Exhibit 10.2

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

This AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the “Agreement”) is made and
entered into as of April 2, 2008 (the “Effective Date”) by and between LAKE
SHORE SAVINGS BANK, a federally-chartered savings bank having an office at 128
East 4th Street, Dunkirk, New York 14048 (the “Bank”) and DAVID C. MANCUSO, an
individual residing at 50 Lafayette Avenue, Dunkirk, New York 14048 (the
“Executive”).

INTRODUCTORY STATEMENT

The Bank has reorganized from a New York-chartered mutual savings and loan
association to a federally-chartered stock savings bank and has become a
wholly-owned subsidiary of LAKE SHORE BANCORP, INC., a federally-chartered
corporation and a mid-tier stock holding company having an office at 128 East
4th Street, Dunkirk, New York 14048 (the “Company”), which is majority owned by
LAKE SHORE, MHC, a mutual holding company (the “Reorganization”). In connection
with the Reorganization, certain shares of the Company’s common stock were sold
in an initial public stock offering, 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 Bank has concluded that it is in the best
interests of the Bank and their prospective shareholders to secure a continuity
in management following the Reorganization. They 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
Bank might be involved. For these reasons, the Board of Directors of the Bank
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 Bank and the Executive have agreed to are as
follows:

AGREEMENT

Section 1. Employment.

The Bank 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 Bank shall employ the Executive during an initial period of three
(3) years beginning on April 2, 2008 (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”).

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(b) The Board of Directors of the Bank 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 Bank
given within ten (10) business days after his receipt of the Bank’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 Bank 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 Bank 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 Bank and the
Executive agree otherwise.

Section 3. Duties.

The Executive shall serve as Chief Executive Officer and President of the Bank,
having such power, authority and responsibility and performing such duties as
are prescribed by or under the Bank’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 Bank 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
Bank shall pay to him a salary at an initial annual rate of TWO HUNDRED FIFTY
FIVE THOUSAND DOLLARS ($255,000), payable in approximately equal installments in
accordance with their respective customary payroll practices for senior
officers. The Bank’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, in its
discretion, approve a salary increase. In addition to salary, the Executive may
receive other cash compensation from the Bank for services hereunder at such
times, in such amounts and on such terms and conditions as the Board of
Directors of the Bank may determine.

 

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Section 5. Employee Benefit Plans and Programs.

During the Employment Period, the Executive shall be treated as an employee of
the Bank 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 Bank, in accordance with the terms
and conditions of such employee benefit plans and programs and compensation
plans and programs and consistent with the Bank’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 Bank 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 Bank.

(b) To the maximum extent permitted under applicable law, during the Employment
Period and for a period of six (6) years thereafter, the Bank 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 Bank to
the fullest extent and on the most favorable terms and conditions that similar
indemnification is offered to any director or officer of the Bank 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 Bank (which approval shall not be
unreasonably 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

 

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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 Bank 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 Bank’s executive
offices at the address first above written, or at such other location as the
Bank and the Executive may mutually agree upon. The Bank 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 Bank and necessary or appropriate in connection with the
performance of his assigned duties under this Agreement. The Bank 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 Bank’s business reimbursement policy then in
effect.

Section 9. Termination Due to Death.

The Executive’s employment with the Bank 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 Bank 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)(1)(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 Bank 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 Bank. 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.”

 

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Section 10. Termination. Due to Disability.

The Bank may terminate the Executive’s employment upon a determination, by vote
of a majority of the members of the Board of Directors of the Bank, 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 Bank 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 Bank 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 Bank (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 Bank 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.

A termination of employment due to disability under this section 10 shall be
effected by notice of termination given to the Executive by the Bank 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 Bank 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 Bank, 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

 

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(ii) at least forty-five (45) days prior to the votes contemplated by section
11(a)(i), the Bank 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
Bank for the purpose of refuting the alleged grounds for Cause for his
discharge; and

(iv) after the votes contemplated by section I1(a)(i), the Bank has 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 Bank 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
Bank 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 Bank 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 the
Executive is not discharged, or is discharged without Cause, within forty-five
(45) days after the giving of a Notice of Intent to Discharge, payments of
salary and cash compensation shall resume, and all payments withheld during the
period of suspension shall be promptly restored. If the Executive is discharged
with Cause not later than forty-five (45) days after the giving of the Notice of
Intent to Discharge, all payments withheld during the period of suspension shall
be deemed forfeited and shall not be included in the Standard Termination
Entitlements, If the Bank 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 Bank may discharge the Executive at any time during the Employment Period
and, unless such discharge constitutes a discharge with Cause:

(a) The Bank 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 Bank 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 Bank. The
coverage provided under this section 12(b) may, at the election of the Bank, 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 Bank 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 Bank 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.”

Section 13. Resignation.

(a) The Executive may resign from his employment with the Bank at any time. A
resignation under this section 13 shall be effected by notice of resignation
given by the Executive to the Bank 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:

(i) the failure of the Bank (whether by act or omission of its Board of
Directors, or otherwise) to appoint or re-appoint or elect or re-elect the
Executive to the position(s) with the Bank, specified in section 3 of this
Agreement;

 

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(ii) any reduction of the Executive’s rate of base salary in effect from time to
time, whether or not material, 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 Bank of any material term, condition or
covenant contained in this Agreement; provided that the Executive shall have
given notice of such material adverse effect to the Bank, and the Bank has not
fully cured such failure within thirty (30) days after such notice is deemed
given; or

(iv) a change in the Executive’s principal place of employment to a place that
is not the principal executive office of the Bank, or a relocation of the Bank’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 Bank’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 Bank 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 Bank
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 Bank 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 Bank and the Executive further agree that the Bank 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
Bank and its officers, directors, shareholders, subsidiaries and affiliates
including the Company, in form and substance satisfactory to the Bank, of any
liability to the Executive, whether for compensation or damages, in connection
with his employment with the Bank and the termination of such employment except
for the Standard Termination Entitlements and the Additional Termination
Entitlements.

 

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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:

(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

 

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(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

(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 Bank 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 Bank, he shall not, without the written consent of the Bank,
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 or after a Pending Change of
Control.

 

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Section 17. Confidentiality.

Unless he obtains the prior written consent of the Bank, the Executive shall
keep confidential and shall refrain from using for the benefit of himself, or
any person or entity other than the Bank or 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 Bank’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 Bank, either directly or indirectly:

(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;

 

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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 Bank 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 Bank is a party 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.

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 Bank
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
Bank may be sold or otherwise transferred. Failure of the Bank to obtain from
any successor its express written assumption of the Bank’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 (1) 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 Bank:

Lake Shore Savings Bank

128 East 4h Street

Dunkirk, New York 14048

Attention: Chairman, Compensation Committee of the Board of Directors

 

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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
(1) 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.

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.

 

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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 Bank hereunder, it being intended
that this Agreement set forth the aggregate compensation and benefits payable to
the Executive for all services to the Bank 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 Bank 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 Bank.

Section 30. Required Regulatory Provisions.

The following provisions are included for the purposes of complying with various
laws, rules and regulations applicable to the Bank:

(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 Regulatory Bulletin 27a or any successor thereto) for
the last five (5) consecutive calendar years to end prior to his termination of
employment with the Bank (or for his entire period of employment with the Bank
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 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 Bank, 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. § 1828(k), and any
regulations promulgated thereunder.

 

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(c) 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 Bank pursuant to a notice served under
Section 8(e)(3) or 8(g)(1) of the FDI Act, 12 U.S.C. §1818(e)(3) or 1818(g)(1),
the Bank’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 Bank, in its discretion, may (i) pay to the
Executive all or part of the compensation withheld while the Bank’s obligations
hereunder were suspended and (ii) reinstate, in whole or in part, any of the
obligations which were suspended.

(d) Notwithstanding anything herein contained to the contrary, if the 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
FDI Act, 12 U.S.C. §1818(e)(4) or (g)(1), all prospective obligations of the
Bank under this Agreement shall terminate as of the effective date of the order,
but vested rights and obligations of the Bank and the Executive shall not be
affected.

(e) Notwithstanding anything herein contained to the contrary, if the Bank 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 Bank under this Agreement shall
terminate as of the date of default, but vested rights and obligations of the
Bank and the Executive shall not be affected.

(f) Notwithstanding anything herein contained to the contrary, all prospective
obligations of the Bank hereunder shall be terminated, except to the extent that
a continuation of this Agreement is necessary for the continued operation of the
Bank: (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 Bank under the authority contained in
Section 13(c) of the FDI Act, 12 U.S.C. § 1823(c); (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 Bank or when the Bank
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. 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

 

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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 32. 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 31 of this Agreement.

 

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IN WITNESS WHEREOF, the Bank 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:       LAKESHORE SAVINGS BANK By:  

/s/ Lori Danforth

    By:  

/s/ Rachel A. Foley

Name:   Lori Danforth     Name:   Rachel A. Foley Title:   Assistant Corporate
Secretary     Title:   Chief Financial Officer [Seal]