Document:

EX-10.2 2006 Management Incentive Plan for Key Exe

 

Exhibit 10.2

LNB Bancorp, Inc.

2006 Management Incentive Plan

For Key Executives

Section I. PURPOSE

The LNB Bancorp, Inc. 2006 Management Incentive Plan for Key Executives is designed to reward Key
Executives with incentive compensation payments for achieving profitability goals and subjective
goals.

Section II. DEFINITIONS

The following terms, as used in this Plan, shall mean:

	A.	 	Committee. The Compensation and Governance Committee of the Board of Directors of
LNB Bancorp, Inc., or such other committee as such Board may designate.
	 
	B.	 	Employer or Lorain National Bank. LNB Bancorp, Inc., its subsidiaries and
affiliates.
	 
	C.	 	Plan year. January 1, 2006 through December 31, 2006.
	 
	D.	 	Employee/Key Executive. The CEO of Employer and other participants selected to
participate in this Plan as described in Section III below.
	 
	E.	 	Plan. The LNB Bancorp, Inc. 2006 Management Incentive Plan for Key Executives.
	 
	F.	 	Incentive Payment. Cash payment earned by Employee on the Incentive Payment Date, as
determined in accordance with Section IV and the other terms of this Plan.
	 
	G.	 	Incentive Payment Date. The date on which an Incentive Payment to Employee is paid,
which shall be as soon as reasonably practicable after such payment is calculated and
authorized by the Committee but not later than two and one-half months following the end of
the Plan year.
	 
	H.	 	Profitability. Profitability is defined as net income after tax of LNB Bancorp, Inc.
and its consolidated subsidiaries for the Plan year, as determined by the Committee. The
Committee has the discretion to adjust for any unforeseen occurrences which may affect the
profitability number.
	 
	I.	 	Profitability Goal. An amount of Profitability established as a goal by the
Committee in its discretion and solely for purposes of this Plan, and communicated to a Key
Executive when the Key Executive is selected to participate in this Plan.

 

 

Section III. ELIGIBILITY

Employees of Lorain National Bank, including the CEO, are eligible to participate in this Plan.
Based upon CEO recommendations, the Committee has the authority, in its discretion, to designate
the Employees who will participate in this Plan during the Plan year.

Section IV. AMOUNT OF INCENTIVE PAYMENT

Subject to the other terms of this Plan, the amount of the Incentive Payment earned by an Employee
under this Plan will be determined in accordance with the terms of Attachment I, based on
Employer’s actual Profitability achievement for the Plan year relative to the percentage of the
Profitability Goal set forth on Attachment I and the other terms of Attachment I, each as
determined, interpreted and established in the sole discretion of the Committee. Employee
expressly acknowledges and agrees that the amount of the actual Incentive Payment that may be
earned by Employee (if any) will depend on many factors, including without limitation the actual
Profitability for the Plan year, the percentage of the Plan pool referenced on Attachment I
distributed to the CEO and the remainder of such pool distributed in the aggregate to other
participants in this Plan (the “Remainder”), the number of such other Employees who are
participants in this Plan (as determined under Section III), the allocation of such Remainder among
such other Employees, and the other terms of this Plan.

Section V. OTHER INCENTIVE PAYMENT TERMS

A. Payments and Deductions/Withholding Taxes.

Employer will pay an Employee the Incentive Payment on the Incentive Payment Date provided the
Employee is an active employee of Employer on that date. The amount of the Incentive Payment, if
any, shall be calculated as provided in Section IV of this Plan. Deductions may also be made at
the discretion of Employer and in accordance with applicable law for any amounts the employee owes
to Employer.

Employer may withhold from any amounts payable under or in connection with this Plan all federal,
state, local and other taxes as may be required to be withheld by Employer under applicable law or
governmental regulation or ruling.

B. Incentive Payment Calculation.

The Committee will have the sole authority and discretion to evaluate all aspects of the Employer’s
incentive compensation awards and to determine performance and the total pool money available to
all Employees in the aggregate. The Committee will determine the distribution to the CEO, in its
sole discretion. The CEO will determine the distribution to the Key Executives, subject to
Committee approval in its sole discretion.

The Committee retains the right and authority (in addition to any other rights or remedies of
Employer) not to pay all or any part of an Incentive Payment to any Employee based on operational
wrongdoing or misconduct of the Employee, as determined by the Committee in its sole discretion.
The Employer must document all such exceptions to this Plan, including but not limited to,
forfeiture of payments.

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D. Special Circumstances.

1. Conflicts with Law. If any provision of this Plan violates local, state or
federal law, the applicable law shall control.

2. Voluntary or Involuntary Termination. If Employee’s employment is voluntarily or
involuntarily terminated before the Incentive Payment Date, Employee is not entitled to receive and
will forfeit the Incentive Payment. Employee must be employed on the Incentive Payment Date to be
entitled to the Incentive Payment.

3. Transfer. If an Employee transfers to another position within Employer that does not
participate under this Plan before the Incentive Payment Date, the Employee is not entitled to
receive and will forfeit the Incentive Payment. A payment of a pro-rated amount may be awarded in
the Committee’s sole discretion.

4. Leave of Absence. Incentive Payments will be pro-rated based on months of active
employment as determined by the Committee in its sole discretion. An Employee on a leave of
absence must be employed on the Incentive Payment Date to receive an Incentive Payment.

5. Death. In the event of the Employee’s death before the Incentive Payment Date, the
Employee’s estate is not entitled to receive and will forfeit the Incentive Payment.

Section VI. NON-SOLICITATION AND CONFIDENTIALITY

A. Non-Solicitation.

In consideration of Employee’s participation in this Plan, Employee agrees that during the
term of Employee’s employment and for one year after Employee’s voluntary termination of employment
or termination of employment for cause, Employee will not, directly or indirectly: (1) influence
or advise any other person to employ or solicit for employment anyone who is employed by Employer
on the date of Employee’s separation; (2) influence or advise any person who is or shall be in the
service of Employer to leave the service of Employer; (3) use any of the information or business
secrets used by Employer, except in accordance with Employer’s policies in the regular course of
Employee’s duties for Employer; (4) disclose the proprietary methods of conducting the business of
Employer, except in accordance with Employer’s policies in the regular course of Employee’s duties
for Employer; (5) make any statement or take any actions that may interfere with Employer’s
customers, except in accordance with Employer’s policies in the regular course of Employee’s duties
for Employer; or (6) attempt to divert any of the business of Employer or any business which
Employer has a reasonable expectation of obtaining by soliciting, contacting, or communicating with
any customers and/or potential customers which have been derived from leads or lists developed and
delivered to Employee by Employer.

B. Confidentiality.

In consideration of Employee’s participation in this Plan, Employee agrees that during and
following termination of employment with Employer, Employee will hold in strictest confidence and
will not disclose to anyone, except in accordance with Employer’s policies in the regular course of
Employee’s duties for Employer, any information concerning:

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1. The business or affairs of, or nonpublic information concerning, a current, past or prospective
customer of Lorain National Bank.

2. The development of any product, device, method or invention of Lorain National Bank.

3. Any information concerning Lorain National Bank or its operations not readily available to the
public, unless expressly authorized by the President or any Vice President of Lorain National Bank.

Employee further agrees that all rights, title and interest to any product, device, invention, or
enhancement to a product or service, developed during his or her employment with Employer and using
Employer resources or know-how, shall belong exclusively to Lorain National Bank. Employee agrees
to execute any documents necessary to reflect Lorain National Bank’s exclusive ownership in such
items.

Upon termination of employment with Employer, Employee will deliver to Lorain National Bank all
documents, notes, materials and all copies thereof, relating to the operations or the business of
Lorain National Bank and its customers.

B. Related Provisions

1. Prior Agreements. This Section VI does not supercede any prior agreements or
understandings between Employer and Employee to the extent that such prior agreement or
understanding is more favorable with respect to Employer.

2. Equitable Relief. Employee acknowledges and agrees that the covenants contained in this
Section VI are of a special nature and that any breach, violation or evasion by Employee of the
terms of Section VI will result in immediate and irreparable injury and harm to Employer, for which
there is no adequate remedy at law, and will cause damage to Employer in amounts difficult to
ascertain. Accordingly, Employer shall be entitled to the remedy of injunction, as well as to all
other legal or equitable remedies to which Employer may be entitled (including, without limitation,
the right to seek monetary damages), for any breach, violation or evasion by Employee of the terms
of Section VI.

Section VII. GENERAL PROVISIONS

1. Administration. The Plan shall be administered by the Committee. The Committee has the
sole and exclusive authority, subject to any limitations specifically set forth in this Plan,
to: adopt, amend, alter and repeal this Plan at any time as it deems advisable in its
sole discretion from time to time; construe, interpret, administer and implement the terms and
provisions of this Plan; and otherwise supervise the administration of this Plan. Notwithstanding
the foregoing, all decisions made by the Committee pursuant to the provisions of this Plan are
final and binding on all persons, including Employee, but may be made by their terms subject to
ratification or approval by the Board of Directors of LNB Bancorp, Inc. or another committee of the
Board of Directors.

2. No Implied Rights to Employment. Neither this Plan nor any Incentive Payment hereunder
shall be construed as giving any individual any right to continued employment or any particular
level of salary or benefits with Employer. This Plan does not constitute a contract of employment,
and Employer expressly reserves the right at any time to terminate any Employee free from liability
or any claim.

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3. Other Compensation Plans. Nothing contained in this Plan prevents Employer from
adopting or modifying other or additional compensation arrangements, and such arrangements may be
either generally applicable or applicable only in specific cases.

4. Successors; Amendments. All obligations of Employer with respect to Incentive Payments
under this Plan are binding on any successor to Employer, whether as a result of a direct or
indirect purchase, merger, consolidation or otherwise of all or substantially all of the business
and/or assets of Employer. Employee may not assign any rights or obligations under this
Plan without the written consent of Employer. Subject to the Committee’s rights under Section
VII.1. above, none of the terms of Section VI may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing, and is signed by Employee and by an
authorized officer of Employer.

5. Validity. The invalidity or unenforceability of any provision or provisions of this
Plan shall not affect the validity or enforceability of any other provision of this Plan, which
shall remain in full force and effect. In the event that any provision of Section VI is found by a
court of competent jurisdiction to be invalid or unenforceable as against public policy, such court
shall exercise its discretion in reforming such provision to the end that Employee shall be subject
to such restrictions and obligations as are reasonable under the circumstances and enforceable by
Employer.

6. Governing Law; Interpretation. This Plan shall be construed in accordance with and
governed by the laws of the State of Ohio, without giving effect to the conflict of law principles
of such State. This Plan is not intended to be governed by the Employee Retirement Income Security
Act and shall be so construed and administered. The headings contained herein are for reference
purposes only and shall not in any way affect the meaning or interpretation of this Plan.

7. Entire Agreement. This Plan embodies the entire agreement and understanding
between Employer and Employee with respect to the subject matter hereof, and supercedes all prior
agreements and understandings relating hereto, except as expressly stated herein.

Employee and Employer have agreed to the terms of this Plan as of the latest date set forth below.

	 	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	“Employee”	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Approved:
	 	 	 	 	 	Date:	 	 	 	 
	 

	 	 	 	 

	 	 
	 	 	 	 

	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	“Employer”	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 	 	 
	 

	 	Approved:
	 	 	 	 	 	Date:	 	 	 	 
	 

	 	 	 	 

By: Daniel E. Klimas, President & CEO
	 	 
	 	 	 	 

	 	 

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ATTACHMENT I

	 	 	 	 	 
	 	 	Profitability
Goal	 	Pool
$
	Below
Threshold
	 	Less than 80%	 	             0
	Threshold
	 	  80%	 	$100,000
	 
	 	  81%	 	$115,000
	 
	 	  82%	 	$130,000
	 
	 	  83%	 	$145,000
	 
	 	  84%	 	$160,000
	 
	 	  85%	 	$175,000
	 
	 	  86%	 	$190,000
	 
	 	  87%	 	$205,000
	 
	 	  88%	 	$220,000
	 
	 	  89%	 	$235,000
	 
	 	  90%	 	$250,000
	 
	 	  91%	 	$265,000
	 
	 	  92%	 	$280,000
	 
	 	  93%	 	$295,000
	 
	 	  94%	 	$310,000
	 
	 	  95%	 	$325,000
	 
	 	  96%	 	$340,000
	 
	 	  97%	 	$355,000
	 
	 	  98%	 	$370,000
	 
	 	  99%	 	$385,000
	Target
	 	100%	 	  $400,000*
	Goal
Plus
	 	110%	 	$440,000
	 
	 	120%	 	$480,000
	 
	 	130%	 	$520,000
	 
	 	140%	 	$560,000
	 
	 	150%	 	$600,000
	 
	 	160%	 	$640,000
	 
	 	170%	 	$680,000
	 
	 	180%	 	$720,000
	 
	 	190%	 	$760,000
	 
	 	200% and above	 	$800,000

If Employer’s actual Profitability is determined to be an amount that falls between the percentage
thresholds set forth above, the amount of the pool will be determined using straight-line
interpolation between the threshold points above. The amount of the pool (a) will be $0 if actual
Profitability is less than 80% of the Profitability Goal and (b) will never exceed $800,000.

The Committee will determine, in its sole discretion, the percentage of the Plan pool to be
distributed to the CEO. The remainder of the Plan pool will be distributed to other Employees,
with the portion of the remainder to be paid to an Employee as the Incentive Payment determined by
the CEO, based 60% on financial goals and 40% on non-financial goals, subject to approval of the
Committee in its sole discretion.

 

*
     Pool dollars will be based on numbers for all participants. Actual numbers may vary slightly
from the target.

6EX-10.3 LNB BANCORP Stock Appreviation Rights Plan

 

Exhibit 10.3

LNB BANCORP, INC.

STOCK APPRECIATION RIGHTS PLAN

ARTICLE 1

General Purpose of Plan; Definitions

     1.1 Name and Purposes. The name of this Plan is the LNB Bancorp, Inc. Stock Appreciation
Rights Plan. The purpose of this Plan is to enable LNB Bancorp, Inc. and its Affiliates to: (i)
attract and retain skilled and qualified officers and key employees who are expected to contribute
to the Company’s success by providing long-term incentive compensation opportunities; (ii) motivate
participants to achieve the long-term success and growth of the Company; and (iii) align the
interests of the participants with those of the Company’s shareholders. In order to achieve this
purpose, this Plan provides for the grant of stock appreciation rights related to the Company’s
Common Shares.

     1.2 Certain Definitions. Unless the context otherwise indicates, the following words used
herein shall have the following meanings whenever used in this instrument:

          (a) “Affiliate” means any corporation, partnership, joint venture or other entity, directly or
indirectly, through one or more intermediaries, controlling, controlled by, or under common control
with the Company, as determined by the Board of Directors in its discretion.

          (b) “Board of Directors” mean the Board of Directors of the Company, as constituted from time
to time.

          (c) “Code” means the Internal Revenue Code of 1986, as amended, and any lawful regulations or
guidance promulgated thereunder. Whenever reference is made to a specific Internal Revenue Code
section, such reference shall be deemed to be a reference to any successor Internal Revenue Code
section or sections with the same or similar purpose.

          (d) “Committee” means the committee administering this Plan as provided in Section 2.1.

          (e) “Common Shares” mean the common shares, $1.00 par value per share, of the Company.

          (f) “Company” means LNB Bancorp, Inc., a corporation organized under the laws of the State of
Ohio and, except for purposes of determining whether a Change in Control has occurred, any
corporation or entity that is a successor to LNB Bancorp, Inc. or substantially all of the assets
of LNB Bancorp, Inc. and that assumes the obligations of LNB Bancorp, Inc. under this Plan by
operation of law or otherwise.

          (g) “Date of Grant” means the date on which the Committee grants an SAR.

          (h) “Director” means a member of the Board of Directors.

 

 

          (i) “Eligible Employee” is defined in Article 4.

          (j) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and any lawful
regulations or guidance promulgated thereunder.

          (k) “Exercise Price” means the exercise price per Share related to a Stock Appreciation Right.

          (l) “Fair Market Value” means the closing price of a Share as reported on The Nasdaq Stock
Market, or, if applicable, on any national securities exchange or automated quotation system on
which the Common Shares are principally traded, on the date for which the determination of Fair
Market Value is made, or, if there are no sales of Common Shares on such date, then on the most
recent immediately preceding date on which there were any sales of Common Shares. If the Common
Shares are not, or cease to be, traded on The Nasdaq Stock Market or any national securities
exchange or automated quotation system, the “Fair Market Value” of Common Shares shall be
determined pursuant to a reasonable valuation method prescribed by the Committee. Notwithstanding
the foregoing, as of any date, the “Fair Market Value” of Common Shares shall be determined in a
manner consistent with Code Section 409A and the guidance then-existing thereunder.

          (m) “Independent Director” means a Director who meets the definitions of the terms
“independent director” set forth in The Nasdaq Stock Market, Inc. rules and “non-employee director”
set forth in Rule 16b-3, or any successor definitions adopted by The Nasdaq Stock Market, Inc. and
Securities and Exchange Commission, respectively, and similar requirements under any other
applicable laws and regulations.

          (n) “Plan” means this LNB Bancorp, Inc. Stock Appreciation Rights Plan, as amended from time
to time.

          (o) “Rule 16b-3” is defined in Article 11.

          (p) “Share” or “Shares” mean one or more of the Common Shares.

          (q) “Stock Appreciation Rights” and “SARs” mean any right to receive the appreciation in Fair
Market Value of a specified number of Shares over a specified Exercise Price pursuant to an award
granted under this Plan.

          (r) “Vested” means when the Stock Appreciation Right first becomes exercisable for payment.
The words “Vest” and “Vesting” have meanings correlative to the foregoing.

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ARTICLE 2

Administration

     2.1 Authority and Duties of the Committee.

          (a) The Plan shall be administered by a Committee of at least three Directors who are
appointed by the Board of Directors. Unless otherwise determined by the Board of Directors, the
Compensation and Governance Committee shall serve as the Committee, and all of the members of the
Committee shall be Independent Directors. Notwithstanding the requirement that the Committee
consist exclusively of Independent Directors, no action or determination by the Committee or an
individual then considered to be an Independent Director shall be deemed void because a member of
the Committee or such individual fails to satisfy the requirements for being an Independent
Director, except to the extent required by applicable law.

          (b) The Committee has the power and authority to grant SARs pursuant to the terms of this Plan
to Eligible Employees.

          (c) The Committee has the sole and exclusive authority, subject to any limitations
specifically set forth in this Plan, to:

	 	(i)	 	select the Eligible Employees to whom SARs are
granted;
	 
	 	(ii)	 	determine the timing of SARs granted;
	 
	 	(iii)	 	determine the number of Shares relating to
each SAR granted hereunder;
	 
	 	(iv)	 	determine the other terms and conditions, not
inconsistent with the terms of this Plan, of any SAR granted hereunder;
such terms and conditions include, but are not limited to, the Exercise
Price, the time or times when Stock Appreciation Rights may be
exercised (which may be based on performance objectives), any Vesting,
acceleration or waiver of forfeiture restrictions, any performance
criteria applicable to an SAR, and any restriction or limitation
regarding any Stock Appreciation Right, based in each case on such
factors as the Committee, in its sole discretion, shall determine;
	 
	 	(v)	 	determine whether any conditions or objectives
related to SARs have been met;
	 
	 	(vi)	 	subsequently modify or waive any terms and
conditions of SARs, not inconsistent with the terms of this Plan;
	 
	 	(vii)	 	adopt, alter and repeal such administrative
rules, guidelines and practices governing this Plan as it deems
advisable from time to time;

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	 	(viii)	 	promulgate such administrative forms as it from time to time deems
necessary or appropriate for administration of the Plan;
	 
	 	(ix)	 	construe, interpret, administer and implement
the terms and provisions of this Plan, any SAR and any related
agreements;
	 
	 	(x)	 	correct any defect, supply any omission and
reconcile any inconsistency in or between the Plan, any SAR and any
related agreements; and
	 
	 	(xi)	 	otherwise supervise the administration of this
Plan.

          (d) Notwithstanding the foregoing, all decisions made by the Committee pursuant to the
provisions of this Plan are final and binding on all persons, including the Company, its
shareholders and participants, but may be made by their terms subject to ratification or approval
by, the Board of Directors, another committee of the Board of Directors or shareholders.

          (e) The Company shall furnish the Committee with such clerical and other assistance as is
necessary for the performance of the Committee’s duties under the Plan.

     2.2 Delegation of Duties. The Committee may delegate ministerial duties to any other person
or persons, and it may employ attorneys, consultants, accountants or other professional advisers
for purposes of plan administration at the expense of the Company.

     2.3 Limitation of Liability. Members of the Board of Directors, members of the Committee and
Company employees who are their designees acting under this Plan shall be fully protected in
relying in good faith upon the advice of counsel and shall incur no liability except for gross or
willful misconduct in the performance of their duties hereunder.

ARTICLE 3

Limitations on Total SARs Granted Under the Plan

     3.1 Total Stock Appreciation Rights Limit. Subject to the provisions of this Article, SARs
may not be granted for more than an aggregate of 50,000 Shares under this Plan.

     3.2 Participant Limit. SARs may not be granted to any participant in any fiscal year for more
than a maximum of 10,000 Shares under this Plan.

     3.3 SARs Not Exercised. If any outstanding SAR, or portion thereof, expires, or is
terminated, canceled or forfeited without being exercised, the number of Shares related to such
expired, terminated, canceled or forfeited SAR, or portion thereof, shall no longer count toward
the limit expressed in Section 3.1 and shall again be available for the grant of SARs under this
Plan.

     3.4 Dilution and Other Adjustments. In the event that the Committee determines that any
dividend or other distribution (whether in the form of cash, Shares, other securities or other

4

 

property), recapitalization, stock split, reverse stock split, reorganization, redesignation,
reclassification, merger, consolidation, liquidation, split-up, reverse split, spin-off,
combination, repurchase or exchange of Shares or other securities of the Company, issuance of
warrants or other rights to purchase Shares or other securities of the Company or other similar
corporate transaction or event affects the Shares such that an adjustment is determined by the
Committee to be appropriate in order to prevent dilution or enlargement of the benefits or
potential benefits intended to be made available under this Plan, then the Committee may, in such
manner as it deems equitable, adjust any or all of (i) the number and type of Shares (or other
securities or other property) which thereafter may be made the subject of SARs, (ii) the number and
type of Shares (or other securities or other property) subject to outstanding SARs, (iii) the
limitations set forth above and (iv) the purchase or exercise price or any performance objective
with respect to any SAR; provided, however, that the number of Shares or other securities covered
by any SAR or to which such SAR relates is always a whole number. Notwithstanding the foregoing,
the foregoing adjustments shall be made in compliance with Section 409A of the Code, to the extent
necessary to avoid its application or avoid adverse tax consequences thereunder.

ARTICLE 4

Participants

     4.1 Eligibility. Officers and all other key employees of the Company or any of its Affiliates
(each an “Eligible Employee”) who are selected by the Committee in its sole discretion are eligible
to participate in this Plan.

     4.2 Plan Agreements. SARs are contingent upon the participant’s execution of a written
agreement in a form prescribed by the Committee. Execution of a plan agreement shall constitute
the participant’s irrevocable agreement to, and acceptance of, the terms and conditions of the SAR
set forth in such agreement and of the terms and conditions of the Plan applicable to such SAR.
Plan agreements may differ from time to time and from participant to participant.

ARTICLE 5

Grant of Stock Appreciation Rights

     5.1 SAR Grant and Agreement. Each SAR granted under this Plan will be evidenced by minutes of
a meeting, or by a unanimous written consent without a meeting, of the Committee and by a written
agreement dated as of the Date of Grant and executed by the Company and by the appropriate
participant.

     5.2 Terms and Conditions of SARs. Stock Appreciation Rights will be subject to the following
terms and conditions:

          (a) Term. Any unexercised portion of a Stock Appreciation Right granted hereunder shall
expire at the end of the stated term of the Stock Appreciation Right. The Committee shall
determine the term of each Stock Appreciation Right at the time of grant, which term shall not
exceed ten years from the Date of Grant. The Committee may extend the term of a Stock Appreciation
Right, in its discretion, but not beyond the date immediately prior to the tenth

5

 

anniversary of the original Date of Grant. If a definite term is not specified by the
Committee at the time of grant, then the term is deemed to be ten years.

          (b) Exercisability. A Stock Appreciation Right is exercisable, in whole or in part, at such
time or times as determined by the Committee at or after the time of grant.

          (c) Exercise Price. Subject to Section 3.4, the Exercise Price of a Stock Appreciation Right
will never be less than 100% of the Fair Market Value of the related Shares on the Date of Grant.
If a variable Exercise Price is specified at the time of grant, the Exercise Price may vary
pursuant to a formula or other method established by the Committee; provided, however, that such
formula or method will provide for a minimum Exercise Price equal to the Fair Market Value of the
Shares on the Date of Grant. Except as otherwise provided in Section 3.4, no subsequent amendment
of an outstanding Stock Appreciation Right may reduce the Exercise Price to less than 100% of the
Fair Market Value of the Shares on the Date of Grant. Nothing in this Section 5.2(c) shall be
construed as limiting the Committee’s authority to grant premium price Stock Appreciation Rights
which do not become exercisable until the Fair Market Value of the related Shares exceeds a
specified percentage (e.g., 110%) of the Exercise Price; provided, however, that such percentage
will never be less than 100%.

          (d) Method of Exercise. A Stock Appreciation Right may be exercised in whole or in part
during the term by giving written notice of exercise to the Company specifying the number of Shares
in respect of which the Stock Appreciation Right is being exercised. The notice must be given by
or on behalf of a person entitled to exercise the Stock Appreciation Right. Upon the exercise of a
Stock Appreciation Right, subject to satisfaction of projected tax withholding requirements
pursuant to Article 10, the holder of the Stock Appreciation Right is entitled to receive payment
in cash equal in value to the excess of the Fair Market Value of a Share on the exercise date over
the Exercise Price of the SAR multiplied by the number of Stock Appreciation Rights being
exercised. At any time the Fair Market Value of a Share on a proposed exercise date does not
exceed the Exercise Price of the SAR, the holder of the Stock Appreciation Right shall not be
permitted to exercise such right.

          (e) SAR Payable Solely in Cash. All Stock Appreciation Rights granted under this Plan shall
be settled solely in cash, subject to the withholding requirements of this Plan. No Shares shall
be issued, paid or delivered under this Plan or any SAR, and no Shares shall be reserved by the
Company for such purpose.

          (f) Early Termination Prior to Expiration. If the employment of an optionee with the Company
or its Affiliates terminates for any reason, all unexercised Stock Appreciation Rights may be
exercised only in accordance with rules established by the Committee or as specified in the
relevant agreement evidencing such Stock Appreciation Rights. Such rules may provide, as the
Committee deems appropriate, for the expiration, continuation, or acceleration of the vesting of
all or part of such Stock Appreciation Rights.

     5.3 Other Terms and Conditions of SAR Grants. Stock Appreciation Rights are subject to such
other terms and conditions, not inconsistent with the provisions of this Plan, as are determined
from time to time by the Committee.

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     5.4 Special Limitations. Unless an SAR agreement approved by the Committee provides otherwise,
Stock Appreciation Rights awarded under this Plan are intended to meet the requirements for
exclusion from coverage under Code Section 409A and all Stock Appreciation Right awards shall be
construed and administered accordingly.

ARTICLE 6

Transfers and Leaves of Absence

     6.1 Transfer of Participant. For purposes of this Plan, the transfer of a participant among
the Company and its Affiliates is deemed not to be a termination of employment.

     6.2 Effect of Leaves of Absence. For purposes of this Plan, the following leaves of absence
are deemed not to be a termination of employment:

          (a) a leave of absence, approved in writing by the Company, for military service, sickness or
any other purpose approved by the Company, if the period of such leave does not exceed 90 days;

          (b) a leave of absence in excess of 90 days, approved in writing by the Company, but only if
the employee’s right to reemployment is guaranteed either by a statute or by contract, and provided
that, in the case of any such leave of absence, the employee returns to work within 30 days after
the end of such leave; and

          (c) any other absence determined by the Committee in its discretion not to constitute a
termination of employment.

ARTICLE 7

Effect of Change in Control

     7.1 Change in Control Defined. “Change in Control” means the occurrence of any of the
following:

          (a) If individuals who, on the effective date of this Plan, constitute the Board of Directors
(the “Incumbent Directors”) cease for any reason to constitute at least a majority of the Board of
Directors; provided, however, that:

	 	(i)	 	any person becoming a director subsequent to
the effective date of this Plan, whose election or nomination for
election was approved by a vote of at least two-thirds (2/3) of the
Incumbent Directors then on the Board of Directors (either by a
specific vote or by approval of the proxy statement of the Company in
which such person is named as a nominee for director, without written
objection by such Incumbent Directors to such nomination), shall be
deemed to be an Incumbent Director, and

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	 	(ii)	 	no individual elected or nominated as a
director of the Company initially as a result of an actual or
threatened election contest with respect to directors or any other
actual or threatened solicitation of proxies by or on behalf of any
person other than the Board of Directors shall be deemed to be an
Incumbent Director;

          (b) If any “person” (as such term is defined in Section 3(a)(9) of the Exchange Act, and as
used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act) is or becomes a “beneficial owner” (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company
representing twenty percent (20%) or more of the combined voting power of the Company’s
then-outstanding securities eligible to vote for the election of the Board of Directors (the
“Company Voting Securities”); provided, however, that the events described in this paragraph (b)
shall not be deemed to be a Change in Control by virtue of any of the following acquisitions of
Company Voting Securities:

	 	(i)	 	by the Company or any Subsidiary,
	 
	 	(ii)	 	by any employee benefit plan sponsored or
maintained by the Company or any Subsidiary or by any employee stock
benefit trust created by the Company or any Subsidiary,
	 
	 	(iii)	 	by any underwriter temporarily holding
securities pursuant to an offering of such securities,
	 
	 	(iv)	 	pursuant to a Non-Qualifying Transaction (as
defined in paragraph (c), below), or
	 
	 	(v)	 	a transaction (other than one described in
paragraph (c), below) in which Company Voting Securities are acquired
from the Company, if a majority of the Incumbent Directors approves a
resolution providing expressly that the acquisition pursuant to this
subparagraph (v) does not constitute a Change in Control under this
paragraph (b);

          (c) The consummation of a merger, consolidation, share exchange or similar form of corporate
transaction involving the Company or any of its Subsidiaries that requires the approval of the
Company’s shareholders, whether for such transaction or the issuance of securities in the
transaction (a “Business Combination”), unless immediately following such Business Combination:

	 	(i)	 	more than fifty percent (50%) of the total
voting power of either (x) the corporation resulting from the
consummation of such Business Combination (the “Surviving Corporation”)
or, if applicable, (y) the ultimate parent corporation that directly or
indirectly has beneficial ownership of one hundred percent (100%) of
the voting securities eligible to elect directors of the Surviving
Corporation (the “Parent Corporation”) is represented by Company Voting
Securities that were outstanding immediately prior to such

8

 

	 	 	 	Business Combination (or, if applicable, represented by shares into
which such Company Voting Securities were converted pursuant to such
Business Combination), and such voting power among the holders
thereof is in substantially the same proportion as the voting power
of such Company Voting Securities among the holders thereof
immediately prior to the Business Combination,

	 	(ii)	 	no person (other than any employee benefit plan
sponsored or maintained by the Surviving Corporation or the Parent
Corporation or any employee stock benefit trust created by the
Surviving Corporation or the Parent Corporation) is or becomes the
beneficial owner, directly or indirectly, of twenty percent (20%) or
more of the total voting power of the outstanding voting securities
eligible to elect directors of the Parent Corporation (or, if there is
no Parent Corporation, the Surviving Corporation), and
	 
	 	(iii)	 	at least a majority of the members of the
board of directors of the Parent Corporation (or, if there is no Parent
Corporation, the Surviving Corporation) were Incumbent Directors at the
time of the Board of Director’s approval of the execution of the
initial agreement providing for such Business Combination (any Business
Combination which satisfies all of the criteria specified in (i), (ii)
and (iii) of this Section 9.1(c) shall be deemed to be a
“Non-Qualifying Transaction”); or

          (d) If the shareholders of the Company approve a plan of complete liquidation or dissolution
of the Company or a sale of all or substantially all of the Company’s assets but only if, pursuant
to such liquidation or sale, the assets of the Company are transferred to an entity not owned
(directly or indirectly) by the Company’s shareholders.

Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any
person acquires beneficial ownership of more than twenty percent (20%) of Company Voting Securities
as a result of the acquisition of Company Voting Securities by the Company which reduces the number
of Company Voting Securities outstanding; provided, however, that if (after such acquisition by the
Company) such person becomes the beneficial owner of additional Company Voting Securities that
increases the percentage of outstanding Company Voting Securities beneficially owned by such
person, a Change in Control shall then occur.

     7.2 Effect of Change in Control. In the event of a Change in Control of the Company, the
Committee shall have the right, in its sole discretion, to:

          (a) accelerate the exercisability of any or all SARs, notwithstanding any limitations set
forth in the Plan or SAR agreement;

          (b) cancel any or all outstanding SARs in exchange for the value of the shares of the
surviving or new corporation, cash, securities, evidences of indebtedness, other property or any
combination thereof receivable in respect of Shares related to the SARs upon consummation

9

 

of the transaction in question (the “Acquisition Consideration”), less the applicable exercise
price therefor;

          (c) cause the holders of any or all SARs to have the right thereafter and during the term of
the SAR to receive upon exercise thereof the Acquisition Consideration receivable upon the
consummation of such transaction by a holder of the number of Common Shares to which the SAR
relates, less the applicable exercise price therefor, or to convert such SAR into an appreciation
right relating to the surviving or new corporation in the transaction; or

          (d) take such other action as it deems appropriate to preserve the value of the SAR to the
Participant.

The Committee may provide for any of the foreoing in an SAR agreement in advance, may provide for
any of the forgoing in connection with a Change in Control, or do both. Alternatively, the
Committee shall also have the right to require any purchaser of the Company’s assets or stock, as
the case may be, to take any of the actions set forth in the preceding sentence as such purchaser
may determine to be appropriate or desirable.

          The manner of application and interpretation of the foregoing provisions of this Section 7.2
shall be determined by the Committee in its sole and absolute discretion.

ARTICLE 8

Transferability of SARs

     8.1 SARs Are Non-Transferable. Except as provided in Section 8.2, SARs are non-transferable
and any attempts to assign, pledge, hypothecate or otherwise alienate or encumber (whether by
operation of law or otherwise) any SAR shall be null and void.

     8.2 Inter-Vivos Exercise of SARs; Limited Transferability of Certain SARs. During a
participant’s lifetime, SARs are exercisable only by the participant or, as permitted by applicable
law and notwithstanding Section 8.1 to the contrary, the participant’s guardian or other legal
representative. Notwithstanding Section 8.1 to the contrary, SARs may be transferred by will and
by the laws of descent and distribution and to the extent required by a court order.

ARTICLE 9

Amendment and Discontinuation

     9.1 Amendment or Discontinuation of this Plan. The Board of Directors may amend, alter, or
discontinue this Plan at any time, provided that no amendment, alteration, or discontinuance may be
made:

          (a) which would materially and adversely affect the rights of a participant under any SAR
granted prior to the date such action is adopted by the Board of Directors without the
participant’s written consent thereto; and

10

 

          (b) without shareholder approval, if shareholder approval is required under applicable laws,
regulations or exchange requirements.

Notwithstanding the foregoing, this Plan may be amended without affecting participants’ consent to:
(i) comply with any law; (ii) preserve any intended favorable tax effects for the Company, the
Plan or participants; or (iii) avoid any unintended unfavorable tax effects for the Company, the
Plan or participants.

     9.2 Amendment of Grants. The Committee may amend, prospectively or retroactively, the terms
of any outstanding SAR, provided that no such amendment may be inconsistent with the terms of this
Plan (specifically including the prohibition on granting SARs with an Exercise Price less than 100%
of the Fair Market Value of the related Common Shares on the Date of Grant) or would materially and
adversely affect the rights of any holder without his or her written consent.

ARTICLE 10

Satisfaction of Projected Tax Liabilities

     10.1 In General. The Committee shall cause the Company to withhold any taxes which it
determines it is required by law or required by the terms of this Plan to withhold in connection
with any payments incident to this Plan. The participant or other recipient shall provide the
Committee with such additional information or documentation as may be necessary for the Committee
to discharge its obligations under this Section. The Company may withhold cash in an amount equal
to the amount which the Committee determines is necessary to satisfy the obligation of the Company
to withhold federal, state and local income taxes or other amounts incurred by reason of the grant
or exercise of an SAR or its disposition. Alternatively, the Company may require the holder to pay
to the Company such amounts, in cash, promptly upon demand.

ARTICLE 11

General Provisions

     11.1 No Implied Rights to SARs or Employment. No potential participant has any claim or right
to be granted an SAR under this Plan, and there is no obligation of uniformity of treatment of
participants under this Plan. Neither this Plan nor any SAR thereunder shall be construed as
giving any individual any right to continued employment with the Company or any Affiliate. The
Plan does not constitute a contract of employment, and the Company and each Affiliate expressly
reserve the right at any time to terminate employees free from liability, or any claim, under this
Plan, except as may be specifically provided in this Plan or in an SAR agreement.

     11.2 Other Compensation Plans. Nothing contained in this Plan prevents the Board of Directors
from adopting other or additional compensation arrangements, subject to shareholder approval if
such approval is required, and such arrangements may be either generally applicable or applicable
only in specific cases.

11

 

     11.3 Rule 16b-3 Compliance. The Plan is intended to comply with all applicable conditions of
Rule 16b-3 of the Exchange Act, as such rule may be amended from time to time (“Rule 16b-3”). All
transactions involving any participant subject to Section 16(a) of the Exchange Act shall be
subject to the conditions set forth in Rule 16b-3, regardless of whether such conditions are
expressly set forth in this Plan. Any provision of this Plan that is contrary to Rule 16b-3 does
not apply to such participants.

     11.4 Successors. All obligations of the Company with respect to SARs granted under this Plan
are binding on any successor to the Company, whether as a result of a direct or indirect purchase,
merger, consolidation or otherwise of all or substantially all of the business and/or assets of the
Company.

     11.5 Severability. In the event any provision of this Plan, or the application thereof to any
person or circumstances, is held illegal or invalid for any reason, the illegality or invalidity
shall not affect the remaining parts of this Plan, or other applications, and this Plan is to be
construed and enforced as if the illegal or invalid provision had not been included.

     11.6 Governing Law. To the extent not preempted by Federal law, this Plan and all SAR
agreements pursuant thereto are construed in accordance with and governed by the laws of the State
of Ohio. This Plan is not intended to be governed by the Employee Retirement Income Security Act
and shall be so construed and administered.

ARTICLE 12

Effective Date

     12.1 Effective Date. The effective date of this LNB Bancorp, Inc. Stock Appreciation Rights
Plan is the date on which the Board of Directors approves it.

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