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[LENOX BANCORP LETTERHEAD]
April 24, 2001
Dear Fellow Shareholder:
o Your Board has nominated Henry E. Brown, currently Chairman of the
Board, and Vernon L. Morrison for election as Directors. Information
concerning Messrs. Brown and Morrison is included in the Lenox
Bancorp proxy statement dated April 13, 2001, previously sent to
you.
o As you are aware, John Lame is conducting a proxy contest to elect
his slate of Directors.
o In the opinion of your Board of Directors, other than Lame and
Behymer, who is supporting Lame and his nominee (the "Lame Group"),
it is critical for Lenox Bancorp and your investment in it that you
vote to elect the Board's nominees, Henry E. Brown and Vernon L.
Morrison, as Directors.
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PLEASE DO NOT FILL OUT OR RETURN
THE LAME GROUP WHITE PROXY
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We believe that Mr. Lame's conduct regarding Lenox Bancorp and its
subsidiary, Lenox Savings Bank (the "Bank"), over the past three years, as
outlined below, demonstrates that:
1. Lame has sought to promote his own interest;
2. Lenox Bancorp has not been benefitted by a number of Lame's actions;
and
3. Lame has tried to exercise control over Lenox Bancorp without
authority to do so and in an irresponsible manner;
Further, Lame's aggressive tactics have taken significant time and
attention of your Board and management to address and, in our view, have
hindered our ability to address ways to improve operations and enhance the value
of your investment.
We base our view regarding Lame's conduct on:
1. Lame was appointed to the Board on August 17, 1998 based in
significant part on his written presentation which suggested he and
his business, the Fitzgerald, Lame Group, could be instrumental in
annually referring 20 to 30 mortgage loans averaging $300,000 each,
to the Bank and could help the Bank raise between $20 to $30 million
of new deposits.
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2. In fact, increased deposits never materialized, and neither Lame nor
his business referred loans directly to our Bank. Instead, loans
apparently were referred to Mortgage House of America. Mortgage
House then sought to sell the loans to the Bank. Lame's
brother-in-law is one of the owners of Mortgage House of America.
3. Then, in April of 1999, Lame asked Lenox Bancorp to have the Bank
purchase Mortgage House of America.
4. In July 1999, Lame tried to have Lenox Bancorp repurchase
approximately 3,365 shares of his Lenox Bancorp common stock for
approximately $19.00 per share. That price was in excess of the
price at which Lenox shares were trading at that time. Mr. Lame's
repurchase request was made shortly after Lenox completed a
substantial open market repurchase program regarding its shares,
which was available to all stockholders, including Mr. Lame. Lenox's
repurchase program was conducted pursuant to parameters established
by its outside financial advisor as prudent for Lenox to follow.
5. Following Lenox Bancorp's last Annual Meeting of Stockholders on May
24, 2000, at which no Director positions were up for election, Lame:
o claimed four new Directors, including an owner of Mortgage
House and Guy Napier, had been elected Director;
o claimed he was the new Chairman of Lenox's Board;
o presented orders to management of Lenox regarding the conduct
of operations of the Company;
o tried to exercise control over Lenox funds; and
o threatened legal action personally against the Board members
if they caused Lenox to take any action not approved by Lame.
However, at the time, Lenox Bancorp already had five Directors whose terms
of office ran for at least another year. Even though the Board had specified the
total number of Directors to be five, Lame attempted at the shareholder meeting
to elect four additional Directors. Thereafter, Lame claimed he and his four
proposed Directors controlled Lenox Bancorp and issued his various orders
recited above.
We believe this whole pattern of conduct has been irresponsible and
dangerous to Lenox Bancorp and should not be tolerated. In our view, Lame's
conduct hindered the Board's ability to address important issues because of the
uncertainty raised by his assertions that he and his group controlled Lenox
Bancorp.
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Together we need to address our significant operating problems and find
ways to enhance the value of your investment through improved operations and/or
finding a buyer for a fair price.
YOUR BOARD OF DIRECTORS URGES YOU TO COMPLETE, SIGN, DATE AND RETURN
MANAGEMENT'S GREEN PROXY CARD, IN ITS POSTAGE-PAID ENVELOPE, VOTING "FOR" ALL OF
ITS NOMINEES.
PLEASE DO NOT RETURN THE WHITE PROXY CARD TO THE LAME GROUP.
IF ANY OF YOUR SHARES ARE HELD IN THE NAME OF A BANK, BROKER OR OTHER
NOMINEE, PLEASE CONTACT THE PARTY RESPONSIBLE FOR YOUR ACCOUNT AND DIRECT THEM
TO VOTE YOUR SHARES FOR YOUR COMPANY'S NOMINEES ON THE GREEN PROXY CARD.
Sincerely,
/s/ Henry E. Brown
Henry E. Brown
Chairman of the Board
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YOUR VOTE IS IMPORTANT
1. The Board of Directors urges you to DISCARD the WHITE proxy card recently
sent to you by the Lame Group. A "WITHHOLD AUTHORITY" vote on the Lame
Group's White proxy card is not a vote for the Board's nominees. To vote
FOR your Company's nominees you MUST execute a GREEN proxy card.
2. If you voted on a White proxy card BUT WISH TO SUPPORT YOUR COMPANY'S
NOMINEES, please sign, date and mail the enclosed GREEN proxy card in the
postage-paid envelope provided as soon as possible.
3. Remember-only your latest dated proxy will determine how your shares are
to be voted at the meeting.
4. If any of your shares are held in the name of a bank, broker or other
nominee, please contact the party responsible for you account and direct
them to vote your shares for your Company's nominees on the GREEN proxy
card.
5. For assistance in voting your shares, or for further information, please
contact Ginny Heitzman, Chief Executive Officer of Lenox Bancorp at (513)
531-8655, or our proxy solicitor:
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IF YOU HAVE ANY QUESTIONS, NEED ANOTHER COPY OF OUR APRIL 13, 2001 PROXY
STATEMENT FOR THE ANNUAL MEETING OR NEED FURTHER ASSISTANCE IN VOTING YOUR
SHARES, PLEASE CALL:
GEORGESON SHAREHOLDER COMMUNICATIONS INC.
17 STATE STREET, 10TH FLOOR
NEW YORK, NY 10004 CALL TOLL FREE (800) 223-2064
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ADDITIONAL INFORMATION
SOLICITATION OF PROXIES
The cost of soliciting Management's proxies will be borne by Lenox
Bancorp. Lenox Bancorp will reimburse brokerage firms and other custodians,
nominees and fiduciaries for reasonable and appropriate expenses incurred by
them in sending Management's proxy materials to the beneficial owners of Lenox
Bancorp's Common Stock. Lenox Bancorp has retained Georgeson Shareholder
Communications Inc., a professional proxy solicitation firm, to assist in the
solicitation of proxies for a fee of $12,500, plus reimbursement of expenses.
Approximately 25 persons will be utilized by Georgeson Shareholder
Communications, Inc. in such solicitation. The total amount estimated to be
expended in connection with this proxy contest is $40,000, which excludes the
amount normally expended in connection with a solicitation for the election of
directors in the absence of a contest, and costs represented by salaries and
wages of regular employees and officers of Lenox Bancorp. Approximately $7,000
has been paid to date. In addition to solicitation by mail, directors and
officers of Lenox Bancorp may solicit proxies personally, by telegraph, by
facsimile transmission or by telephone without additional compensation.