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Lake Shore Bancorp, Inc. 8-K [lsb-8k_0326.htm]

Exhibit 10.1
 
 
Amended And Restated Employment Agreement
 
This Amended And Restated Employment Agreement (the Agreement") is made and
entered into as of April 3, 2010 (the "Effective Date") by and between Lake
Shore Bancorp Inc., a federally-chartered corporation having an office at 128
East 4th Street, Dunkirk, New York 14048 (the "Company") and David C. Mancuso,
an individual residing at 50 Lafayette Avenue, Dunkirk, New York 14048 (the
"Executive").
 
Introductory Statement
 
Lake Shore Savings Bank, a federally-chartered savings bank having an office at
128 East 4th Street, Dunkirk, New York 14048 (the "Bank) is a
federally-chartered stock savings bank and a wholly-owned subsidiary of the
Company, a mid-tier stock holding company, which is majority owned by Lake
Shore, MHC, a mutual holding company. The Executive has served the Bank in an
executive capacity for many years and is familiar with the Bank's operations.
 
The Board of Directors of the Company has concluded that it is in the best
interests of the Company and their shareholders to secure a continuity in
management and also consider it desirable to establish a working environment for
the Executive which minimizes the personal distractions that might result from
possible business combinations in which the Company might be involved. For these
reasons, the Board of Directors of the Company has decided to offer to enter
into a contract with the Executive for his future services. The Executive has
accepted this offer.
 
The terms and conditions which the Company and the Executive have agreed to are
as follows.
 
Agreement
 
Section 1.                      Employment.
 
The Company hereby continues to employ the Executive, and the Executive hereby
accepts such continued employment, during the period and upon the terms and
conditions set forth in this Agreement.
 
Section 2.                      Employment Period; Remaining Unexpired
Employment Period.
 
(a)           The Company shall employ the Executive during an initial period of
three (3) years beginning on April 3, 2010 (the "Employment Commencement Date")
and ending on the day before the third (3rd) anniversary of the Employment
Commencement Date, and during the period of any additional extensions described
in section 2(b) (the "Employment Period).
 
(b)           The Board of Directors of the Company shall conduct an annual
review of the Executive's performance on or about each anniversary of the
Employment Commencement Date (each, an "Anniversary Date") and may, on the basis
of such review and by written notice to the Executive, offer to extend the
Employment Period through the day before the third (3rd) anniversary of the
relevant Anniversary Date. In such event, the Employment Period shall be deemed
extended in the absence of objection from the Executive by written notice to the
Company given within ten (10) business days after his receipt of the Company's
offer of extension.
 
(c)           Except as otherwise expressly provided in this Agreement, any
reference in this Agreement to the term "Remaining Unexpired Employment Period
as of any date shall mean the period beginning on such date and ending on the
day before the third (3rd) anniversary of the Employment Commencement Date or,
if later, on the day before the third (3rd) anniversary of the last Anniversary
Date as of which the Employment Period was extended pursuant to section 2(b).
 
(d)           Nothing in this Agreement shall be deemed to prohibit the Company
from terminating the Executive's employment before the end of the Employment
Period with or without notice for any reason. This Agreement shall determine the
relative rights and obligations of the Company and the Executive in the event of
any such termination. In addition, nothing in this Agreement shall require the
termination of the Executive's employment at the expiration of the Employment
Period. Any continuation of the Executive's employment beyond the expiration of
the Employment Period shall be on an "at-will" basis unless the Company and the
Executive agree otherwise.

 
 

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Section 3.                      Duties.
 
The Executive shall serve as Chief Executive Officer and President of the
Company, having such power, authority and responsibility and performing such
duties as are prescribed by or under the Company's By-Laws and as are
customarily associated with such positions. The Executive shall devote his full
business time and attention (other than during weekends, holidays, approved
vacation periods, and periods of illness or approved leaves of absence) to the
business and affairs of the Company and shall use his best efforts to advance
their respective best interests.
 
Section 4.                      Cash Compensation.
 
In consideration for the services to be rendered by the Executive hereunder, the
Company shall pay to him a salary at an initial annual rate of TWO HUNDRED
SEVENTY FIVE THOUSAND DOLLARS ($275,000), payable in approximately equal
installments in accordance with their respective customary payroll practices for
senior officers. The Company's Board of Directors shall review the Executive's
annual rate of salary at such times during the Employment Period as it deems
appropriate, but not less frequently than once every twelve (12) months, and
may, at its discretion, approve a salary increase. In addition to salary, the
Executive may receive other cash compensation from the Company for services
hereunder at such times, in such amounts and on such terms and conditions as the
Board of Directors of the Company may determine.
 
Section 5.                      Employee Benefit Plans and Programs.
 
During the Employment Period, the Executive shall be treated as an employee of
the Company and shall be entitled to participate in and receive benefits under
any and all qualified or non-qualified retirement, pension, savings,
profit-sharing or stock bonus plans, any and all group life, health (including
hospitalization, medical and major medical), dental, accident and long-term
disability insurance plans, and any other employee benefit and compensation
plans (including, but not limited to, any incentive compensation plans or
programs, stock option and appreciation rights plans and restricted stock plans)
as may from time to time be maintained by, or cover employees of, the Company,
in accordance with the terms and conditions of such employee benefit plans and
programs and compensation plans and programs and consistent with the Company's
customary practices.
 
Section 6.                      Indemnification and Insurance.
 
(a)           To the maximum extent permitted under applicable law, during the
Employment Period and for a period of six (6) years thereafter, the Company
shall cause the Executive to be covered by and named as an insured under any
policy or contract of insurance obtained by them to insure their directors and
officers against personal liability for acts or omissions in connection with
service as an officer or director of the Company or the Bank or service in other
capacities at their request, provided, however, that any indemnification
provided under this Agreement shall be subject to any applicable Office of
Thrift Supervision (“OTS”) indemnification rules. The coverage provided to the
Executive pursuant to this section 6 shall be of the same scope and on the same
terms and conditions as the coverage (if any) provided to other officers or
directors of the Company.

 
 

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(b)           To the maximum extent permitted under applicable law, during the
Employment Period and for a period of six (6) years thereafter, the Company
shall indemnify the Executive against and hold him harmless from any costs,
damages, losses and exposures arising out of a bona fide action, suit or
proceeding in which he may be involved by reason of his having been a director
or officer of the Company to the fullest extent and on the most favorable terms
and conditions that similar indemnification is offered to any director or
officer of the Company or any subsidiary or affiliate thereof, provided,
however, that any indemnification provided under this Agreement shall be subject
to any applicable OTS indemnification rules.
 
(c)           The Executive, the Company and the Bank agree that the termination
benefits described in this Section 6 are intended to be exempt from Section 409A
("Section 409A") of the Internal Revenue Code of 1986, as amended (the "Code")
pursuant to Treasury Regulation Section 1.409A-l(b)(10) as certain
indemnification and liability insurance plans.
 
Section 7.                      Outside Activities.
 
The Executive may serve as a member of the boards of directors of such business,
community and charitable organizations as he may disclose to and as may be
approved by the Board of Directors of the Company (which approval shall not be
unseasonably withheld); provided, however, that such service shall not
materially interfere with the performance of his duties under this Agreement nor
shall it violate any applicable laws or regulations. The Executive may also
engage in personal business and investment activities which do not materially
interfere with the performance of his duties hereunder; provided, however, that
such activities are not prohibited under any code of conduct or investment or
securities trading policy established by the Company and generally applicable to
all similarly situated executives and that such activities are not prohibited by
any applicable laws or regulations.
 
Section 8.                      Working Facilities and Expenses.
 
The Executive's principal place of employment shall be at the Company's
executive offices at the address first above written, or at such other location
as the Company and the Executive may mutually agree upon. The Company shall
provide the Executive at his principal place of employment with a private
office, secretarial services and other support services and facilities suitable
to his positions with the Company and necessary or appropriate in connection
with the performance of his assigned duties under this Agreement. The Company
shall reimburse the Executive for his ordinary and necessary business expenses,
including, without limitation, fees for memberships in such clubs and
organizations that are necessary and appropriate for business purposes as
mutually agreed by the Company and the Executive, and his travel and
entertainment expenses incurred in connection with the performance of his duties
under this Agreement, in each case only if such expenses are presented and
approved in accordance with the Company's business reimbursement policy then in
effect.

 
 

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Section 9.                      Termination Due to Death.
 
The Executive's employment with the Company shall terminate, automatically and
without any further action on the part of any party to this Agreement, on the
date of the Executive's death. In such event:

(a)           The Company shall pay to the Executive's estate his earned but
unpaid compensation (including, without limitation, salary and all other items
which constitute wages under applicable law) as of the date of his termination
of employment as defined in Treasury Regulation Section 1.409A-l(h)(l)(ii). This
payment shall be made at the time and in the manner prescribed by law applicable
to the payment of wages but in no event later than thirty (30) days after the
date of the Executive's termination of employment.
 
(b)           The Company shall provide the benefits, if any, due to the
Executive's estate, surviving dependents or his designated beneficiaries under
the employee benefit plans and programs and compensation plans and programs
maintained for the benefit of the officers and employees of the Company. The
time and manner of payment or other delivery of these benefits and the
recipients of such benefits shall be determined according to the terms and
conditions of the applicable plans and programs.
 
The payments and benefits described in sections 9(a) and (b) shall be referred
to in this Agreement as the "Standard Termination Entitlements."
 
Section 10.                      Termination Due to Disability.
 
The Company may terminate the Executive's employment upon a determination, by
vote of a majority of the members of the Board of Directors of the Company,
acting in reliance on the written advice of a medical professional acceptable to
them, that the Executive is suffering from a physical or mental impairment
which, at the date of the determination, has prevented the Executive from
performing his assigned duties on a substantially full-time basis for a period
of at least one hundred and eighty (180) days during the period of one (1) year
ending with the date of the determination or is likely to result in death or
prevent the Executive from performing his assigned duties on a substantially
full-time basis for a period of at least one hundred and eighty (180) days
during the period of one (1) year beginning with the date of the determination.
In such event:
 
(a)           The Company shall pay and deliver to the Executive (or in the
event of his death before payment, to his estate and surviving dependents and
beneficiaries, as applicable) the Standard Termination Entitlements within the
timeframes contained in section 9.
 
(b)           In addition to the Standard Termination Entitlements, the Company
shall continue to pay the Executive his base salary, at the annual rate in
effect for him immediately prior to the termination of his employment, during a
period ending on the earliest of: (i) the expiration of one hundred and eighty
(180) days after the date of termination of his employment; (ii) the date on
which long-term disability insurance benefits are first payable to him under any
long-term disability insurance plan covering employees of the Company (the "LTD
Eligibility Date"); (iii) the date of his death; and (iv) the expiration of the
Remaining Unexpired Employment Period (the "Initial Continuation Period). If the
end of the Initial Continuation Period is neither the LTD Eligibility Date nor
the date of his death, the Company shall continue to pay the Executive his base
salary, at an annual rate equal to sixty percent (60%) of the annual rate in
effect for him immediately prior to the termination of his employment, during an
additional period ending on the earliest of the LTD Eligibility Date, the date
of his death and the expiration of the Remaining Unexpired Employment Period.

 
 

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A termination of employment due to disability under this section 10 shall be
effected by  notice of termination given to the Executive by the Company and
shall take effect on the later of the effective date of termination specified in
such notice or the date on which the notice of termination is deemed given to
the Executive.

Section 11.                      Discharge with Cause.
 
(a)           The Company may terminate the Executive's employment during the
Employment Period, and such termination shall be deemed to have occurred with
"Cause", only if:
 
(i)              The Board of Directors of the Company, by majority vote of
their entire membership, determine that the Executive should be discharged
because of personal dishonesty, incompetence, willful misconduct, breach of
fiduciary duty involving personal profit, intentional failure to perform stated
duties, willful violation of any law, rule or regulation (other than traffic
violations or similar offenses) or final cease and desist order, or any material
breach of this Agreement; and
 
(ii)              at least forty-five (45) days prior to the votes contemplated
by section 1 l(a)(i), the Company has provided the Executive with notice of its
intent to discharge the Executive for Cause, detailing with particularity the
facts and circumstances which are alleged to constitute Cause (the "Notice of
Intent to Discharge"); and
 
(iii)              after the giving of the Notice of Intent to Discharge and
before the taking of the votes contemplated by section 11(a)(i), the Executive
(together with his legal counsel, if he so desires) is afforded a reasonable
opportunity to make both written and oral presentations before the Board of
Directors of the Company for the purpose of refuting the alleged grounds for
Cause for his discharge; and
 
(iv)              after the votes contemplated by section 11(a)(i), the Company
have furnished to the Executive a notice of termination which shall specify the
effective date of his termination of employment (which shall in no event be
earlier than the date on which such notice is deemed given) and include a copy
of a resolution or resolutions adopted by the Board of Directors of the Company,
certified by its corporate secretary and signed by each member of the Board of
Directors voting in favor of adoption of the resolution(s), authorizing the
termination of the Executive's employment with Cause and stating with
particularity the facts and circumstances found to constitute Cause for his
discharge (the "Final Discharge Notice").
 
(b)           If the Executive is discharged during the Employment Period with
Cause, the Company shall pay and provide to him (or, in the event of his death,
to his estate, his surviving beneficiaries and his dependents) the Standard
Termination Entitlements only, within the timeframes contained in section 9.
Following the giving of a Notice of Intent to Discharge, the Company shall
temporarily suspend the Executive's duties and authority and, in such event,
shall also suspend the payment of salary and other cash compensation, but not
the Executive's participation in retirement, insurance and other employee
benefit plans. If, after the giving of a Notice of Intent to Discharge, the
Executive is not discharged, or is discharged without Cause, payments of salary
and cash compensation shall resume in accordance with this Agreement, and all
payments withheld during the period of suspension shall be promptly restored. If
the Executive is discharged with Cause in accordance with this Section 11, all
payments withheld during the period of suspension shall be deemed forfeited and
shall not be included in the Standard Termination Entitlements. If the Company
does not give a Final Discharge Notice to the Executive within ninety (90) days
after giving a Notice of Intent to Discharge, the Notice of Intent to Discharge
shall be deemed withdrawn and any future action to discharge the Executive with
Cause shall require the giving of a new Notice of Intent to Discharge.

 
 

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Section 12.                      Discharge without Cause.

The Company may discharge the Executive at any time during the Employment Period
and, unless such discharge constitutes a discharge with Cause:

(a)           The Company shall pay and deliver to the Executive (or in the
event of his death before payment, to his estate and surviving dependents and
beneficiaries, as applicable) the Standard Termination Entitlements within the
timeframes contained in section 9.
 
(b)           During the Remaining Unexpired Employment Period, the Company
shall provide for the Executive and his dependents continued group life, health
(including hospitalization, medical and major medical), dental, accident and
long-term disability insurance benefits on substantially the same terms and
conditions (including any required premium-sharing arrangements, co-payments and
deductibles) in effect for similarly situated employees of the Company. The
coverage provided under this section 12(b) may, at the election of the Company,
be secondary to the coverage provided as part of the Standard Termination
Entitlements and to any employer-paid coverage provided by a subsequent employer
or through Medicare, with the result that benefits under the other coverages
will offset the coverage required by this section 12(b).
 
(c)           The Company shall make a lump sum payment to the Executive (or, in
the event of his death before payment, to his estate), in an amount equal to the
value of the salary, bonus, short-term and long-term cash compensation that the
Executive received in the calendar year preceding that in which the termination
of employment with the Company occurs divided by twelve (12) and then multiplied
by the number of months remaining in the Remaining Unexpired Employment Period
to compensate the Executive for the payments the Executive would have received
during the Remaining Unexpired Employment Period. Such lump sum shall be paid in
lieu of all other payments of salary, bonus, short-term and long-term cash
compensation provided for under this Agreement in respect of the period
following any such termination. Such payment shall be made (without discounting
for early payment) within thirty (30) days following the Executive’s termination
of employment.
 
The payments and benefits described in sections 12(b) and 12(c) are referred to
in this Agreement as the "Additional Termination Entitlements".  Notwithstanding
the foregoing, the Executive shall not receive any severance hereunder (above
the Standard Entitlements) unless within 30 days after terminating employment,
the Executive has signed a general release of claims in a form generally
acceptable to the Company; provided that the Company has sent such form to the
Executive within 10 business days after termination of his employment.
 
Section 13.                      Resignation.
 
(a)           The Executive may resign from his employment with the Company at
any time. A resignation under this section 13 shall be effected by notice of
resignation given by the Executive to the Company and shall take effect on the
later of the effective date of termination specified in such notice or the date
on which the notice of termination is deemed given by the Executive. The
Executive's resignation of any of the positions within the Bank or the Company
to which he has been assigned shall be deemed a resignation from all such
positions.
 
(b)           The Executive's resignation shall be deemed to be for "Good
Reason" if the effective date of resignation occurs within ninety (90) days
after any of the following; provided that the Executive shall have given notice
of such material adverse effect to the Company, and the Company has not fully
cured such failure within thirty (30) days after such notice is deemed given:

 
 

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(i)             any material change in the Executive's duties, functions, and
responsibilities with the Company;
 
(ii)             any material reduction of the Executive's rate of base salary
in effect from time to time, or any failure (other than due to reasonable
administrative error that is cured promptly upon notice) to pay any portion of
the Executive's compensation as and when due;
 
(iii)             any material breach by the Company of any material term,
condition or covenant contained in this Agreement; or
 
(iv)             a change in the Executive's principal place of employment to a
place that is not the principal executive office of the Company, or a relocation
of the Company's principal executive office to a location that is both more than
one-hundred (100) miles away from the Executive's principal residence and more
than one-hundred (100) miles away from the location of the Company's principal
executive office on the date of this Agreement.
 
In all other cases, a resignation by the Executive shall be deemed to be without
Good Reason.
 
(c)           In the event of the Executive's resignation before the expiration
of the Employment Period, the Company shall pay and deliver the Standard
Termination Entitlements within the timeframes contained in section 9. In
addition, if the Executive's resignation is deemed to be a resignation with Good
Reason, the Company shall also pay and deliver the Additional Termination
Entitlements within the timeframes contained in section 12.
 
Section 14.                      Terms and Conditions of the Additional
Termination Entitlements.
 
The Company and the Executive hereby stipulate that the damages which may be
incurred by the Executive following any termination of employment are not
capable of accurate measurement as of the date first above written and that the
Additional Termination Entitlements constitute reasonable damages under the
circumstances and shall be payable without any requirement of proof of actual
damage and without regard to the Executive's efforts, if any, to mitigate
damages. The Company and the Executive further agree that the Company may
condition the payment and delivery of the Additional Termination Entitlements on
(i) the receipt of the Executive's resignation from any and all positions which
he holds as an officer, director or committee member with respect to the
Company, the Bank or any subsidiary or affiliate of either of them and (ii) a
release of the Company and its officers, directors, shareholders, subsidiaries
and affiliates, in form and substance satisfactory to the Company, of any
liability to the Executive, whether for compensation or damages, in connection
with his employment with the Company and the termination of such employment
except for the Standard Termination Entitlements and the Additional Termination
Entitlements.
 
Section 15.                      Termination Upon or Following a Change of
Control.
 
(a)           A "Change of Control" shall be deemed to have occurred upon the
happening of any of the following events:
 

 
 

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(i)             the consummation of a reorganization, merger or consolidation of
the Company with one (1) or more other persons, other than a transaction
following which:
 
(A)             at least 51% of the equity ownership interests of the entity
resulting from such transaction are beneficially owned (within the meaning of
Rule 13d-3 promulgated under the Securities Exchange Act of 1934, as amended
("Exchange Act")) in substantially the same relative proportions by persons who,
immediately prior to such transaction, beneficially owned (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) at least 51% of the outstanding
equity ownership interests in the Company; and
 
(B)             at least 51% of the securities entitled to vote generally in the
election of directors of the entity resulting from such transaction are
beneficially owned (within the meaning of Rule 13d-3 promulgated under the
Exchange Act) in substantially the same relative proportions by persons who,
immediately prior to such transaction, beneficially owned (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) at least 51% of the securities
entitled to vote generally in the election of directors of the Company;
 
(ii)             the acquisition of all or substantially all of the assets of
the Company or beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of 25% or more of the outstanding securities
of the Company entitled to vote generally in the election of directors by any
person or by any persons acting in concert;
 
(iii)             a complete liquidation or dissolution of the Company;
 
(iv)             the occurrence of any event if, immediately following such
event, at least 50% of the members of the Board of Directors of the Company do
not belong to any of the following groups:
 
(A)             individuals who were members of the Board of Directors of the
Company on the date of this Agreement; or
 
(B)             individuals who first became members of the Board of Directors
of the Company after the date of this Agreement either:
 
(1)           upon election to serve as a member of the Board of Directors of
the Company by affirmative vote of three-quarters of the members of such board,
or of a nominating committee thereof, in office at the time of such first
election; or
 
(2)           upon election by the shareholders of the Board of Directors of the
Company to serve as a member of such board, but only if nominated for election
by affirmative vote of three-quarters of the members of the Board of Directors
of the Company, or of a nominating committee thereof, in office at the time of
such first nomination;
 
provided, however, that such individual's election or nomination did not result
from an actual or threatened election contest or other actual or threatened
solicitation of proxies or consents other than by or on behalf of the Board of
Directors of the Company; provided, however, that this section 15(a)(iv) shall
only apply if the Company is not majority owned by Lake Shore, MHC; or

 
 

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(v)             any event which would be described in section 15(a)(i), (ii),
(iii) or (iv) if the term "Bank were substituted for the term "Company" therein.
 
In no event, however, shall a Change of Control be deemed to have occurred as a
result of (i) any acquisition of securities or assets of the Company, the Bank,
or a subsidiary of either of them, by the Company, the Bank, or any subsidiary
of either of them, or by any employee benefit plan maintained by any of them or
(ii) the conversion of Lake Shore, MHC to a stock form company and the issuance
of additional shares of the Company in connection therewith. For purposes of
this section 15(a), the term "person" shall have the meaning assigned to it
under Sections 13(d)(3) or 14(d)(2) of the Exchange Act.
 
(b)           For purposes of this Agreement, a "Pending Change of Control"
shall mean: (i) the signing of a definitive agreement for a transaction which,
if consummated, would result in a Change of Control; (ii) the commencement of a
tender offer which, if successful, would result in a Change of Control; or (iii)
the circulation of a proxy statement seeking proxies in opposition to management
in an election contest which, if successful, would result in a Change of
Control.
 
(c)           Notwithstanding anything in this Agreement to the contrary, for
purposes of computing the Additional Termination Entitlements due upon a
termination of employment that occurs, or is deemed to have occurred, after a
Change of Control, the Remaining Unexpired Employment Period shall be deemed to
be three (3) full years.
 
Section 16.                      Covenant Not To Compete.
 
The Executive hereby covenants and agrees that, in the event of his termination
of employment with the Company prior to the expiration of the Employment Period,
for a period of three (3) years following the date of his termination of
employment with the Company, he shall not, without the written consent of the
Company, become an officer, employee, consultant, director or trustee of any
savings bank, savings and loan association, savings and loan holding company,
bank or bank holding company, any other entity engaged in the business of
accepting deposits or making loans or any direct or indirect subsidiary or
affiliate of any such entity, that entails working within the State of New York
or any city or county in any other state in which the Company or the Bank
maintains an office; provided, however, that this section 16 shall not apply if
the Executive is entitled to the Additional Termination Entitlements due to a
Change of Control or after a Pending Change of Control.
 
Section 17.                      Confidentiality.
 
Unless he obtains the prior written consent of the Company, the Executive shall
keep confidential and shall refrain from using for the benefit of himself, or
any person or entity other than the Company or any entity which is a subsidiary
of the Company or of which the Company is a subsidiary, any material document or
information obtained from the Company, or from its parent or subsidiaries, in
the course of his employment with any of them concerning their properties,
operations or business (unless such document or information is readily
ascertainable from public or published information or trade sources or has
otherwise been made available to the public through no fault of his own) until
the same ceases to be material (or becomes so ascertainable or available);
provided, however, that nothing in this section 17 shall prevent the Executive,
with or without the Company's consent, from participating in or disclosing
documents or information in connection with any judicial or administrative
investigation, inquiry or proceeding to the extent that such participation or
disclosure is required under applicable law.
 
Section 18.                      Solicitation.
 
The Executive hereby covenants and agrees that, for a period of three (3) years
following his termination of employment with the Company or the Bank, he shall
not, without the written consent of the Company, either directly or indirectly:

 
 

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(a)           solicit, offer employment to, or take any other action intended,
or that a reasonable person acting in like circumstances would expect, to have
the effect of causing any officer or employee of the Company, the Bank or any of
their respective subsidiaries or affiliates to terminate his or her employment
and accept employment or become affiliated with, or provide services for
compensation in any capacity whatsoever to, any savings bank, savings and loan
association, bank, bank holding company, savings and loan holding company, or
other institution engaged in the business of accepting deposits, making loans or
doing business within the counties specified in section 16;
 
(b)           provide any information, advice or recommendation with respect to
any such officer or employee of any savings bank, savings and loan association,
bank, bank holding company, savings and loan holding company, or other
institution engaged in the business of accepting deposits, making loans or doing
business within the counties specified in section 16; that is intended, or that
a reasonable person acting in like circumstances would expect, to have the
effect of causing any officer or employee of the Company, the Bank, or any of
their respective subsidiaries or affiliates to terminate his employment and
accept employment or become affiliated with, or provide services for
compensation in any capacity whatsoever to, any savings bank, savings and loan
association, bank, bank holding company, savings and loan holding company, or
other institution engaged in the business of accepting deposits, making loans or
doing business within the counties specified in section 16;
 
(c)           solicit, provide any information, advice or recommendation or take
any other action intended, or that a reasonable person acting in like
circumstances would expect, to have the effect of causing any customer of the
Company or the Bank to terminate an existing business or commercial relationship
with the Company or the Bank;
 
provided however, that this section 18 shall not apply if the Executive is
entitled to the Additional Termination Entitlements due to a Change of Control
or after a Pending Change of Control.
 
Section 19.                      No Effect on Employee Benefit Plans or
Programs.
 
The termination of the Executive's employment during the term of this Agreement
or thereafter, whether by the Company or by the Executive, shall have no effect
on the rights and obligations of the parties hereto under the Company's or the
Bank's qualified or non-qualified retirement, pension, savings, thrift,
profit-sharing or stock bonus plans, group life, health (including
hospitalization, medical and major medical), dental, accident and long term
disability insurance plans or such other employee benefit plans or programs, or
compensation plans or programs, as may be maintained by, or cover employees of,
the Company or the Bank from time to time; provided, however, that nothing in
this Agreement shall be deemed to duplicate any compensation or benefits
provided under any agreement, plan or program covering the Executive to which
the Company is a pasty and any duplicative amount payable under any such
agreement, plan or program shall be applied as an offset to reduce the amounts
otherwise payable hereunder.

 
 

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Section 20.                      Successors and Assigns.
 
This Agreement will inure to the benefit of and be binding upon the Executive,
his legal representatives and testate or intestate distributees, and the Company
and their respective successors and assigns, including any successor by merger
or consolidation or a statutory receiver or any other person or firm or
corporation to which all or substantially all of the assets and business of the
Company may be sold or otherwise transferred. Failure of the Company to obtain
from any successor its express written assumption of the Company's obligations
hereunder at least sixty (60) days in advance of the scheduled effective date of
any such succession shall be deemed a material breach of this Agreement.
 
Section 21.                      Notices.
 
Any communication required or permitted to be given under this Agreement,
including any notice, direction, designation, consent, instruction, objection or
waiver, shall be in writing and shall be deemed to have been given at such time
as it is delivered personally, or five (5) days after mailing if mailed, postage
prepaid, by registered or certified mail, return receipt requested, addressed to
such party at the address listed below or at such other address as one (I) such
party may by written notice specify to the other party:
 
If to the Executive:
 
David C. Mancuso
50 Lafayette Avenue
Dunkirk, New York 14048
 
If to the Company:
 
Lake Shore Bancorp, Inc.
128 East 4th Street
Dunkirk, New York 14048
 
Attention:
Chairman, Compensation Committee
 
of the Board of Directors

 
Section 22.                      Waiver.
 
Failure to insist upon strict compliance with any of the terms, covenants or
conditions hereof shall not be deemed a waiver of such term, covenant, or
condition. A waiver of any provision of this Agreement must be made in writing,
designated as a waiver, and signed by the party against whom its enforcement is
sought. Any waiver or relinquishment of any right or power hereunder at any one
(I) or more times shall not be deemed a waiver or relinquishment of such right
or power at any other time or times.
 
Section 23.                      Counterparts.
 
This Agreement may be executed in two (2) or more counterparts, each of which
shall be deemed an original, and all of which shall constitute one and the same
Agreement.
 
Section 24.                      Governing Law.
 
This Agreement shall be governed by and construed and enforced in accordance
with the federal laws of the United States and, to the extent that federal law
is inapplicable, in accordance with the laws of the State of New York applicable
to contracts entered into and to be performed entirely within the State of New
York.

 
 

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Section 25.                      Headings and Construction.
 
The headings of sections in this Agreement are for convenience of reference only
and are not intended to qualify the meaning of any section. Any reference to a
section number shall refer to a section of this Agreement, unless otherwise
stated.
 
Section 26.                      Entire Agreement; Modifications.
 
This instrument contains the entire agreement of the parties relating to the
subject matter hereof, and supersedes in its entirety any and all prior
agreements, understandings or representations relating to the subject matter
hereof. No modifications of this Agreement shall be valid unless made in writing
and signed by the parties hereto. Notwithstanding the preceding sentence, this
Agreement shall be construed and administered in such manner as shall be
necessary to effect compliance with Section 409A and shall be subject to
amendment in the future, in such manner as the Company and the Bank may deem
necessary or appropriate to effect such compliance; provided that any such
amendment shall preserve for the Executive the benefit originally afforded
pursuant to this Agreement.
 
Section 27.                      Non-duplication.
 
In the event that the Executive shall perform services for the Bank or any other
direct or indirect subsidiary or affiliate of the Company or the Bank, any
compensation or benefits provided to the Executive by such other employer shall
be applied to offset the obligations of the Company hereunder, it being intended
that this Agreement set forth the aggregate compensation and benefits payable to
the Executive for all services to the Company and all of its respective direct
or indirect subsidiaries and affiliates.
 
Section 28.                      Survival.
 
The provisions of sections 6, 16, 17, 18 and 19 shall survive the expiration of
the Employment Period or termination of the Agreement.
 
Section 29.                      Indemnification for Attorneys' Fees.
 
The Company shall indemnify, hold harmless and defend Executive against
reasonable costs, including legal fees, incurred by him in connection with or
arising out of any action, suit or proceeding in which he may be involved, as a
result of his efforts, in good faith, to defend or enforce the terms of this
Agreement; provided, however, that Executive shall have substantially prevailed
on the merits pursuant to a judgment, decree or order of a court of competent
jurisdiction or of an arbitrator in an arbitration proceeding, provided,
however, that any indemnification provided under this Agreement shall be subject
to any applicable OTS indemnification rules. The determination whether the
Executive shall have substantially prevailed on the merits and is therefore
entitled to such indemnification, shall be made by the court or arbitrator, as
applicable. In the event of a settlement pursuant to a settlement agreement, any
indemnification payment under this section 29 shall be made only after a
determination by the members of the Board (other than the Executive and any
other member of the Board to which the Executive is related by blood or
marriage) that the Executive has acted in good faith and that such
indemnification payment is in the best interests of the Company.
 
Section 30.                      Required Regulatory Provisions
 
The following provisions are included for the purposes of complying with various
laws, rules and regulations applicable to the Company:
 
(a)           Notwithstanding anything herein contained to the contrary, in no
event shall the aggregate amount of compensation payable to the Executive under
section 12(b) hereof exceed three (3) times the Executive's average annual
compensation (within the meaning of OTS Examination Handbook, Thrift Activities
§ 310 or any successor thereto) for the last five (5) consecutive calendar years
to end prior to his termination of employment with the Company (or for his
entire period of employment with the Company if less than five (5) calendar
years). The compensation payable to the Executive hereunder shall be further
reduced (but not below zero) if such reduction
 

 
 

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would avoid the assessment of excise taxes on excess parachute payments (within
the meaning of Section 280G of the Code).
 
(b)           Notwithstanding anything herein contained to the contrary, any
payments to the Executive by the Company, whether pursuant to this Agreement or
otherwise, are subject to and conditioned upon their compliance with Section
18(k) of the Federal Deposit Insurance Act ("FDI Act"), 12 U.S.C. 5 1828(k), and
any regulations promulgated thereunder, including FDIC regulation 12 C.F.R. Part
359, Golden Parachute and Indemnification Payments.
 
(c)           Notwithstanding anything herein contained to the contrary, the
Company’s Board of Directors may terminate the Executive’s employment at any
time, but any termination by the Company’s Board of Directors other than
termination for Cause, shall not prejudice the Executive’s right to compensation
or other benefits under this Agreement. The Executive shall have no right to
receive compensation or other benefits for any period after termination for
Cause.
 
(d)           Notwithstanding anything herein contained to the contrary, if the
Executive is suspended from office and/or temporarily prohibited from
participating in the conduct of the affairs of the Company pursuant to a notice
served under Section 8(e)(3) or 8(g)(l) of the FDI Act, 12 U.S.C. §1818(e)(3) or
1818(g)(l), the Company's obligations under this Agreement shall be suspended as
of the date of service of such notice, unless stayed by appropriate proceedings.
If the charges in such notice are dismissed, the Company, in its discretion, may
(i) pay to the Executive all or part of the compensation withheld while the
Company's obligations hereunder were suspended and (ii) reinstate, in whole or
in part, any of the obligations which were suspended.
 
(e)           Notwithstanding anything herein contained to the contrary, if the
Executive is removed and/or permanently prohibited from participating in the
conduct of the Company's affairs by an order issued under Section 8(e)(4) or
8(g)(l) of the FDI Act, 12 U.S.C. §1818(e)(4) or (g)(l), all prospective
obligations of the Company under this Agreement shall terminate as of the
effective date of the order, but vested rights and obligations of the Company
and the Executive shall not be affected.
 
(f)           Notwithstanding anything herein contained to the contrary, if the
Company is in default (within the meaning of Section 3(x)(1) of the FDI Act, 12
U.S.C. § 1813(x)(1), all prospective obligations of the Company under this
Agreement shall terminate as of the date of default, but vested rights and
obligations of the Company and the Executive shall not be affected.
 
(g)           Notwithstanding anything herein contained to the contrary, all
prospective obligations of the Company hereunder shall be terminated, except to
the extent that a continuation of this Agreement is necessary for the continued
operation of the Company: (i) by the Director of the OTS or his designee or the
Federal Deposit Insurance Corporation ("FDIC"), at the time the FDIC enters into
an agreement to provide assistance to or on behalf of the Company under the
authority contained in Section 13(c) of the FDI Act, 12 U.S.C. §1823(c); or (ii)
by the Director of the OTS or his designee at the time such Director or designee
approves a supervisory merger to resolve problems related to the operation of
the Company or when the Company is determined by such Director to be in an
unsafe or unsound condition. The vested rights and obligations of the parties
shall not be affected.
 
If and to the extent that any of the foregoing provisions shall cease to be
required or by applicable law, rule or regulation, the same shall become
inoperative as though eliminated by formal amendment of this Agreement.
 
Section 31.                      Guarantee; Non-Duplication.

 
 

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The Company hereby agrees to guarantee the payment by the Bank of any benefits
and compensation to which the Executive is or may be entitled to under the terms
and conditions of the employment agreement of even date herewith between the
Bank and the Executive. In the event that the Executive shall perform services
for the Bank or any other direct or indirect subsidiary of the Company, any
compensation or benefits provided to the Executive by such other employer shall
be applied to offset the obligations of the Company hereunder, it being intended
that this Agreement set forth the aggregate compensation and benefits payable to
the Executive for all services to the Company and all of its direct or indirect
subsidiaries.
 
Section 32.                      Payments to Specified Employees.
 
Notwithstanding anything in this Agreement to the contrary, if at the time of
Executive’s “separation from service” (within the meaning of Section 409A and
Treas. Reg. §1.409A-1(h)), the Executive is a “specified employee” (within the
meaning of Section 409A and Treas. Reg. §1.409A-1(i)(1)), the Bank will not pay
or provide any “Specified Benefits” (as defined herein) until after the end of
the sixth calendar month beginning after the Executive’s separation from service
(the “409A Suspension Period”); provided, however, that to the extent the 409A
Suspension Period is imposed as a result of a Change of Control as defined in
section 15(a), the resulting Specified Benefits shall be paid into a rabbi trust
for the benefit of the Executive as if the 409A Suspension Period was not
imposed with such amounts then being distributed to the Executive within
fourteen (14) days after the 409A Suspension Period ends. For purposes of this
Agreement, “Specified Benefits” are any amounts or benefits that would be
subject to taxation under Section 409A if the Bank or the Company were to pay
them, pursuant to this Agreement, on account of the Executive’s separation from
service (and without the delay contemplated by this paragraph).
 
Section 33.                      Involuntary Termination Payments to Employees
(Safe Harbor).

 
To the extent allowable under Section 409A, in the event a payment is made to an
employee upon an involuntary termination of employment, as deemed pursuant to
this Agreement, such payment will not be subject to Section 409A provided that
such payment does not exceed two (2) times the lesser of (i) the sum of the
Executive's annualized compensation based on the taxable year immediately
preceding the year in which termination of employment occurs or (ii) the maximum
amount that may be taken into account under a qualified plan pursuant to Section
401(a)(17) of the Code for the year in which the Executive terminates service
(the "Safe Harbor Amount"). However, if such payment exceeds the Safe Harbor
Amount, only the amount in excess of the Safe Harbor Amount will be subject to
Section 409A. In addition, if such Executive is considered a specified employee,
such payment in excess of the Safe Harbor Amount will have its timing delayed
and will be subject to the 409A Suspension Period as provided in section 32 of
this Agreement.
 

 
 

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In Witness Whereof the Company has caused this Agreement to be executed and the
Executive has hereunto set his hand, all as of the day and year first above
written.
 

 

   
/s/ David C. Mancuso
   
David C. Mancuso

 

 

Attest:    
Lake Shore Bancorp, Inc.
       
By:
/s/ Lori Danforth
 
By:
/s/ Rachel A. Foley
Name:
Lori Danforth
 
Name:
Rachel A. Foley
Title:
Assistant Corporate Secretary
 
Title:
Chief Financial Officer