Exhibit 10.8

DIRECTORS’

SUPPLEMENTAL BENEFIT PLAN

LAKE SHORE SAVINGS BANK

(formerly Lake Shore Savings and Loan Association)

Originally Effective October 1, 2001,

As Amended and Restated Effective January 1, 2005

Further Amended and Restated Effective January 1, 2007

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DIRECTORS’ SUPPLEMENTAL BENEFIT PLAN

This Directors’ Supplemental Benefit Plan (the “Plan”), initially effective as
of the 1st day of October, 2001, was adopted by LAKE SHORE SAVINGS BANK (the
“Bank”) (at the time of the Plan adoption, the Bank was known as Lake Shore
Savings and Loan Association), a then mutual savings association and now a stock
savings association and the wholly-owned subsidiary of Lake Shore Bancorp, Inc.,
for the benefit of the Bank’s Directors, hereinafter referred to as
“Director(s)”who shall be eligible to participate in this Plan by execution of a
Directors’ Supplemental Benefit Plan Joinder Agreement in a form provided by the
Bank. The Plan was amended and restated effective as of January 1, 2005, in
order to conform the Plan to the requirements of Section 409A of the Internal
Revenue Code of 1986, as amended (“Code”). The Plan is hereby further amended
and restated effective January 1, 2007, in order to clarify that the benefit
formula herein, which is set forth in each Director’s Joinder Agreement, is
based generally on average compensation and years of service on the Board of
Directors (the “Board”) of the Bank.

WITNESSETH:

WHEREAS, the Directors serve the Bank as members of the Board of Directors; and

WHEREAS, the Bank desires to honor, reward and recognize the Directors who have
provided long and faithful service to the Bank and to ensure the continued
service on the Board by such Directors until retirement age; and

WHEREAS, the Directors wish to be assured that they will be entitled to a
certain amount of additional compensation for some definite period of time from
and after retirement from active service with the Bank or other termination of
service and wish to provide their beneficiaries with benefits from and after
death; and

WHEREAS, the Bank and the Directors have previously provided the terms and
conditions upon which the Bank shall pay such additional compensation to the
Directors after retirement or other termination of service and/or death benefits
to their beneficiaries after death; and

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WHEREAS, the Bank and the Directors intend this Plan to be considered an
unfunded arrangement, maintained primarily to provide supplemental retirement
income for such Directors; and

WHEREAS, the Plan is a nonqualified deferred compensation arrangement that is
required to comply with Code Section 409A and the proposed regulations and other
authority promulgated thereunder; and

WHEREAS, the Bank now desires to amend and restate this Directors Supplemental
Benefit Plan which controls all issues relating to Supplemental Benefits as
described herein;

NOW, THEREFORE, in consideration of the premises and of the mutual promises
herein contained, the Bank and the Directors agree as follows:

 

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SECTION I.

DEFINITIONS

When used herein, the following words and phrases shall have the meanings below
unless the context clearly indicates otherwise:

 

1.1 “Accrued Benefit” means, with respect to any Plan Year, that portion of the
Supplemental Benefit which is expensed and accrued as of the Valuation Date of
such Plan Year under generally accepted accounting principles (GAAP) utilizing
the benefits/years-of-service method. A Director shall always be 100% vested in
his Accrued Benefit under the Plan. The Accrued Benefit for each Plan Year shall
be set forth in each Director’s Joinder Agreement.

 

1.2 “Act” means the Employee Retirement Income Security Act of 1974, as amended
from time to time.

 

1.3 “Actuarial Equivalent” or “Actuarial Equivalency” means the Accrued Benefit
payable at the Director’s Benefits Age. The Actuarial Equivalent shall be
computed using pre-retirement and post-retirement interest of 5.75%.

 

1.4 “Administrator” means the Committee.

 

1.5 “Bank” means LAKE SHORE SAVINGS BANK (formerly Lake Shore Savings and Loan
Association) and any successor thereto.

 

1.6 “Beneficiary” means the person or persons and their heirs designated as
Beneficiary in the Director’s Joinder Agreement to whom the deceased Director’s
benefits are payable. If no Beneficiary is so designated, then the Director’s
Spouse, if living, will be deemed the Beneficiary. If the Director’s Spouse is
not living, then the Children of the Director will be deemed the Beneficiaries
and will take on a per stirpes basis. If there are no living Children, then the
Estate of the Director will be deemed the Beneficiary.

 

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1.7 “Benefit Age” shall be the age at which the Director becomes eligible to
receive the Supplemental Benefit under the Plan. Such age shall be designated in
the Director’s Joinder Agreement.

 

1.8 “Benefit Eligibility Date” shall be the date on which a Director is entitled
to receive his Supplemental Benefit. Except in the case of Termination of
Service due to death, Disability or following a Change in Control, a Director’s
“Benefit Eligibility Date” shall occur on the 1st day of the month coincident
with or next following the month in which the Director attains his Benefit Age
designated in the Joinder Agreement.

 

1.9 “Benefits Determiner” shall mean a third party administrator or agent
designated by the Committee. The Benefits Determiner shall calculate the
Actuarial Equivalency of the Accrued Benefit payable to a Director or
Beneficiary pursuant to Section III of the Plan, unless such amount is set forth
in the Director’s Joinder Agreement.

 

1.10 “Cause” means personal dishonesty, willful misconduct, willful malfeasance,
breach of fiduciary duty involving personal profit, intentional failure to
perform stated duties, willful violation of any law, rule, regulation (other
than traffic violations or similar offenses), or final cease-and-desist order,
material breach of any provision of this Plan, or gross negligence in matters of
material importance to the Bank.

 

1.11 For these purposes, a “Change in Control” shall mean and include the
following with respect to the Bank:

 

  (a) Change in the ownership of the Bank. A change in the ownership of the Bank
shall occur on the date that any one person, or more than one person acting as a
group (as defined in Proposed Treasury Regulation Section 1.409A-3(g)(5)(v)(B)),
acquires ownership of stock of the corporation that, together with stock held by
such person or group, constitutes more than 50% of the total fair market value
or total voting power of the stock of such corporation.

 

  (b)

Change in the effective control of the Bank. A change in the effective control
of the Bank shall occur on the date that either (i) any one person, or more than
one person acting as a group (as defined in Proposed Treasury Regulation

 

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Section 1.409A-3(g)(5)(v)(B)), acquires (or has acquired during the 12-month
period ending on the date of the most recent acquisition by such person or
persons) ownership of stock of the corporation possessing 35% or more of the
total voting power of the stock of such corporation; or (ii) a majority of
members of the corporation’s Board of Directors is replaced during any 12-month
period by Directors whose appointment or election is not endorsed by a majority
of the members of the corporation’s Board of Directors prior to the date of the
appointment or election, provided that this sub-section (ii) is inapplicable
where a majority shareholder of the Bank is another corporation.

 

  (c) Change in the ownership of a substantial portion of the Bank’s assets. A
change in the ownership of a substantial portion of the Bank’s assets shall
occur on the date that any one person, or more than one person acting as a group
(as defined in Proposed Treasury Regulation Section 1.409A-3(g)(v)(5)(B)),
acquires (or has acquired during the 12-month period ending on the date of the
most recent acquisition by such person or persons) assets from the corporation
that have a total gross fair market value equal to or more than 40% of the total
gross fair market value of (i) all of the assets of the Bank, or (ii) the value
of the assets being disposed of, either of which is determined without regard to
any liabilities associated with such assets.

 

  (d) For all purposes hereunder, the definition of Change in Control shall be
construed to be consistent with the requirements of Proposed Treasury Regulation
Section 1.409A-3(g), except to the extent that such proposed regulations are
superseded by subsequent guidance. In addition, for these purposes, “Bank” shall
be construed to mean also the Company.

 

1.12 “Children” means the Director’s children, or the issue of any deceased
child, then living at the time payments are due the Children under this Plan.
The term “Children” shall include both natural and adopted Children.

 

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1.13 “Committee” means the Committee appointed by the Board of Directors to
administer the Plan.

 

1.14 “Director” means a Director of the Bank.

 

1.15 “Disability Benefit” means the monthly benefit payable to the Director over
the Payout Period following a determination, in accordance with Subsection 3.6,
that the Director is Totally and Permanently Disabled.

 

1.16 “Effective Date.” The Effective Date of the Directors’ Supplemental Benefit
Plan was initially October 1, 2001. The Plan was amended and restated effective
January 1, 2005 in order to conform to Code Section 409A. The Plan is hereby
further amended and restated effective January 1, 2007.

 

1.17 “Estate” means the estate of the Director.

 

1.18 “Joinder Agreement” means the agreement executed by a Director to
acknowledge his initial participation in the Plan, or any successor to such
agreement that a Director executes to reflect his assent to changes in the terms
of the Plan or the amount of his Supplemental Benefit computation herein.

 

1.19 “Payout Period” means the time frame during which certain benefits payable
hereunder shall be distributed. Payments shall be made, generally, in equal
monthly installments commencing within thirty (30) days following the occurrence
of the event which triggers distribution and continuing for One Hundred Eighty
(180) consecutive months. For purposes of the Survivor’s Benefits payable
hereunder, the Payout Period shall be One Hundred Eighty (180) consecutive
months, unless a timely election for a lump sum benefit is made in accordance
with Section 3.7 of the Plan.

 

1.20 “Plan Year” shall mean each October 1 to September 30, commencing
October 1, 2001 and continuing each October 1 to September 30 thereafter.

 

1.21 “Spouse” means the individual to whom the Director is legally married at
the time of the Director’s death.

 

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1.22 “Supplemental Benefit” means an annual amount payable to the Director
pursuant to the Plan. The Supplemental Benefit to which a Director will become
entitled upon the satisfaction of the applicable conditions shall be an amount
equal to the amount set forth in the Director’s Joinder Agreement. Such amount
shall be recalculated every three (3) years or at such other time as the Board
deems appropriate, and shall be based on a formula equal to 2% of the Director’s
average final pay over the three (3) years of service immediately prior to the
year of the Director’s Termination of Service, times the number of years of
service that the Director has served on the Board, up to a maximum of 40%
(except as otherwise set forth herein at Section 3.3(c)). Notwithstanding the
preceding sentence, a Director’s Supplemental Benefit computed on the basis of
the above formula cannot be less than the Actuarial Equivalent of the Accrued
Benefit for such Director as of the effective date of this amendment and
restatement of the Plan, or as of January 1, 2007. Notwithstanding anything
herein to the contrary, the Supplemental Benefit shall be the amount set forth
in a Participant’s Joinder Agreement unless and until the Administrator
recalculates such amount pursuant to the foregoing formula and provides an
amendment to the Director’s Joinder Agreement that reflects the recomputed
Supplemental Benefit.

 

1.23 “Survivor’s Benefit” means an annual amount payable to the Beneficiary in
monthly installments throughout the Payout Period, equal to the amount
designated in the Director’s Joinder Agreement and subject to Subsection 3.2.
Notwithstanding the foregoing, the Survivor’s Benefit may be paid in the form of
a lump sum benefit if a timely election is made in accordance with Section 3.7.

 

1.24 “Termination of Service” means a “separation from service” within the
meaning of Code Section 409A.

 

1.25 “Total and Permanent Disability” or “Disability” means the Director: (i) is
unable to engage in any substantial gainful activity by reason of any medically
determinable physical or mental impairment which can be expected to result in
death or can be expected to last for a continuous period of not less than 12
months; (ii) is, by reason of any medically determinable physical or

 

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mental impairment that satisfies “(i)” above, receiving income replacement
benefits for a period of not less than 3 months under an accident and health
plan covering employees of the Director’s employer; or (iii) is Disabled within
the meaning of the Social Security Act.

 

1.26 “Valuation Date” shall mean the date during the Plan Year on which the
Director’s Accrued Benefit is determined for the Plan Year. The Valuation Date
shall be September 30th of each Plan Year, and any other date so determined by
the Committee.

SECTION II.

ELIGIBILITY AND PARTICIPATION

 

2.1 Eligibility - Eligibility to participate in the Plan shall be limited to
those Directors of the Bank who are not also employees of the Bank.

 

2.2 Participation - A Director’s participation in the Plan shall be effective
upon completion of a Joinder Agreement by the Director and acceptance of the
Joinder Agreement by the Committee. A Director shall complete the Joinder
Agreement and return it to the Committee within thirty (30) days of being
notified that he is eligible for participation in the Plan. Notwithstanding the
foregoing, a Director who is participating in the Plan as of January 1, 2007
(other than one who attains his or her Benefit Age in 2007) will complete an
amended and restated Joinder Agreement to acknowledge his new Supplemental
Benefit amount, and to assent to the terms of the Plan, as amended and restated
herein. Any such amended and restated Joinder Agreement will supersede any
previous Joinder Agreement(s) executed by the Director. Participation in the
Plan shall continue until such time as the Director terminates service with the
Bank, and as long thereafter as the Director is eligible to receive benefits
under this Plan.

 

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SECTION III.

BENEFITS

 

3.1 Supplemental Benefit. If the Director is in the service of the Bank until
reaching his Benefit Age, the Director shall be entitled to the Supplement
Benefit. Such Supplemental Benefit shall commence on the 1st day of the month
following the Director’s attainment of his Benefit Age and shall be payable in
monthly installments throughout the Payout Period. In the event a Director dies
after commencement of the Supplemental Benefit payments but before completion of
all such payments due and owing hereunder, the Bank shall pay to the Director’s
Beneficiary a continuation of the monthly installments for the remainder of the
Payout Period.

 

3.2 Death Prior to Benefit Age. If the Director dies prior to attaining his
Benefit Age but while employed by the Bank, the Director’s Beneficiary shall be
entitled to the Survivor Benefit. Such death benefit shall commence within
thirty (30) days of the Director’s death and shall be payable in monthly
installments throughout the Payout Period, unless a timely election is made in
accordance with Section 3.7 hereof for distribution of the Survivor’s Benefit in
a lump sum.

 

3.3 Voluntary or Involuntary Termination Other Than for Cause; Early Retirement.

 

  (a) If the Director has a Termination of Service with the Bank (whether
voluntarily or involuntarily) prior to the attainment of his Benefit Eligibility
Date, for any reason other than for Cause, the Director’s death, Disability, or
following a Change in Control (as defined), the Director (or his Beneficiary)
shall be entitled to his Accrued Benefit, as set forth in the Director’s Joinder
Agreement. Such Accrued Benefit shall be annuitized and the Actuarial Equivalent
shall be payable commencing on the Director’s Benefit Eligibility Date following
attainment of his Benefit Age in monthly installments throughout the Payout
Period. In the event the Director dies at any time after commencement of
payments hereunder, but prior to completion of all such payments due and owing
hereunder, the Bank shall pay to the Director’s Beneficiary a continuation of
the monthly installments for the remainder of the Payout Period.

 

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  (b) If the Director dies after his voluntary or involuntary Termination of
Service occurring prior to his Benefit Eligibility Date, and prior to the
commencement of benefits hereunder, the Director’s Beneficiary shall be entitled
to the Director’s Accrued Benefit, which shall be annuitized and the Actuarial
Equivalent shall be payable in monthly installments over the Payout Period. The
payment of such benefit shall commence within thirty (30) days of the Director’s
death.

 

  (c) Notwithstanding anything to the contrary herein, a Director may elect in
writing during 2007 to retire early from active service on the Board of
Directors at any time during calendar year 2008. Any Director who elects early
retirement shall receive credit for two (2) additional years of service for
purposes of computing his Supplemental Benefit herein. Notwithstanding the 40%
of final average pay limitation set forth in Section 1.22 herein, the maximum
percentage of final pay for purposes of computing a Director’s Supplemental
Benefit herein upon early retirement shall be 44%. For example, an active
Director with 19 years of service credit who elects early retirement during 2008
will receive credit for a total of twenty-one (21) years of service, and a
maximum Supplemental Benefit of 42% of final average pay. Such early retirement
election, if made, must be made by a Director before December 31, 2007.

 

3.4 Termination of Service Related to a Change in Control.

 

  (a) If the Director has a Termination of Service (either voluntarily or
involuntarily) following or coincident with a Change in Control, the Director
shall be entitled to his full Supplemental Benefit (as if he had remained in
service until his Benefit Age). Such benefit shall commence on the 1st day of
the month following his Termination of Service and shall be payable in monthly
installments throughout the Payout Period, provided, however, that each Director
will be entitled to make

 

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an election in the form attached hereto as Exhibit A, prior to December 31, 2007
(or the last day of the “transition period” under Code Section 409A), to receive
a lump sum distribution on Termination of Service following a Change in Control.
In the event that the Director dies at any time after commencement of the
payments, but prior to completion of all such payments due and owing hereunder,
the Bank, or its successor, shall pay to the Director’s Beneficiary a
continuation of the monthly installments for the remainder of the Payout Period.

 

  (b) If, after such termination, the Director dies prior to commencement of the
benefits hereunder, the Director’s Beneficiary shall be entitled to the
Survivor’s Benefit which shall commence within thirty (30) days of the
Director’s death. The Survivor’s Benefit shall be payable in monthly
installments over the Payout Period, unless a timely election is made in
accordance with Section 3.7 hereof for distribution of the Survivor’s Benefit in
a lump sum. Notwithstanding anything to the contrary herein, the Survivor’s
Benefit shall be payable in accordance with the Director’s election under
Section 3.2, even if such election varies from the Director’s election under
Section 3.4(a) for distributions to the Director following a Change in Control.

 

3.5 Termination for Cause. If the Director is terminated for Cause, all benefits
under the Director’s Joinder Agreement shall be forfeited and the Joinder
Agreement shall become null and void.

 

3.6 Payment of a Disability Benefit.

 

  (a) Notwithstanding any other provision hereof, the Director who has not
attained his Benefit Eligibility Date shall be entitled to receive the
Disability Benefit hereunder, in any case in which it is determined that the
Director has become Totally and Permanently Disabled. If the Director’s service
is terminated pursuant to this paragraph, the Director shall begin receiving the
Disability Benefit in lieu of any benefit available under Section 3.3, which is
not available prior to the Director’s

 

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Benefit Eligibility Date. The Disability Benefit shall be an annuitized amount
which is the Actuarial Equivalent of the Director’s Accrued Benefit, which shall
be calculated by the Benefits Determiner. The Disability Benefit shall be
payable in monthly installments over the Payout Period commencing within thirty
(30) days following the determination that the Director is Totally and
Permanently Disabled. In the event the Director dies while receiving payments
pursuant to this Subsection, but prior to the completion of all payments due and
owing hereunder, the Bank shall pay to the Director’s Beneficiary a continuation
of the monthly installments for the remainder of the Payout Period.

 

  (b) If the Director dies after Termination of Service due to Disability but
before the commencement of such payments, the Director’s Beneficiary shall be
entitled to the Actuarial Equivalent of the Director’s Accrued Benefit, which
shall be calculated by the Benefits Determiner. Such benefit shall be payable to
the Beneficiary in monthly installments over the Payout Period commencing within
thirty (30) days of the Director’s death.

 

3.7 Election to Receive A Lump Sum Benefit in Certain Circumstances.
Notwithstanding anything to the contrary herein, the Director (or the Director’s
Beneficiary, as applicable) shall be entitled to receive a distribution in the
form of a lump sum payment in the event the Director makes a timely election
prior to December 31, 2007 (or the last day of the “transition period” under
Code Section 409A, if later), and the Director or his Beneficiary (as
applicable) becomes entitled to a distribution in accordance with Section 3.2
[Death Prior to Benefit Age] or Section 3.4 [Termination of Service Related to a
Change in Control]. If an election to receive a lump sum benefit has been made,
such payment shall be made to the Director or his Beneficiary, as applicable,
within thirty (30) days after the event which triggers the distribution. In the
event of a lump sum distribution under Section 3.2, the election can be made at
any time, so long as it is made at least twelve (12) full months prior to the
Director’s death.

 

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3.8 Distribution of De Minimus Amounts. Notwithstanding anything herein to the
contrary, if the value of the Director’s Accrued Benefit (when added together
with all of his benefits under all nonqualified deferred compensation plans
maintained by the Bank and required to be aggregated under Code Section 409A) is
$10,000 or less at the time of the distribution event, payment shall be made in
a lump sum, even if the Director had specified a different form of payment, and
such payment shall be made before the later of (i) December 31 of the year in
which the Director has a Termination of Service or (ii) the 15th day of the
third month following the Director’s Termination of Service.

 

3.9 Non-Competition During and After Service on the Board.

 

  (a) In consideration of the agreements of the Bank contained herein and of the
payments to be made by the Bank pursuant hereto, the Director hereby agrees
that, so long as he remains in the service of the Bank, he will not actively
engage, either directly or indirectly, in any business or other activity which
is or may be deemed to be in any way competitive with or adverse to the best
interests of the business of the Bank unless the Director’s participation
therein has been consented to, in writing, by the Board of Directors.

 

  (b) The Director expressly agrees that, as consideration for the covenants of
the Bank contained herein and as a condition to the performance by the Bank of
its obligations hereunder, from and after any voluntary or involuntary
termination of service from the Board, other than a termination of service in
connection with a Change in Control pursuant to Subsection 3.4, and continuing
throughout the entire Payout Period, as provided herein, he will not, without
the prior written consent of the Bank, become associated with, in the capacity
of an employee, director, or officer, any bank holding company, bank, savings
association or mortgage company with offices in Chautauqua County, New York,
and/or any other counties in which the Bank has offices, and which offers
products and services competing with those offered by the Bank.

 

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  (c) In the event of a termination of service related to a Change in Control
pursuant to Subsection 3.4, paragraph (b) of this Subsection 3.9 shall cease to
be a condition to the performance by the Bank of its obligations under this
Plan.

 

3.10 Breach. In the event of any breach by the Director of the agreements and
covenants contained herein, the Board of Directors of the Bank shall direct that
any unpaid balance of any payments to the Director under this Plan be suspended,
and shall thereupon notify the Director of such suspensions, in writing.
Thereupon, if the Board of Directors of the Bank shall determine that said
breach by the Director has continued for a period of one (1) month following
notification of such suspension, all rights of the Director and his
Beneficiaries under this Plan, including rights to further payments hereunder,
shall thereupon terminate.

SECTION IV.

BENEFICIARY DESIGNATION

The Director shall make an initial designation of primary and secondary
Beneficiaries upon execution of his Joinder Agreement and shall have the right
to change such designation, at any subsequent time, by submitting to the
Administrator in substantially the form attached as Exhibit A to the Joinder
Agreement, a written designation of primary and secondary Beneficiaries. Any
Beneficiary designation made subsequent to execution of the Joinder Agreement
shall become effective only when receipt thereof is acknowledged in writing by
the Administrator.

SECTION V.

DIRECTOR’S RIGHT TO ASSETS

The rights of the Director, any Beneficiary, or any other person claiming
through the Director under this Plan, shall be solely those of an unsecured
general creditor of the Bank. The Director, the Beneficiary, or any other person
claiming through the Director, shall only have the right to receive from the
Bank those payments so specified under this Plan. The Director agrees that he,
his Beneficiary, or any other person claiming through him shall have no rights
or interests whatsoever in any asset of the Bank, including any insurance
policies or contracts which the Bank may possess or obtain to informally fund
this Plan. Any asset used or acquired by

 

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the Bank in connection with the liabilities it has assumed under this Plan,
unless expressly provided herein, shall not be deemed to be held under any trust
for the benefit of the Director or his Beneficiaries, nor shall any asset be
considered security for the performance of the obligations of the Bank. Any such
assets shall be and remain, a general, unpledged, and unrestricted asset of the
Bank.

SECTION VI.

RESTRICTIONS UPON FUNDING

The Bank shall have no obligation to set aside, earmark or entrust any fund or
money with which to pay its obligations under this Plan. The Director, his
Beneficiaries, or any successor in interest to him shall be and remain simply a
general unsecured creditor of the Bank in the same manner as any other creditor
having a general claim for matured and unpaid compensation. The Bank reserves
the absolute right in its sole discretion to either purchase assets to meet its
obligations undertaken by this Plan or to refrain from the same and to determine
the extent, nature, and method of such asset purchases. Should the Bank decide
to purchase assets such as life insurance, mutual funds, disability policies or
annuities, the Bank reserves the absolute right, in its sole discretion, to
terminate such assets at any time, in whole or in part. At no time shall the
Director be deemed to have any lien, right, title or interest in or to any
specific investment or to any assets of the Bank. If the Bank elects to invest
in a life insurance, disability or annuity policy upon the life of the Director,
then the Director shall assist the Bank by freely submitting to a physical
examination and by supplying such additional information necessary to obtain
such insurance or annuities.

SECTION VII.

ALIENABILITY AND ASSIGNMENT PROHIBITION

Neither the Director nor any Beneficiary under this Plan shall have any power or
right to transfer, assign, anticipate, hypothecate, mortgage, commute, modify or
otherwise encumber in advance any of the benefits payable hereunder, nor shall
any of said benefits be subject to seizure for the payments of any debts,
judgments, alimony or separate maintenance owed by the Director or his
Beneficiary, nor be transferable by operation of law in the event of bankruptcy,
insolvency or otherwise. In the event the Director or any Beneficiary attempts
assignment, communication, hypothecation, transfer or disposal of the benefits
hereunder, the Bank’s liabilities shall forthwith cease and terminate.

 

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SECTION VIII.

ADMINISTRATION

 

8.1 Named Fiduciary and Administrator. The Bank shall name a Committee of the
Board of Directors as the Named Fiduciary and Administrator of this Plan. The
Committee shall consist of not less than three persons. The Committee shall have
the authority to make, amend, interpret and enforce all appropriate rules and
regulations for the administration of this Plan, as may arise in connection with
the Plan. A majority vote of the Committee members shall control any decision.

 

8.2 Agents. The Committee may, from time to time, employ other agents and
delegate to them such administrative duties as it sees fit, and may from time to
time consult with counsel who may be counsel to the Bank.

 

8.3 Binding Effect of Decisions. The decision or action of the Committee in
respect of any question arising out of or in connection with the administration,
interpretation and application of the Plan and the rules and regulations
promulgated hereunder shall be final and conclusive and binding upon all persons
having any interest in the Plan.

 

8.4 Indemnity of Committee. The Bank shall indemnify and hold harmless the
members of the Committee against any and all claims, loss, damage, expense or
liability arising from any action or failure to act with respect to this Plan,
except in the case of gross negligence or willful misconduct.

SECTION IX.

CLAIMS PROCEDURE AND ARBITRATION

 

9.1 Claims Procedure. In the event that benefits under this Plan are not paid to
the Director (or to his Beneficiary in the case of the Director’s death) and
such claimants feel they are entitled to receive such benefits, then a written
claim must be made to the Committee within sixty (60) days from the date
payments are refused. The Committee shall review the written claim and, if the
claim is denied, in whole or in part, it shall provide in writing, within ninety
(90) days of receipt of such claim, its specific

 

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reasons for such denial is based, reference to the provisions of this Plan or
the Joinder Agreement upon which the denial is based, and any additional
material or information necessary to perfect the claim. Such writing by
Committee shall further indicate the additional steps which must be undertaken
by claimants if an additional review of the claim denial is desired.

If claimants desire a second review, they shall notify the Committee in writing
within sixty (60) days of the first claim denial. Claimants may review this
Plan, the Joinder Agreement or any documents relating thereto and submit any
issues and comments, in writing, they may feel appropriate. The Committee shall
refer the claim to the Bank’s full Board of Directors. The Board of Directors of
the Bank shall then review the second claim and provide a written decision
within sixty (60) days of receipt of such claim. The decision shall state the
specific reasons for the decision and shall include reference to specific
provisions of this Plan or the Joinder Agreement upon which the Bank’s decision
is based.

 

9.2 Arbitration. If claimants continue to dispute the benefit denial based upon
completed performance of this Plan and the Joinder Agreement or the meaning and
effect of the terms and conditions thereof, then claimants may submit the
dispute to mediation, administered by the American Arbitration Association
(“AAA”) (or a mediator selected by the parties) in accordance with the AAA’s
Commercial Mediation Rules. If mediation is not successful in resolving the
dispute, it shall be settled by arbitration administered by the AAA under its
Commercial Arbitration Rules, and judgment on the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction thereof.

SECTION X.

MISCELLANEOUS

 

10.1 No Effect on Director’s Rights. Nothing contained herein will confer upon
the Director the right to be retained in the service of the Bank nor limit the
right of the Bank to deal with the Director without regard to the existence of
the Plan.

 

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10.2 State Law. The Plan is established under, and will be construed according
to, the laws of the State of New York, to the extent such laws are not preempted
by the Act and valid regulations published thereunder.

 

10.3 Severability. In the event that any of the provisions of this Plan or
portion thereof, are held to be inoperative or invalid by any court of competent
jurisdiction, then: (1) insofar as is reasonable, effect will be given to the
intent manifested in the provisions held invalid or inoperative, and (2) the
validity and enforce ability of the remaining provisions will not be affected
thereby.

 

10.4 Incapacity of Recipient. In the event the Director is declared incompetent
and a conservator or other person legally charged with the care of his person or
Estate is appointed, any benefits under the Plan to which such Director is
entitled shall be paid to such conservator or other person legally charged with
the care of his person or Estate.

 

10.5 Unclaimed Benefit. The Director shall keep the Bank informed of his current
address and the current address of his Beneficiaries. The Bank shall not be
obligated to search for the whereabouts of any person. If the location of the
Director is not made known to the Bank as of the date upon which any payment of
any benefits may first be made, the Bank shall delay payment of the Director’s
benefit payment(s) until the location of the Director is made known to the Bank;
however, the Bank shall only be obligated to hold such benefit payment(s) for
the Director until the expiration of thirty-six (36) months. Upon expiration of
the thirty-six (36) month period, the Bank may discharge its obligation by
payment to the Director’s Beneficiary. If the location of the Director’s
Beneficiary is not made known to the Bank by the end of an additional two
(2) month period following expiration of the thirty-six (36) month period, the
Bank may discharge its obligation by payment to the Director’s Estate. If there
is no Estate in existence at such time or if such fact cannot be determined by
the Bank, the Director and his Beneficiary(ies) shall thereupon forfeit any
rights to the balance, if any, of any benefits provided for such Director and/or
Beneficiary under this Plan.

 

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10.6 Establishment of Rabbi Trust. The Bank may establish a rabbi trust into
which the Bank may contribute assets, subject to the claims of the Bank’s
creditors in the event of the Bank’s “Insolvency”, until the contributed assets
are paid to the Directors and their Beneficiaries in such manner and at such
times as specified in this Plan. Such rabbi trust and any assets held therein
shall conform to the terms of the rabbi trust agreement. To the extent the
language in this Plan is modified by the language in the rabbi trust agreement,
the rabbi trust agreement shall supersede this Plan. Any contributions to a
rabbi trust shall be made during each Plan Year in accordance with the rabbi
trust agreement.

 

10.7 Limitations on Liability. Notwithstanding any of the preceding provisions
of the Plan, no individual acting as an employee or agent of the Bank, or as a
member of the Board of Directors shall be personally liable to the Director or
any other person for any claim, loss, liability or expense incurred in
connection with the Plan.

 

10.8 Gender. Whenever in this plan words are used in the masculine or neuter
gender, they shall be read and construed as in the masculine, feminine or neuter
gender, whenever they should so apply.

 

10.9 Effect on Other Corporate Benefit Plans. Nothing contained in this Plan
shall affect the right of the Director to participate in or be covered by any
other corporate benefit available to Directors of the Bank constituting a part
of the Bank’s existing or future compensation structure.

 

10.10 Suicide. Notwithstanding anything to the contrary in this Plan, the
benefits otherwise provided herein shall be not payable and this Plan shall
become null and void with respect to the Director if the Director’s death
results from suicide, whether sane or insane, within twenty-four (24) months
after the execution of his Joinder Agreement.

 

10.11 Inurement. This Plan shall be binding upon and shall inure to the benefit
of the Bank, its successors and assigns, and the Director, his successors,
heirs, executors, administrators and Beneficiaries.

 

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10.12 Headings. Headings and sub-headings in this Plan are inserted for
reference and convenience only and shall not be deemed a part of this Plan.

 

10.13 Compliance with Section 409A of the Code. The Plan is intended to be a
non-qualified deferred compensation plan described in Section 409A of the Code.
The Plan shall be operated, administered and construed to give effect to such
intent. To the extent that a provision of the Plan fails to comply with Code
Section 409A and a construction consistent with Code Section 409A is not
possible, such provision shall be void ab initio. In addition, the Plan shall be
subject to amendment, with or without advance notice to Directors and other
interested parties, and on a prospective or retroactive basis, including but not
limited to amendment in a manner that adversely affects the rights of Directors
and other interested parties, to the extent necessary to effect such compliance.

SECTION XI.

AMENDMENT/REVOCATION

 

11.1 Amendment. The Board of Directors may at any time amend the Plan in whole
or in part, provided, however, that no amendment shall be effective to decrease
or restrict any Director’s Accrued Benefit under the Plan, determined as of the
date of Amendment, and provided further, no amendment shall be made, or if made,
shall be effective, if such amendment would cause the Plan to violate Code
Section 409A. Any change in the Actuarial Equivalency factors shall not become
effective until the first day of the calendar year which follows the adoption of
the amendment and providing at least thirty (30) days’ written notice of the
amendment to the Director. Notwithstanding the above, following a Change in
Control, this Plan shall not be amended, modified or revoked at any time, in
whole or part, as to any Director, other than as necessary to comply with
applicable laws, without the mutual written consent of the Director and the
Bank, and such mutual consent shall be required even if the Director is no
longer in the service of the Bank.

 

11.2 Termination. The Board of Directors may within the first twelve (12) months
after the Plan’s Effective Date partially or completely terminate the Plan, if,
as a result of changes in the tax laws, the tax, accounting, or other effects of
the continuance of the Plan, or potential payments thereunder, would not be in
the best interests of the Bank.

 

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SECTION XII.

EXECUTION

 

12.1 This Plan and any and all properly executed Joinder Agreements set forth
the entire understanding of the parties hereto with respect to the transactions
contemplated hereby.

 

12.2 This Plan shall be executed in triplicate, each copy of which, when so
executed and delivered, shall be an original, but all three copies shall
together constitute one and the same instrument.

 

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IN WITNESS WHEREOF, the Bank has caused this Plan to be executed on the day and
date first above written.

 

ATTEST:    LAKE SHORE SAVINGS BANK

/s/  Beverley J. Mulkin

   By:  

/s/ David C. Mancuso

Secretary    Title:   President and Chief Executive Officer     

 

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EXHIBIT A

LAKE SHORE SAVINGS BANK

(formerly Lake Shore Savings and Loan Association)

DIRECTORS SUPPLEMENTAL BENEFIT PLAN

ELECTION TO RECEIVE A LUMP SUM BENEFIT IN CERTAIN CIRCUMSTANCES

 

1. Change in Control

According to the terms of Section 3.4 of this Plan, I understand that I may
elect to receive a lump sum distribution upon my Termination of Service
coincident with or following a Change in Control and that such election must be
made no later than December 31, 2007 (or the last day of the “transition period”
under Code Section 409A, if later).

In the event of a Change in Control, I hereby elect to receive my Supplemental
Benefit in the following form (check one):

 

  ¨ Lump Sum Distribution

 

  ¨ Substantially equal monthly payments over a period of 180 months

 

Date:

 

 

   Signature:   

 

 

2. Death

According to the terms of Sections 3.2 of this Plan, I understand that I may
elect that the Survivor’s Benefit be distributed in a lump sum and that such
election must be made no later than twelve (12) months prior to my death.

In the event of my death, I hereby elect that the Survivor’s Benefit be
distributed to my beneficiary(ies) in the following form (check one):

 

  ¨ Lump Sum Distribution

 

  ¨ Substantially equal monthly payments over a period of 180 months

 

Date:  

 

  Signature:  

 

Received by the Bank this              day of                              ,
20    . By  

 

    Title