EXHIBIT 10.1
 
LAKE SHORE SAVINGS BANK
 
AMENDED AND RESTATED EMPLOYMENT AGREEMENT
 
This Amended and Restated Employment Agreement (the “Agreement”) is made and
entered into, effective as of the 1st day of January, 2017 (the “Effective
Date”), by and between Lake Shore Savings Bank, a federally-chartered savings
bank having its principal place of business at 128 East 4th Street, Dunkirk, New
York 14048 (the “Bank”), and Daniel P. Reininga, of Fredonia, New York (the
“Executive”).  Any reference to the “Company” shall mean Lake Shore Bancorp,
Inc., the parent corporation of the Bank.  The Company is a signatory to this
Agreement solely for the purpose of guaranteeing the Bank’s performance
hereunder.
 
WITNESSETH THAT:
 
WHEREAS, Executive is currently employed as President and Chief Executive
Officer of the Bank pursuant to an employment agreement between the Bank and
Executive entered into as of January 28, 2011 and an employment agreement
between the Company and Executive entered into as of January 28, 2011
(collectively, the “Prior Agreement”); and
 
WHEREAS, the Bank and the Executive desire to continue such employment, subject
to the terms and conditions set forth in this Agreement; and

WHEREAS, the Bank and Executive have read and understand the terms and
provisions set forth in this Agreement and have been afforded a reasonable
opportunity to review this Agreement with their respective legal counsel.

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and
upon the terms and conditions hereinafter provided, the parties hereby agree as
follows:
 
1.           Employment and Employment Period.  The Bank hereby employs the
Executive and the Executive agrees to be employed by the Bank, on the terms and
conditions set forth in this Agreement, for a period commencing on the date
hereof and continuing until December 31, 2019 (the “Term”).  Commencing on
January 1, 2018, and on each January 1 thereafter (each, an “Renewal Date”), the
Term shall extend automatically for one additional year, so that the Term shall
be three-years from such Renewal Date; provided, however, that in order for this
Agreement to renew, the outside non-employee members of the Board of Directors
of the Bank (the “Board”) must take the following actions within the time frames
set forth below prior to each Renewal Date:  (i) at least thirty (30) days prior
to the Renewal Date, conduct a comprehensive performance evaluation and review
of Executive for purposes of determining whether to extend this Agreement; and
(ii) affirmatively approve the renewal or non-renewal of this Agreement, which
decision shall be included in the minutes of the Board’s meeting.  If the
decision of the outside non-employee members of the Board is not to renew this
Agreement, then the Board shall provide Executive with a written notice of
non-renewal (the “Non-Renewal Notice”) at least thirty (30) days prior to any
Renewal Date, such that this Agreement shall terminate at the end of twenty-four
(24) months following such Renewal Date.  The failure of the outside
non-employee members of the Board to take the actions set forth herein before
any Renewal Date will result in the automatic non-renewal of this Agreement,
even if the Board fails to affirmatively issue the Non-Renewal Notice to
Executive.  If the Board fails to inform Executive of its determination
regarding the renewal or non-renewal of this Agreement, the Executive may
request, in writing, the results of the Board’s action (or non-action) and the
Board shall, within ten (10) days of the receipt of such request, provide a
written response to Executive.  Reference herein to the term of this Agreement
shall refer to both such initial term and such extended terms.  Notwithstanding
the foregoing, in the event a Change in Control (as defined below) occurs during
the initial Term or the extended Term, the Term shall be extended automatically
so that it is scheduled to expire no less than thirty-six (36) months beyond the
effective date of the Change in Control, subject to extension as set forth
above.

 
 

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2.           Capacity and Extent of Service.
 
(a)           At all times during the Term of this Agreement, the Bank shall
employ the Executive as its President and Chief Executive Officer.
 
(b)           The Executive shall be employed on a full-time basis as President
and Chief Executive Officer of the Bank and shall be assigned only such duties
and tasks as are appropriate for a person in such positions.  It is the
intention of the Bank and the Executive that, subject to the direction and
supervision of the Board, the Executive shall have full discretionary authority
to control the day-to-day operations of the Bank and to incur such obligations
on behalf of the Bank as may be necessary or appropriate in the ordinary course
of its business.
 
(c)           During his employment hereunder, the Executive shall devote his
full business time and his best efforts, business judgment, skill and knowledge
to the performance of his duties and responsibilities hereunder.  Except as
otherwise permitted in this Section 2(c) and Section 2(d), the Executive shall
not engage in any other business activity during the Term, other than an
activity approved in writing by the Board.  For the avoidance of doubt, the
Executive may engage in civic or charitable services or activities (“Community
Activities”) during normal business hours without the need for prior notice to
the Board; provided that such services or activities do not involve a material
time commitment.  The Executive shall promptly disclose any such Community
Activities to the Board and shall cease any such Community Activities if
directed in writing by the Board; provided that the Board determines in good
faith that continuation of such Community Activities is contrary to the best
interests of the Bank, taking into account the Bank’s reputation in the markets
served by the Bank.
 
(d)           With the prior written approval of the Board, the Executive may
serve on boards of both for-profit and not-for-profit entities or engage in
Community Activities that involve a material time commitment.  Notwithstanding
the foregoing, the Executive may continue to serve on any board of directors on
which he was serving at the Effective Date.  A list of such boards of directors
has been supplied to the Board.
 
3.           Compensation and Benefits.
 
(a)           Base Compensation.  As compensation for the services to be
performed by the Executive during the Term, the Bank shall pay to the Executive,
in regular periodic installments, a base salary (“Base Salary”) at the rate of
Three Hundred Thirteen Thousand Dollars ($313,000) per year.  Such Base Salary
will be payable in accordance with the customary payroll practices of the
Bank. During the term of this Agreement, the Board may consider increasing, but
not decreasing (other than a decrease which is applicable to all named executive
officers of the Bank and in a percentage not in excess of the percentage
decrease for other named executive officers), Executive’s Base Salary as the
Board deems appropriate.  Any change in Base Salary will become the “Base
Salary” for purposes of this Agreement.

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(b)           Short-Term Incentive Compensation.  In addition to the foregoing
Base Salary, the Executive shall be eligible during the Term to receive cash
short-term incentive compensation, determined and payable in the discretion of
the Compensation Committee of the Board.  At least annually, the Compensation
Committee shall consider awarding short-term incentive compensation to the
Executive.
 
(c)           Long-Term Incentive Compensation.  In addition to the foregoing
Base Salary, the Executive shall be eligible during the Term to receive
long-term incentive compensation determined and payable in the discretion of the
Compensation Committee of the Board.  At least annually, the Compensation
Committee shall consider awarding long-term incentive compensation to the
Executive.
 
(d)           Other Benefits.  During the Term, the Bank shall provide the
Executive with other benefits in which the Executive was participating on the
Effective Date.  The Executive shall also be entitled to participate in any
employee benefit plans from time to time in effect for executive officers of the
Bank.  The Executive shall be entitled to vacation pursuant to the Bank’s
written policies, including the Bank’s Paid-Time Off Policy, as determined by
the Board from time to time.  The Executive shall be entitled to an executive
perquisites allotment of Twenty-Four Thousand Dollars ($24,000) annually (the
“Personal Benefits Allotment”), or such other greater amount as recommended by
the Compensation Committee and approved by the Board from time to time (any
increase in the Personal Benefits Allotment shall become the “Personal Benefits
Allotment”), to be applied by Executive, in his sole discretion, towards
perquisites as the Executive deems to be appropriate or desirable to his
executive position, and this amount shall be fully taxable to the Executive.
 
(e)           Timing of Certain Payments.  Any compensation payable or provided
under this Section 3 shall be paid or provided not later than two and one-half
months after the calendar year in which such compensation is no longer subject
to a substantial risk of forfeiture, within the meaning of Treasury Regulations
Section 1.409A-l(d).
 
4.           Business Expenses.  The Bank shall reimburse the Executive for all
reasonable travel and other business expenses incurred by him in the performance
of his duties and responsibilities, including but not limited to, annual dues
and/or membership fees in professional associations, and attendance at industry
seminars and educational conferences.  Such payments or reimbursements shall be
subject to such reasonable requirements with respect to substantiation and
documentation as may be specified by the Bank or its auditors.  Reimbursements
of expenses and in-kind benefits subject to this Section 4 or otherwise provided
to the Executive shall be subject to the following rules:  (i) the amount of
such expenses eligible for reimbursement or in-kind benefits provided in any
taxable year shall not affect the expenses eligible for reimbursement or in-kind
benefits provided in any other taxable year, except as otherwise allowed by
Section 409A of the Internal Revenue Code (“Code”); (ii) any reimbursement shall
be made as soon as practicable but not later than on or before the last day of
the calendar year in which the expenses were incurred; and (iii) no right to
reimbursement or in-kind benefits may be liquidated or exchanged for another
benefit.

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5.           Termination.  Notwithstanding the provisions of Section 1, the
Executive’s employment hereunder shall terminate under the following
circumstances:
 
(a)           Death.  In the event of the Executive’s death during his
employment under this Agreement, the Executive’s employment shall terminate on
the date of his death; provided, however, that, for a period of three (3) months
following the Executive’s death, the Bank shall pay to the Executive’s
designated beneficiary (or to his estate, if he fails to make such designation)
an amount equal to the Executive’s Base Salary at the rate in effect at the time
of his death (unless an increased Base Salary shall previously have been
authorized to take effect as of a later date, in which case such increase shall
apply as of that later date), such payments to be made on the same periodic
dates as salary payments would have been made to the Executive had he not died.
 
(b)           Disability.  In the event the Executive becomes disabled during
his employment under this Agreement, the Executive’s employment hereunder shall
terminate.  For purposes of this Agreement, disability means any medically
determinable physical or mental impairment that can be expected to result in
death or can be expected to last for a continuous period of not less than twelve
(12) months and that renders the Executive unable to engage in any substantial
gainful activity.  Such determination may be made by the Board with objective
medical input from a physician chosen by the Board.  In the event of such
termination, the Executive shall continue to receive his full Base Salary and
benefits under Section 3(d) of this Agreement until he becomes eligible for and
receives disability income under the long-term disability insurance coverage
then in effect for the Executive.
 
(c)           Termination by the Executive Without Good Reason.  Notwithstanding
the provisions of Section 1, the Executive may resign from the Bank at any time
upon thirty (30) days’ prior written notice to the Bank.  In the event of
resignation by the Executive under this Section 5(c), the Board may elect to
waive the period of notice, or any portion thereof.
 
(d)           Termination by the Bank Without Cause.  The Executive’s employment
under this Agreement may be terminated by the Bank without Cause upon thirty
(30) days’ prior written notice to the Executive.
 
(e)           Termination by the Executive for Good Reason.  The Executive may
terminate his employment hereunder for Good Reason.  For purposes of this
Agreement, “Good Reason” shall mean that the Executive has complied with the
“Good Reason Process” (hereinafter defined) following the occurrence of any of
the following events:
 
(i)           Failure of the Bank to continue the Executive in the positions of
President and Chief Executive Officer (other than a change in position to which
the Executive consents) during the Term;

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(ii)           Material adverse change by the Bank, not consented to by the
Executive, in the nature or scope of the Executive’s responsibilities, title,
authorities, powers, functions or duties from the responsibilities, title,
authorities, powers, functions or duties normally exercised by an executive in
the positions of President and Chief Executive Officer of the Bank;
 
(iii)           An involuntary reduction in the Executive’s Base Salary except
across-the-board salary reductions based on the Bank’s deteriorating financial
performance similarly affecting substantially all executive management
employees;
 
(iv)           The involuntary relocation of the office at which the Executive
is principally employed to a location more than twenty-five (25) miles’ driving
distance from such office as of the Effective Date hereof (unless the relocated
office is closer to the Executive’s then principal residence); or
 
(v)           Material breach by the Bank of Section 3 hereof or of any other
provision of this Agreement, which breach continues for more than ten (10) days
following written notice given by the Executive to the Bank, such written notice
to set forth in reasonable detail the nature of such breach.
 
“Good Reason Process” shall mean that (i) the Executive reasonably determines in
good faith that a “Good Reason” condition has occurred; (ii) the Executive
notifies the Bank in writing of the first occurrence of the Good Reason
condition within sixty (60) days of the first occurrence of such condition;
(iii) the Executive cooperates in good faith with the Bank’s efforts, for a
period not less than thirty (30) days following such notice (the “Cure Period”),
to remedy the condition; (iv) notwithstanding such efforts, the Good Reason
condition continues to exist; and (v) the Executive terminates his employment
within sixty (60) days after the end of the Cure Period.  If the Bank cures the
Good Reason condition during the Cure Period, Good Reason shall be deemed not to
have occurred.  Notwithstanding the foregoing, the Bank may elect to waive the
Cure Period, in which case, the Executive’s termination may occur within such
30-day period.
 
(f)           Termination by the Bank for Cause.  At any time during the Term,
the Bank may terminate the Executive’s employment hereunder for Cause if at a
meeting of the Board called and held for such purpose (after notice to the
Executive and an opportunity for him  to be heard before the Board, which notice
shall specify the basis for a proposal to terminate the Executive’s employment
for “Cause”) a majority of Board determines in good faith that the Executive is
guilty of conduct that constitutes “Cause” as defined herein.  Only the
following shall constitute “Cause” for such termination:
 

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(i)            personal dishonesty;
 
(ii)           incompetence;
 
(iii)           willful misconduct;
 
(iv)          breach of fiduciary duty involving personal profit;
 
(v)           intentional failure to perform stated duties;
 
 
(vi)
willful violation of any law, rule or regulation (other than traffic violations
or similar offenses) or final cease-and-desist order; or

(vii)         material breach by Executive of any provision of this Agreement.
 

(g)           Termination due to Retirement.  Upon termination of the Executive
based on Retirement, no amounts or benefits shall be due the Executive under
this Agreement, and the Executive shall be entitled to all benefits under any
retirement plan of the Bank and other plans to which the Executive is a
party.  Termination of the Executive’s employment based on “Retirement” shall
mean termination of the Executive’s employment in accordance with a retirement
policy established by the Board or if no retirement policy exists, termination
of Executive’s employment for any reason after Executive attains age 65.
 
6.           Compensation Upon Termination.
 
(a)           Termination Generally.  If the Executive’s employment with the
Bank is terminated for any reason, the Bank shall pay or provide to the
Executive (or to his authorized representative or estate) (i) on or before the
time required by law but in no event more than thirty (30) days after the
Executive’s date of termination (the “Termination Date”), the sum of (A) any
Base Salary earned through the Termination Date, (B) unpaid expense
reimbursements (subject to, and in accordance with, Section 4 of this
Agreement), (C) unused vacation that accrued through the Termination Date, (D)
any earned but unpaid short-term and long-term incentive compensation for the
year immediately preceding the year of termination and (E) except in the case of
a termination under Section 5(c) or Section 5(f), a prorated portion of the
Executive’s target short-term and long-term incentive compensation for the year
of termination; and (ii) any vested benefits the Executive may have under any
employee benefit plan of the Bank through the Termination Date, which vested
benefits shall be paid and/or provided in accordance with the terms of such
employee benefit plans (collectively, the “Accrued Benefits”).
 
(b)           Termination by the Bank Without Cause or by the Executive for Good
Reason.  During the Term, if the Executive’s employment is terminated by the
Bank without Cause as provided in Section 5(d), or the Executive terminates his
employment for Good Reason as provided in Section 5(e), the Bank shall pay to
the Executive his Accrued Benefits.  In addition, subject to the last paragraph
of this Section 6(b), the Bank shall provide the benefits listed in sub-sections
6(b)(i) to (iii) below (the “Severance Benefits”) to the Executive:
 
(i)           Severance Payments.  The Bank shall pay the Executive a severance
payment in an amount equal to three (3) times the sum of: (A) the Executive’s
Base Salary plus (B) the average annual incentive cash compensation awarded to
the Executive, pursuant to Section 3(b), with respect to the three (3) most
recent fiscal years ending before the year of termination (the “Severance
Amount”).  The Severance Amount shall be paid to the Executive in a single lump
sum cash payment within thirty (30) days of the Termination Date, subject to the
receipt of the signed release within such thirty (30) day period (unless the
Executive’s termination occurs under circumstances requiring the Executive to
execute a release of claims within forty-five (45) days of termination, in which
case the thirty (30) day period shall be extended to sixty (60) days); and
further subject to the delay specified in Section 8(a) hereof, solely to the
extent necessary to avoid penalties under Section 409A of the Code in the event
the Executive is a specified employee (as defined therein); provided, however,
that if the 30-day (or 60-day) period begins in one calendar year and ends in a
second calendar year, the payment of the Severance Amount shall commence in the
second calendar year.  ;
 

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(ii)           Other Post-Termination Benefits.  In the event of any termination
without Cause of the Executive’s employment under Section 5(d), above, or any
termination for Good Reason by the Executive of his own employment under Section
5(e), above, the Bank shall pay an additional cash lump sum payment to the
Executive equal to the Bank’s applicable percentage of such cost (i.e., the
Bank’s co-payment percentage) that would have been payable for a period of
thirty-six (36) months on behalf of Executive (and, to the extent eligible under
the terms of the applicable plans, the Executive’s family members), for
continuing life, medical and dental coverage, based on the costs in effect for
the Executive on the Termination Date.  To the extent that the Executive and/or
his family members elect COBRA continuation coverage for any period after the
Executive’s termination, such cost will be paid by the Executive.
 
Such amount shall be paid to the Executive within the thirty (30) day period (or
sixty (60) day period, as applicable) following the Termination Date, provided
however, if, at the Termination Date, the Executive is a specified employee as
defined in Section 8(a) hereof, then, solely to the extent required to avoid
taxes and penalties under Section 409A of the Code, such payment shall be made
within the first thirty (30) days after the first day of the seventh calendar
month commencing after such Termination Date.
 
The Bank may condition the provision of the Severance Benefits on the Executive
signing a Release Agreement in substantially the form of Exhibit A (the “Release
Agreement”) within twenty-one (21) days (or forty-five (45) days in certain
conditions, in accordance with applicable law) after it is tendered and not
revoking the Release Agreement within the seven (7) day revocation period set
forth in the Release Agreement; provided that the Bank tenders the Release
Agreement to the Executive no later than the Termination Date.  Notwithstanding
the foregoing, the Release Agreement may be modified to the extent necessary
based on changes in applicable law from and after the date of this Agreement.
 
7.           Change in Control Payment.  The provisions of this Section 7 set
forth the rights and obligations of  Executive and the Bank  upon the occurrence
of a Change in Control of the Bank.  These provisions are intended to assure and
encourage in advance the Executive’s continued attention and dedication to his
assigned duties and his objectivity during the pendency and after the occurrence
of any such event.  These provisions shall apply in lieu of, and expressly
supersede, the provisions of Section 6(b) regarding severance pay and benefits
upon a termination of employment, if such termination of employment occurs
within twenty-four (24) months after the occurrence of the first event
constituting a Change in Control.  These provisions shall terminate and be of no
further force or effect beginning twenty-four (24) months after the occurrence
of a Change in Control.

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(a)           Change in Control.  During the Term, if within twenty-four (24)
months after a Change in Control, the Executive’s employment is terminated by
the Bank without Cause as provided in Section 5(d) or the Executive terminates
his employment for Good Reason as provided in Section 5(e), the Bank shall pay
the Executive his Accrued Benefits.  In addition, the Executive shall be
entitled to the following:
 
(i)           The Bank shall pay to the Executive a Change in Control severance
payment (“Change in Control Severance Payment”) in an amount equal to three (3)
times the sum of (A) the Executive’s current Base Salary (or the Executive’s
Base Salary in effect immediately prior to the Change in Control, if higher),
plus (B) the highest annual incentive cash compensation earned by the Executive
pursuant to Section 3(b) with respect to the three (3) most recent fiscal years
ending before the year of the Change in Control.  The Change in Control
Severance Payment shall be paid out in a lump sum payment no later than five (5)
business days after the Termination Date, subject to Section 8(a) hereof, solely
to the extent required to avoid penalties under Section 409A of the Code;
 
(ii)           The Bank shall pay an additional cash lump sum payment to the
Executive equal to the cost of providing for a period of thirty-six (36) months,
at no expense to the Executive (and, to the extent eligible under the terms of
the applicable plans, the Executive’s family members), continuing life, medical
and dental coverage to the Executive and, as applicable, his family members,
based on the aggregate cost of such coverage in effect for the Executive on the
Termination Date.  Such payment shall be made at the same time as the payment
under Section 7(a)(i) above.  To the extent that the Executive and/or his family
members elect COBRA continuation coverage for any period after the Executive’s
termination, such cost will be paid by the Executive;
 
  (b)           Change in Control.  For purposes of this Agreement, the term
“Change in Control” shall mean the consummation by the Company or the Bank, in a
single transaction or series of related transactions, of any of the following:
 
(i)           Merger:  The Company or the Bank merges into or consolidates with
another entity, or merges another bank or corporation into the Bank or the
Company, and as a result, less than a majority of the combined voting power of
the resulting corporation immediately after the merger or consolidation is held
by persons who were stockholders of the Company or the Bank immediately before
the merger or consolidation;
 
(ii)           Acquisition of Significant Share Ownership:  There is filed, or
is required to be filed, a report on Schedule 13D or another form or schedule
(other than Schedule 13G) required under Sections 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended, if the schedule discloses that the
filing person or persons acting in concert has or have become the beneficial
owner of 25% or more of a class of the Company’s or the Bank’s voting
securities; provided, however, this clause (ii) shall not apply to beneficial
ownership of the Company’s or the Bank’s voting shares held in a fiduciary
capacity by an entity of which the Company directly or indirectly beneficially
owns 50% or more of its outstanding voting securities;

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(iii)           Change in Board Composition:  During any period of two
consecutive years, individuals who constitute the Company’s or the Bank’s board
of directors at the beginning of the two-year period cease for any reason to
constitute at least a majority of the Company’s or the Bank’s board of
directors; provided, however, that for purposes of this clause (iii), each
director who is first elected by the board (or first nominated by the board for
election by the stockholders) by a vote of at least two-thirds (2/3) of the
directors who were directors at the beginning of the two-year period or who is
appointed to the board as the result of a directive, supervisory agreement or
order issued by the primary  regulator of the Company or the Bank or by the
Federal Deposit Insurance Corporation (“FDIC”) shall be deemed to have also been
a director at the beginning of such period; or
 
(iv)           Sale of Assets:  The Company or the Bank sells to a third party
all or substantially all of its assets.
 
Notwithstanding anything in this Agreement to the contrary, in no event shall a
reorganization of Lake Shore, MHC, the Company or Bank solely within its
corporate structure, including a second-step conversion from mutual to stock
form of Lake Shore, MHC, constitute a “Change in Control” for purposes of this
Agreement.
 
8.           Section 409A.
 
(a)           Anything in this Agreement to the contrary notwithstanding, if at
the time of the Executive’s “Separation from Service” (as defined below), the
Bank determines that the Executive is a “specified employee” within the meaning
of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or
benefit that the Executive becomes entitled to under this Agreement on account
of the Executive’s Separation from Service would be considered deferred
compensation subject to the 20 percent additional tax imposed pursuant to
Section 409A(a) of the Code as a result of the application of Section
409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit
shall not be provided until the date that is the earlier of (A) six months and
one day after the Executive’s Separation from Service, or (B) the Executive’s
death.  If any such delayed cash payment is otherwise payable on an installment
basis, the first payment shall include a catch-up payment covering amounts that
would otherwise have been paid during the six-month period but for the
application of this provision, and the balance of the installments shall be
payable in accordance with their original schedule.  Any such delayed cash
payment shall earn interest at an annual rate equal to the applicable federal
short-term rate published by the Internal Revenue Service for the month in which
the date of Separation from Service occurs, from such date of Separation from
Service until the payment date.

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(b)           To the extent that any payment or benefit described in this
Agreement constitutes “non-qualified deferred compensation” under Section 409A
of the Code, and to the extent that such payment or benefit is payable upon the
Executive’s termination of employment, then such payments or benefits shall be
payable only upon the Executive’s Separation from Service.”  For purposes of
this Agreement, a “Separation from Service” shall have occurred if the Bank and
the Executive reasonably anticipate that either no further services will be
performed by the Executive after the date of termination (whether as an employee
or as an independent contractor) or the level of further services performed is
less than fifty (50) percent of the average level of bona fide services in the
thirty-six (36) months immediately preceding the termination.  For all purposes
hereunder, the definition of Separation from Service shall be interpreted
consistent with Treasury Regulation Section 1.409A-1(h).
 
(c)           The parties intend that this Agreement will be administered in
accordance with Section 409A of the Code.  To the extent that any provision of
this Agreement is ambiguous as to its compliance with Section 409A of the Code,
the provision shall be read in such a manner so that all payments hereunder
comply with Section 409A of the Code.  The parties agree that this Agreement may
be amended, as reasonably requested by either party, and as may be necessary to
fully comply with Section 409A of the Code and all related rules and regulations
in order to preserve the payments and benefits provided hereunder without
additional cost to either party.
 
9.           Non-Competition, Non-Solicitation and Confidential Information.
 
(a)           Non-Competition.  Upon any termination of the Executive’s
employment for which the Executive receives a severance payment pursuant to
Section 6(b) of this Agreement, the Executive agrees not to compete with the
Bank for a period of two years following such termination in any city, town or
county in which the Executive’s normal business office is located and the Bank
or the Company has an office or have filed an application for regulatory
approval to establish an office, determined as of the Termination Date.  The
Executive agrees that during such period and within said cities, towns and
counties, the Executive shall not work for or advise, consult or otherwise serve
with, directly or indirectly, any entity whose business materially competes with
the depository, lending or other business activities of the Bank or its
affiliates.  The parties hereto, recognizing that irreparable injury will result
to the Bank in the event of the Executive’s breach of this Section 9(a), agree
that in the event of any such breach by the Executive, the Bank will be
entitled, in addition to any other remedies and damages available, to an
injunction to restrain the violation hereof by the Executive, the Executive’s
partners, agents, servants, employees and all persons acting for or under the
direction of the Executive.  The Executive represents and admits that, in the
event of the termination of his employment pursuant to Section 6(b) of this
Agreement, the Executive’s experience and capabilities are such that the
Executive can obtain employment in a business engaged in other lines and/or of a
different nature than the Bank, and that the enforcement of a remedy by way of
injunction will not prevent the Executive from earning a livelihood.  Nothing
herein will be construed as prohibiting the Bank from pursuing any other
remedies available to the Bank for such breach or threatened breach, including
the recovery of damages from the Executive.

(b)           Non-Solicitation.  During the term of the Executive’s employment
under this Agreement and two years following the Termination Date  (other than a
termination under Section 7 hereof), the Executive shall not, directly or
indirectly (i) hire or attempt to hire any employee of the Bank, assist in such
hiring by any other person, or encourage any such employee to terminate his or
her relationship with the Bank, or (ii) solicit business from any customer of
the Bank or their subsidiaries, divert or attempt to divert any business from
the Bank or their subsidiaries, or induce, attempt to induce, or assist others
in inducing or attempting to induce any agent, customer or supplier of the Bank
or any other person or entity associated or doing business with the Bank (or
proposing to become associated or to do business with the Bank) to terminate
such person’s or entity’s relationship with the Bank (or to refrain from
becoming associated with or doing business with the Bank) or in any other manner
to interfere with the relationship between the Bank and any such person or
entity.  The Executive understands that the restrictions set forth in this
Section 9(b) and the following Section 9(c) are intended to protect the Bank’
interests in its Confidential Information (as defined below) and established
employee, customer and supplier relationships and goodwill, and the Executive
agrees that such restrictions are reasonable and appropriate for this
purpose.  For the avoidance of doubt, the Executive’s involvement in general
advertising or general personnel recruiting efforts that are not targeted at
customers or employees of any of the Bank shall not be considered to violate
this Section 9(b).

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(c)           Confidential Information.  The Executive shall not at any time
divulge, use, furnish, disclose or make accessible to anyone, other than to an
employee or director of the Bank with a reasonable need to know, any knowledge
or information with respect to confidential or secret data, procedures or
techniques of the Bank (“Confidential Information”), provided, however, that
nothing in this Section 9 shall prevent the disclosure by the Executive of any
such information which at any time comes into the public domain other than as a
result of the violation of the terms of this Section 9 by the Executive or which
is otherwise lawfully acquired by the Executive.
 
(d)           Documents, Records, etc.  All documents, records, data, apparatus,
equipment and other physical property, whether or not pertaining to Confidential
Information, which are furnished to the Executive by the Bank or are produced by
the Executive in connection with the Executive’s employment will be and remain
the sole property of the Bank.  The Executive will return to the Bank all such
materials and property as and when requested by the Bank.  In any event, the
Executive will return all such materials and property immediately upon
termination of the Executive’s employment for any reason.  The Executive will
not retain any such material or property or any copies thereof after such
termination.
 
(e)           Third-Party Agreements and Rights.  The Executive hereby confirms
that the Executive is not bound by the terms of any agreement with any previous
employer or other party which restricts in any way the Executive’s use or
disclosure of information or the Executive’s engagement in any business.  The
Executive represents to the Bank that the Executive’s execution of this
Agreement, the Executive’s employment with the Bank and the performance of the
Executive’s proposed duties for the Bank will not violate any obligations the
Executive may have to any such previous employer or other party.  In the
Executive’s work for the Bank, the Executive will not disclose or make use of
any information in violation of any agreements with or rights of any such
previous employer or other party, and the Executive will not bring to the
premises of the Bank any copies or other tangible embodiments of non-public
information belonging to or obtained from any such previous employment or other
party.

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(f)           Litigation and Regulatory Cooperation.  During and after the
Executive’s employment with the Bank, the Executive shall cooperate fully with
the Bank in the defense or prosecution of any claims or any actions now in
existence or that may be brought in the future against or on behalf of the Bank
that relate to events or occurrences that transpired while the Executive was
employed by the Bank; provided that after the end of the Executive’s employment,
the Executive shall not be required to perform more than one hundred (100) hours
of services pursuant to this Section 9(f) above and beyond services that could
be compelled by issuance of a subpoena.  The Executive’s full cooperation in
connection with such claims or actions shall include, but not be limited to,
being available to meet with counsel to prepare for discovery or trial and to
act as a witness on behalf of the Bank at mutually convenient times.  During and
after the Executive’s employment, the Executive also shall cooperate fully with
the Bank in connection with any investigation or review by any federal, state or
local regulatory authority as such investigation or review relates to events or
occurrences that transpired while the Executive was employed by the Bank.  The
Bank shall reimburse the Executive for any reasonable out-of-pocket expenses
incurred in connection with the Executive’s performance of his obligations
pursuant to this Section 9(f).  Unless the Executive is then employed by the
Bank, the Bank shall pay the Executive for any services pursuant to this Section
9(f) at the hourly rate of the Executive’s final annual Base Salary divided by
2,080; provided that no payment obligation shall apply to services that could be
compelled pursuant to a subpoena.
 
(g)           Injunction.  The Executive agrees that it would be difficult to
measure any damages caused to the Bank that might result from any breach by the
Executive of the promises set forth in this Section 9, and that in any event
money damages would be an inadequate remedy for any such breach. Accordingly,
the Executive agrees that if the Executive breaches or proposes to breach, any
portion of this Section 9, the Bank shall be entitled, in addition to all other
remedies that it may have, to an injunction or other appropriate equitable
relief to restrain any such breach without showing or proving any actual damages
to the Bank.
 
10.           Withholding.  All payments made by the Bank under this Agreement
shall be net of any tax or other amounts required to be withheld by the Bank
under applicable law.
 
11.           Indemnification.  During the period of his employment hereunder,
the Bank agrees to indemnify the Executive in his capacity as an officer of the
Bank, all to the maximum extent permitted under Federal law; provided, however,
the Bank shall not be required to indemnify or reimburse Executive for legal
expenses or liabilities incurred in connection with an action, suit or
proceeding arising from any illegal or fraudulent act committed by
Executive.  The provisions of this Section 11 shall survive expiration or
termination of this Agreement for any reason whatsoever.
 
12.           Notices.  Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by registered or certified mail, postage paid, to the
Executive at the last address the Executive has filed in writing with the Bank
or, in the case of the Bank, at its main office, attention of the Chairman of
the Board.
 
13.           Entire Agreement.  This Agreement constitutes the entire agreement
between the parties with respect to its subject matter and may not be changed
except by a writing duly executed and delivered by the Bank and the Executive in
the same manner as this Agreement, and this Agreement supersedes the Prior
Agreement in its entirety.

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14.           Binding Effect, Non-assignability.  This Agreement shall be
binding upon and inure to the benefit of the Bank and its successors.  Neither
this Agreement nor any rights arising hereunder may be assigned or pledged by
the Executive during his lifetime.  This Agreement shall inure to the benefit of
and be enforceable by the Executive’s personal or legal representatives,
executors, administrators, successors, heirs, distributees, devisees and
legatees.
 
15.           Amendment.  This Agreement may be amended or modified only by a
written instrument signed by the Executive and by a duly authorized
representative of  the Bank.
 
16.           Enforceability.  If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
 
17.           Forfeiture of Payments.  The Executive agrees that the receipt of
severance compensation under Section 6(b) is conditioned upon the Executive’s
compliance in all material respects with the covenants set forth in Section
9.  The foregoing shall be in addition to any other remedies or rights the Bank
may have at law or in equity as a result of the Executive’s failure to observe
such provisions.
 
18.           Applicable Law.  This Agreement shall be construed and enforced in
all respects in accordance with the laws of the State of New York, without
regard to its principles of conflicts of laws, and in accordance with and
subject to any applicable federal laws to which the Bank may be subject as an
FDIC insured institution.
 
  19.           Required Provisions.

(a)           The Bank may terminate Executive’s employment at any time, but any
termination by the Bank, other than termination for Cause, shall not prejudice
Executive’s right to receive compensation or other benefits under this
Agreement.  Executive shall not have the right to receive compensation or other
benefits for any period after termination for Cause as defined in this
Agreement.

(b)           If Executive is suspended from office and/or temporarily
prohibited from participating in the conduct of the Bank’s affairs by a notice
served under Section 8(e)(3) or 8(g)(1) of the Federal Deposit Insurance Act, 12
U.S.C.  §1818(e)(3) or (g)(1); the Bank’s obligations under this contract shall
be suspended as of the date of service, unless stayed by appropriate
proceedings.  If the charges in the notice are dismissed, the Bank may in its
discretion: (i) pay Executive all or part of the compensation withheld while
their contract obligations were suspended; and (ii) reinstate (in whole or in
part) any of the obligations which were suspended.

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(c)           If Executive is removed and/or permanently prohibited from
participating in the conduct of the Bank’s affairs by an order issued under
Section 8(e)(4) or 8(g)(1) of the Federal Deposit Insurance Act, 12 U.S.C.
§1818(e)(4) or (g)(1), all obligations of the Bank under this contract shall
terminate as of the effective date of the order, but vested rights of the
contracting parties shall not be affected.

(d)           If the Bank is in default as defined in Section 3(x)(1) of the
Federal Deposit Insurance Act, 12 U.S.C. §1813(x)(1), all obligations of the
Bank under this contract shall terminate as of the date of default, but this
paragraph shall not affect any vested rights of the contracting parties.

(e)           All obligations of the Bank under this contract shall be
terminated, except to the extent it is determined that continuation of the
contract is necessary for the continued operation of the Bank: (i) by the
Director of the Office of the Comptroller of the Currency (“OCC”) or its
successor, or his designee, or the FDIC, at the time the FDIC enters into an
agreement to provide assistance to or on behalf of the Bank under the authority
contained in Section 13(c) of the Federal Deposit Insurance Act, 12 U.S.C.
§1823(c); or (ii) by the Director of the OCC or its successor (or his designee)
at the time the Director (or his designee) approves a supervisory merger to
resolve problems related to the operations of the Bank, or when the Bank is
determined by the Director to be in an unsafe or unsound condition.  Any rights
of the parties that have already vested, however, shall not be affected by such
action.

(f)           Any payments made to Executive pursuant to this Agreement, or
otherwise, are subject to and conditioned upon compliance with 12 U.S.C.
§1828(k) and any rules and regulations promulgated thereunder, including 12
C.F.R. Part 359, and to the extent applicable 12 C.F.R. §163.39.

20.           Dispute Resolution.
 
(a)           If a dispute arises out of or relates to this Agreement, or the
breach hereof, and if such dispute is not settled within a commercially
reasonably time (not to exceed sixty (60) days, through negotiations), the
parties shall attempt in good faith to settle the dispute by mediation under the
Employment Arbitration Rules and Mediation Procedures of the American
Arbitration Association as then in effect (the “Rules”) before resorting to
litigation.  No resolution or attempted resolution of any dispute or
disagreement pursuant to this Section 19 shall be deemed to be a waiver of any
term or provision of this Agreement or a consent to any breach or default,
unless such waiver or consent shall be in writing and signed by the party
claimed to have waived or consented.
 
(b)           Any dispute or controversy not settled in accordance with the
foregoing provisions of this Section 20 shall be settled exclusively by binding
arbitration to be conducted before a single arbitrator mutually acceptable to
the Bank and Executive in a location within twenty-five (25) miles of the Bank’s
headquarters in the State of New York, in accordance with the Rules.
 
(c)           The parties covenant and agree that they will participate in such
mediation and/or arbitration in good faith and that the Bank, subject to Section
20(e), will bear the fees and expenses of such proceeding charged by the
American Arbitration Association (including the fees of the arbitrators).  In an
arbitration, the arbitrator shall not have the power to award damages in excess
of actual compensatory damages and shall not multiply actual damages or award
punitive damages or any other damages, and each party hereby irrevocably waives
any claim to such damages.

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(d)           Any payment required under this Section 20 shall be made after the
final resolution referenced herein, but not later than the later of (i) December
31 of the calendar year in which such resolution is achieved, and (ii) two and
one-half months after the date on which such final resolution is achieved.
 
(e)           The prevailing party in any arbitration proceeding or any other
legal proceeding between the Executive and the Bank , shall be entitled to
reimbursement from the other party for all reasonable attorneys’ fees, costs and
expenses that such prevailing party incurs in connection with any such
proceeding.
 
21.           Counterparts.  This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to be
an original; but such counterparts shall together constitute one and the same
document.
 
22.           Successors to the Bank.  The Bank shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Bank expressly to
assume and agree to perform the Bank’s obligations under this Agreement to the
same extent that the Bank would be required to perform it if no succession had
taken place.  Failure of the Bank to obtain an assumption of this Agreement at
or prior to the effectiveness of any succession shall be a material breach of
this Agreement.
 
23.           Indemnification.  The Bank agrees to indemnify the Executive in
his capacity as an officer of the Bank.  In addition, to the extent that the
Executive serves at the request of the Bank as a representative, an officer or a
Board member of any community organization or financial services industry
association or similar entity, he shall be entitled to indemnification by the
Bank.  Indemnification pursuant to this Section 22 shall be subject to and
administered in accordance with the charter or by-laws of the Bank, as amended
from time to time; provided, however, that the terms of such indemnification
shall be no less favorable to the Executive than those set forth in the charter
or by-laws of the Bank as of the date of this Agreement.  Any indemnification
with respect to service to a third party shall be provided only to the extent
that no indemnification or insurance is available from such third party or that
any such indemnification or insurance has been exhausted.
 
24.           No Mitigation.  The Executive shall not be required to mitigate
the amount of any payment provided for in this Agreement by seeking other
employment or otherwise.  No payment provided for in this Agreement shall be
reduced by any compensation earned by the Executive as the result of employment
by another employer, or the Executive’s receipt of income from any other
sources, after termination of his employment with the Bank.
 
[Signature Page Follows]
 

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IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by
the Bank, by its duly authorized officers, and by the Executive, this 25th day
of January, 2017.

   
ATTEST:
LAKE SHORE SAVINGS BANK
         /s/ Wendy J. Harrington
By: /s/ Gary W. Winger          
Secretary
Chairman of the Board
       
ATTEST:
LAKE SHORE BANCORP, INC.
          /s/ Wendy J. Harrington
By: /s/ Gary W. Winger         
Secretary
Chairman of the Board
             
DANIEL P. REININGA
 
   /s/ Daniel P. Reininga          
Executive

 
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