Exhibit 10.1
 

March 11, 2013

LNB Bancorp, Inc.
457 Broadway
Lorain, Ohio 44052-1769

Ladies and Gentlemen:

Each of the entities identified on Schedule 1 hereto (each, a “Seller” and
collectively, the “Sellers”) is the owner of the number of shares of Fixed Rate
Cumulative Perpetual Preferred Stock, Series B, without par value (the “Series B
Preferred Stock”) (CUSIP 502100308) of LNB Bancorp, Inc., an Ohio corporation
(the “Company”), set forth opposite such Seller’s name on Schedule 1.  The
shares of Series B Preferred Stock covered by this agreement are referred to
collectively herein as the “Preferred Shares.”  Each Seller and the Company
desire that the Seller exchange its Preferred Shares for Common Shares (as
defined below) and cash on the terms set forth herein.  Subject to the terms and
conditions set forth herein, the exchange of the Preferred Shares for Common
Shares and cash shall take place on the Delivery Date (as defined below).

1.           Representations and Warranties of the Company.  The Company
represents to and agrees with each Seller that:
 
(a)         The Company has been duly incorporated and is validly existing as a
corporation in good standing in the state of Ohio, and has the corporate
authority and power to (i) enter into this agreement and effect the transactions
covered hereby and (ii) own its properties and to carry on its business as now
being conducted.
 
(b)         This agreement has been duly authorized, executed and delivered by
the Company, and constitutes the legal, valid and binding obligations of the
Company, enforceable against the Company in accordance with its terms, except as
such enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of applicable creditors’
rights and remedies.
 
(c)         The issuance of the common shares of the Company, par value $1.00
per share, to be issued by the Company pursuant to this agreement (the “Common
Shares”), has been duly authorized and the Common Shares, upon issuance in
accordance with the terms of this agreement, will be validly issued, fully paid
and non-assessable.  The offer and issuance of the Common Shares is exempt from
registration under the Securities Act of 1933, as amended (the “Securities
Act”), pursuant to the exemption provided by Section 3(a)(9) thereof.  Based in
part on the representations and warranties of the Sellers herein contained and
the structure of the transaction, the Common Shares, upon issuance, will be
issued to the Sellers without any restrictive legend and the Common Shares will
be freely tradable by the Sellers.
 
(d)         The execution and delivery by the Company of, and the performance by
the Company of its obligations under, this agreement will not contravene any (i)
provision of applicable law, (ii) the charter or code of regulations of the
Company, (iii) any agreement or other instrument binding upon the Company or any
of its subsidiaries, (iv) any judgment, order or decree of any governmental
body, agency or court having jurisdiction over the Company or any of its
subsidiaries or (v) applicable rules and regulations of the Nasdaq Stock Market,
and no consent, approval, authorization or order of, or qualification with, any
governmental body or agency is required for the performance by the Company of
its obligations under this agreement other than those consents, approvals,
authorizations, orders or qualifications which have been obtained.
 
 
 

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(e)         The Company has not engaged any broker, finder or other person
acting in such capacity that is entitled to any commission or fee in connection
with the transactions contemplated by this agreement.
 
(f)          Neither the Company nor any other person acting on its behalf has
provided to any Seller any material information that has not been publicly
disclosed concerning the Company and its subsidiaries, other than with respect
to the transactions contemplated by this agreement.  The Company understands and
confirms that each of the Sellers will rely on the foregoing representations in
effecting transactions in securities of the Company.
 
(g)         The Preferred Shares have not been owned by the Company or, to the
best knowledge of the Company, any affiliate of the Company within the last 12
months.
 
(h)         Since January 1, 2012, the Company has filed all required reports
and other documents of the Company identified in Rule 144(c)(1) under the
Securities Act.   The documents of the Company filed with the Securities and
Exchange Commission (the “SEC”) in accordance with the Securities Exchange Act
of 1934, as amended (the “Exchange Act”), from the commencement of the fiscal
year covered by the Company’s most recent Annual Report on Form 10-K to the date
of this agreement (the “SEC Documents”), as of their respective dates, complied
in all material respects with the requirements of the Exchange Act and the rules
and regulations of the SEC promulgated thereunder applicable to the SEC
Documents, and none of the SEC Documents, at the time they were filed with the
SEC, contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. As of their respective dates, the audited financial
statements and unaudited interim financial statements of the Company included in
the SEC Documents complied in all material respects with applicable accounting
requirements and the published rules and regulations of the SEC with respect
thereto as in effect as of the time of filing. Such financial statements have
been prepared in accordance with generally accepted accounting principles,
consistently applied, during the periods involved (except (i) as may be
otherwise indicated in such financial statements or the notes thereto, or (ii)
in the case of unaudited interim financial statements, to the extent they may
exclude footnotes or may be condensed or summary statements) and fairly present
in all material respects the financial position of the Company as of the dates
thereof and the results of its operations and cash flows for the periods then
ended (subject, in the case of unaudited interim financial statements, to normal
year-end audit adjustments which will not be material, either individually or in
the aggregate).
 
 
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(i)          Since the date of the most recent balance sheet included in the
Company’s audited financial statements contained in the Company’s most recent
Annual Report on Form 10-K, except as disclosed in the SEC Documents filed
subsequent to such Form 10-K, there has been no material adverse change and no
material adverse development in the business affairs, condition (financial or
otherwise) or business prospects of the Company and its subsidiaries considered
as one enterprise. Since the date of the most recent balance sheet included in
the Company’s audited financial statements contained in the Company’s most
recent Annual Report on Form 10-K, except as disclosed in the SEC Documents
filed subsequent to such Form 10-K, neither the Company nor any of its
subsidiaries has (i) declared or paid any dividends other than regular quarterly
dividends on the Company’s securities, (ii) sold any assets outside of the
ordinary course of business or (iii) made any material capital expenditures
(either individually or in the aggregate). Neither the Company nor any of its
subsidiaries has taken any steps to seek protection pursuant to any law or
statute relating to bankruptcy, insolvency, reorganization, receivership,
liquidation or winding up, nor does the Company or any subsidiary have any
knowledge or reason to believe that any of their respective creditors intend to
initiate involuntary bankruptcy proceedings or any actual knowledge of any fact
which would reasonably lead a creditor to do so.
 
(j)          The Company is not, and has never been, an issuer identified in
Rule 144(i)(1) under the Securities Act.
 
(k)         The Company does not have any agreement or understanding with any
person to acquire shares of Series B Preferred Stock on terms that are more
favorable in any material respect than the rights and benefits established in
favor of the Sellers by this agreement.
 
2.           Representations and Warranties of the Sellers.  Each Seller, for
itself and for no other Seller, represents and warrants to and agrees with the
Company that:
 
(a)         This agreement has been duly authorized, executed and delivered by
or on behalf of such Seller, and constitutes the legal, valid and binding
obligations of such Seller, enforceable against such Seller in accordance with
its terms, except as such enforceability may be limited by general principles of
equity or applicable bankruptcy, insolvency, reorganization, moratorium,
liquidation or similar laws relating to, or affecting generally, the enforcement
of applicable creditors’ rights and remedies.
 
(b)         The execution and delivery by such Seller of, and the performance of
its obligations under, this agreement will not contravene any (i) provisions of
applicable law, (ii) the organizational documents of such Seller, (iii) any
agreement or other instrument binding on such Seller, or (iv) any judgment,
order or decree of any governmental body, agency or court having jurisdiction
over such Seller, and no consent, approval, authorization or order of or
qualification with, any governmental body or agency is required for the
performance by such Seller of its obligations under this agreement.
 
(c)         Such Seller has good, marketable and unencumbered title to its
Preferred Shares, free and clear of all security interests, claims, liens,
equities or other encumbrances, and the legal right and power, and all
authorization and approval required by law, (i) to enter into this agreement and
(ii) to exchange, transfer and deliver its Preferred Shares.  The delivery of
its Preferred Shares in accordance with this agreement will convey to the
Company good, marketable and unencumbered title to such Preferred Shares, free
and clear of all security interests, claims, liens, equities or other
encumbrances.
 
 
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(d)         Such Seller, together with its affiliates, (i) is not at present,
and has not been during the preceding 12 months, an affiliate of the Company,
(ii) immediately after giving effect to the transactions contemplated by this
agreement and the issuance of the Common Shares, will not beneficially own
(calculated in accordance with Section 13(d) of the Exchange Act) more than
9.99% of the outstanding common shares of the Company and (iii) has not and will
not have beneficially owned (calculated in accordance with Section 13(d) of the
Exchange Act) in excess of 9.99% of the outstanding common shares of the Company
at any time during the 12 month period ending on the Delivery Date.  To the best
knowledge of such Seller, its Preferred Shares have not been owned by affiliates
of the Company within the last 12 months.
 
(e)         Such Seller understands that the Common Shares have not been
registered under the Securities Act, are being issued pursuant to an exemption
under Section 3(a)(9) of the Securities Act and may not be resold except in
accordance with Rule 144 under the Securities Act or pursuant to another
available exemption from the registration requirements of the Securities Act or
pursuant to a registration statement.
 
(f)          Such Seller has not engaged any broker, finder or other person
acting in such capacity that is entitled to any commission or fee in connection
with the transactions contemplated by this agreement.
 
(g)         Such Seller has the requisite knowledge and experience in financial
and business matters so that it is capable of evaluating the merits and risks of
the transactions contemplated by this agreement and acquiring the Common Shares
in connection therewith, and such Seller acknowledges that (i) the Company makes
no representation regarding the value of the Preferred Shares or the Common
Shares, (ii) the rights and privileges of holders of the Common Shares are
substantially different from, and less favorable than, the rights of holders of
the Preferred Shares and (iii) such Seller has independently and without
reliance upon the Company made its own analysis and decision to enter into this
agreement and the transactions contemplated hereby.  Such Seller is an
“accredited investor” as defined in Rule 501 under the Securities Act.
 
3.           Holding Period.  In determining the period the Common Shares have
been held by the Sellers for the purposes of Rule 144(d)(3) under the Securities
Act (as in effect on the date of this agreement), upon the basis of the
representations and warranties herein contained, the Company acknowledges and
agrees that the Common Shares may be deemed to have been acquired at the same
time as the Preferred Shares.
 
4.           Exchange.  Upon the basis of the representations and warranties
herein contained, but subject to the conditions hereinafter stated, each Seller
shall exchange its Preferred Shares with the Company for, and in exchange
therefor the Company shall issue and deliver to such Seller, (i) the number of
unlegended and freely tradable Common Shares set forth opposite such Seller’s
name on Schedule 1 hereto (such number of Common Shares determined by dividing
(A) the product of (x) the number of such Seller’s Preferred Shares and (y) the
$1,000 liquidation preference per share of the Preferred Shares by (B) $7.16)
and (ii) cash in the amount set forth opposite such Seller’s name on Schedule 1
hereto under the heading “Total Cash Amount” (the “Cash Amount”), representing
accrued and unpaid dividends due on the Preferred Shares and cash in lieu of any
factional Common Shares.  On the third business day after the date hereof (the
“Delivery Date”), (i) the Company shall (A) credit the number of Common Shares
set forth opposite each Seller’s name on Schedule 1 hereto to the balance
account specified in writing by such Seller with The Depository Trust Company
through its Deposit/Withdrawal at Custodian system and (B) pay to each Seller
its Cash Amount to such Seller’s account specified in writing by such Seller and
(ii) such Seller shall deliver electronically the Preferred Shares in accordance
with such instructions as the Company may specify in writing, and each Seller
shall execute such documents and take such further action as may be reasonably
necessary in order to transfer to the Company all right, title and interest to
the Preferred Shares.
 
 
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5.           Conditions to the Obligations of the Sellers.  The obligation of
each Seller to exchange the Preferred Shares in accordance with the terms hereof
is subject to the following conditions:
 
(a)         The representations and warranties of the Company shall be true and
correct as of the date of this agreement and as of the Delivery Date;
 
(b)         The Company shall have performed, satisfied and complied with the
covenants, agreements and conditions required by this agreement at or prior to
the Delivery Date; and
 
(c)         The Common Shares shall be freely tradeable, without legends, and
shall have been listed on the NASDAQ Stock Market.
 
6.           Conditions to the Obligations of the Company.  The obligation of
the Company to issue and deliver the Common Shares and Cash Amount to each
Seller in exchange for such Seller’s Preferred Shares is subject to the
following conditions:
 
(a)         The representations and warranties of such Seller shall be true and
correct as of the date of this agreement and as of the Delivery Date; and
 
(b)         Such Seller shall have performed, satisfied and complied with the
covenants, agreements and conditions required by this agreement at or prior to
the Delivery Date.
 
7.           Securities Laws Disclosure; Publicity.  The Company shall, by 9:00
a.m., New York City time, on the first (1st) business day immediately following
the Delivery Date issue one or more press releases (collectively, the “Press
Release”) reasonably acceptable to the Sellers disclosing all material terms of
the transactions contemplated hereby and by any similar agreements that are then
in effect but which have not been previously disclosed.  On or before 5:30 p.m.,
New York City time, on the fourth (4th) business day immediately following the
date of this agreement, the Company will file a Current Report on Form 8-K with
the SEC describing the material terms of this agreement and any similar
agreements that are then in effect but which have not been previously disclosed
on Form 8-K (and include a form of this agreement as an exhibit to such Current
Report on Form 8-K). Notwithstanding the foregoing, the Company shall not
publicly disclose the name of any Seller or any affiliate or investment adviser
of any Seller, or include the name of any Seller or any affiliate or investment
adviser of any Seller in any press release or in any filing with the SEC or any
regulatory agency or trading market, without the prior written consent of such
Seller, except (i) as required in order to comply with the federal securities
laws in connection with the filing of the Current Report on Form 8-K referenced
in the preceding sentence and the final agreements with the SEC and (ii) to the
extent such disclosure is otherwise required by law, at the request of the staff
of the SEC or any regulatory agency or under trading market regulations, in
which case the Company shall provide such Seller with prior written notice of
such disclosure permitted under this subclause (ii).
 
 
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8.           Notices.  All notices, requests, demands, claims and other
communications hereunder shall be in writing and shall be (a) transmitted by
hand delivery, (b) mailed by first class, registered or certified mail, postage
prepaid, (c) transmitted by overnight courier, or (d) transmitted by facsimile
or e-mail, and in each case to the relevant party at the address set forth
below:
 
 

  If to the Company:   If to a Seller:         
LNB Bancorp, Inc. 
457 Broadway
Lorain, OH  44052-1769
Attn:  Chief Financial Officer
Facsimile:  (440) 244-4815
E-Mail:  gelek@4lnb.com
[Seller Name]
[Address]
[Address]
Attn:
Facsimile:
E-Mail:

 
9.           Counterparts.  This agreement may be signed in two or more
counterparts, each of which shall be an original, with the same effect as if the
signatures thereto and hereto were upon the same instrument.
 
10.         Entire Agreement.  This agreement constitutes the entire agreement
among the parties pertaining to the transactions contemplated herein and
supersedes the parties’ prior agreements, understandings, negotiations and
discussions, whether oral or written, on such matters, and this agreement shall
not be amended, changed, supplemented, waived or otherwise modified except in a
writing executed by each of the parties hereto.
 
11.         Governing Law.  This agreement shall be governed by and construed in
accordance with the internal laws of the State of Ohio.
 
[Signature page follows.]
 
 
 
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Very truly yours,

[Seller
Name]                                                                           
 
 

By:
                                                              
    Name:
Title:
 

 
Accepted as of the date hereof:

LNB Bancorp, Inc.

 

By:
                                                              
    Name:
Title:
 

 
 
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Schedule 1

(a)
Seller’s Name
(b)
Preferred Shares
to be Exchanged
(c)
Common Shares
to be Acquired
(d)
Accrued
Dividends
(e)
Cash in Lieu of
Fractional Share
(f)
Total Cash
Amount
(d) + (e)
                                                                               
                           

 
 
 

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Schedule of Exchange Agreements with Sellers

 
 
 
Seller’s Name
 
Aggregate
Preferred Shares to
be Exchanged
 
Aggregate
Common Shares to
be Acquired
 
Aggregate
Total Cash
Amount
 
Institutional investors advised by Wellington
Management Company, LLP
 
 
3,152 
 
440,220 
 
$12,720.36 
Institutional investors managed by Sandler O’Neill
Asset Management, LLC
 
 
4,459 
 
622,763 
 
$17,976.78 
Institutional investors advised by Basswood Capital
Management, LLC
 
 
1,822 
 
254,466 
 
$7,362.05 
Jeffrey A. Aukerman
 
300 
41,899 
$1,211.49