all of its assets) involving an
"interested shareholder", defined as another entity owning 10% or more of
the outstanding capital stock of the Corporation, unless first approved by
a majority of the Corporation's directors not affiliated with the
interested shareholder. Further, the Code of Regulations still requires
the approval of 66-2/3% of the outstanding shares, exclusive of the shares
held by the interested shareholder, or the payment of a "fair price" as
defined in the amended Code of Regulations, for any shares acquired by an
interested shareholder unless approved by the directors who are not
affiliated with the interested shareholder.
The Corporation is also subject to two (2) sets of provisions under the
Ohio General Corporation Law which are referred to as the "Control Share
Acquisition Act" and the "Merger Moratorium Statute". The Control Share
Acquisition Act prescribes certain notice and informational filings, and
special meeting and voting procedures, which must be followed prior to the
consummation by an acquirer of a company's voting shares within any of the
following ranges: 20% or more but less than 33-1/3%; 33-1/3% but less
than a majority; and a majority or more. The acquisition may be made if
it is approved by both a majority of the voting power of the company and a
majority of the voting power remaining after excluding the voting power of
the acquirer and certain affiliated parties. The Merger Moratorium
Statute regulates certain business combinations between a "public company"
and a "interested shareholder" such as mergers or disposition of
substantially all of the company's assets. Subject to certain exceptions,
these transactions are prohibited for a three-year period. Prior to the
end of the three-year period, a prohibited transaction may take place
provided certain conditions are satisfied.
The Board of Directors is not aware of any present threat or attempt to
gain control of the Corporation and the Proposed Amendments described
herein are not in response to any such action. Furthermore, the Proposed
Amendments are not part of a plan by the Corporation to adopt a series of
amendments with an anti-takeover purpose and the Corporation does not
currently intend to propose anti-takeover measures in future proxy
solicitations.
RECOMMENDATION AND REQUIRED VOTE
The affirmative vote of two-thirds (2/3) of the outstanding voting stock
of LNB Bancorp, Inc. is required for approval of Proposal 2. An
affirmative vote for Proposal 2 to amend the Articles of Incorporation and
the Code of Regulations will be an affirmative vote for all subheadings
under Proposal 2 - subheadings 2(a) through 2(g). THE BOARD OF DIRECTORS
UNANIMOUSLY APPROVES AND RECOMMENDS TO SHAREHOLDERS THE ADOPTION OF
PROPOSAL 2.
PRINCIPAL ACCOUNTANTS
The independent accounting firm of KPMG LLP has served as the principal
accountants for the Bank since 1972. A representative of the firm will be
present at the Annual Meeting and will be available to respond to
questions.
28
<PAGE>29
SHAREHOLDER PROPOSALS FOR NEXT ANNUAL MEETING
Shareholders may submit proposals appropriate for shareholder action at
the Corporation's Annual Meeting consistent with the regulations of the
Securities and Exchange Commission. For proposals to be considered for
inclusion in the Proxy Statement for the 2001 Annual Meeting, they must be
received by the Corporation no later than December 18, 2000. Such
proposals should be directed to LNB Bancorp, Inc., Attention: Shareholder
Relations, 457 Broadway, Lorain, Ohio 44052.
OTHER BUSINESS
The Board of Directors knows of no business that will come before the
meeting for action except as described in the accompanying Notice of
Meeting. However, as to any such business, the persons designated as
proxies will have discretionary authority to act in their best judgment.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT
Section 16(a) of the Securities Exchange Act requires the Corporation's
officers and directors to file reports of ownership and changes of
ownership of the Corporation's registered securities on Forms 3, 4 and 5
with the Securities and Exchange Commission (SEC).
The Corporation believes that all officers and directors complied with
all filing requirements applicable to them with respect to transactions
during fiscal year 1999.
ANNUAL REPORT
A copy of the Corporation's Annual Report has been mailed to
shareholders prior to the meeting. The Annual Report is not intended to
be part of this Proxy Statement. A report of the operations of the
Corporation and the Bank for the fiscal year ended December 31, 1999 will
be presented at the annual meeting. A copy of the Corporation's Annual
Report on Form 10-K under the Securities Exchange Act of 1934 is available
to shareholders without charge upon request to Thomas P. Ryan, Executive
Vice President and Secretary/Treasurer, LNB Bancorp, Inc., 457 Broadway,
Lorain, Ohio 44052-1739.
By Order of the Board of Directors
/s/Thomas P. Ryan
Thomas P. Ryan
Executive Vice President
and Secretary/Treasurer
29
<PAGE>30
THIS PAGE LEFT INTENTIONALLY BLANK
<PAGE>31
APPENDIX A
AMENDED ARTICLES OF INCORPORATION
OF
LNB BANCORP, INC.
Pursuant to Sections 1701.69, 1701.71, and 1701.72 of the Ohio Revised
Code, these Amended Articles of Incorporation of LNB Bancorp, Inc. (herein
called the "Corporation") hereby supersede Corporation's existing Articles
of Incorporation and shall read as follows:
FIRST. The name of Corporation shall be LNB Bancorp, Inc.
SECOND. The place in Ohio where Corporation's principal office is to
be located is the City of Lorain, Lorain County.
THIRD. The purpose for which Corporation is formed is to engage in
any lawful act or activity for which corporations may be formed under
Sections 1701.01 through 1701.98, inclusive, of the Ohio Revised Code,
including (but not limited to) to qualify and act as a "financial holding
company" as defined by the Gramm-Leach-Bliley Act of 1999.
FOURTH. The number of shares (collectively, the "Shares") which
Corporation is authorized to have outstanding is 16,000,000 Shares
consisting of: (i) 15,000,000 of common Shares, $1.00 par value (the
"Common Shares"); and (ii) 1,000,000 of voting preferred Shares, no par
value (the "Voting Preferred Shares") as follows:
A. Common Shares:
The holders of the Common Shares are entitled at all times
to one (1) vote for each Share and to such dividends as the Board of
Directors may in its discretion periodically declare, subject, however, to
the voting and dividend rights of the holders of the Voting Preferred
Shares. In the event of any liquidation, dissolution or winding up of
Corporation, the remaining assets of Corporation after the payment of all
debts and necessary expenses shall be distributed among the holders of the
Common Shares pro rata in accordance with their respective Share holdings,
subject, however, to the rights of the holders of the Voting Preferred
Shares then outstanding. The Common Shares are subject to all of the
terms and provisions of the Voting Preferred Shares as established by the
Board of Directors as herein provided.
B. Voting Preferred Shares:
The Board of Directors is hereby expressly authorized to
adopt amendments to the Articles of Incorporation to provide for the
issuance, in its discretion, of one (1) or more series of Voting Preferred
Shares; to establish periodically the number of Shares to be included in
each such series; and to fix the designation, powers, preferences,
dividend rights and other rights of the Voting Preferred Shares of each
such series and any qualifications, limitations or restrictions thereof,
to the fullest extent permitted bu the Ohio General Corporation Law, as
the same is now in effect of hereafter amended. The holders of Voting
Preferred Shares shall be entitled at all times to one (1) vote for each
Voting Preferred Share, voting as a class.
1
<PAGE>32
Voting Preferred Shares redeemed or otherwise acquired by Corporation
shall assume the status of authorized but unissued Voting Preferred
Shares, shall be unclassified as to series, and may hereafter be reissued
in the same manner as other authorized but unissued Voting Preferred
Shares.
FIFTH. Corporation is hereby authorized to purchase through action
of its Board of Directors, without the approval of the holders of any
Shares of any class and upon such terms and conditions as the Board of
Directors determines: (1) Shares of any class or series issued by
Corporation, subject to express terms of such Shares; (2) any security
or other obligation of the Corporation which may confer upon the holder
thereof the right to convert the same into Shares of any class or series
authorized by the Articles of Incorporation; and (3) any security or other
obligation which may confer upon the holder thereof the right to purchase
Shares of any class of series authorized by these Articles of
Incorporation. By action of Corporation's Board of Directors and without
approval of the holders of any Shares of any class, Corporation shall also
have the right to purchase Shares of any class issued by Corporation if
and when any holder of Shares desires to (or, upon the happening of any
event, is required to) sell such Shares.
SIXTH. No holder of any Shares of any class shall have the right to
vote cumulatively in the election of Directors to Corporation's Board of
Directors.
SEVENTH. No holder of the Shares of any class shall have any
preemptive right to subscribe for or to purchase any Shares of any class
whether now or hereafter authorized.
Dated:_________________
2
<PAGE>33
APPENDIX B
AMENDED
CODE OF REGULATIONS
OF
LNB BANCORP, INC.
TABLE OF CONTENTS
PAGE
ARTICLE I DEFINITIONS AND USAGE
SECTION 1. Definitions 1
SECTION 2. Word Usage 2
SECTION 3. Ohio Law 2
ARTICLE II SHAREHOLDER MEETINGS
SECTION 1. Annual Shareholder Meetings 2
SECTION 2. Special Shareholder Meetings 2
SECTION 3. Record Dates 3
SECTION 4. Notice 3
SECTION 5. Quorum and Attendance 4
SECTION 6. Voting 4
SECTION 7. Proxies 4
SECTION 8. Parliamentary Procedure and Minutes 4
SECTION 9. Action by Shareholders in Writing Without a Meeting 5
ARTICLE III BOARD MEETINGS
SECTION 1. Annual Reorganizational Board Meeting 5
SECTION 2. Regular Board Meetings 5
SECTION 3. Special Board Meetings 5
SECTION 4. Notice 6
SECTION 5. Quorum and Attendance 6
SECTION 6. Voting 6
SECTION 7. Election of Officers 7
SECTION 8. Parliamentary Procedure 7
SECTION 9. Action by Directors in Writing Without a Meeting 7
SECTION 10. Amendments to Article III 7
i
<PAGE>34
PAGE
ARTICLE IV BOARD OF DIRECTORS
SECTION 1. Number, Election, Qualification and Term 8
SECTION 2. Board Vacancies 9
SECTION 3. Board Powers and Duties 9
SECTION 4. Voting 10
SECTION 5. Board Committees 10
SECTION 6. Compensation and Expenses 10
SECTION 7. Bylaws 10
SECTION 8. Amendment of Article IV 10
ARTICLE V OFFICERS
SECTION 1. Designation and Qualification 11
SECTION 2. Officer Vacancies and Succession 11
SECTION 3. Powers and Duties of Officers 12
ARTICLE VI INDEMNIFICATION OF SHAREHOLDERS, DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS
SECTION 1. Definitions 13
SECTION 2. Indemnification for Third-Party Claims 13
SECTION 3. Indemnification for Claims by or in the Right of the
Corporation 13
SECTION 4. Release from Liability and Contribution 14
SECTION 5. Subrogation 14
SECTION 6. Insurance and Similar Protection 14
SECTION 7. Other Rights 14
SECTION 8. Conditions and Limitations 15
ARTICLE VII SHARES
SECTION 1. Certificates and Share Records 15
SECTION 2. Lost, Stolen or Destroyed Share Certificates 15
SECTION 3. Cancellation of Share Certificates 16
SECTION 4. Transfer of Shares 16
ARTICLE VIII OTHER INSTRUMENTS
SECTION 1. Prior Instruments 16
SECTION 2. Conflicts of Instruments 16
ii
<PAGE>35
PAGE
ARTICLE IX FAIR PRICE AND SUPER VOTE REQUIREMENTS
IN CERTAIN BUSINESS COMBINATIONS
SECTION 1. Definitions 16
SECTION 2. Supermajority Vote to Effect Business Combination 18
SECTION 3. Conditions Required to Effect Business Combination 18
SECTION 4. Conditions and Requirements to Fair Price 19
SECTION 5. Other Applicable Voting Requirements 20
SECTION 6. Continuing Directors 20
SECTION 7. Effects on Fiduciary Obligations of Interested
Shareholders 20
SECTION 8. Further Considerations to Effect Business
Combination 20
SECTION 9. Repeal 21
ARTICLE X AMENDMENTS AND MISCELLANEOUS
SECTION 1. Amendments 21
SECTION 2. Miscellaneous 21
iii
<PAGE>36
THIS PAGE LEFT INTENTIONALLY BLANK
<PAGE>37
AMENDED
CODE OF REGULATIONS
OF
LNB BANCORP, INC.
ARTICLE I
DEFINITIONS AND USAGE
Section 1. Definitions.
For purposes of these Regulations, the following words and phrases have
the meanings designated below:
a. "Articles of Incorporation" herein means the Corporation's
articles of incorporation filed with the Secretary of State of Ohio on
October 11, 1983, all amendments thereto and restatements thereof, and all
amended articles of incorporation.
b. "Board" herein means the Board of Directors of the Corporation.
c. "Board Meeting" herein means any Annual Reorganizational Board
Meeting, Regular Board Meeting or Special Board Meeting (as defined in
Article III, Sections 1, 2 and 3, respectively).
d. "Committees" herein means those Board Committees designated in
Article IV of these Regulations.
e. "Common Shares" herein means the Corporation's issued and
outstanding common shares as defined in the Articles of Incorporation.
f. "Corporation" herein means LNB Bancorp, Inc.
g. "Days" herein means calendar days.
h. "Director" herein means any person properly elected or appointed
to the Board and holding the office as a Director as described in Article
IV of these Regulations.
I. "Interested Shareholder" herein means any Shareholder of the
Corporation (as defined in Article IX, Section 1g.).
j. "Officer" herein means any person properly elected or appointed to
an Officership designated in Section 1 of Article V of these Regulations.
k. "Person" herein means an individual, partnership, trust,
corporation, limited liability company, or other entity.
1
<PAGE>38
l. "Regulations" herein means these amended Regulations.
m. "Share" herein means a unit of the Corporation's issued and
outstanding voting shares as evidenced by a share certificate and shall
consist of: (i) Common Shares, and (ii) Voting Preferred Shares.
n. "Shareholder" herein means any Person who or which hereafter owns
at least one (1) Share; provided, however, any such Person shall cease
being a "Shareholder" for purposes of these Regulations immediately when
such Person no longer owns at least one (1) Share.
o. "Shareholder Meeting" herein means any Annual Shareholder Meeting
or any Special Shareholder Meeting (as defined in Article II, Sections 1
and 2, respectively).
p. "Voting Preferred Shares" herein means the Corporation's issued
and outstanding voting preferred shares as defined in the Articles of
Incorporation.
Section 2. Word Usage.
Where the context of these Regulations require, words used in the
masculine shall include the feminine and neuter; words in the singular,
the plural; and vice-versa.
Section 3. Ohio Law.
These Regulations are adopted in the State of Ohio and Ohio's laws shall
govern all matters of interpretation, construction and validity and all
disputes, controversies and litigation arising hereunder.
ARTICLE II
SHAREHOLDER MEETINGS
Section 1. Annual Shareholder Meetings.
a. The annual meeting of the Shareholders (herein called the "Annual
Shareholder Meeting") shall be held at the Corporation's principal office
on the third Tuesday in April of each year (but, if a legal holiday, then
on the next following business day), or on such other day and at such
other time and place (within or without the State of Ohio) as the Board
determines and calls in its sole discretion; provided, however, that the
Annual Shareholder Meeting must be held each year no later than six (6)
months after the close of the Corporation's fiscal year.
b. The purposes of the Annual Shareholder Meeting are to elect
Directors, receive all Corporation's annual financial statements as
required by law, receive and act upon annual and other reports of the
Officers and the Board, transact other Shareholder business and
activities, and take any other Shareholder actions.
2
<PAGE>39
Section 2. Special Shareholder Meetings.
a. Special meetings of the Shareholders (herein called a "Special
Shareholder Meeting") may be called by the registered holders of at least
twenty-five percent (25%) of the Corporation's Shares, by the Chairman of
the Board, by the Vice-Chairman of the Board, by the Chief Executive
Officer (as designated by the Board under Section 1 of Article V of these
Regulations), by the Chief Operating Officer (if any is so designated by
the Board under Section 1 of Article V), or by the Board (by action at any
Board Meeting or by a majority of the Directors acting without a Board
Meeting) through a written request delivered either in person or by
registered United States mail to the President or the Secretary of the
Corporation.
b. All Special Shareholder Meetings shall be held within sixty (60)
days of call, on the day, at the time and at the place (within or without
the State of Ohio) as the Board determines.
c. The purpose(s) of any Special Shareholder Meeting may be to
transact any Shareholder business and activities and to take any
Shareholder actions.
Section 3. Record Dates.
a. For purposes of determining those Shareholders entitled to (1)
receive Notice (as defined in Section 3 hereof) of any Shareholder Meeting,
or (2)receive dividends or distributions, or (3)exercise any other Shareholder
rights, the Board shall fix record dates (herein called "Record Dates") not
earlier than the date on which the Record Date is established and not more
than sixty(60) days prior to the designated event. If the Board fails to fix
a Record Date, the Record Date shall be deemed to be the date immediately
preceding the day on which either the Notice is given or, if applicable, on
which the Shareholder Meeting is held.
b. Unless otherwise provided by law, only holders of Shares actually
registered in the holder's name on the Corporation's Share records at the
close of business on the Record Date shall be recognized and counted for
the applicable purposes designated in Section 3a., above.
Section 4. Notice.
a. The President or Secretary of the Corporation shall prepare
written notice (herein called "Notice") stating the date, time, place and
purpose(s) of each Shareholder Meeting. Not less than ten (10) nor more
than sixty (60) days before any Shareholder Meeting, the President or
Secretary of the Corporation either shall cause personal delivery of the
Notice or shall mail (by ordinary United States mail, postage prepaid) the
Notice to each registered holder (as of the Record Date) of the
Corporation's Shares at the address then appearing on the Corporation's
Share records. All Notices with respect to any Shares in the names of two
(2) or more Persons may be given to any of such Persons and the Notice so
given shall be effective as to all holders of such Shares. Any Person who
becomes a Shareholder after the Notice has been delivered or mailed shall
be deemed to have received and shall be bound by such Notice.
b. Notwithstanding any contrary provision herein, a Shareholder's
attendance (in person or by proxy) at any Shareholder Meeting waives any
lack of or deficiency in Notice of
<PAGE>40
3
<PAGE>41
such Meeting and a Shareholder may further waive Notice (before, after or
during any Shareholder Meeting) through a written document signed by such
Shareholder.
c. Notice of adjournment of any Shareholder Meeting need not be given
if the date, time and place to which the Meeting is adjourned are fixed
and announced at such Meeting.
Section 5. Quorum and Attendance.
a. The Shareholders present (in person or by proxy) constitute a
quorum for the transaction of business at any Shareholder Meeting, unless
otherwise expressly provided in the Articles of Incorporation or these
Regulations unless otherwise required by law.
b. Whether or not a quorum exists, a majority of the Shares
(represented in person or by proxy) at any Shareholder Meeting may adjourn
the Meeting.
Section 6. Voting.
a. Except as otherwise modified by the express terms of any Shares,
by the Articles of Incorporation, or by these Regulations, each holder of
a Share shall be entitled to one (1) vote for each Share registered in
such holder's name on the Corporation's Share records as of the Record
Date.
b. At any Shareholder Meeting, all matters properly submitted to the
Shareholders shall be decided by a majority vote of the Shares represented
in person or by proxy, unless otherwise provided in these Regulations or
in the Articles of Incorporation or otherwise required by law.
Section 7. Proxies.
a. A Shareholder may be represented and vote at any Shareholder
Meeting by written proxy signed by such Shareholder (or by the
Shareholder's duly authorized officer) and submitted to the Secretary or
the President of the Corporation at or before the Shareholder Meeting.
Such Proxy shall be valid for only the Shareholder Meeting designated
therein and shall name as proxy only another Shareholder.
b. A Shareholder may exercise any Shareholder consents, waivers,
releases or other Shareholder rights by written proxy signed by such
Shareholder (or by the Shareholder's duly authorized officer) and
submitted to the Secretary or the President of the Corporation prior to
the exercise thereof.
Section 8. Parliamentary Procedure and Minutes.
a. Robert's Rules of Order (as periodically revised) constitute the
final authority for parliamentary procedures at all Shareholder Meetings,
except where such Rules conflict with law or with these Regulations.
b. At all Shareholder Meetings, the order of business shall be as
follows:
4
<PAGE>42
(1) Roll call or attendance record;
(2) Presentation and action upon Minutes of previous Shareholder
Meeting;
(3) Unfinished (old) business;
(4) Review of Annual Financial Statements of the Corporation;
(5) Financial or other reports of the Board;
(6) Financial or other reports of Officers;
(7) Reports of Committees (if any);
(8) Election of Directors (if applicable);
(9) New or miscellaneous business; and
(10) Adjournment.
The order of business may be periodically changed for any Shareholder
Meeting by the Chairman of the Meeting or by a majority vote of the Shares
present (in person or by proxy) at such Meeting.
c. The Secretary of the Corporation shall cause to be recorded
Minutes of all Shareholder Meetings.
Section 9. Action by Shareholders in Writing Without a Meeting.
Notwithstanding any contrary provision in these Regulations,
Shareholders may properly and officially act without a Meeting through a
written document or documents signed by the registered holders of all
Shares as of the Record Date for such action and all such documents shall
be filed with or entered upon the records of the Corporation.
ARTICLE III
BOARD MEETINGS
Section 1. Annual Reorganizational Board Meeting.
a. The annual reorganizational meeting of the Board (herein called
the "Annual Reorganizational Board Meeting") shall be held each year
following the Annual Shareholder Meeting at such time and place (within or
without the State of Ohio) as determined by the Board but, in no event,
later than six (6) months after the close of the Corporation's fiscal
year.
b. The purposes of the Annual Reorganizational Board Meeting are to
elect Officers, receive and act upon any reports, transact any other Board
business and activities, and take any other Board actions.
5
<PAGE>43
Section 2. Regular Board Meetings.
Regular meetings of the Board (herein called "Regular Board Meetings")
shall be periodically held on the days and at the times and places (within
or without the State of Ohio) as the Board (in its sole discretion)
determines.
Section 3. Special Board Meetings.
a. Special meetings of the Board (herein called "Special Board
Meetings") may be called by any two (2) Directors, the Chairman of the
Board, or the President.
b. All Special Board Meetings shall be held within seven (7) days of
call, at the time and at the place (within or without the State of Ohio)
as the Board, the Chairman of the Board or the President determines.
c. The purpose(s) of any Special Board Meeting may be to transact any
Board business and activities and to take any Board actions.
Section 4. Notice.
a. The Secretary of the Corporation or any other Officer shall give
to each Director written or oral notice (herein called "Notice") stating
the date, time and place (but not necessarily the purposes) of each Board
Meeting. At least two (2) days before each Board Meeting (or such shorter
time period as the Chairman of the Board or the President determines to be
reasonably necessary), the Secretary of the Corporation (or any other
Officer) shall cause personal delivery or other communication of the
Notice or shall mail (by ordinary United States mail, postage prepaid) the
Notice to each Director.
b. Notwithstanding any contrary provision herein, a Director's
attendance at any Board Meeting constitutes such Director's waiver of any
failure to give or deficiency in Notice of such Meeting and a Director may
further waive Notice (before, after or during any Board Meeting) through a
written document signed by such Director.
c. Notice of adjournment of any Board Meeting need not be given if
the date, time and place to which the Meeting is adjourned are fixed and
announced at such Meeting.
Section 5. Quorum and Attendance.
a. A majority of the Directors in office (who must be present in
person) constitutes a quorum for the transaction of business at any Board
Meeting. A quorum must exist as a condition precedent to (and at the time
of) the transaction of any Board business or the vote upon any matter
submitted to the Board.
b. Whether or not a quorum exists, a majority of the Directors
present in person at any Board Meeting may adjourn the Meeting.
6
<PAGE>44
Section 6. Voting.
a. Upon all matters properly submitted to the Board, each Director in
office shall be entitled to one (1) vote but Directors shall vote and act
as a Board.
b. At any Board Meeting, all matters properly submitted to the Board
shall be decided by a majority vote of all the Directors present in person
at the Board Meeting, unless otherwise provided in these Regulations or
required by law.
c. A Director may not vote, consent, take any action as a Director or
be represented at a Board Meeting by proxy. Only Directors present in
person at a Board Meeting during the actual transaction of a matter may
vote thereon.
d. For purposes of these Regulations, a Director shall be deemed to
be "present in person" at any Board Meeting if such Director:
(i) participates at the Board Meeting by means of communications equipment
but only if all Directors participating at the Board Meeting can hear each
other Director, or (ii) is actually physically present at the Board
Meeting; provided, however, that a Director who is deemed to be present in
person at any Board Meeting pursuant to subitem (i) of this Section 6d.
shall not be entitled to Director's fees or compensation for such Board
Meeting.
Section 7. Election of Officers.
a. At each Annual Reorganizational Board Meeting, the Board shall
elect Officers to serve until their respective successors are elected at
the next Annual Reorganizational Board Meeting, or until their earlier
death, disqualification, resignation or removal from office.
b. If no Annual Reorganizational Board Meeting is held or if all
Officers are not elected at the Annual Reorganizational Board Meeting, the
Board shall elect any remaining unelected Officers at a Special or Regular
Board Meeting and such Officers shall serve until their respective
successors are elected at the next Annual Reorganizational Board Meeting,
or until their earlier death, disqualification, resignation or removal
from office.
c. Any Director in office may designate Persons (qualified under
Section 1 of Article V of these Regulations) as nominees for Officers.
Only nominees are eligible to be elected Officers and nominees receiving
the greatest number of votes shall be so elected.
d. Any Person (who is qualified as designated in Section 1 of Article
V) shall be eligible to serve and to be elected for an unlimited number of
consecutive or non-consecutive terms as an Officer.
Section 8. Parliamentary Procedure.
a. Robert's Rules of Order (as periodically revised) constitute the
final authority for parliamentary procedures at all Board Meetings, except
where such Rules conflict with law or with these Regulations.
7
<PAGE>45
b. The Secretary of the Corporation shall cause to be recorded
Minutes of all Board Meetings.
Section 9. Action by Directors in Writing Without a Meeting.
Notwithstanding any contrary provision in these Regulations, the Board
may properly and officially act without a Meeting through a written
document or documents signed by all Directors then serving on the Board
and all such documents shall be filed with or entered upon the records of
the Corporation.
Section 10. Amendments to Article III.
Notwithstanding any contrary provision in these Regulations, amendments
to any provision of this Article III shall require the affirmative vote of
the holders of seventy-five percent (75%) of the Shares; provided,
however, that any such amendments shall, instead, be governed by the
Shareholder voting requirements of Section 1 of Article X of these
Regulations if: (i) the Corporation has no Interested Shareholder (as
defined in Section 1 of Article IX) and the proposed amendment is first
approved by a majority vote of the whole Board, or (ii) the Corporation
has an Interested Shareholder and the proposed amendment is first approved
by a two-thirds (2/3) majority of the Continuing Directors (as defined in
Section 1 of Article IX).
ARTICLE IV
BOARD OF DIRECTORS
Section 1. Number, Election, Qualification and Term.
a. The number of Directors on the Board shall be fixed at fifteen
(15) unless and until changed by the Board as provided in these
Regulations.
b. At each Annual Shareholder Meeting, the Shareholders shall elect
Directors by ballot (in accordance with these Regulations) to serve for a
Term (as defined in Section 1e. of this Article) and until their
respective successors are elected or until their earlier death,
disqualification, resignation or removal from the Board.
c. If no Annual Shareholder Meeting is held or if all Directors are
not elected at the Annual Shareholder Meeting, the Shareholders shall
elect (by ballot in accordance with these Regulations) Persons to the
Board at a Special Shareholder Meeting and such Directors shall serve for
a Term (as defined in Section 1e. of this Article) and until their
respective successors are elected or until their earlier death,
disqualification, resignation or removal from the Board.
d. Notwithstanding any contrary provision in the Regulations, the
number of Directors on the Board may be periodically changed by the Board
(in its sole discretion) either (i) by a two-thirds (2/3) majority vote of
the Continuing Directors (as defined in Section 1 of Article IX of these
Regulations), if the Corporation has an Interested Shareholder (as defined
in
8
<PAGE>46
Section 1 of Article IX of these Regulations), or (ii) by a majority
vote of the whole Board, if the Corporation has no Interested Shareholder.
The Board shall fill (at any time in its sole discretion) any Directorship
created by the Board either (i) by a two-thirds (2/3) majority vote of the
Continuing Directors, if the Corporation has an Interested Shareholder, or
(ii) by a majority of the whole Board, if the Corporation has no
Interested Shareholder. New Directors so elected by the Board shall be
assigned to one or more Director Classes in accordance with Section 1e. of
this Article.
e. The Directorships shall be divided into three (3) classes (herein
the "Director Classes"), Class I, Class II, Class III, and each Director
shall be assigned to a Director Class. Each Director Class shall consist
of approximately an equal number of Directors and the terms of office for
each Director Class shall expire in succeeding years. At each annual
election of Directors by the Shareholders, the Directors so elected shall
be identified as to Director Class and as to the Directorships succeeded
and shall be elected for a term (herein called the "Term") expiring at the
third (3rd) following Annual Shareholder Meeting and the election of their
respective successors. If the number of Directorships is changed by the
Board pursuant to Section 1d. of this Article, any increase or decrease in
the Directorships shall be apportioned among the Director Classes as
equally as possible and each additional Director's Term shall coincide
with the terms of such Director Class.
f. Nominations for election to the Board may be made by the Board (by
a majority vote thereof) or any Shareholder. Nominations (other than
those made by the Board) shall be made in writing and shall be delivered
or mailed to the President or the Secretary not less than fourteen (14)
days nor more than fifty (50) days prior to any Shareholder Meeting called
for the election of Directors; provided, however, that if less than
twenty-one (21) days Notice of the Shareholder Meeting is given to the
Shareholders, such nominations shall be mailed or delivered to the
President or the Secretary not later than the close of business on the
seventh (7th) day following the day on which the Notice of the Shareholder
Meeting was mailed. Such notification shall contain the following
information: (i) the name and address of each proposed nominee; and (ii)
the principal occupation of each proposed nominee; and (iii) if known, the
total number of Shares that will be noted for each proposed nominee; and
(iv) the name and residence address of the notifying Shareholder(s); and
(v) the number of Shares owned by the notifying Shareholder(s).
Nominations not made in accordance with this Section 1f. shall not qualify
and shall be disregarded at the Shareholder Meeting..
g. Subject to this Section 1, a Person may serve as a Director for an
unlimited number of consecutive or non-consecutive Terms.
Section 2. Board Vacancies.
a. Board vacancies shall occur from the disqualification, death, or
resignation of any Director; from the removal (with or without cause) of a
Director from the Board; or from the Shareholders' failure to elect the
entire fixed and authorized number of Directors; provided, however, that a
vacancy shall not occur if, as a result of any of the foregoing, the Board
determines to reduce the corresponding number of Directorships pursuant to
its authority under Section 1d. of this Article IV.
9
<PAGE>47
b. Any Director may be removed from the Board (with or without cause)
at any time and without notice or demand by the vote of the holders of at
least seventy-five percent (75%) of the Shares.
c. At any time, a Director may resign from the Board by delivering or
mailing (by certified, United States mail) written notice of the
resignation to the President or the Secretary. The resignation shall be
effective upon actual receipt of the notice by the Officer, unless the
notice specifies a later resignation date.
d. The vote of the majority of the remaining Directors (even if such
Directors are less than a majority of the whole authorized number of
Directors) shall fill all Board vacancies (when and as determined by such
remaining Directors) by electing successor Directors to fill the unexpired
Term of the vacated Directorships and to serve until their respective
successors are elected, or until their earlier resignation,
disqualification, death or removal from the Board.
Section 3. Board Powers and Duties.
a. Except as otherwise expressly provided in these Regulations, all
policy and administrative powers and authority of the Corporation are
vested in and shall be exercised solely and exclusively by (or under the
direction of) the Board which, in its sole discretion, shall have charge,
control and management of the Corporation's property, affairs, businesses,
activities and funds. In accordance with these Regulations, the Board
also shall elect Officers, create and disband Board Committees, appoint
Board agents, authorize and empower the Corporation to negotiate and
execute contracts, and perform all other acts and functions permitted by
law and consistent with the Articles of Incorporation and these
Regulations.
b. Except as otherwise expressly designated by the Board, individual
Directors shall have no powers and authority to act on the Board's behalf
or on the Corporation's behalf and all Directors shall act and vote as a
Board.
Section 4. Voting.
a. Each Director shall be entitled to one (1) vote on all matters
properly submitted to the Board for its vote, consent, waiver, release or
other action.
b. Unless otherwise provided in these Regulations or by law, the
Board shall act by a majority vote of those Directors actually present in
person at any Board Meeting when a quorum of Directors then exists.
Section 5. Board Committees.
a. The Board may create Board Committee(s) and appoint, remove and
reappoint all members to such Committee(s). Such Committee(s) shall act
at the Board's direction and the Board shall have exclusive authority to
designate the duties, functions and powers of the Committee(s).
10
<PAGE>48
b. By resolution adopted by a majority of the whole Board, the Board
may create (from its membership) and define the powers and duties of an
Executive Committee and may determine that, during the intervals between
Board Meetings, the Executive Committee may possess and may exercise all
of the powers of the Board in the management and control of the business
of the Corporation to the extent permitted by law. All action taken by
the Executive Committee shall be reported to the Board at its first
Meeting thereafter.
c. Unless otherwise provided by the Board, a majority of the members
of any Committee appointed by the Board (pursuant to this Section) shall
constitute a quorum at any meeting thereof and the act of a majority of
the members present at a meeting at which a quorum exists shall be the act
of such Committee. Action may be taken by any such Committee without a
meeting by a writing signed by all its members. Any such Committee shall
prescribe its own rules for calling and holding meetings and its methods
of procedure, subject to any rules prescribed by the Board, and shall keep
a written record of all action taken by the Committee.
Section 6. Compensation and Expenses.
Directors shall be entitled to such compensation in their capacities as
Directors and to reimbursement for such expenses as the Board periodically
determines in its sole discretion. Members of Board Committees shall be
entitled to such additional compensation in their capacities as Committee
members and to reimbursement for such additional expenses as the Board
periodically determines in its sole discretion.
Section 7. Bylaws.
For its own government, the Board may adopt bylaws consistent with the
Articles of Incorporation and these Regulations.
Section 8. Amendment of Article IV.
Notwithstanding any contrary provision in the Regulations, amendments to
any provisions of this Article IV shall require the affirmative vote of
the holders of seventy-five percent (75%) of the Shares; provided,
however, that any such amendments shall, instead, be governed by the
Shareholder voting requirements of Section 1 of Article X of these
Regulations if: (i) the Corporation has no Interested Shareholder (as
defined in Section 1 of Article IX) and the proposed amendment is first
approved by a majority vote of the whole Board, or (ii) the Corporation
has an Interested Shareholder and the proposed amendment is first approved
by a two-thirds (2/3) majority of the Continuing Directors (as defined in
Section 1 of Article IX).
11
<PAGE>49
ARTICLE V
OFFICERS
Section 1. Designation and Qualification.
a. The Officers of the Corporation may consist of: (i) a Chairman of
the Board (who must be a Director), (ii) a Vice-Chairman of the Board (who
must also be a Director), (iii) a President (who must also be a Director),
(iv) a Secretary, (v) a Treasurer, and (vi) one or more Executive
Vice-Presidents and Senior Vice-Presidents, Assistant Officers and such
other Officers as the Board periodically determines. The same Person may
hold any two (2) or more Officerships. The President or the Chairman of
the Board shall serve as the Corporation's Chief Executive Officer (CEO)
as periodically determined by the Board. In its discretion, the Board may
also designate an Executive Vice-President or a Senior Vice-President as
the Corporation's Chief Operating Officer (COO).
b. At the Annual Reorganizational Board Meeting (or at any other
Special or Regular Board Meeting called for the purpose of electing
Officers), the Board shall elect all Officers to serve until the
expiration of their respective terms of office (as determined by the
Board) and until their respective successors are elected, or until their
earlier death, resignation, disqualification, or removal from office. The
terms of office for each Officership shall be periodically determined by
the Board.
c. Subject to the qualifications designated in this Section 1, any
person may serve or be elected as an Officer for an unlimited number of
consecutive or non-consecutive terms.
Section 2. Officer Vacancies and Succession.
a. Officer vacancies shall occur from an Officer's disqualification,
death, resignation or removal (with or without cause) from office.
b. Without prior notice or demand, any Officer may be removed at any
time from office (with or without cause) by the Board, unless such removal
is subject to the terms of a written contract between the Officer and the
Corporation.
c. Unless an Officer's resignation is subject to the terms of a
written contract between the Officer and the Corporation, an Officer may
resign from office at any time by delivering or mailing (by certified,
United States mail) written notice of the resignation to the Board or to
any Officer (other than the resigning Officer) and, unless the notice
specifies a later resignation date, the resignation shall be effective
upon actual receipt of the notice.
d. The Board shall fill all Officer vacancies, however created, by
electing (when and as determined by the Board) successor Officers to
serve until the expiration of their respective terms of office. Prior to
any such action by the Board, the Vice-Chairman shall fill any vacancy in
the office of the Chairman of the Board and the President shall fill any
vacancy in the office of the Vice-Chairman of the Board.
12
<PAGE>50
Section 3. Powers and Duties of Officers.
a. Chairman of the Board. The Chairman of the Board shall preside at
all Shareholder and Board Meetings; may serve as the Chief Executive
Officer (CEO) of the Corporation, if the Board so determines; and
generally shall perform all duties incident to the office and such other
duties and responsibilities as the Board periodically requires.
b. Vice-Chairman of the Board. The Vice-Chairman of the Board shall
perform all duties and responsibilities of the Chairman of the Board
during the Chairman's absence or incapacity, until the Board otherwise
directs, and shall perform such other duties and responsibilities as the
Board periodically requires.
c. President. The President of the Corporation shall perform all
duties and responsibilities of the Vice-Chairman of the Board during the
Vice-Chairman's absence or incapacity; ensure that all Board orders and
actions are implemented; sign the Corporation's documents; exercise
general executive supervision, management and control over the
Corporation's affairs, property, personnel, businesses, activities, other
Officers and funds; may serve as the Chief Executive Officer (CEO) of the
Corporation, if the Board so determines; and generally shall perform all
duties incident to the office and such other duties and responsibilities
as the Board periodically requires.
d. Executive and Senior Vice-President(s). Any Executive and Senior
Vice-President(s) of the Corporation shall, upon request of the Board,
perform such portion or all of the duties and responsibilities of the
President during the President's absence or incapacity, until the Board
otherwise directs; shall otherwise report to the President; and shall
perform such other duties and responsibilities as the Board or the
President periodically requires.
e. Secretary. The Secretary of the Corporation shall: take and
maintain (or cause to be taken and maintained) Minutes of all Shareholder
Meetings and all Board Meetings; unless otherwise provided herein, give
(or cause to be given) Notice of all Shareholder Meetings and all Director
Meetings as required by these Regulations; maintain (or cause to be
maintained) the Corporation's Seal (if any) and all books, records and
other documents of the Corporation; maintain (or cause to be maintained) a
record of all Share Certificates and all Shareholders; report to the
President; and generally perform all duties incident to the office and
such other duties and responsibilities as the Board or the President
periodically requires.
f. Treasurer. The Treasurer of the Corporation shall: maintain (or
cause to be maintained) custody of the Corporation's funds, securities,
properties, and other assets as periodically required by the Board;
prepare (or cause to be prepared) accurate financial accounts and
statements of the Corporation's financial condition, as periodically
required by the Board; maintain (or cause to be maintained) accurate
accounts of all funds received and paid by the Corporation and all other
financial transactions of the Corporation; report to the President; and
generally perform all duties incident to the office and such other duties
and responsibilities as the Board or the President periodically requires.
g. Other Officers. Any other Officer(s) of the Corporation shall
report to the President and shall have such duties and responsibilities
and such titles as the Board or the President periodically requires.
<PAGE>51
13
<PAGE>52
ARTICLE VI
INDEMNIFICATION OF SHAREHOLDERS, DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS
Section 1. Definitions.
For purposes of this Article, the following words and phrases shall have
the meanings designated below:
a. "Claim" means, with respect to any Indemnified Individual, any and
all threatened, pending or completed claims, actions, suits or proceedings
(whether civil, criminal, administrative, investigative or otherwise and
whether under State or Federal law) and any and all appeals related
thereto; and
b. "Indemnified Individual" means, subject to Section 8 of this
Article, such of the following as the Board may determine (by a majority
vote of a quorum of disinterested Directors): all past, present and
future Shareholders, Directors, Officers, employees and other agents of
the Corporation acting in any capacity at the request of or on behalf of
the Corporation; and
c. "Liabilities" means any and all judgments, decrees, fines,
investigation costs, penalties, expenses, fees, amounts paid in
settlement, costs, losses, expenses (including, but not limited to,
attorneys' fees and court costs), charges, and any other liabilities
actually and reasonably incurred by an Indemnified Individual with respect
to any Claim, either before or after final disposition of the Claim.
Section 2. Indemnification for Third-Party Claims.
To the fullest extent authorized or permitted by law, the Shareholders
hereby determine that the Corporation shall indemnify and save harmless
any and all Indemnified Individuals from and against all Liabilities
arising or resulting from any Claim (other than a Claim by or in the right
of the Corporation), under which the Indemnified Individual is a party or
participant because of actions or omissions of the Corporation or of the
Indemnified Individual or of any Shareholder, Director, Officer, employee,
agent or other Person acting in any capacity at the request of or on
behalf of the Corporation, if such Indemnified Individual has acted in
good faith and in a manner the Indemnified Individual reasonably believed
to be in and not opposed to the best interests of the Corporation and,
with respect to any criminal action or proceeding, if the Indemnified
Individual had no reasonable cause to believe the Indemnified Individual's
conduct was unlawful; provided, however, that (unless otherwise determined
by a majority vote of a quorum of disinterested Directors) the Corporation
shall not indemnify or save harmless an Indemnified Individual for such
Person's willful misconduct.
14
<PAGE>53
Section 3. Indemnification for Claims by or in the Right of the
Corporation.
To the fullest extent authorized or permitted by law, the Shareholders
hereby determine that the Corporation shall indemnify and save harmless
any and all Indemnified Individuals from and against all Liabilities
arising or resulting from any Claim by or in the right of the Corporation,
under which the Indemnified Individual is a party or participant because
of actions or omissions of the Corporation or of the Indemnified
Individual or of any Shareholder, Director, Officer, employee, agent or
other Person acting in any capacity at the request of or on behalf of the
Corporation, if the Indemnified Individual acted in good faith and in a
manner the Indemnified Individual reasonably believed to be in (or not
opposed to) the best interests of the Corporation; provided, however, that
the Corporation shall not indemnify or save harmless an Indemnified
Individual for (i) such Person's adjudicated negligence or misconduct in
the performance of the Indemnified Individual's duty to the Corporation,
or (ii) a violation of Section 1701.95 of the Ohio Revised Code.
Section 4. Release from Liability and Contribution.
To the fullest extent authorized or permitted by law, no Indemnified
Individual shall be liable to the Corporation or to any other Person and
no Claim shall be maintained against any Indemnified Individual by the
Corporation (or, for the Corporation's benefit, by any other Shareholder)
because of any action or omission (except for willful misconduct, unless
otherwise determined by a majority vote of a quorum of disinterested
Directors) of such Indemnified Individual in any capacity at the request
of or on behalf of the Corporation; provided, however, that an Indemnified
Individual shall be liable to the Corporation for the Indemnified
Individual's willful misconduct, unless otherwise determined by a majority
vote of a quorum of disinterested Directors. To the fullest extent
authorized or permitted by law, no Indemnified Individual shall be
responsible for or be required to contribute to the payment of any
Liabilities incurred by the Corporation or by any other Indemnified
Individual because of the actions or omissions (except for willful
misconduct, unless otherwise determined by a majority vote of a quorum of
disinterested Directors) of any Indemnified Individual serving in any
capacity at the request of or on behalf of the Corporation; provided,
however, that an Indemnified Individual shall be liable to the Corporation
and to any other Indemnified Individual for the Indemnified Individual's
willful misconduct, unless otherwise determined by a majority vote of a
quorum of disinterested Directors.
Section 5. Subrogation.
To the extent of any payment by the Corporation under this Article, the
Corporation: (i) shall be subrogated to all the Indemnified Individual's
rights of recovery from any other Person and, as a condition precedent to
any indemnification or other rights under this Article, such Indemnified
Individual shall execute all reasonable documents and take all reasonable
actions requested by the Corporation to implement the Corporation's right
of subrogation, and (ii) hereby waives any right of subrogation against or
contribution from an Indemnified Individual.
15
<PAGE>54
Section 6. Insurance and Similar Protection.
Whether or not the indemnification, release and other provisions of
Section 2, Section 3 or Section 4 of this Article apply, the Corporation
may purchase and maintain insurance upon and/or furnish similar protection
(including, but not limited to: trust funds, letters of credit and
self-insurance) for any Indemnified Individual to cover any Liabilities
such Indemnified Individual might incur from the exercise of the
Indemnified Individual's duties for the Corporation or from such
Indemnified Individual's capacity as an agent or representative of the
Corporation.
Section 7. Other Rights.
The provisions of this Article shall be in addition to and shall not
exclude or limit any rights or benefits to which any Indemnified
Individual is or may be otherwise entitled: (a) as a matter of law or
statute; (b) by the Articles of Incorporation, Regulations or any bylaws;
(c) by any agreement; (d) by the vote of Shareholders or Directors; or (e)
otherwise.
Section 8. Conditions and Limitations.
a. As a condition precedent to the indemnification, release and/or
performance of any other obligation of the Corporation under this Article,
the Indemnified Individual must first: (1) promptly notify the President
or Secretary of the Corporation of any actual or potential Claim; and (2)
authorize and permit the Corporation, in its sole discretion, to choose
any legal counsel to defend and otherwise handle the Claim and all
proceedings and matters related thereto (including, but not limited to,
any counter-claims, cross-claims and defenses); and (3) permit the
Corporation to assume total, complete and exclusive control of the Claim
and all proceedings and matters related thereto (including, but not
limited to, any counter-claims, cross-claims and defenses); and (4) in all
respects, cooperate with the Corporation and its counsel in the defense of
the Claim and in the prosecution of any counter-claims, cross-claims and
defenses.
b. At the Corporation's option, the Corporation's obligations under
this Article may cease and terminate (without notice or demand): (i) if
the Indemnified Individual is an employee of the Corporation, upon
termination of the Indemnified Individual's employment with the
Corporation, or (ii) if the Indemnified Individual is a Director or
Officer, upon removal of such Director or Officer for cause (as determined
by the Board) in accordance with these Regulations.
ARTICLE VII
SHARES
Section 1. Certificates and Share Records.
a. Certificates (herein called "Certificates" or "Share
Certificates") evidencing ownership of Shares shall be issued and
registered (on the Corporation's Share
16
<PAGE>55
records) to the lawful owner or holder of such Shares upon full payment
therefor. All Certificates shall contain such signatures and information
as required by these Regulations and Ohio law and shall be of such tenor
and design as the Board periodically determines.
b. The Secretary of the Corporation shall maintain (or cause to be
maintained) a record of all Share Certificates, the registered owner or
holder thereof, the date of issuance and cancellation, and any other
information the Board periodically requires.
c. A Person in whose name Shares are recorded on the books of the
Corporation shall conclusively be deemed the unqualified owner of such
Shares for all purposes and to have capacity to exercise all rights of
ownership. Neither the Corporation nor any transfer agent of the
Corporation shall be obligated to recognize any equitable interest in or
claim to such Shares by any other Person, whether disclosed upon the Share
Certificate or otherwise.
d. All Share Certificates shall be transferable in person or by
attorney; provided, however, that (except as otherwise provided in Section
2 of this Article) no Share transfer shall be entered upon the
Corporation's records until the previous Share Certificates for such
Shares have been surrendered and cancelled.
Section 2. Lost, Stolen or Destroyed Share Certificates.
The Board may issue new Share Certificates to replace lost, stolen or
destroyed Certificates. In its sole discretion, the Board may first
require the registered Shareholder to indemnify the Corporation and/or to
furnish a bond to the Corporation from such sureties, for such amount, and
with such terms and conditions as the Board determines to protect the
Corporation, its Shareholders, Directors, Officers, employees, agents
and/or any other Person from injury or damage by issuance of a new Share
Certificate.
Section 3. Cancellation of Share Certificates.
In its sole discretion, the Board shall determine whenever any
outstanding Share Certificates shall be cancelled and exchanged for other
Share Certificates and shall order and require the holders of such
outstanding Share Certificates to surrender them for such purposes. Until
compliance with the Board's order, all rights of the holder (as a
Shareholder) of any such Share Certificates shall be suspended with
respect to the Share(s) represented thereby.
Section 4. Transfer of Shares.
a. Shares may be transferred on the Corporation's Share records by
the registered holder, by the Shareholder's legally empowered attorney, or
by the Shareholder's legal representative upon surrender and cancellation
of the Share Certificates with duly-executed assignment and power of
transfer endorsed thereon (or attached thereto) and with such proof of
signatures as the Board requires.
b. After the Board fixes a Record Date for any Shareholder Meeting,
for the payment of a dividend or for the exercise of any Shareholder
rights, no Shares shall be transferred on the Corporation's Share records
until immediately after the occurrence of such event.
17
<PAGE>56
ARTICLE VIII
OTHER INSTRUMENTS
Section 1. Prior Instruments.
These Regulations supersede and nullify any and all prior regulations,
constitutions, bylaws and similar instruments previously adopted by the
Shareholders and/or the Board.
Section 2. Conflicts of Instruments.
In the event of a conflict between these Regulations and any other
instrument, bylaw, rule, regulation, document or policy of the
Corporation, these Regulations shall be superior to any such other
instrument, bylaw, rule, document, regulation and policy of the
Corporation (except as expressly stated herein), and the Articles of
Incorporation shall be superior to these Regulations.
ARTICLE IX
FAIR PRICE AND SUPER VOTE REQUIREMENTS
IN CERTAIN BUSINESS COMBINATIONS
Section 1. Definitions.
a. "Affiliate" or "Associate" shall have the respective meanings
given to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as in effect on January 1,
1989, or as may thereafter be amended.
b. A Person shall be a "Beneficial Owner" of any Voting Shares (as
defined in this Article): (i) which such Person or any of its Affiliates
or Associates beneficially owns, directly or indirectly; or (ii) which
such Person or any of its Affiliates or Associates has by itself or with
others (a) the right to acquire (whether such right is exercisable
immediately or only after the passage of time), pursuant to any agreement,
arrangement or understanding or upon the exercise of conversion rights,
exchange rights, warrants or options, or otherwise, or (b) the right to
vote pursuant to any agreement, arrangement or understanding; or (iii)
which is beneficially owned, directly or indirectly, by any other Person
with which such Person or any of its Affiliates or Associates has any
agreement, arrangement or understanding for the purpose of acquiring,
holding, voting or disposing of any Voting Shares.
c. "Business Combination" shall include: (i) any merger or
consolidation of the Corporation or any of its subsidiaries with or into
an Interested Shareholder (as defined in this Article), regardless of
which Person is the surviving entity; (ii) any sale, lease, exchange,
mortgage, pledge, or other disposition (in one transaction or a series of
transactions) from the Corporation or any of its subsidiaries to an
Interested Shareholder, or from an Interested Shareholder to the
Corporation or any of its subsidiaries, of assets having an aggregate Fair
18
<PAGE>57
Market Value (as defined in this Article) of ten percent (10%) or more of
the Corporation's total shareholders equity; (iii) the issuance, sale or
other transfer by the Corporation or any subsidiary thereof of any
securities of the Corporation or any subsidiary thereof to an Interested
Shareholder (other than an issuance or transfer of securities which is
effected on a pro rata basis to all holders of Shares of the Corporation);
(iv) the acquisition by the Corporation or any of its subsidiaries of any
securities of an Interested Shareholder; (v) the adoption of any plan or
proposal for the liquidation or dissolution of the Corporation proposed by
or on behalf of an Interested Shareholder; (vi) any reclassification or
recapitalization of the Voting Shares or other securities of the
Corporation if the affect, directly or indirectly, of such transaction is
to increase the relative voting power of an Interested Shareholder; or
(vii) any agreement, contract or other arrangement providing for or
resulting in any of the transactions described in this definition of
Business Combination.
d. "Continuing Director" shall mean any member of the Board who is
unaffiliated with the Interested Shareholder and was a member of the Board
prior to the time that the Interested Shareholder became an Interested
Shareholder; any successor of a Continuing Director who is unaffiliated
with the Interested Shareholder and is approved to succeed a Continuing
Director by the Continuing Directors; any member of the Board who is
appointed to fill a vacancy on the Board, who is unaffiliated with the
Interested Shareholder, and who is approved by the Continuing Directors.
e. "Fair Market Value" shall mean: (i) in the case of securities
listed on a national securities exchange or quoted in the National
Association of Securities Dealers Automated Quotations System (or any
successor thereof), the highest sales price or bid quotation, as the case
may be, reported for securities of the same class or series traded on the
national securities exchange or in the over-the-counter market during the
thirty (30) day period immediately prior to the date in question or, if no
such report or quotation is available, the Fair Market Value as determined
by the Continuing Directors; and (ii) in the case of other securities and
of other property or consideration (except cash), the Fair Market Value as
determined by the Continuing Directors; provided, however, if the power
and authority of the Continuing Directors ceases and terminates pursuant
to Section 6 of this Article as a result of there being less than five (5)
Continuing Directors at any time, then (a) for purposes of clause (ii) of
the definition of "Business Combination," any sale, lease, exchange,
mortgage, pledge, or other disposition of assets from the Corporation or
any of its subsidiaries to an Interested Shareholder or from an Interested
Shareholder to the Corporation or any of its subsidiaries, regardless of
the Fair Market Value thereof, shall constitute a Business Combination,
and (b) for purposes of paragraph 1 of Section 4 of this Article, in
determining the amount of consideration received or to be received per
Share by the Independent Shareholders in a Business Combination, there
shall be excluded all consideration other than cash and the Fair Market
Value of securities listed on a national securities exchange or quoted in
the National Association of Securities Dealers Automated Quotations System
(of any successor thereof) for which there is a reported sales price or
bid quotation, as the case may be, during the thirty (30) day period
immediately prior to the date in question.
f. "Independent Shareholder" shall mean all holders of Shares of the
Corporation other than the Interested Shareholder engaged in or proposing
the Business Combination.
19
<PAGE>58
g. "Interested Shareholder" shall mean: (a) any Person (other than
the Corporation or any of its subsidiaries), and (b) the Affiliates and
Associates of such Person, who (or which together) are: (i) the
Beneficial Owner, directly or indirectly, of ten percent (10%) or more of
the then outstanding Voting Shares; or (ii) an assignee of or other Person
who has succeeded to any Voting Shares which were at any time within the
two (2) year period immediately prior to the date in question
beneficially owned by an Interested Shareholder, if such assignment or
succession shall have occurred in the course of a transaction or series of
transactions not involving a public offering within the meaning of the
Securities Act of 1933. Notwithstanding any contrary provision in this
Section 1(g): (i) no Trust Department or designated fiduciary or other
trustee of such Trust Department of the Corporation or a subsidiary of the
Corporation, or similar fiduciary capacity of the Corporation with direct
voting control of the outstanding Voting Shares shall be included or
considered as an Interested Shareholder, and (ii) no profit sharing,
employee stock ownership, employee stock purchase and savings, employee
pension, or other employee benefit plan of the Corporation or any of its
subsidiaries and no trustee of any such plan (in its capacity as such
trustee) shall be included or considered as an Interested Shareholder.
h. A "Person" shall mean an individual, partnership, trust,
corporation, limited liability company or other entity and further
includes any two (2) or more of the foregoing acting in concert.
I. "Voting Shares" shall mean all outstanding Common Shares and
Voting Preferred Shares of the Corporation.
j. All definitions contained in Article I of these Regulations shall
also apply to this Article IX, unless (and to the extent that) such
definitions conflict with the definitions in this Section 1.
Section 2. Supermajority Vote to Effect Business Combination.
No Business Combination shall be effected or consummated unless: (1)
authorized and approved by Continuing Directors and, if otherwise required
by law to authorize or approve the transaction, by the affirmative vote
of the holders of such Shares as are mandated by the Ohio Revised Code; or
(2) authorized and approved by the affirmative vote of holders of not less
than seventy-five percent (75%) of the outstanding Voting Shares voting
together as a single class. The authorization and approval required by
this Section 2 are in addition to any authorization and approval required
by Section 3 of this Article.
Section 3. Conditions Required to Effect Business Combination.
No Business Combination shall be effected or consummated unless: (1)
all the fair price and other conditions and requirements set forth in
Section 4 of this Article have been satisfied; or (2) authorized and
approved by the Continuing Directors; or (3) authorized and approved by
the affirmative vote of holders of not less than sixty-six and two-thirds
percent (66-2/3%) of the outstanding Voting Shares held by all Independent
Shareholders voting together as a single class. Any authorization and
approval required by this Section 3 are in addition to any authorization
and approval required by Section 2 of this Article.
20
<PAGE>59
Section 4. Conditions and Requirements to Fair Price.
All the following conditions and requirements must be complied with in
order for subitem (1) of Section 3 of this Article to be satisfied:
a. The cash and Fair Market Value of the property, securities or
other consideration to be received by the Independent Shareholders in the
Business Combination per Share for each Share of the Corporation must not
be less than the sum of: (i) the highest per Share price (including
brokerage commissions, transfer taxes, soliciting dealer's fees and
similar payments) paid by the Interested Shareholder in acquiring any
Shares; and (ii) the amount, if any, by which interest on the per Share
price, calculated at the Treasury Bill rate periodically in effect (from
the date the Interested Shareholder first became an Interested Shareholder
until the Business Combination has been consummated) exceeds the per Share
amount of cash dividends received by the Independent Shareholders during
such period (for purposes of this Subparagraph, the "Treasury Bill Rate"
mean, for each calendar quarter or part thereof, the interest rate of the
last auction in the preceding calendar quarter of ninety-one (91)-day
United States Treasury Bills expressed as a bond equivalent yield); for
purposes of this Section 4a., per Share amounts shall be appropriately
adjusted for any recapitalization, reclassification, Share dividend, Share
split, reverse split, or other similar transaction. Any Business
Combination which does not result in the Independent Shareholders'
receiving consideration for or in respect of their Shares shall not be
treated as complying with the requirements of this Section 4a.
b. The form of the consideration to be received by the Independent
Shareholders owning the Shares must be the same as was previously paid by
the Interested Shareholder(s); provided, however, that if the Interested
Shareholder previously paid for such Shares with different forms of
consideration, the form of the consideration to be received by the
Independent Shareholders must be in the form as was previously paid by the
Interested Shareholder in acquiring the largest number of Shares. The
provisions of this Section 4b. are not intended to diminish the aggregate
amount of cash and Fair Market Value of any other consideration that any
holder of Shares is otherwise entitled to receive upon the liquidation or
dissolution of the Corporation, under the terms of any contract with the
Corporation or an Interested Shareholder, or otherwise.
c. From the date the Interested Shareholder first becomes an
Interested Shareholder until the Business Combination has been
consummated, the following requirements must be complied with unless the
Continuing Directors otherwise determine: (i) the Interested Shareholder
has not received, directly or indirectly, the benefit (except
proportionately as a holder of Shares) of any loan, advance, guaranty,
pledge, or other financial assistance, tax credit or deduction, or other
benefit from the Corporation or any of its subsidiaries; (ii) there shall
have been no failure to declare and pay in full (when and as due or
scheduled) any dividends required to be paid on any class or series of
Shares; (iii) there shall have been (a) no reduction in the annual rate of
dividends paid on Common Shares (except as necessary to reflect any split
of the Common Shares), and (b) an increase in the annual rate of dividends
as necessary to reflect reclassification (including a reverse split),
recapitalization or any similar transaction which has the effect of
reducing the number of outstanding Common Shares; and (iv) there shall
have been no amendment or other modification to any profit-sharing,
employee stock ownership, employee stock purchase and savings, employee
pension or other employee benefit plan of the Corporation
<PAGE>60
21
<PAGE>61
or any of its subsidiaries the effect of which is to change in any manner
the provisions governing the voting of any Shares of the Corporation in or
covered by such plan.
d. A proxy or information statement describing the Business
Combination and complying with the requirements of the Securities Exchange
Act of 1934, as amended, and the rules and regulations thereunder (or any
subsequent provisions replacing that Act and the rules and regulations
thereunder) has been mailed at least thirty (30) days prior to the
completion of the Business Combination to the holders of all outstanding
Voting Shares. If deemed advisable by the Continuing Directors, the proxy
or information statement shall contain a recommendation by the Continuing
Directors as to the advisability (or inadvisability)of the Business
Combination and/or an opinion by an investment banking firm, selected by
the Continuing Directors and retained at the expense of the Corporation,
as to the fairness (or unfairness) of the Business Combination to the
Independent Shareholders.
Section 5. Other Applicable Voting Requirements.
The affirmative votes or approvals required to be received from holders
of the Shares of the Corporation under Sections 2, 3, and 9 of this
Article shall apply even though no vote of a lesser percentage vote may be
required by law or by other provisions of these Regulations, or otherwise.
Any authorization, approval or other action of the Continuing Directors
under this Article is in addition to any required authorization, approval
or other action of the Board.
Section 6. Continuing Directors.
All actions required or permitted to be taken in these Regulations by
the Continuing Directors shall be taken with or without a meeting by the
vote or written consent of two-thirds (2/3) of the Continuing Directors,
regardless of whether the Continuing Directors constitute a quorum of the
members of the Board then in office. If the number of Continuing
Directors is at any time less than five (5), all power and authority of
the Continuing Directors under this Article shall thereupon cease and
terminate, including (without limitation) the authority of the Continuing
Directors to authorize and approve a Business Combination Sections 2 and 3
of this Article and to approve a successor Continuing Director.
Two-thirds (2/3) of the Continuing Directors shall have the power and duty
(consistent with their fiduciary obligations) to determine for the purpose
of this Article, on the basis of information known to them: (1) whether
any Person is an Interested Shareholder; (2) whether any Person in an
Affiliate or Associate ; (3) whether any Person has an agreement,
arrangement, or understanding with another or is acting in concert with
another; and (4) the Fair Market Value of property, securities or other
considerations (other than cash). The good faith determination of the
Continuing Directors on such matters shall be binding and conclusive for
purposes of this Article.
Section 7. Effects on Fiduciary Obligations of Interested
Shareholders.
Nothing contained in this Article shall be construed to relieve any
Interested Shareholder from any fiduciary obligations imposed by law.
22
<PAGE>62
Section 8. Further Considerations to Effect Business Combination.
No Business Combination (as defined in this Article) shall be effected
or consummated unless, in addition to the consideration set forth in
Sections 2, 3, 4, 5 and 6 of this Article, the Board (including the
Continuing Directors) shall consider all of the following factors and any
other factors which the Board deems relevant: (1) the social and
economic effects of the transaction on the Corporation and its
subsidiaries, employees, depositors, loan and other customers, creditors
and other elements of the communities in which the Corporation and its
subsidiaries operate or are located; (2) the business and financial
conditions and earnings prospects of the Interested Shareholder, including
(but not limited to) debt services another existing or likely financial
obligations of the Interested Shareholder, and the possible effect thereof
on other elements of the communities in which the Corporation and its
subsidiaries operate or are located, and (3) the competence, experience
and integrity of the Interested Shareholder and his, its or their
management.
Section 9. Repeal.
Notwithstanding any other provisions of these Regulations and
notwithstanding the fact that a lesser percentage vote may be required by
law or other provision of these Regulations, the provisions of this
Article may not be repealed, amended, supplemented or otherwise modified,
unless: (1) the Continuing Directors (or, if there is no Interested
Shareholder, a majority vote of the whole Board) recommend such repeal,
amendment, supplement or modification and such repeal, amendment,
supplement or modification is approved by the affirmative vote of the
holders of not less than sixty-six and two-thirds percent (66-2/3%) of the
outstanding Voting Shares; or (2) such repeal, amendment, supplement or
modification is approved by the affirmative vote of holders of (a) not
less than seventy-five percent (75%) of the outstanding Voting Shares
voting together as a single class, and (b) not less than sixty-six and
two-thirds percent (66-2/3%) of the outstanding Voting Shares held by all
Independent Shareholders voting together as a single class.
ARTICLE X
AMENDMENTS AND MISCELLANEOUS
Section 1. Amendments.
a. Except as otherwise expressly provided in these Regulations, the
Shareholders may repeal or amend these Regulations or adopt amended
regulations: (i) at any Shareholder Meeting (with previous notice of such
amendment, repeal or adoption), by the affirmative vote of the registered
holders of a majority of the Shares represented in person or by proxy at
such Shareholder Meeting, or (ii) without a Shareholder Meeting, by the
written consent of the registered holders of a majority of the Shares.
b. If these Regulations are amended or amended regulations are
adopted without a Shareholder Meeting, the Secretary of the Corporation
(or any other Officer) shall forthwith mail a copy of the amendment to
these Regulations or the amended regulations to each
23
<PAGE>63
Shareholder who did not participate in the adoption of the amendment or
the amended regulations.
Section 2. Miscellaneous.
a. When acting on the Corporation's behalf, no Shareholder, Director,
Officer, employee, or other agent of the Corporation shall discriminate
against any Person because of race, religion, color, creed, sex, national
origin, or handicap.
b. If any provision or Article of these Regulations is ever
judicially determined to be invalid or unenforceable, such determination
shall not affect the validity or enforceability of any other provision or
Article of these Regulations.
Dated:___________________
24
<PAGE>64
[X] PLEASE MARK VOTES REVOCABLE PROXY
AS IN THIS EXAMPLE LNB BANCORP, INC.
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING
OF SHAREHOLDERS TO BE HELD APRIL 18, 2000
The undersigned hereby appoints Daniel P. Batista, David M. Koethe and
Eugene M. Sofranko, and each of them, with power of substitution,
proxies and agents of the undersigned to vote at the Annual Meeting of
Shareholders of LNB Bancorp, Inc. (the "Corporation"), to be held at The
Lorain National Bank, 521 Broadway, Lorain, Ohio, 44052, on April 18,
2000, at 10:00 a.m., and at any adjournment thereof, all shares of common
stock of the Corporation which the undersigned would be entitled to vote
if personally present for the following matters.
This proxy, when properly executed, will be voted in the manner directed
herein by the undersigned stockholder. If no direction is made, this
proxy will be voted FOR Proposals 1 and 2. The undersigned
acknowledges receipt of the Notice of Annual Meeting of Shareholders and
the related Proxy Statement.
The Board of Directors recommends a vote FOR each of the following:
1. ELECTION OF DIRECTORS for a three-year term expiring in 2003 (except
as marked to the contrary below):
For [ ] Withhold [ ] For All Except [ ]
Robert M. Campana, James F. Kidd, Jeffrey F. Riddell, and Thomas P.
Ryan
INSTRUCTION: To withhold authority to vote for any individual nominee(s),
mark "For All Except" and write that (those) nominee's name(s) in the
space provided below.
_________________________________________________________________
2. PROPOSAL TO AMEND THE ARTICLES OF INCORPORATION AND CODE OF
REGULATIONS AS MORE FULLY DESCRIBED UNDER THE FOLLOWING SUBHEADINGS
AND IN THE PROXY STATEMENT:
a) Amend and restate Articles of Incorporation to simplify and
update language as authorized by Ohio law; which amendments would
not affect shareholders' rights;
b) State in the Articles of Incorporation that one of the purposes for
which the Corporation is formed is to qualify and act as a
"financial holding company" as defined by the Gramm-Leach-Bliley Act
of 1999;
c) Removal of fair price and super majority vote provisions as
currently stated in Articles XIII and XIV of the Articles
of Incorporation and relocate such provisions to the Code of
Regulations;
d) Amend and restate Code of Regulations to simplify and update
language as authorized by Ohio law; which amendments would not
affect shareholders' rights;
e) Provide that the number of directors on the Board of Directors may
periodically be changed and authorize the Board of Directors to fill
terms of directorships created by the Board of Directors;
f) Provide that directors and members of board committees may be
<PAGE>65
entitled to compensation and reimbursement for additional expenses
as the Board of Directors periodically determines in its sole
discretion; and
g) Provide for indemnification of shareholders, directors, officers,
employees and agents from claims arising from acts of the
Corporation or others acting on behalf of the Corporation.
AN AFFIRMATIVE VOTE FOR PROPOSAL 2 TO AMEND THE ARTICLES OF
INCORPORATION AND THE CODE OF REGULATIONS WILL BE AN AFFIRMATIVE VOTE
FOR ALL SUBHEADINGS UNDER PROPOSAL 2-SUBHEADINGS 2(a) THROUGH 2(g).
For [ ] Against [ ] Abstain [ ]
3. OTHER BUSINESS - To transact any other business that may properly
come before the meeting or any adjournment thereof.
In their discretion, the proxies are authorized to vote upon such other
business as properly may come before the meeting.
Please be sure to sign and date Date [ ]
this Proxy in the box below.
[ ]
Shareholder sign above Co-holder (if any) sign above
Detach above card, sign, date and mail in postage paid envelope
provided.
LNB BANCORP, INC.
Please sign exactly as name appears hereon. When shares are held by joint
tenants, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by President or other
authorized officer. If a partnership, please sign in partnership name by
an authorized person.
PLEASE ACT PROMPTLY
SIGN, DATE & MAIL YOUR PROXY CARD TODAY
