EXHIBIT
10.2
STOCK OPTION
AGREEMENT
(Non-Qualified Stock Option)
THIS STOCK OPTION AGREEMENT (this
“Agreement”) is made to be effective as of
February 1, 2005, by and between LNB Bancorp, Inc., an Ohio
corporation (the “Company”) and Daniel E. Klimas (the
“Optionee”).
WITNESSETH :
WHEREAS, the Optionee, the Company,
and The Lorain National Bank (the “Bank”) are parties
to that certain Employment Agreement, made as of January 28,
2005 (the “Employment Agreement”);
WHEREAS, pursuant to Section 5.1
of the Employment Agreement, the Company has agreed to issue to
Optionee options to purchase 90,000 of the common shares, $1.00 par
value, of the Company (the “Common Shares”), subject to
the terms and conditions of the Employment Agreement; and
WHEREAS, the Company and the Employee
desire to evidence the terms and conditions relating to the initial
grant of the options;
NOW, THEREFORE, in consideration of
the premises, the parties hereto make the following agreement,
intending to be legally bound thereby:
1. Defined Terms . When
used in this Agreement, the following capitalized terms have the
respective meanings set forth in this Section:
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(a) |
Act : The Securities Exchange Act of 1934, as amended,
or any successor thereto. |
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(b) |
Administrator : The Company’s Board of Directors
or the Compensation Committee of the Company’s Board of
Directors if the Board of Directors has delegated to the
Compensation Committee such responsibility. |
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(c) |
Applicable Laws : The requirements relating to the
administration of stock options under U.S. state corporate laws,
U.S. federal and state securities laws, the Code and any stock
exchange, market or quotation system on which the Common Shares are
listed or quoted. |
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(d) |
Change in Control : The meaning of “Change in
Control” set forth in the Employment Agreement. |
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(e) |
Code : The Internal Revenue Code of 1986, as amended, or
any successor thereto. |
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(f) |
Fair Market Value : On a given date, the closing sale
price for the Common Shares as reported on any securities exchange,
market or quotation system on which the Shares may be listed or
quoted on such date or, if no such sale occurred on that date, then
for the next preceding date on which a sale was made. If the Shares
should be no longer listed or quoted on a securities exchange,
market or quotation system, the fair market value shall be
determined by an arbitrator mutually acceptable to the Company and
the Optionee. |
2. Grant of Option .
Subject to adjustment pursuant to Section 4 of this Agreement,
the Company hereby grants to the Optionee an option (the
“Option”) to purchase 30,000 Common Shares (the
“Shares”). The Option is not intended to qualify as an
incentive stock option under Section 422 of the Code.
3. Terms and Conditions of
the Option .
(a)
Option Price . The purchase price (the “Option
Price”) to be paid by the Optionee to the Company upon the
exercise of the Option shall be $19.17 per Share, subject to
adjustment as provided in Section 4 of this Agreement.
(b)
Exercise of the Option . Except as otherwise provided in
this Agreement, the Option may be exercised by the Optionee as
follows:
(i) The
Option shall vest and become exercisable with respect to 10,000
Shares on each of the first three anniversaries of the date hereof.
The portion of the Option which has become vested and exercisable
pursuant to this Section 3 is hereinafter referred to as the
“Vested Portion.”
(ii) In
the event of a Change of Control, any portion of the Option that is
not then exercisable shall vest and become exercisable immediately
prior to such Change in Control.
(iii) Upon
the termination of the Employment Agreement (A) by the
Optionee following a material violation by the Company or the Bank
of the terms and conditions of the Employment Agreement in
accordance with the provisions of Section 7.1 of the
Employment Agreement or for Good Cause (as defined in the
Employment Agreement), or (B) by the Company pursuant to the
provisions of Section 7.2 of the Employment Agreement, any
portion of the Option that is not then exercisable shall vest and
become exercisable upon the effective date of termination of the
Employment Agreement.
The grant of the Option shall not
confer upon the Optionee any right to continue in the employment of
the Company or the Bank nor, subject to the provisions of the
Employment Agreement, limit in any way the right of the Company or
the Bank to terminate the employment of the Optionee at any
time.
(c)
Method of Exercise of Option . At any time prior to the
Expiration Date (as defined in Section 6), the Optionee may
exercise all or a portion of the Option by delivering written
notice of exercise to the Company, together with payment in full
for the Shares in an amount equal to the product of the Option
Price multiplied by the number of Shares to be acquired. Such
payment may be made in cash or its equivalent (e.g., by check) or
in previously issued Common Shares, which Common Shares have been
owned by the Optionee for more than six months prior to the date of
exercise and shall be valued at Fair Market Value on the date of
exercise.
(d)
Tax Withholding . The Company shall be entitled to withhold
(or secure payment from the Optionee in lieu of withholding) the
amount of any withholding or other payment required under the tax
withholding provisions of the Code, any state’s income tax
act or any other applicable law with respect to any Shares issuable
under the exercised Option.
4. Adjustments and Changes
in the Shares .
The following provisions shall apply
to the Option:
(a)
Generally . If the Company shall at any time after the date
hereof (i) declare a dividend on its common shares payable in
shares of its capital stock (of any class), (ii) subdivide its
outstanding common shares, (iii) combine its outstanding
common shares into a smaller number of shares, or (iv) issue
any shares of its capital stock in connection with a consolidation
or merger in which it is the continuing corporation, the Option
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