Exhibit 10.1
SETTLEMENT AGREEMENT
     SETTLEMENT AGREEMENT, between and among Richard M. Osborne and Steven A.
Calabrese (together, the “Committee”), AMG Investments, LLC, an Ohio limited
liability company (“AMG”), and LNB Bancorp, Inc., an Ohio corporation (the
“Company”).
     The parties hereby agree as follows:
     1. The Company, AMG and the Committee agree that: (a) the Committee shall
withdraw its proposals for consideration at the Annual Meeting of Shareholders
of the Company to be held on May 20, 2008 (the “2008 Annual Meeting”) as set
forth in its proxy materials dated April 8, 2008; (b) the members of the
Committee and AMG will not, directly or indirectly, engage in any solicitation
of proxies with respect to such proposals or any other proposals to be
considered or acted upon at the 2008 Annual Meeting; and (c) none of the members
of the Committee or AMG shall make or cause to be made any proposals at the 2008
Annual Meeting.
     2. The Company shall not submit any matter other than the election of
Class I directors for consideration by the shareholders at the 2008 Annual
Meeting unless approved in writing by the Committee.
     3. By April 22, 2008, the Company shall: (a) expand its board of directors
to fifteen members in accordance with the Company’s code of regulations; and
(b) elect two individuals designated by the Committee (but not any person the
members of the Committee have advised the Company will not be designated) and
reasonably acceptable to the board of directors of the Company to serve as
directors of the Company in the class specified below. The parties agree that in
determining whether a particular candidate is reasonably acceptable, the
decision of the board of directors of the Company, acting in good faith and in
accordance with the Company’s customary governance review procedures with
respect to nominees, shall be final. In the event that the board of directors
determines that a candidate proposed by the Committee is not reasonably
acceptable, it shall promptly inform the Committee of that decision and the
Committee shall have the opportunity to propose an alternative candidate for
consideration by the board of directors as described above. The directors
designated by the Committee shall serve as Class III directors. Directors
designated by the Committee shall have the same protections and obligations, and
shall have the same rights and benefits, as are applicable to all non-employee
directors of the Company; provided that for purposes of the Company’s Corporate
Governance Guidelines, shares of the Company owned by the Committee shall be
counted toward any requirement that directors of the Company own shares. AMG and
the Committee shall cause any person designated by the Committee to serve as a
director to cooperate with all reasonable requests of the Company in connection
with his or her election as a director, including without limitation the
completion of director and officer questionnaires identical to those completed
by the other directors of the Company and other inquiries relating to such
individual’s availability and willingness to regularly attend meetings of the
board of directors and board committees.

 

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     4. The Company hereby agrees to provide the Committee and AMG with a
reasonable opportunity to review and comment in advance on all disclosures
contained in the Company’s proxy materials that relate to AMG, the Committee,
the proxy solicitation initiated by AMG and the Committee and the election of
directors.
     5. In the event that any time prior to the scheduled expiration of their
respective terms, one of the individuals designated to serve as a director by
the Committee is unable to serve as a director, whether because of resignation,
removal or otherwise, the Committee shall be entitled to designate a substitute
nominee (but not any person the members of the Committee have advised the
Company will not be designated), who is reasonably acceptable to the board of
directors (the acceptability of any such candidate to be determined by the board
of directors in accordance with the provisions of Section 3 of this agreement),
and the Company shall cause such reasonably acceptable nominee to be appointed
to the Company’s board of directors to complete the term of the original
designee. Notwithstanding the foregoing, (a) if at any time the members of the
Committee do not beneficially own (as determined in accordance with Rule 13d-3
promulgated under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)), in the aggregate, at least 5% of the outstanding shares of the Company’s
common stock, the Committee’s right to designate such substitute nominee shall
terminate; and (b) the Committee shall have no right to designate such
substitute nominee in the event that directors designated by the Committee
resign from such positions pursuant to Section 9(c) of this Agreement.
     6. As soon as practicable after the execution of this Agreement but in no
event later than the close of business on April 22, 2008, the Committee will
jointly with the Company, issue a press release setting forth the matters
described in this Agreement. The Committee and the Company shall mutually agree
upon the press release. The Company shall announce the settlement on Form 8-K
and shall file the mutually agreed upon press release and this Agreement as an
exhibit to the Form 8-K. AMG and the Committee shall announce the settlement in
an amendment to Schedule 13D and shall file the mutually agreed upon press
release and this Agreement as exhibits to the Schedule 13D. Other than as set
forth in this Agreement and except as required by law, none of the Company, AMG
or the Committee shall, and the Company, AMG and the Committee shall cause its
or their representatives, attorneys and agents not to, publicly disseminate any
documents or materials regarding the Annual Meeting, the election of directors
at the Annual Meeting or the dismissal of the lawsuit described in Section 10.
     7. Neither the Committee nor AMG shall nominate any candidate for election
to the board of directors at the Annual Meeting, or vote its or his shares of
common stock of the Company (the “Common Stock”), in opposition to the Company’s
slate of director nominees by any means at the Annual Meeting. Other than the
immediately preceding sentence and the limitations contained in Section 9 of
this Agreement, there shall be no limitations on the voting rights with respect
to the Common Stock held by any member of the Committee or AMG.
     8. Nothing contained in this Agreement shall be construed to obligate the
Company to nominate any person designated by the Committee (or any successor to
such person) for election to an additional term as a director after such
person’s term expires; provide, however, that the Committees’ designees will be
considered for nomination for election to the board on the

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same basis as other incumbent directors. The Company will provide notice to the
Committee and AMG no less than 30 days before the deadline for notice under the
Company’s code of regulations by shareholders of intent to nominate candidates
for election to the board of directors at an annual meeting of shareholders of
the Company, if the board of directors does not intend to nominate either of the
persons designated by the Committee (including any replacement thereof
designated in accordance with Section 5 of this Agreement) the for re-election
at the expiration of their respective terms.
     9. (a) Except as expressly permitted in this Agreement, neither the
Committee nor AMG will, and will not assist or encourage others (including by
providing financing) to, directly or indirectly (individually or as a part of
any “group” (within the meaning of Section 13(d)(3) of the Exchange Act)), for a
period beginning on the date hereof and ending 18 months from the date hereof:
(i) seek representation on the Company’s board of directors or the removal of
any member of the board, (ii) propose, effect or seek to participate in (A) any
acquisition of any assets of the Company or any of its subsidiaries, (B) any
tender or exchange offer or merger or other business combination involving the
Company or any of its subsidiaries, or (C) any recapitalization, restructuring,
liquidation, dissolution or other extraordinary transaction with respect to the
Company or any of its subsidiaries; (iii) engage in any “solicitation” (as such
term is used in the proxy rules of the SEC) of proxies or consents (whether or
not relating to the election or removal of directors) with respect to the
Company; (iv) seek to advise, encourage or influence any person or entity with
respect to the voting of any voting securities; (v) initiate, propose or
otherwise “solicit” (as such term is used in the proxy rules of the SEC)
shareholders of the Company for the approval of shareholder proposals whether
made pursuant to Rule 14a-8 under the Exchange Act or otherwise; or (vi) enter
into any discussions, negotiations, agreements, arrangements or understandings
with any third party with respect to any of the foregoing, or make or disclose
any proposal to amend or terminate any of the provisions of this Section 9. The
Committee and AMG may acquire securities (or beneficial ownership thereof) of
the Company provided that such acquisitions are not made in connection with any
of the actions prohibited by this Section 9(a) and provided, further, that
nothing contained in this Agreement shall be deemed to amend or modify in any
respect the provisions of the Rights Agreement dated October 24, 2000 between
the Company and Registrar and Transfer Company, as amended (the “Rights Plan”),
to authorize any acquisition of shares that would result in any person becoming
an Acquiring Person (as defined in the Rights Plan), or to waive application of
any of the provisions of the Rights Plan in connection with any transaction
involving the Committee or AMG.
     (b) The provisions of Section 9(a) of this Agreement shall terminate upon:
(i) a decision by the Company’s board of directors to engage in substantive
negotiations with any prospective merger partner or partners identified through
a solicitation of indications of interest or otherwise, with respect to (a) any
merger, consolidation, reorganization, recapitalization or other transaction or
series of related transactions that would result in the

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acquisition, directly or indirectly, by another person or “group” (within the
meaning of Section 13(d)(3) of the Exchange Act), of securities entitling such
person or group to exercise at least a majority of the total voting power of the
Company in the election of directors (or, if the Company is not the surviving or
resulting corporation in such a transaction, if the transaction would result in
the acquisition, directly or indirectly, by such person or group of securities
entitling such person or group to exercise at least a majority of the total
voting power of such surviving or resulting corporation), or (b) the sale of all
or substantially all of the Company’s assets (each of the transactions referred
to in clauses (a) and (b) above are hereinafter referred to as a “Sale
Transaction”); or (ii) the receipt by the Company of a bona fide unsolicited
written proposal (which proposal sets forth a proposed purchase price) by a
potential acquiror with respect to a Sale Transaction; provided, however, that
the provisions of Section 9(a) shall not terminate under the circumstances set
forth in this Section 9(b)(ii) if the receipt of any such proposal or the making
of such public announcement resulted from the breach by either AMG or the
Committee of their obligations under Section 9(a) hereof. For purposes of this
Section 9(b), the parties agree that the term “substantive negotiations” shall
not extend to any discussions between the Company and any other party prior to
the earlier of the time that such other party has made a written or oral
proposal to the Company with respect to a Sale Transaction (specifying price) or
the time that the Company has provided non-public business or financial
information to such other party.
     (c) AMG and the Committee will not, at any time during or after the
18 month period referenced in Section 9(a) above: (i) bring any action, suit,
claim or cause of action against the Company, its officers or directors, or
(ii) engage in any of the conduct specified in clauses (i) through (vi) of the
first sentence of Section 9(a), unless and until each of the persons designated
to serve as directors of the Company by the Committee shall have resigned as
directors.
     10. Mr. Osborne agrees to dismiss, with prejudice, all of his claims in the
lawsuit styled Richard M. Osborne v. LNB Bancorp, Inc., Case No. 1:08 CV 473.
     11. Each party agrees to bear its own expenses in connection with the proxy
solicitations for the Special Meeting and the Annual Meeting by the parties
prior to the date hereof, and the lawsuit referred to in Section 10.
     12. AMG and the Committee, on the one hand, and the Company, on the other,
acknowledge and agree that irreparable injury to the other party would occur in
the event any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached and that such
injury would not be adequately compensable in damages. Therefore, without
prejudice to the rights and remedies otherwise available to it, the parties
agree that each party hereto (the “Moving Party”) shall be entitled to specific
enforcement of, and injunctive relief to prevent any violation of, the terms
hereof and the other parties hereto will not take action, directly or
indirectly, in opposition to the Moving Party seeking such relief on the grounds
that any other remedy or relief is available at law or in equity.
     13. (a) AMG and the Committee hereby agree for the benefit of the Company,
and each officer, director, shareholder, agent, affiliate, employee, partner,
attorney, heir, assign, executor, administrator, predecessor and successor, past
and present, of the Company (the Company and each such person being a “Company
Released Person”) as follows:

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     (i) AMG and the Committee, for themselves and for their respective
managers, members, assigns, agents and successors, past and present, hereby
agree and confirm that, effective from and after the date of this Agreement,
they hereby acknowledges full and complete satisfaction of, and covenants not to
sue, and forever fully release and discharge each Company Released Person of,
and holds each Company Released Person harmless from, any and all rights,
claims, warranties, demands, debts, obligations, liabilities, costs, attorneys’
fees, expenses, suits, losses and causes of action (“Claims”) of any nature
whatsoever, whether known or unknown, suspected or unsuspected, arising in
respect of or in connection with, the composition of the board, or the proxy
solicitations for the Special Meeting and Annual Meeting of shareholders, or
statements made in connection with such proxy solicitations, occurring any time
or period of time on or prior to the date of the execution of this Agreement
(including the future effects of such transactions, occurrences, conditions,
acts or omissions).
     (ii) The undersigned understand and agree that the Claims released by AMG
and the Committee above include not only those Claims presently known but also
include all unknown or unanticipated claims, rights, demands, actions,
obligations, liabilities, and causes of action of every kind and character that
would otherwise come within the scope of the Claims as described above. AMG and
the Committee understand that they may hereafter discover facts different from
or in addition to what they now believe to be true, which if known, could have
materially affected this release of Claims, but they nevertheless waive any
claims or rights based on different or additional facts.
     (b) The Company hereby agrees for the benefit of AMG and the Committee, and
each manager, member, agent, affiliate, employee, partner, attorney, heir,
assign, executor, administrator, predecessor and successor, past and present,
thereof (AMG, the Committee and each such person being an “AMG Released Person”)
as follows:
     (i) The Company, for itself and for its Affiliates, officers, directors,
assigns, agents and successors, past and present, hereby agrees and confirms
that, effective from and after the date of this Agreement, it hereby
acknowledges full and complete satisfaction of, and covenants not to sue, and
forever fully releases and discharges each AMG Released Person of, and holds
each AMG Released Person harmless from, any and all Claims of any nature
whatsoever, whether known or unknown, suspected or unsuspected, arising in
respect of or in connection with, the composition of the board, or the proxy
solicitations for the Special Meeting and Annual Meeting of shareholders, or
statements made in connection with such proxy solicitations, occurring any time
or period of time on or prior to the date of the execution of this Agreement
(including the future effects of such transactions, occurrences, conditions,
acts or omissions).
     (ii) The undersigned understand and agree that the Claims released by the
Company above include not only those Claims presently known but also include all
unknown or unanticipated claims, rights, demands, actions, obligations,
liabilities, and causes of action of every kind and character that would
otherwise come within the scope of the Claims as described above. The Company
understands that it may hereafter

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discover facts different from or in addition to what it now believes to be true,
which if known, could have materially affected this release of Claims, but it
nevertheless waives any claims or rights based on different or additional facts.
     (c) None of the foregoing releases in this Section 13 shall (i) relieve, or
be deemed to relieve, any party from its obligations to comply with the terms of
this Agreement, (ii) release, or be deemed to release, the right of any party to
enforce the terms of this Agreement, or (iii) release, or be deemed to release,
any Claim arising from or in connection with fraud.
     14. The parties acknowledge and agree that the objective is to reduce the
size of the board through normal retirement of directors as required under the
Company’s Corporate Governance Guidelines in existence on the date of this
Agreement, and that upon any such retirements, the board of directors will take
appropriate action to reduce the number of authorized directors until such time
as no more than 12 directorships are authorized. Notwithstanding the foregoing,
the parties agree that: (i) with the exception of the departure of any members
of the board who are within three years of reaching the Company’s mandatory
retirement age, any current director who leaves the board for reasons other than
retirement may be replaced by a new director selected by the vote of a majority
of the entire board of directors; (ii) if at any time the number of directors of
the Company is less than 12, such number of directors may be added by the vote
of a majority of the entire board of directors as may be necessary to restore
the number of directors of the Company in office to 12; and (iii) the number of
directors may be increased and new directors may be added to the board by the
vote of a majority of the entire board of directors in connection with
acquisitions or strategic alliances. Except as set forth in clauses (i) through
(iii) of the preceding sentence, any increase in the authorized number of
directors of the Company beyond 12 shall require, in addition to the approval of
a majority of the entire board of directors, the approval of the board members
designated by the Committee (or any successor to such person), which approval
shall not unreasonably be withheld. The parties agree that such approval shall
not be deemed to have been unreasonably withheld if a prospective board member
does not bring specialized expertise or skills that are likely to be of
significant value to the Company.
     15. Any terms or provisions of this Agreement may be waived in writing at
any time by the party that is entitled to the benefits thereof. The failure of
any party at any time or times to require performance of any provision hereof
shall in no manner affect such party’s right at a later time to enforce the
same. No waiver by any party of a condition or of the breach of any term,
contained in this Agreement, whether by conduct or otherwise, in any one or more
instances shall be deemed to be or construed as a further or continuing waiver
of any such condition or breach or a waiver of any other condition or of the
breach of any other term of this Agreement.
     16. All notices or other communications required, permitted or desired to
be given hereunder shall be deemed to have been duly given if delivered in
writing by hand delivery, overnight courier or mailed by certified mail, or by
facsimile with confirmation, and addressed as follows:

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If to the Committee or AMG:
  AMG Investments, LLC
8500 Station Street, Suite 113
Mentor, OH 44060
Attn: Richard M. Osborne
Facsimile: 440-255-8645
 
   
     With a copy to:
  Kohrman Jackson & Krantz P.L.L.
One Cleveland Center, 20th Floor
1375 East 9th Street
Cleveland, OH 44114
Attn: Christopher J. Hubbert
Facsimile: 216-621-6536
 
   
If to the Company:
  LNB Bancorp, Inc.
457 Broadway
Lorain, OH 44052
Attn: Daniel E. Klimas
Facsimile: 440-244-4815
 
   
     With a copy to:
  Calfee, Halter & Griswold LLP
1400 KeyBank Center
800 Superior Avenue
Cleveland, OH 44114
Attn: John J. Jenkins
Facsimile: 216-241-0816

Any party may change its address for receiving notice by giving notice of a new
address in the manner provided herein. Any notice so given, shall be deemed to
be delivered on the third business day after the same is deposited in the United
States mail, on the next business day if sent by overnight courier or sent by
facsimile after the close of business, or on the same business day if sent by
facsimile before the close of business.
     17. Nothing in this Agreement, whether express or implied, is intended to
confer any rights or remedies under or by reason of this Agreement on any
persons other than the parties to it and their respective successors and
assigns.
     18. This Agreement is binding upon and shall inure to the benefit of the
parties and their respective successors and assigns. For avoidance of doubt,
references herein to the “Committee” shall mean and include the Committee as a
whole and each of Richard M. Osborne and Steven A. Calabrese.
     19. The parties may amend or modify this Agreement in a writing duly
executed in the same manner as this Agreement.

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     20. This Agreement shall be governed by and construed in accordance with
the laws of the State of Ohio without giving effect to the conflicts of law
principles thereof.
     21. This Agreement contains the entire agreement between the parties hereto
with respect to the transactions contemplated herein and supercedes any prior
oral agreements of the parties relating to the transactions contemplated herein.
     22. This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument. Any counterpart signature page delivered by
facsimile transmission shall be deemed to be and have the same force and effect
as an originally executed signature page.
     23. This Agreement shall be effective upon the delivery of counterparts by
each of the Company, AMG, Richard M. Osborne and Steven A. Calabrese to each of
the other parties.
     IN WITNESS WHEREOF, the undersigned have executed and delivered this
Agreement as of the 18th day of April, 2008.

                  LNB Bancorp, Inc.    
 
           
 
  By:
Name:   /s/ Daniel E. Klimas
 
Daniel E. Klimas    
 
  Title:   President and Chief Executive Officer    
 
                AMG Investments, LLC    
 
           
 
  By:   /s/ Richard M. Osborne    
 
           
 
  Name:   Richard M. Osborne    
 
  Title:   Managing Member    
 
                /s/ Richard M. Osborne                   Richard M. Osborne    
 
                /s/ Steven A. Calabrese                   Steven A. Calabrese  
 

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