Document:

Amended and Restated Employment Agreement

 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”). 

 (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. 
  

 2 

 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 

  

 3 

 
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.” 
  

 4 

 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

  

 5 

 (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. 
  

 6 

 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; 
  

 7 

 (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. 
  

 8 

 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 
  

 9 

 (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. 
  

 10 

 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; 
  

 11 

 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 
  

 12 

 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. 
  

 13 

 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. 
  

 14 

 (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 

  

 15 

 
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. 
  

 16 

 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]exh10_1.htm

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    
       

      
        	
                Exhibit
      10.1

              

      

       

    

     

    THIS
AGREEMENT is entered into this 31st day of
March, 2008, to be effective as at the 24th day of
September, 2007 (the “Effective Date”)

    

    BETWEEN:

    

    LML
Payment Systems Inc., a company incorporated pursuant to the laws of British
Columbia and carrying on business at 1680 - 1140 West Pender Street, Vancouver,
BC V6E 4G1  (the “Company”)

    

    AND:

    

    PATRICK
GAINES, of  21018 11-200 Burrard Street, Vancouver, BC V6C 3L0 
(the
“Executive”)

    

    WHEREAS:

    

    
      	
              A.

            	
              The
      Executive is the President and Chief Executive Officer of the
      Company;

            

    

    

    
      	
              B.

            	
              The
      Company recognizes that the Executive’s talents and abilities are unique
      and have been integral to the success of the Company and thus wishes to
      secure the ongoing services of the Executive on the terms and conditions
      set forth herein;

            

    

    

    NOW
THEREFORE, in consideration of the premises and the mutual covenants set forth
below, the parties agree as follows:

    

    
      	
              1.

            	
              EMPLOYMENT
      TERM

            

    

    

    
      	
              1.1

            	
              The
      employment of the Executive shall commence on the Effective Date and shall
      continue until terminated as hereinafter provided (the
      “Term”).

            

    

    

    
      	
              1.2

            	
              Despite
      the provisions of paragraphs 1.1 hereof, either the Executive or the
      Company may terminate the Executive’s employment at any time without
      notice for cause. Cause shall mean any serious, culpable conduct, deemed
      cause under the common law of the Province of British Columbia.
      (“Cause”)

            

    

    

    
      	
              2.

            	
              SERVICES

            

    

    

    
      	
              2.1

            	
              The
      Executive agrees to perform the duties and responsibilities of President
      and Chief Executive Officer of the Company and as Chair of the Board of
      Directors (the “Board”). The Executive’s duties will include the
      day-to-day management of the Company, attendance at all Board meetings and
      Board committee meetings, and such other incidental duties and
      responsibilities as may be reasonably required by the Company and assigned
      to the Executive by the Board from time to time (hereinafter collectively
      referred to as the “Services”).

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
              2.2

            	
              The
      Executive shall devote substantially all of his working time, attention
      and energies during normal business hours (other than absences due to
      illness or vacation) to the performance of his duties for the Company.
      Notwithstanding the above, the Executive shall be permitted, to the extent
      that such activities do not substantially interfere with the performance
      of his duties and responsibilities hereunder or violate Sections 12, 13 or
      14 of this Agreement, to

            

    

    

    
      	
               
      

            	
              (a)

            	
              manage
      his personal, financial and legal
affairs,

            

    

    

    
      	
               
      

            	
              (b)

            	
              serve
      on civic or charitable boards or committees (it being expressly understood
      and agreed that the Executive’s continuing to serve on any such board
      and/or committees on which he is serving, or with which he is otherwise
      associated, as of the Effective Date, shall be deemed not to interfere
      with the performance of his duties and responsibilities under this
      Agreement),

            

    

    

    
      	
               
      

            	
              (c)

            	
              serve
      on boards of other companies; and

            

    

    

    
      	
               
      

            	
              (d)

            	
              make
      personal appearances and lectures, and the Executive shall be entitled to
      receive and retain all remuneration received by him from the items listed
      in clauses 2.2(a) through (d) of this
Section.

            

    

    

    
      	
              3.

            	
              PLACE
      OF PERFORMANCE

            

    

    

    
      	
              3.1

            	
              During
      the Term, the Company shall maintain executive offices for the Executive
      in Vancouver, British Columbia, Canada and the Executive shall not be
      required to relocate to any other location. During the Term, the Company
      shall provide the Executive with an office and staff in the above offices
      consistent with the practices of the Company immediately prior to the
      Effective Date.

            

    

    

    
      	
              4.

            	
              COMPENSATION

            

    

    

    
      	
              4.1

            	
              The
      Company agrees to pay to the Executive a base salary of not less than
      CDN

            

    

    $200,000.00
per year (“Base Salary”). The Base Salary shall be paid in approximately equal
installments in accordance with the Company’s customary payroll practices. If
the Company increases the Base Salary, such increased Base Salary shall then
constitute the Base Salary for all purposes of this Agreement.

    

    
      	
              4.2

            	
              For
      each full fiscal year of the Company that begins and ends during the Term,
      and for the portion of the fiscal year of the Company that begins in 2007
      (“Fiscal Year 2008”), the Executive shall be eligible to earn an annual
      cash bonus (the “Annual Bonus”) of up to thirty-five per cent (35%) of the
      Base Salary based on the achievement by the Company of reasonable
      performance goals established by the Compensation Committee for each such
      fiscal year (or portion) which may include targets related to the earnings
      before interest, taxes, depreciation and amortization (“EBITDA”) of the
      Company. The Compensation Committee shall, prior to the execution of this
      Agreement, establish objective criteria to be used to determine the extent
      to which performance goals have been
satisfied.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
              5.

            	
              BENEFITS

            

    

    

    
      	
              5.1

            	
              During
      the Term, the Executive (and his eligible spouse and dependants) shall be
      entitled to participate in all the welfare benefit plans and programs
      maintained by the Company from time to time for the benefit of its senior
      executives, including, without limitation, all medical, hospitalization,
      dental, disability, accidental death and dismemberment and travel accident
      insurance plans and programs. In addition, during the Term, the Executive
      shall be eligible to participate in all pensions, retirement, savings and
      other employee benefit plans and programs maintained from time to time by
      the Company for the benefit of its senior executives, other than any
      annual cash incentive plan. The policy documents of such benefit plans
      shall determine benefit
entitlement.

            

    

    

    
      	
              6.

            	
              EXPENSES

            

    

    

    
      	
              6.1

            	
              In
      accordance with the policies formulated by the Company from time to time,
      the Executive shall be reimbursed for all reasonable traveling, business
      and entertainment expenses actually and properly incurred by the Executive
      in connection with the performance of his duties and functions, including,
      without limitation, first class transportation. For all such expenses the
      Executive shall keep proper accounts and shall furnish statements and
      receipts to the Company in a timely
manner.

            

    

    

    
      	
              7.

            	
              AUTOMOBILES

            

    

    

    
      	
              7.1

            	
              The
      Company shall provide the Executive with automobiles consistent with the
      practices of the Company immediately prior to the commencement of the
      Term.

            

    

    

    
      	
              8.

            	
              VACATION

            

    

    

    
      	
              8.1

            	
              The
      Executive shall be entitled to six weeks’ vacation.  Vacation
      not taken during the applicable fiscal year may be carried over to the
      next following fiscal year.

            

    

    

    
      	
              9.

            	
              STOCK
      OPTIONS

            

    

    

    
      	
              9.1

            	
              The
      Executive shall be entitled to maintain his current stock options and
      shall be entitled to participate in the company’s stock option plans as
      determined by the Compensation Committee, from time to time, and shall be
      entitled to immediately receive 1,200,000 stock options, pursuant to the
      terms of the Company’s stock option plan, which will provide for the
      vesting of 400,000 stock options per year, with a ten (10) year exercise
      term, and immediate vesting of all stock options upon a Control Change (as
      defined in paragraph 11.1 below)

            

    

    

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
              10.

            	
              ILLNESS,
      DISABILITY, OR DEATH

            

    

    

    
      	
              10.1

            	
              The
      Executive’s employment hereunder shall terminate upon his
      death.

            

    

    

    
      	
              10.2

            	
              If
      the Executive’s employment is terminated by his death, the Company shall
      provide to the Executive’s beneficiary, legal representatives or estate,
      as the case may be, a lump sum as set out in Section 11.7
      below.

            

    

    

    
      	
              11.

            	
              TERMINATION
      OF EMPLOYMENT

            

    

    

    
      	
              11.1

            	
              In
      this section:

            

    

    

    
      	
               
      

            	
              (a)

            	
              "Control
      Change" means the occurrence of any of the following
    events:

            

    

    

    
      	
              (i)  

            	
              any
      Person acquiring twenty percent (20%) or more of the issued and
      outstanding shares of the Company;
or

            

    

    

    
      	
              (ii)  

            	
              any
      Person making an offer to purchase all or substantially all of the assets
      of the Company,

            

    

    

    provided
that for the purpose of the foregoing definition, "Person" means a third party
that is operating at arm's length from the Executive.  For greater
certainty, "Person" shall not include any person, partnership, corporation or
other entity with which the Executive is involved directly or indirectly as
principal, agent, shareholder, officer, employee or in any other manner
whatsoever.

    

    
      	
              11.2

            	
              The
      Executive may terminate his employment for good reason (“Good Reason”)
      after giving the Company detailed written notice thereof, if the Company
      shall have failed to cure the event or circumstance constituting Good
      Reason within 10 business days after receiving such notice. Good Reason
      shall mean the occurrence of any of the following without the written
      consent of the Executive or his approval in his capacity as the Chair of
      the Board:

            

    

    

    
      	
               
      

            	
              (a)

            	
              a
      Control Change;

            

    

    

    
      	
               
      

            	
              (b)

            	
              the
      assignment to the Executive of duties inconsistent with this Agreement or
      a change in his titles or
authority;

            

    

    

    
      	
               
      

            	
              (c)

            	
              any
      failure by the Company to comply with Sections 4, 5, or 9 in a material
      way;

            

    

    

    
      	
               
      

            	
              (d)

            	
              a
      material decrease in the Executive’s Base Salary, Annual Bonus, benefits
      or incentives;

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
               
      

            	
              (e)

            	
              the
      requirement of the Executive to relocate to a location other than that
      provided in Section 3 hereof;

            

    

    

    
      	
               
      

            	
              (f)

            	
              the
      failure of the Company to comply with and satisfy Section 16 of
      this  Agreement; or

            

    

    

    
      	
               
      

            	
              (g)

            	
              any
      material fundamental breach of this Agreement by the
    Company.

            

    

    

    
      	
              11.3

            	
              The
      Executive’s right to terminate his employment for Good Reason shall expire
      if the Executive has not tendered his resignation from the Company for
      Good Reason within 30 business days of his providing written notice
      thereof to the Company.

            

    

    

    
      	
              11.4

            	
              The
      Company may terminate the Executive’s employment at any time for Cause
      without notice or payment in lieu of notice, save and except that Cause
      shall not exist unless and until the Company has delivered to the
      Executive a copy of a resolution duly adopted by a majority of the Board
      (excluding the Executive for purposes of determining such majority) at a
      meeting of the Board called and held for such purpose after reasonable
      notice to the Executive and an opportunity for the Executive, together
      with his counsel, to be heard before the Board, finding that in the good
      faith opinion of the Board that Cause exists, and specifying the
      particulars thereof in detail. This Section 11.4 shall not prevent the
      Executive from challenging in any court of competent jurisdiction the
      Board’s determination that Cause exists or that the Executive has failed
      to cure any act (or failure to act) that purportedly formed the basis for
      the Board’s determination.

            

    

    

    
      	
              11.5

            	
              The
      Company shall have the right to terminate the Executive’s employment
      hereunder without Cause by providing to the Executive notice of
      termination as set out in Section
11.7.

            

    

    

    
      	
              11.6

            	
              Any
      termination of the Executive’s employment by the Company shall be
      communicated by written notice of termination to the
      Executive.

            

    

    

    
      	
              11.7

            	
              In
      the event that the Executive’s employment terminates during the Term, the
      Company shall provide the Executive with the payments and benefits set
      forth below. The Executive acknowledges and agrees that the payments set
      forth in this Section 11.7 constitute liquidated damages for termination
      of his employment during the Term.

            

    

    

    
      	
               
      

            	
              (a)

            	
              If
      the Executive’s employment is terminated by the Company without Cause, or
      the Executive terminates his employment for Good
  Reason,

            

    

    

    
      	
               
      

            	
              (i)

            	
              the
      Company shall pay to the Executive on or before the date of termination
      (the “Date of Termination”) a lump sum equal
to

            

    

    

    
      	
               
      

            	
              A.

            	
              Base
      Salary and accrued vacation pay through to the Date of Termination;
      plus

            
	 	 	 
	 	B.	Two
      (2) years’ current Base Salary plus two (2) times the Executive’s last
      Annual Bonus;

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
    

    

    
      	
               
      

            	
              (ii)

            	
              the
      Company shall, consistent with past practice, reimburse the Executive
      pursuant to Section 6 for business expenses incurred but not paid prior to
      such termination of his employment;

            

    

    

    
      	
               
      

            	
              (iii)

            	
              upon
      the Date of Termination all of the Executive’s granted but unexpired stock
      options shall vest forthwith;

            

    

    

    
      	
               
      

            	
              (iv)

            	
              the
      Company shall continue the welfare benefit plan and programs described in
      Section 5 above for two (2) years’ following the Date of Termination, or
      until the Executive replaces such plans and programs, whichever is
      earlier; and

            

    

    

    
      	
               
      

            	
              (v)

            	
              In
      the event of a Control Change, the Executive shall also receive a lump sum
      equal to three and one-half per cent (3.5%) of the total consideration
      paid to/for the Company.

            

    

    

    
      	
              11.8

            	
              If
      the Executive’s employment is terminated by the Company for Cause or by
      the Executive other than for Good Reason, then the Company shall provide
      the Executive with any compensation earned by the Executive to the Date of
      Termination including any accrued obligations owing to the Executive
      pursuant to the provisions of Sections 4, 5, 6, 8 and 9 hereof and shall
      have no further obligation to the Executive
  hereunder.

            

    

    

    
      	
              12.

            	
              CONFIDENTIAL
      INFORMATION AND COMPANY PROPERTY

            

    

    

    
      	
              12.1

            	
              For
      purposes of this Agreement, the term “Confidential Information” means all
      of the following materials and information (whether or not reduced to
      writing and whether or not patentable or protectible by copyright) which
      the Executive receives, received access to, conceived or developed, in
      whole or part, directly or indirectly, in connection with his employment
      with the Company or in the course of his employment with the Company (in
      any capacity, whether executive, managerial, planning, technical, sales,
      research, development, manufacturing, engineering or otherwise) or through
      the use of any of the Company’s facilities or
  resources:

            

    

    

    
      	
               
      

            	
              (a)

            	
              business
      plans, strategies, tactics, policies, resolutions, patent applications,
      trademark applications, trade name applications and industrial design
      applications;

            

    

    

    
      	
               
      

            	
              (b)

            	
              litigation,
      negotiations or contractual
arrangements;

            

    

    

    
      	
               
      

            	
              (c)

            	
              financial
      information, including, but not limited to, cost, pricing, performance
      data, debt arrangements, equity structure, interests and
      holdings;

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    

    
      	
               
      

            	
              (d)

            	
              operational
      and scientific information, including, but not limited to, marketing
      research techniques, trade secrets, product specifications, data, data
      base information, know-how, methodologies, formulae, models, compositions,
      processes, improvements, devices, inventions, discoveries, concepts,
      ideas, designs, sketches, photographs, graphs, drawings, notes, samples,
      past, current and planned research and development, systems, structures
      and architectures and related processes (collectively the
      “Works”);

            

    

    

    
      	
               
      

            	
              (e)

            	
              marketing
      information, including, but not limited to, current and planned marketing
      activities, methods and processes, marketing strategies, advertising
      strategies, customer or client lists, current and anticipated customer or
      client requirements, price lists and methodologies, marketing research
      methodologies, market studies, sales and marketing plans and information
      concerning customers, clients or suppliers, and strategies for attracting
      and dealing with customers or clients, including information relevant to
      the design and implementation of marketing plans and advertising
      campaigns;

            

    

    

    
      	
               
      

            	
              (f)

            	
              personnel
      information, including, but not limited to, the names and backgrounds of
      key personnel, personnel lists, résumés, personnel data, including
      information about compensation and benefits, organization structure,
      performance evaluations of personnel of the Company and personnel training
      techniques and materials;

            

    

    

    
      	
               
      

            	
              (g)

            	
              any
      and all information concerning the business and affairs of the Company
      which the Company treats as proprietary and confidential and which is not
      in the public domain;

            

    

    

    
      	
               
      

            	
              (h)

            	
              any
      other information, however documented, of the Employer that is a trade
      secret under any applicable legislation or at common law;
    and

            

    

    

    
      	
               
      

            	
              (i)

            	
              all
      ideas which are derived from or related to the Executive’s access to or
      knowledge of any of the above enumerated materials and
      information.

            

    

    

    
      	
              12.2

            	
              Failure
      to make any of the Confidential Information as confidential, proprietary
      or protected information does not affect its status as part of the
      Confidential Information under the terms of this
  Agreement.

            

    

    

    
      	
              12.3

            	
              For
      purposes of this Agreement, the information that would otherwise be
      Confidential Information which is or becomes publicly available without
      breach of:

            

    

    

    
      	
               
      

            	
              (a)

            	
              this
      Agreement;

            

    

    

    
      	
               
      

            	
              (b)

            	
              any
      other agreement or instrument to which the Company is a part or a
      beneficiary; or

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    

    
      	
               
      

            	
              (c)

            	
              any
      duty owed to the Company by the Executive or any third
    party;

            

    

    

    
      	
               
      

            	
              (“Available
      Information”)

            

    

    

    
      	
               
      

            	
              is
      not Confidential Information, provided, however, that the Executive
      acknowledges and agrees that if the Executive seeks to disclose, divulge,
      reveal, report, publish, transfer or use, for any purpose, any Available
      Information, the Executive bears the burden of proving that such
      information is Available
Information.

            

    

    

    
      	
              12.4

            	
              For
      purposes of this Agreement, the term “Intellectual Property” means all
      works, trademarks, trademark applications, patents, patent applications,
      copyright materials, trade names, trade name applications, industrial
      designs, and applications to register
designs.

            

    

    

    
      	
              12.5

            	
              The
      Executive acknowledges that as a result of his employment by the Company,
      the Executive may use, acquire or add to Confidential Information or
      Intellectual Property.

            

    

    

    
      	
              12.6

            	
              The
      Executive shall not at any time during or following the Term of the
      Executive’s employment by the Company, directly or indirectly, disclose,
      divulge, reveal, report, publish, transfer or use for any purpose any of
      the Confidential Information, except with the prior written consent of the
      Company, or except if the Executive is acting as an employee of the
      Company solely for the benefit of the Company in connection with the
      Company’s business and in accordance with the Company’s business practices
      and employment policies.

            

    

    

    
      	
              12.7

            	
              Disclosure
      of any Confidential Information is not prohibited if the disclosure is
      directly pursuant to a valid and existing order of a court or other
      governmental body or agency within Canada; provided, however,
      that:

            

    

    

    
      	
               
      

            	
              (a)

            	
              the
      Executive shall first have given prompt notice to the Company of any
      possible or prospective order (or proceedings pursuant to which any order
      may result); and

            

    

    

    
      	
               
      

            	
              (b)

            	
              the
      Company shall have been afforded a reasonable opportunity to prevent or
      limit any disclosure.

            

    

    

    
      	
              12.8

            	
              The
      Executive acknowledges and agrees that all rights, title and interest in
      any Confidential Information or Intellectual Property remains the
      exclusive property of the Company. Accordingly, the Executive specifically
      agrees and acknowledges that he has no interest in the Confidential
      Information or Intellectual Property, notwithstanding the fact that the
      Executive may have created or contributed to the creation of or his name
      is used in association with such Confidential Information or Intellectual
      Property.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    13.           NON-COMPETITION

    

    
      	
              13.1

            	
              During
      the Term and until the 12 month anniversary of the Date of Termination, if
      the Executive’s employment is terminated by the Company for Cause or the
      Executive terminates employment without Good Reason, the Executive shall
      not engage in or become associated with any business or other endeavour
      that engages in any country in which the Company has significant business
      operations as of the Date of Termination to a significant degree in a
      business that directly competes with all or any substantial part of the
      Company’s business of:

            

    

    

    
      	
               
      

            	
              (a)

            	
              financial
      payment processing specializing in providing end to end cheque processing
      solutions including,

            

    

    

    
      	
               
      

            	
              (b)

            	
              electronic
      cheque conversation (whereby paper cheques are converted into electronic
      transactions at the point of
purchase),

            

    

    

    
      	
               
      

            	
              (c)

            	
              electronic
      cheque re-presentment (whereby returned paper cheques are represented for
      payment electronically),

            

    

    

    
      	
               
      

            	
              (d)

            	
              electronic
      cheque verification, and

            

    

    

    
      	
               
      

            	
              (e)

            	
              cheque
      collection. (collectively “Competitive
  Activity”)

            

    

    

    
      	
              13.2

            	
              A
      Competitive Activity shall not
include:

            

    

    

    
      	
               
      

            	
              (a)

            	
              any
      speaking engagement to the extent that such speaking engagement does not
      promote or endorse a product or service of the
  Business,

            

    

    

    
      	
               
      

            	
              (b)

            	
              the
      writing of any book or articles relating to subjects other than Business,
      or

            

    

    

    
      	
               
      

            	
              (c)

            	
              the
      television, video or movie business so long as such business does not
      relate to the Business.

            

    

    

    
      	
              13.3

            	
              The
      Executive shall be considered to have become “associated with a
      Competitive Activity” if he becomes involved as an owner, employee,
      officer, director, independent contractor, agent, partner, advisor or in
      any other capacity calling for the rendition of the Executive’s personal
      services, with any individual, partnership, corporation or other
      organization that is engaged in a Competitive Activity and his involvement
      relates to a significant extent to the Competitive Activity of such
      entity; provided, however, that the Executive shall not be prohibited
      from:

            

    

    

    
      	
               
      

            	
              (a)

            	
              owning
      less than five percent of any publicly traded corporation, whether or not
      such corporation is in competition with the Company,
  or

            

    

    

    
      	
               
      

            	
              (b)

            	
              serving
      as a director of a corporation or other entity the primary business of
      which is not a Competitive
Activity.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
              14.

            	
              NON-SOLICITATION

            

    

    

    
      	
              14.1

            	
              During
      the Term, and for 12 months after the Date of Termination if the
      Executive’s employment is terminated by the Company for Cause or the
      Executive terminates employment without Good Reason, the Executive will
      not, directly or indirectly, solicit for employment by other than the
      Company any person (other than any personal secretary or assistant hired
      to work directly for the Executive) employed by the Company or its
      affiliated companies, nor will the Executive, directly or indirectly,
      solicit for employment by other than the Company any person known by the
      Executive (after reasonable inquiry) to be employed at the time by the
      Company or its affiliated
companies.

            

    

    

    
      	
              14.2

            	
              If,
      at any time, the provisions of Sections 13 or 14 shall be determined to be
      invalid or unenforceable by reason of being vague or unreasonable as to
      area, duration or scope of activity, Sections 13 or 14 shall be considered
      divisible and shall become and be immediately amended to only such area,
      duration and scope of activity as shall be determined to be reasonable and
      enforceable by the court or other body having jurisdiction over the
      matter; and the Executive agrees that Sections 13 and 14 as so amended
      shall be valid and binding as though any invalid or unenforceable
      provision had not been included
herein.

            

    

    

    
      	
              15.

            	
              INJUNCTIVE
      RELIEF

            

    

    

    
      	
              15.1

            	
              In
      the event of a breach or threatened breach of Sections 13 or 14, the
      Executive agrees that the Company shall be entitled to injunctive relief
      in a court of appropriate jurisdiction to remedy any such breach or
      threatened breach, the Executive acknowledging that damages would be
      inadequate and insufficient.

            

    

    

    
      	
              16.

            	
              INDEMNIFICATION

            

    

    

    
      	
               
      

            	
              (a)

            	
              The
      Company agrees that if the Executive is made a party or is threatened to
      be made a party to any action, suit or proceeding, whether civil,
      criminal, administrative or investigative (a “Proceeding”), by reason of
      the fact that the Executive is or was a trustee, director or officer of
      the Company or any predecessor of the Company or any of its affiliates or
      is or was serving at the request of the Company, any predecessor of the
      Company, or any of its affiliates as a trustee, director, officer, member,
      employee or agent including, without limitation, service with respect to
      employee benefit plans, whether or not the basis of such proceeding is
      alleged action in an official capacity as a trustee, director, officer,
      member, employee or agent while serving as a trustee, director, officer,
      member, employee or agent, the Executive shall be indemnified and held
      harmless by the Company to the fullest extent authorized by law as the
      same exists or may hereafter be amended against all expenses incurred or
      suffered by the Executive in connection therewith, and such
      indemnification shall continue as to the Executive even if the Executive
      has ceased to be an officer, director, trustee or agent or is no longer
      employed by the Company and shall enure to the benefit of his heirs,
      executors and administrators.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
               
      

            	
              (b)

            	
              If
      a claim or request under this Section 16 is not paid by the Company or on
      its behalf, within 30 days after a written claim or request has been
      received by the Company, the Executive may at any time thereafter bring
      suit against the Company to recover the unpaid amount of the claim or
      request and if successful in whole or in part, the Executive shall be
      entitled to be paid also the expenses of prosecuting such suit. All
      obligations for indemnification hereunder shall be subject to and paid in
      accordance with the law of British
Columbia.

            

    

    

    
      	
               
      

            	
              (c)

            	
              If
      the Executive is entitled under any provision of this Agreement to
      indemnification by the Company for some or a portion of any claim in this
      Section 16 but not, however, for the total amount thereof, the Company
      shall nevertheless indemnify the Executive for the portion of such claim
      to which the Executive is entitled.

            

    

    

    
      	
               
      

            	
              (d)

            	
              Expenses
      incurred by the Executive in connection with any Proceeding shall be paid
      by the Company in advance upon request of the Executive that the Company
      pay such expenses, but only in the event that the Executive shall have
      delivered in writing to the
Company,

            

    

    

    
      	
               
      

            	
              (i)

            	
              an
      undertaking to reimburse the Company for expenses with respect to which
      the Executive is not entitled to indemnification,
  and

            

    

    

    
      	
               
      

            	
              (ii)

            	
              a
      statement of his good faith belief that the standard of conduct necessary
      for indemnification by the Company has been
met.

            

    

    

    
      	
               
      

            	
              (e)

            	
              The
      Executive shall give to the Company notice of any claim made against him
      for which indemnification will or could be sought under this Agreement. In
      addition, the Executive shall give the Company such information and
      cooperation as it may reasonably require and as shall be within the
      Executive’s power and at such time and places as are convenient for the
      Executive.

            

    

    

    
      	
               
      

            	
              (f)

            	
              With
      respect to any Proceeding as to which the Executive notifies the Company
      of the commencement thereof:

            

    

    

    
      	
               
      

            	
              (i)

            	
              The
      Company will be entitled to participate therein at its own
      expense;

            

    

    

    
      	
               
      

            	
              (ii)

            	
              Except
      as otherwise provided below, to the extent that it may wish, the Company
      will be entitled to assume the defence thereof, with counsel, reasonably
      satisfactory to the Executive, which in the Company’s sole discretion may
      be regular counsel to the Company and may be counsel to other officers and
      directors of the Company or any subsidiary. The Executive also shall have
      the right to employ his own counsel in such action, suit or proceedings if
      he reasonably concludes that failure to do so would involve a conflict of
      interest between the Company and the Executive, and under such
      circumstances the fees and expenses of such counsel shall be at the
      expense of the Company;

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
               
      

            	
              (iii)

            	
              The
      Company shall not be liable to indemnify the Executive under this
      Agreement for any amounts paid in settlement of any action or claim
      affected without its written consent. The Company shall not settle any
      action or claim in any manner which would impose any penalty that would
      not be paid directly or indirectly by the Company or limitation on the
      Executive without the Executive’s written consent. Neither the Company nor
      the Executive will unreasonably withhold or delay their consent to any
      proposed settlement.

            

    

    

    
      	
               
      

            	
              (g)

            	
              The
      right to indemnification and the payment of expenses incurred in defending
      a Proceeding in advance of its final disposition conferred in this Section
      16 shall not be exclusive of any other right which the Executive may have
      or hereafter may acquire under any statute or certificate of incorporation
      or by-laws of the Company or any subsidiary, agreement, vote of
      shareholders or disinterested directors or trustees or
      otherwise.

            

    

    

    
      	
              17.

            	
              COMPANY’S
      SUCCESSORS

            

    

    

    
      	
              17.1

            	
              No
      rights or obligations of the Company under this Agreement may be assigned
      or transferred, except that the Company shall require any successor
      (whether direct or indirect, by purchase, merger, consolidation or
      otherwise) to all or substantially all of the business and/or assets of
      the Company to expressly assume and agree to perform this Agreement in the
      same manner and to the same extent that the Company would be required to
      perform it if no such succession had taken place. As used in this
      Agreement, “Company” shall include any successor to its business and/or
      assets (by merger, purchase or otherwise) which executes and delivers the
      agreement provided for in this Section 17, or which otherwise becomes
      bound by all the terms and provisions of this Agreement by operation of
      law.

            

    

    

    
      	
              18.

            	
              EXECUTIVE’S
      SUCCESSORS

            

    

    

    
      	
              18.1

            	
              No
      rights or obligations of the Executive under this Agreement may be
      assigned or transferred by the Executive other than his rights to payments
      or benefits hereunder, which may be transferred by the Executive other
      than his rights to payments or benefits hereunder, which may be
      transferred only by will or the laws of descent and distribution. Upon the
      Executive’s death, this Agreement and all rights of the Executive
      hereunder shall inure to the benefit of and be enforceable by the
      Executive’s beneficiary or beneficiaries, personal or legal
      representatives, or estate, to the extent any such person succeeds to the
      Executive’s interests under this Agreement. If the Executive should die
      following his Date of Termination while any amounts would still be payable
      to him hereunder if he had continued to live, all such amounts unless
      otherwise provided herein shall be paid in accordance with the terms of
      this Agreement to such person or persons so appointed in writing by the
      Executive, or otherwise to his legal representatives or
      estate.

            

    

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
              19.

            	
              NOTICE

            

    

    

    
      	
              19.1

            	
              For
      the purposes of this Agreement, notices, demands and all other
      communications provided for in this Agreement shall be in writing and
      shall be deemed to have been duly given when delivered either personally
      or by certified or registered mail, return receipt requested, postage
      prepaid, addressed as follows:

            

    

    

    If to the
Executive:

    

    At his
address most recently filed with the Company.

    

    If to the
Company:

    

    LML
Payment Systems Inc.

    Suite
1680 — 1140 West Pender Street

    Vancouver
BC Canada V6E 4G1

    

    or to
such other address as any party may have furnished to the others in writing in
accordance herewith, except that notices of change of address shall be effective
only upon receipt.

    

    
      	
              20.

            	
              MISCELLANEOUS

            

    

    

    
      	
              20.1

            	
              No
      provisions of this Agreement may be amended, modified, or waived unless
      such amendment or modification is agreed to in writing signed by the
      Executive and by a duly authorized officer of the Company, and such waiver
      is set forth in writing and signed by the party to be charged. No waiver
      by either party hereto at any time of any breach by the other party hereto
      of any condition or provision of this Agreement to be performed by such
      other party shall be deemed a waiver of similar or dissimilar provisions
      or conditions at the same or at any prior or subsequent time. No
      agreements or representations, oral or otherwise, express or implied, with
      respect to the subject matter hereof have been made by either party that
      are not set forth expressly in this agreement. The respective rights and
      obligations of the parties hereunder of this Agreement shall survive the
      Executive’s termination of employment and the termination of this
      Agreement to the extent necessary for the intended preservation of such
      rights and obligations. The validity, interpretation, construction and
      performance of this Agreement shall be governed by the laws of the
      Province of British Columbia.

            

    

    

    
      	
              20.2

            	
              The
      invalidity or unenforceability of any provision or provisions of
      this

            

    

    Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.

    
      
         

      

      
         

        
          

        

      

      
         

      

    

    

    
      	
              20.3

            	
              This
      Agreement may be executed in one or more counterparts, each of which shall
      be deemed to be an original but all of which together will constitute one
      and the same instrument.

            

    

    

    
      	
              20.4

            	
              This
      Agreement sets forth the entire agreement of the parties hereto in respect
      of the subject matter contained herein and supersedes all prior
      agreements, promises, covenants, arrangements, communications,
      representations or warranties, whether oral or written, by any officer,
      employee or representative of any party hereto in respect of such subject
      matter including, without limitation. Any prior agreement of the parties
      hereto in respect of the subject matter contained herein is hereby
      terminated and cancelled.

            

    

    

    
      	
              20.5

            	
              All
      payments hereunder shall be subject to any required withholding of taxes
      pursuant to any applicable law or
regulation.

            

    

    

    
      	
              20.6

            	
              The
      section headings in this Agreement are for convenience of reference only,
      and they form no part of this Agreement and shall not affect its
      interpretation.

            

    

    

    

    IN
WITNESS WHEREOF the parties hereunto have executed this Agreement as of the
31st  day
of March, 2008, to be effective September 24, 2007.

    

    

    LML
PAYMENT SYSTEMS INC.

    

    Per:
___________________

    Authorized
Signatory

     

     

    
      
        	
                /s/
      Patrick H. Gaines

              
	
                PATRICK H.
      GAINES

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00140-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00140-of-00352.parquet"}]]