Document:

ex101-8k_012517.htm

EXHIBIT 10.1

 

LAKE SHORE SAVINGS BANK

 

AMENDED AND RESTATED EMPLOYMENT AGREEMENT

 

This Amended and Restated Employment Agreement (the “Agreement”) is made and entered into, effective as of the 1st day of January, 2017 (the “Effective Date”), by and between Lake Shore Savings Bank, a federally-chartered savings bank having its principal place of business at 128 East 4th Street, Dunkirk, New York 14048 (the “Bank”), and Daniel P. Reininga, of Fredonia, New York (the “Executive”).  Any reference to the “Company” shall mean Lake Shore Bancorp, Inc., the parent corporation of the Bank.  The Company is a signatory to this Agreement solely for the purpose of guaranteeing the Bank’s performance hereunder.

 

WITNESSETH THAT:

 

WHEREAS, Executive is currently employed as President and Chief Executive Officer of the Bank pursuant to an employment agreement between the Bank and Executive entered into as of January 28, 2011 and an employment agreement between the Company and Executive entered into as of January 28, 2011 (collectively, the “Prior Agreement”); and

 

WHEREAS, the Bank and the Executive desire to continue such employment, subject to the terms and conditions set forth in this Agreement; and

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

NOW, THEREFORE, in consideration of the mutual covenants herein contained, and upon the terms and conditions hereinafter provided, the parties hereby agree as follows:

 

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

  

  

  

2.           Capacity and Extent of Service.

 

(a)           At all times during the Term of this Agreement, the Bank shall employ the Executive as its President and Chief Executive Officer.

 

(b)           The Executive shall be employed on a full-time basis as President and Chief Executive Officer of the Bank and shall be assigned only such duties and tasks as are appropriate for a person in such positions.  It is the intention of the Bank and the Executive that, subject to the direction and supervision of the Board, the Executive shall have full discretionary authority to control the day-to-day operations of the Bank and to incur such obligations on behalf of the Bank as may be necessary or appropriate in the ordinary course of its business.

 

(c)           During his employment hereunder, the Executive shall devote his full business time and his best efforts, business judgment, skill and knowledge to the performance of his duties and responsibilities hereunder.  Except as otherwise permitted in this Section 2(c) and Section 2(d), the Executive shall not engage in any other business activity during the Term, other than an activity approved in writing by the Board.  For the avoidance of doubt, the Executive may engage in civic or charitable services or activities (“Community Activities”) during normal business hours without the need for prior notice to the Board; provided that such services or activities do not involve a material time commitment.  The Executive shall promptly disclose any such Community Activities to the Board and shall cease any such Community Activities if directed in writing by the Board; provided that the Board determines in good faith that continuation of such Community Activities is contrary to the best interests of the Bank, taking into account the Bank’s reputation in the markets served by the Bank.

 

(d)           With the prior written approval of the Board, the Executive may serve on boards of both for-profit and not-for-profit entities or engage in Community Activities that involve a material time commitment.  Notwithstanding the foregoing, the Executive may continue to serve on any board of directors on which he was serving at the Effective Date.  A list of such boards of directors has been supplied to the Board.

 

3.           Compensation and Benefits.

 

(a)           Base Compensation.  As compensation for the services to be performed by the Executive during the Term, the Bank shall pay to the Executive, in regular periodic installments, a base salary (“Base Salary”) at the rate of Three Hundred Thirteen Thousand Dollars ($313,000) per year.  Such Base Salary will be payable in accordance with the customary payroll practices of the Bank. During the term of this Agreement, the Board may consider increasing, but not decreasing (other than a decrease which is applicable to all named executive officers of the Bank and in a percentage not in excess of the percentage decrease for other named executive officers), Executive’s Base Salary as the Board deems appropriate.  Any change in Base Salary will become the “Base Salary” for purposes of this Agreement.

  2

  

  

(b)           Short-Term Incentive Compensation.  In addition to the foregoing Base Salary, the Executive shall be eligible during the Term to receive cash short-term incentive compensation, determined and payable in the discretion of the Compensation Committee of the Board.  At least annually, the Compensation Committee shall consider awarding short-term incentive compensation to the Executive.

 

(c)           Long-Term Incentive Compensation.  In addition to the foregoing Base Salary, the Executive shall be eligible during the Term to receive long-term incentive compensation determined and payable in the discretion of the Compensation Committee of the Board.  At least annually, the Compensation Committee shall consider awarding long-term incentive compensation to the Executive.

 

(d)           Other Benefits.  During the Term, the Bank shall provide the Executive with other benefits in which the Executive was participating on the Effective Date.  The Executive shall also be entitled to participate in any employee benefit plans from time to time in effect for executive officers of the Bank.  The Executive shall be entitled to vacation pursuant to the Bank’s written policies, including the Bank’s Paid-Time Off Policy, as determined by the Board from time to time.  The Executive shall be entitled to an executive perquisites allotment of Twenty-Four Thousand Dollars ($24,000) annually (the “Personal Benefits Allotment”), or such other greater amount as recommended by the Compensation Committee and approved by the Board from time to time (any increase in the Personal Benefits Allotment shall become the “Personal Benefits Allotment”), to be applied by Executive, in his sole discretion, towards perquisites as the Executive deems to be appropriate or desirable to his executive position, and this amount shall be fully taxable to the Executive.

 

(e)           Timing of Certain Payments.  Any compensation payable or provided under this Section 3 shall be paid or provided not later than two and one-half months after the calendar year in which such compensation is no longer subject to a substantial risk of forfeiture, within the meaning of Treasury Regulations Section 1.409A-l(d).

 

4.           Business Expenses.  The Bank shall reimburse the Executive for all reasonable travel and other business expenses incurred by him in the performance of his duties and responsibilities, including but not limited to, annual dues and/or membership fees in professional associations, and attendance at industry seminars and educational conferences.  Such payments or reimbursements shall be subject to such reasonable requirements with respect to substantiation and documentation as may be specified by the Bank or its auditors.  Reimbursements of expenses and in-kind benefits subject to this Section 4 or otherwise provided to the Executive shall be subject to the following rules:  (i) the amount of such expenses eligible for reimbursement or in-kind benefits provided in any taxable year shall not affect the expenses eligible for reimbursement or in-kind benefits provided in any other taxable year, except as otherwise allowed by Section 409A of the Internal Revenue Code (“Code”); (ii) any reimbursement shall be made as soon as practicable but not later than on or before the last day of the calendar year in which the expenses were incurred; and (iii) no right to reimbursement or in-kind benefits may be liquidated or exchanged for another benefit.

  3

  

  

5.           Termination.  Notwithstanding the provisions of Section 1, the Executive’s employment hereunder shall terminate under the following circumstances:

 

(a)           Death.  In the event of the Executive’s death during his employment under this Agreement, the Executive’s employment shall terminate on the date of his death; provided, however, that, for a period of three (3) months following the Executive’s death, the Bank shall pay to the Executive’s designated beneficiary (or to his estate, if he fails to make such designation) an amount equal to the Executive’s Base Salary at the rate in effect at the time of his death (unless an increased Base Salary shall previously have been authorized to take effect as of a later date, in which case such increase shall apply as of that later date), such payments to be made on the same periodic dates as salary payments would have been made to the Executive had he not died.

 

(b)           Disability.  In the event the Executive becomes disabled during his employment under this Agreement, the Executive’s employment hereunder shall terminate.  For purposes of this Agreement, disability means any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months and that renders the Executive unable to engage in any substantial gainful activity.  Such determination may be made by the Board with objective medical input from a physician chosen by the Board.  In the event of such termination, the Executive shall continue to receive his full Base Salary and benefits under Section 3(d) of this Agreement until he becomes eligible for and receives disability income under the long-term disability insurance coverage then in effect for the Executive.

 

(c)           Termination by the Executive Without Good Reason.  Notwithstanding the provisions of Section 1, the Executive may resign from the Bank at any time upon thirty (30) days’ prior written notice to the Bank.  In the event of resignation by the Executive under this Section 5(c), the Board may elect to waive the period of notice, or any portion thereof.

 

(d)           Termination by the Bank Without Cause.  The Executive’s employment under this Agreement may be terminated by the Bank without Cause upon thirty (30) days’ prior written notice to the Executive.

 

(e)           Termination by the Executive for Good Reason.  The Executive may terminate his employment hereunder for Good Reason.  For purposes of this Agreement, “Good Reason” shall mean that the Executive has complied with the “Good Reason Process” (hereinafter defined) following the occurrence of any of the following events:

 

(i)           Failure of the Bank to continue the Executive in the positions of President and Chief Executive Officer (other than a change in position to which the Executive consents) during the Term;

  4

  

  

(ii)           Material adverse change by the Bank, not consented to by the Executive, in the nature or scope of the Executive’s responsibilities, title, authorities, powers, functions or duties from the responsibilities, title, authorities, powers, functions or duties normally exercised by an executive in the positions of President and Chief Executive Officer of the Bank;

 

(iii)           An involuntary reduction in the Executive’s Base Salary except across-the-board salary reductions based on the Bank’s deteriorating financial performance similarly affecting substantially all executive management employees;

 

(iv)           The involuntary relocation of the office at which the Executive is principally employed to a location more than twenty-five (25) miles’ driving distance from such office as of the Effective Date hereof (unless the relocated office is closer to the Executive’s then principal residence); or

 

(v)           Material breach by the Bank of Section 3 hereof or of any other provision of this Agreement, which breach continues for more than ten (10) days following written notice given by the Executive to the Bank, such written notice to set forth in reasonable detail the nature of such breach.

 

“Good Reason Process” shall mean that (i) the Executive reasonably determines in good faith that a “Good Reason” condition has occurred; (ii) the Executive notifies the Bank in writing of the first occurrence of the Good Reason condition within sixty (60) days of the first occurrence of such condition; (iii) the Executive cooperates in good faith with the Bank’s efforts, for a period not less than thirty (30) days following such notice (the “Cure Period”), to remedy the condition; (iv) notwithstanding such efforts, the Good Reason condition continues to exist; and (v) the Executive terminates his employment within sixty (60) days after the end of the Cure Period.  If the Bank cures the Good Reason condition during the Cure Period, Good Reason shall be deemed not to have occurred.  Notwithstanding the foregoing, the Bank may elect to waive the Cure Period, in which case, the Executive’s termination may occur within such 30-day period.

 

(f)           Termination by the Bank for Cause.  At any time during the Term, the Bank may terminate the Executive’s employment hereunder for Cause if at a meeting of the Board called and held for such purpose (after notice to the Executive and an opportunity for him  to be heard before the Board, which notice shall specify the basis for a proposal to terminate the Executive’s employment for “Cause”) a majority of Board determines in good faith that the Executive is guilty of conduct that constitutes “Cause” as defined herein.  Only the following shall constitute “Cause” for such termination:

 

  5

  

  

(i)            personal dishonesty;

 

(ii)           incompetence;

 

(iii)           willful misconduct;

 

(iv)          breach of fiduciary duty involving personal profit;

 

(v)           intentional failure to perform stated duties;

 

	
  

	
(vi)

	
willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order; or

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

 

(g)           Termination due to Retirement.  Upon termination of the Executive based on Retirement, no amounts or benefits shall be due the Executive under this Agreement, and the Executive shall be entitled to all benefits under any retirement plan of the Bank and other plans to which the Executive is a party.  Termination of the Executive’s employment based on “Retirement” shall mean termination of the Executive’s employment in accordance with a retirement policy established by the Board or if no retirement policy exists, termination of Executive’s employment for any reason after Executive attains age 65.

 

6.           Compensation Upon Termination.

 

(a)           Termination Generally.  If the Executive’s employment with the Bank is terminated for any reason, the Bank shall pay or provide to the Executive (or to his authorized representative or estate) (i) on or before the time required by law but in no event more than thirty (30) days after the Executive’s date of termination (the “Termination Date”), the sum of (A) any Base Salary earned through the Termination Date, (B) unpaid expense reimbursements (subject to, and in accordance with, Section 4 of this Agreement), (C) unused vacation that accrued through the Termination Date, (D) any earned but unpaid short-term and long-term incentive compensation for the year immediately preceding the year of termination and (E) except in the case of a termination under Section 5(c) or Section 5(f), a prorated portion of the Executive’s target short-term and long-term incentive compensation for the year of termination; and (ii) any vested benefits the Executive may have under any employee benefit plan of the Bank through the Termination Date, which vested benefits shall be paid and/or provided in accordance with the terms of such employee benefit plans (collectively, the “Accrued Benefits”).

 

(b)           Termination by the Bank Without Cause or by the Executive for Good Reason.  During the Term, if the Executive’s employment is terminated by the Bank without Cause as provided in Section 5(d), or the Executive terminates his employment for Good Reason as provided in Section 5(e), the Bank shall pay to the Executive his Accrued Benefits.  In addition, subject to the last paragraph of this Section 6(b), the Bank shall provide the benefits listed in sub-sections 6(b)(i) to (iii) below (the “Severance Benefits”) to the Executive:

 

(i)           Severance Payments.  The Bank shall pay the Executive a severance payment in an amount equal to three (3) times the sum of: (A) the Executive’s Base Salary plus (B) the average annual incentive cash compensation awarded to the Executive, pursuant to Section 3(b), with respect to the three (3) most recent fiscal years ending before the year of termination (the “Severance Amount”).  The Severance Amount shall be paid to the Executive in a single lump sum cash payment within thirty (30) days of the Termination Date, subject to the receipt of the signed release within such thirty (30) day period (unless the Executive’s termination occurs under circumstances requiring the Executive to execute a release of claims within forty-five (45) days of termination, in which case the thirty (30) day period shall be extended to sixty (60) days); and further subject to the delay specified in Section 8(a) hereof, solely to the extent necessary to avoid penalties under Section 409A of the Code in the event the Executive is a specified employee (as defined therein); provided, however, that if the 30-day (or 60-day) period begins in one calendar year and ends in a second calendar year, the payment of the Severance Amount shall commence in the second calendar year.  ;

 

  6

  

  

(ii)           Other Post-Termination Benefits.  In the event of any termination without Cause of the Executive’s employment under Section 5(d), above, or any termination for Good Reason by the Executive of his own employment under Section 5(e), above, the Bank shall pay an additional cash lump sum payment to the Executive equal to the Bank’s applicable percentage of such cost (i.e., the Bank’s co-payment percentage) that would have been payable for a period of thirty-six (36) months on behalf of Executive (and, to the extent eligible under the terms of the applicable plans, the Executive’s family members), for continuing life, medical and dental coverage, based on the costs in effect for the Executive on the Termination Date.  To the extent that the Executive and/or his family members elect COBRA continuation coverage for any period after the Executive’s termination, such cost will be paid by the Executive.

 

Such amount shall be paid to the Executive within the thirty (30) day period (or sixty (60) day period, as applicable) following the Termination Date, provided however, if, at the Termination Date, the Executive is a specified employee as defined in Section 8(a) hereof, then, solely to the extent required to avoid taxes and penalties under Section 409A of the Code, such payment shall be made within the first thirty (30) days after the first day of the seventh calendar month commencing after such Termination Date.

 

The Bank may condition the provision of the Severance Benefits on the Executive signing a Release Agreement in substantially the form of Exhibit A (the “Release Agreement”) within twenty-one (21) days (or forty-five (45) days in certain conditions, in accordance with applicable law) after it is tendered and not revoking the Release Agreement within the seven (7) day revocation period set forth in the Release Agreement; provided that the Bank tenders the Release Agreement to the Executive no later than the Termination Date.  Notwithstanding the foregoing, the Release Agreement may be modified to the extent necessary based on changes in applicable law from and after the date of this Agreement.

 

7.           Change in Control Payment.  The provisions of this Section 7 set forth the rights and obligations of  Executive and the Bank  upon the occurrence of a Change in Control of the Bank.  These provisions are intended to assure and encourage in advance the Executive’s continued attention and dedication to his assigned duties and his objectivity during the pendency and after the occurrence of any such event.  These provisions shall apply in lieu of, and expressly supersede, the provisions of Section 6(b) regarding severance pay and benefits upon a termination of employment, if such termination of employment occurs within twenty-four (24) months after the occurrence of the first event constituting a Change in Control.  These provisions shall terminate and be of no further force or effect beginning twenty-four (24) months after the occurrence of a Change in Control.

  7

  

  

(a)           Change in Control.  During the Term, if within twenty-four (24) months after a Change in Control, the Executive’s employment is terminated by the Bank without Cause as provided in Section 5(d) or the Executive terminates his employment for Good Reason as provided in Section 5(e), the Bank shall pay the Executive his Accrued Benefits.  In addition, the Executive shall be entitled to the following:

 

(i)           The Bank shall pay to the Executive a Change in Control severance payment (“Change in Control Severance Payment”) in an amount equal to three (3) times the sum of (A) the Executive’s current Base Salary (or the Executive’s Base Salary in effect immediately prior to the Change in Control, if higher), plus (B) the highest annual incentive cash compensation earned by the Executive pursuant to Section 3(b) with respect to the three (3) most recent fiscal years ending before the year of the Change in Control.  The Change in Control Severance Payment shall be paid out in a lump sum payment no later than five (5) business days after the Termination Date, subject to Section 8(a) hereof, solely to the extent required to avoid penalties under Section 409A of the Code;

 

(ii)           The Bank shall pay an additional cash lump sum payment to the Executive equal to the cost of providing for a period of thirty-six (36) months, at no expense to the Executive (and, to the extent eligible under the terms of the applicable plans, the Executive’s family members), continuing life, medical and dental coverage to the Executive and, as applicable, his family members, based on the aggregate cost of such coverage in effect for the Executive on the Termination Date.  Such payment shall be made at the same time as the payment under Section 7(a)(i) above.  To the extent that the Executive and/or his family members elect COBRA continuation coverage for any period after the Executive’s termination, such cost will be paid by the Executive;

 

  (b)           Change in Control.  For purposes of this Agreement, the term “Change in Control” shall mean the consummation by the Company or the Bank, in a single transaction or series of related transactions, of any of the following:

 

(i)           Merger:  The Company or the Bank merges into or consolidates with another entity, or merges another bank or corporation into the Bank or the Company, and as a result, less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company or the Bank immediately before the merger or consolidation;

 

(ii)           Acquisition of Significant Share Ownership:  There is filed, or is required to be filed, a report on Schedule 13D or another form or schedule (other than Schedule 13G) required under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of a class of the Company’s or the Bank’s voting securities; provided, however, this clause (ii) shall not apply to beneficial ownership of the Company’s or the Bank’s voting shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns 50% or more of its outstanding voting securities;

  8

  

  

(iii)           Change in Board Composition:  During any period of two consecutive years, individuals who constitute the Company’s or the Bank’s board of directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Company’s or the Bank’s board of directors; provided, however, that for purposes of this clause (iii), each director who is first elected by the board (or first nominated by the board for election by the stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the two-year period or who is appointed to the board as the result of a directive, supervisory agreement or order issued by the primary  regulator of the Company or the Bank or by the Federal Deposit Insurance Corporation (“FDIC”) shall be deemed to have also been a director at the beginning of such period; or

 

(iv)           Sale of Assets:  The Company or the Bank sells to a third party all or substantially all of its assets.

 

Notwithstanding anything in this Agreement to the contrary, in no event shall a reorganization of Lake Shore, MHC, the Company or Bank solely within its corporate structure, including a second-step conversion from mutual to stock form of Lake Shore, MHC, constitute a “Change in Control” for purposes of this Agreement.

 

8.           Section 409A.

 

(a)           Anything in this Agreement to the contrary notwithstanding, if at the time of the Executive’s “Separation from Service” (as defined below), the Bank determines that the Executive is a “specified employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that the Executive becomes entitled to under this Agreement on account of the Executive’s Separation from Service would be considered deferred compensation subject to the 20 percent additional tax imposed pursuant to Section 409A(a) of the Code as a result of the application of Section 409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit shall not be provided until the date that is the earlier of (A) six months and one day after the Executive’s Separation from Service, or (B) the Executive’s death.  If any such delayed cash payment is otherwise payable on an installment basis, the first payment shall include a catch-up payment covering amounts that would otherwise have been paid during the six-month period but for the application of this provision, and the balance of the installments shall be payable in accordance with their original schedule.  Any such delayed cash payment shall earn interest at an annual rate equal to the applicable federal short-term rate published by the Internal Revenue Service for the month in which the date of Separation from Service occurs, from such date of Separation from Service until the payment date.

  9

  

  

(b)           To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation” under Section 409A of the Code, and to the extent that such payment or benefit is payable upon the Executive’s termination of employment, then such payments or benefits shall be payable only upon the Executive’s Separation from Service.”  For purposes of this Agreement, a “Separation from Service” shall have occurred if the Bank and the Executive reasonably anticipate that either no further services will be performed by the Executive after the date of termination (whether as an employee or as an independent contractor) or the level of further services performed is less than fifty (50) percent of the average level of bona fide services in the thirty-six (36) months immediately preceding the termination.  For all purposes hereunder, the definition of Separation from Service shall be interpreted consistent with Treasury Regulation Section 1.409A-1(h).

 

(c)           The parties intend that this Agreement will be administered in accordance with Section 409A of the Code.  To the extent that any provision of this Agreement is ambiguous as to its compliance with Section 409A of the Code, the provision shall be read in such a manner so that all payments hereunder comply with Section 409A of the Code.  The parties agree that this Agreement may be amended, as reasonably requested by either party, and as may be necessary to fully comply with Section 409A of the Code and all related rules and regulations in order to preserve the payments and benefits provided hereunder without additional cost to either party.

 

9.           Non-Competition, Non-Solicitation and Confidential Information.

 

(a)           Non-Competition.  Upon any termination of the Executive’s employment for which the Executive receives a severance payment pursuant to Section 6(b) of this Agreement, the Executive agrees not to compete with the Bank for a period of two years following such termination in any city, town or county in which the Executive’s normal business office is located and the Bank or the Company has an office or have filed an application for regulatory approval to establish an office, determined as of the Termination Date.  The Executive agrees that during such period and within said cities, towns and counties, the Executive shall not work for or advise, consult or otherwise serve with, directly or indirectly, any entity whose business materially competes with the depository, lending or other business activities of the Bank or its affiliates.  The parties hereto, recognizing that irreparable injury will result to the Bank in the event of the Executive’s breach of this Section 9(a), agree that in the event of any such breach by the Executive, the Bank will be entitled, in addition to any other remedies and damages available, to an injunction to restrain the violation hereof by the Executive, the Executive’s partners, agents, servants, employees and all persons acting for or under the direction of the Executive.  The Executive represents and admits that, in the event of the termination of his employment pursuant to Section 6(b) of this Agreement, the Executive’s experience and capabilities are such that the Executive can obtain employment in a business engaged in other lines and/or of a different nature than the Bank, and that the enforcement of a remedy by way of injunction will not prevent the Executive from earning a livelihood.  Nothing herein will be construed as prohibiting the Bank from pursuing any other remedies available to the Bank for such breach or threatened breach, including the recovery of damages from the Executive.

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

  10

  

  

(c)           Confidential Information.  The Executive shall not at any time divulge, use, furnish, disclose or make accessible to anyone, other than to an employee or director of the Bank with a reasonable need to know, any knowledge or information with respect to confidential or secret data, procedures or techniques of the Bank (“Confidential Information”), provided, however, that nothing in this Section 9 shall prevent the disclosure by the Executive of any such information which at any time comes into the public domain other than as a result of the violation of the terms of this Section 9 by the Executive or which is otherwise lawfully acquired by the Executive.

 

(d)           Documents, Records, etc.  All documents, records, data, apparatus, equipment and other physical property, whether or not pertaining to Confidential Information, which are furnished to the Executive by the Bank or are produced by the Executive in connection with the Executive’s employment will be and remain the sole property of the Bank.  The Executive will return to the Bank all such materials and property as and when requested by the Bank.  In any event, the Executive will return all such materials and property immediately upon termination of the Executive’s employment for any reason.  The Executive will not retain any such material or property or any copies thereof after such termination.

 

(e)           Third-Party Agreements and Rights.  The Executive hereby confirms that the Executive is not bound by the terms of any agreement with any previous employer or other party which restricts in any way the Executive’s use or disclosure of information or the Executive’s engagement in any business.  The Executive represents to the Bank that the Executive’s execution of this Agreement, the Executive’s employment with the Bank and the performance of the Executive’s proposed duties for the Bank will not violate any obligations the Executive may have to any such previous employer or other party.  In the Executive’s work for the Bank, the Executive will not disclose or make use of any information in violation of any agreements with or rights of any such previous employer or other party, and the Executive will not bring to the premises of the Bank any copies or other tangible embodiments of non-public information belonging to or obtained from any such previous employment or other party.

  11

  

  

(f)           Litigation and Regulatory Cooperation.  During and after the Executive’s employment with the Bank, the Executive shall cooperate fully with the Bank in the defense or prosecution of any claims or any actions now in existence or that may be brought in the future against or on behalf of the Bank that relate to events or occurrences that transpired while the Executive was employed by the Bank; provided that after the end of the Executive’s employment, the Executive shall not be required to perform more than one hundred (100) hours of services pursuant to this Section 9(f) above and beyond services that could be compelled by issuance of a subpoena.  The Executive’s full cooperation in connection with such claims or actions shall include, but not be limited to, being available to meet with counsel to prepare for discovery or trial and to act as a witness on behalf of the Bank at mutually convenient times.  During and after the Executive’s employment, the Executive also shall cooperate fully with the Bank in connection with any investigation or review by any federal, state or local regulatory authority as such investigation or review relates to events or occurrences that transpired while the Executive was employed by the Bank.  The Bank shall reimburse the Executive for any reasonable out-of-pocket expenses incurred in connection with the Executive’s performance of his obligations pursuant to this Section 9(f).  Unless the Executive is then employed by the Bank, the Bank shall pay the Executive for any services pursuant to this Section 9(f) at the hourly rate of the Executive’s final annual Base Salary divided by 2,080; provided that no payment obligation shall apply to services that could be compelled pursuant to a subpoena.

 

(g)           Injunction.  The Executive agrees that it would be difficult to measure any damages caused to the Bank that might result from any breach by the Executive of the promises set forth in this Section 9, and that in any event money damages would be an inadequate remedy for any such breach. Accordingly, the Executive agrees that if the Executive breaches or proposes to breach, any portion of this Section 9, the Bank shall be entitled, in addition to all other remedies that it may have, to an injunction or other appropriate equitable relief to restrain any such breach without showing or proving any actual damages to the Bank.

 

10.           Withholding.  All payments made by the Bank under this Agreement shall be net of any tax or other amounts required to be withheld by the Bank under applicable law.

 

11.           Indemnification.  During the period of his employment hereunder, the Bank agrees to indemnify the Executive in his capacity as an officer of the Bank, all to the maximum extent permitted under Federal law; provided, however, the Bank shall not be required to indemnify or reimburse Executive for legal expenses or liabilities incurred in connection with an action, suit or proceeding arising from any illegal or fraudulent act committed by Executive.  The provisions of this Section 11 shall survive expiration or termination of this Agreement for any reason whatsoever.

 

12.           Notices.  Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and delivered in person or sent by registered or certified mail, postage paid, to the Executive at the last address the Executive has filed in writing with the Bank or, in the case of the Bank, at its main office, attention of the Chairman of the Board.

 

13.           Entire Agreement.  This Agreement constitutes the entire agreement between the parties with respect to its subject matter and may not be changed except by a writing duly executed and delivered by the Bank and the Executive in the same manner as this Agreement, and this Agreement supersedes the Prior Agreement in its entirety.

  12

  

  

14.           Binding Effect, Non-assignability.  This Agreement shall be binding upon and inure to the benefit of the Bank and its successors.  Neither this Agreement nor any rights arising hereunder may be assigned or pledged by the Executive during his lifetime.  This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

 

15.           Amendment.  This Agreement may be amended or modified only by a written instrument signed by the Executive and by a duly authorized representative of  the Bank.

 

16.           Enforceability.  If any portion or provision of this Agreement shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

 

17.           Forfeiture of Payments.  The Executive agrees that the receipt of severance compensation under Section 6(b) is conditioned upon the Executive’s compliance in all material respects with the covenants set forth in Section 9.  The foregoing shall be in addition to any other remedies or rights the Bank may have at law or in equity as a result of the Executive’s failure to observe such provisions.

 

18.           Applicable Law.  This Agreement shall be construed and enforced in all respects in accordance with the laws of the State of New York, without regard to its principles of conflicts of laws, and in accordance with and subject to any applicable federal laws to which the Bank may be subject as an FDIC insured institution.

 

  19.           Required Provisions.

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

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

  13

  

  

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

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

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

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

20.           Dispute Resolution.

 

(a)           If a dispute arises out of or relates to this Agreement, or the breach hereof, and if such dispute is not settled within a commercially reasonably time (not to exceed sixty (60) days, through negotiations), the parties shall attempt in good faith to settle the dispute by mediation under the Employment Arbitration Rules and Mediation Procedures of the American Arbitration Association as then in effect (the “Rules”) before resorting to litigation.  No resolution or attempted resolution of any dispute or disagreement pursuant to this Section 19 shall be deemed to be a waiver of any term or provision of this Agreement or a consent to any breach or default, unless such waiver or consent shall be in writing and signed by the party claimed to have waived or consented.

 

(b)           Any dispute or controversy not settled in accordance with the foregoing provisions of this Section 20 shall be settled exclusively by binding arbitration to be conducted before a single arbitrator mutually acceptable to the Bank and Executive in a location within twenty-five (25) miles of the Bank’s headquarters in the State of New York, in accordance with the Rules.

 

(c)           The parties covenant and agree that they will participate in such mediation and/or arbitration in good faith and that the Bank, subject to Section 20(e), will bear the fees and expenses of such proceeding charged by the American Arbitration Association (including the fees of the arbitrators).  In an arbitration, the arbitrator shall not have the power to award damages in excess of actual compensatory damages and shall not multiply actual damages or award punitive damages or any other damages, and each party hereby irrevocably waives any claim to such damages.

  14

  

  

(d)           Any payment required under this Section 20 shall be made after the final resolution referenced herein, but not later than the later of (i) December 31 of the calendar year in which such resolution is achieved, and (ii) two and one-half months after the date on which such final resolution is achieved.

 

(e)           The prevailing party in any arbitration proceeding or any other legal proceeding between the Executive and the Bank , shall be entitled to reimbursement from the other party for all reasonable attorneys’ fees, costs and expenses that such prevailing party incurs in connection with any such proceeding.

 

21.           Counterparts.  This Agreement may be executed in any number of counterparts, each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute one and the same document.

 

22.           Successors to the Bank.  The Bank shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Bank expressly to assume and agree to perform the Bank’s obligations under this Agreement to the same extent that the Bank would be required to perform it if no succession had taken place.  Failure of the Bank to obtain an assumption of this Agreement at or prior to the effectiveness of any succession shall be a material breach of this Agreement.

 

23.           Indemnification.  The Bank agrees to indemnify the Executive in his capacity as an officer of the Bank.  In addition, to the extent that the Executive serves at the request of the Bank as a representative, an officer or a Board member of any community organization or financial services industry association or similar entity, he shall be entitled to indemnification by the Bank.  Indemnification pursuant to this Section 22 shall be subject to and administered in accordance with the charter or by-laws of the Bank, as amended from time to time; provided, however, that the terms of such indemnification shall be no less favorable to the Executive than those set forth in the charter or by-laws of the Bank as of the date of this Agreement.  Any indemnification with respect to service to a third party shall be provided only to the extent that no indemnification or insurance is available from such third party or that any such indemnification or insurance has been exhausted.

 

24.           No Mitigation.  The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise.  No payment provided for in this Agreement shall be reduced by any compensation earned by the Executive as the result of employment by another employer, or the Executive’s receipt of income from any other sources, after termination of his employment with the Bank.

 

[Signature Page Follows]

 

15

  

  

  

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

	  	  
	
ATTEST:

	
LAKE SHORE SAVINGS BANK

	  	  
	  	  
	 /s/ Wendy J. Harrington	
By: /s/ Gary W. Winger           

	
Secretary

	
Chairman of the Board

	  	  
	  	  
	
ATTEST:

	
LAKE SHORE BANCORP, INC.

	  	  
	  	  
	  /s/ Wendy J. Harrington	
By: /s/ Gary W. Winger          

	
Secretary

	
Chairman of the Board

	  	  
	  	  
	  	  
	  	
DANIEL P. REININGA

 

	  	 /s/ Daniel P. Reininga         
	  	
Executive

 

16ex102-8k_012517.htm

EXHIBIT 10.2

LAKE SHORE SAVINGS BANK

AMENDED AND RESTATED

SUPPLEMENTAL EXECUTIVE

RETIREMENT PLAN

Effective January 1, 2017

  

  

  

LAKE SHORE SAVINGS BANK

AMENDED AND RESTATED

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

This Amended and Restated Supplemental Executive Retirement Plan (the “Plan”) is entered into by and between Lake Shore Savings Bank, a federally-chartered savings bank (the “Bank”), and Daniel P. Reininga, President and Chief Executive Officer (the “Executive”) of Lake Shore Bancorp, Inc., a federally-chartered corporation and a mid-tier stock holding company (the “Company”) and the Bank effective as of January 1, 2017.  The Plan supersedes the Amended and Restated Supplemental Executive Retirement Plan, dated as of May 18, 2016, in its entirety.

The purpose of the Plan is to provide additional retirement benefits to the Executive, who has contributed significantly to the success and growth of the Company and the Bank, and whose services are vital to the Company and Bank’s continued growth and success.

W I T N E S S E T H :

WHEREAS, the Executive is the President and Chief Executive Officer of the Company and the Bank; and

WHEREAS, the Company and the Bank recognize the valuable services performed for it by the Executive and wishes to encourage his continued employment and to provide him with additional incentive to achieve corporate objectives; and

WHEREAS, the Bank intends this Plan to be considered an unfunded arrangement, maintained primarily to provide supplemental retirement income for the Executive, and to be considered a non-qualified benefit plan for purposes of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”).

NOW, THEREFORE, except as otherwise provided herein, the Bank and Executive hereby amend and restate the Plan as follows:

ARTICLE I

DEFINITIONS

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

	
1.1

	
“Annual Benefit” means the amount shown on Schedule A.

	
1.2  

	
“Beneficiary” means the person(s) designated by the Executive as the beneficiary to whom the deceased Executive’s benefits are payable. Such beneficiary designation shall be made on a form provided by the Bank and filed with the Bank.  If no Beneficiary is so designated, then the beneficiary will be the Executive’s estate.

2  

  

  

	
1.3  

	
“Board” shall mean the Board of Directors of the Bank, unless specifically noted otherwise.

	
1.4  

	
“Cause” shall mean that the Board of Directors of the Bank, by majority vote of their entire membership, determines 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 Plan.  A termination of employment due to Cause under this 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.

	
1.5  

	
A “Change in Control” shall mean the consummation by the Company or the Bank, in a single transaction or series of related transactions, of any of the following:

 

(i)           Merger:  The Company or the Bank merges into or consolidates with another entity, or merges another bank or corporation into the Bank or the Company, and as a result, less than a majority of the combined voting power of the resulting corporation immediately after the merger or consolidation is held by persons who were stockholders of the Company or the Bank immediately before the merger or consolidation;

 

(ii)           Acquisition of Significant Share Ownership:  There is filed, or is required to be filed, a report on Schedule 13D or another form or schedule (other than Schedule 13G) required under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended, if the schedule discloses that the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of a class of the Company’s or the Bank’s voting securities; provided, however, this clause (ii) shall not apply to beneficial ownership of the Company’s or the Bank’s voting shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns 50% or more of its outstanding voting securities;

 

(iii)           Change in Board Composition:  During any period of two consecutive years, individuals who constitute the Company’s or the Bank’s board of directors at the beginning of the two-year period cease for any reason to constitute at least a majority of the Company’s or the Bank’s board of directors; provided, however, that for purposes of this clause (iii), each director who is first elected by the board (or first nominated by the board for election by the stockholders) by a vote of at least two-thirds (2/3) of the directors who were directors at the beginning of the two-year period or who is appointed to the board as the result of a directive, supervisory agreement or order issued by the primary  regulator of the Company or the Bank or by the Federal Deposit Insurance Corporation (“FDIC”) shall be deemed to have also been a director at the beginning of such period; or

3  

  

  

(iv)           Sale of Assets:  The Company or the Bank sells to a third party all or substantially all of its assets.

 

Notwithstanding anything in this Agreement to the contrary, in no event shall a reorganization of Lake Shore, MHC, the Company or Bank solely within its corporate structure, including a second-step conversion from mutual to stock form of Lake Shore, MHC, constitute a “Change in Control” for purposes of this Agreement.

 

 

	
1.6  

	
“Disability” means any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months and that renders the Executive unable to engage in any substantial gainful activity.  Such determination may be made by the Board with objective medical input from a physician chosen by the Board.

	
1.7  

	
“Early Retirement Age” means the Executive Termination of Employment (other than due to death, Disability or a Change in Control) on or after December 31, 2021 (e.g., age 63 and 1 month) and prior to Normal Retirement Age.

	
1.8  

	
“Effective Date” of this Plan was originally June 30, 2012.  The Effective Date of this amended and restated Plan is January 1, 2017.

	
1.9  

	
“Good Reason” means that the Executive has complied with the “Good Reason Process” (hereinafter defined) following the occurrence of any of the following events:

 

(i)           Failure of the Bank to continue the Executive in the positions of President and Chief Executive Officer (other than a change in position to which the Executive consents);

 

(ii)           Material adverse change by the Bank, not consented to by the Executive, in the nature or scope of the Executive’s responsibilities, title, authorities, powers, functions or duties from the responsibilities, title, authorities, powers, functions or duties normally exercised by an executive in the positions of President and Chief Executive Officer of the Bank;

 

(iii)           An involuntary reduction in the Executive’s Base Salary except across-the-board salary reductions based on the Bank’s deteriorating financial performance similarly affecting substantially all executive management employees;

 

(iv)           The involuntary relocation of the office at which the Executive is principally employed to a location more than twenty-five (25) miles’ driving distance from such office as of the Effective Date hereof (unless the relocated office is closer to the Executive’s then principal residence); or

 

(v)           Material breach by the Bank of this Agreement, which breach continues for more than ten (10) days following written notice given by the Executive to the Bank, such written notice to set forth in reasonable detail the nature of such breach.

4  

  

  

“Good Reason Process” shall mean that (i) the Executive reasonably determines in good faith that a “Good Reason” condition has occurred; (ii) the Executive notifies the Bank in writing of the first occurrence of the Good Reason condition within sixty (60) days of the first occurrence of such condition; (iii) the Executive cooperates in good faith with the Bank’s efforts, for a period not less than thirty (30) days following such notice (the “Cure Period”), to remedy the condition; (iv) notwithstanding such efforts, the Good Reason condition continues to exist; and (v) the Executive terminates his employment within sixty (60) days after the end of the Cure Period.  If the Bank cures the Good Reason condition during the Cure Period, Good Reason shall be deemed not to have occurred.  Notwithstanding the foregoing, the Bank may elect to waive the Cure Period, in which case, the Executive’s termination may occur within such 30-day period.

 

	
1.10  

	
“Normal Retirement Age” means age sixty-seven (67).

	
1.11  

	
“Termination of Employment” means a “Separation from Service” as such term is defined in Section 409A of the Code and the final regulations issued thereunder, provided that whether a Separation from Service has occurred shall be determined based on whether the facts and circumstances indicate that the Bank and the Executive reasonably anticipated that no further services would be performed after a certain date or that the level of bona fide services the Executive would perform after such date (whether as an employee or as an independent contractor) would permanently decrease to less than fifty percent (50%) of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately preceding thirty-six (36) month period (or the full period of services to the Bank if the Executive has been providing services to the Bank less than thirty-six (36) months).

ARTICLE II

ESTABLISHMENT OF RABBI TRUST

The Bank may establish a rabbi trust into which the Bank may contribute assets which shall be held therein, subject to the claims of the Bank’s creditors in the event of the Bank’s “insolvency,” as defined in the trust agreement, until the contributed assets are paid to Executive in such manner and at such times as specified in this Plan. It is the intention of the Bank to make contributions to the rabbi trust to provide the Bank with a source of funds to assist it in meeting the liabilities of this Plan.

5  

  

  

ARTICLE III

BENEFITS

	
3.1  

	
Normal Retirement Benefit.  Upon the attainment of Normal Retirement Age, without regard to whether there is a Termination of Employment, the Bank shall pay to the Executive the benefit described in this Section 3.1 instead of any other benefit under this Plan.

	
(a)  

	
Amount of Benefit.  The annual benefit under this Section 3.1 is $183,545.

	
(b)  

	
Payment of Benefit.  The Bank shall pay the annual benefit to the Executive in 12 equal monthly installments payable on the first day of each month, beginning in the month immediately after the Executive’s attainment of Normal Retirement Age.  This annual benefit shall be paid to the Executive for 15 years (180 monthly payments).

	
3.2  

	
Early Termination Benefit.  For Termination of Employment on or after the Early Retirement Age for reasons other than death, disability, Cause or after a Change in Control and before Normal Retirement Age, the Bank shall pay to the Executive the benefit described in this Section 3.2 instead of any other benefit under this Plan.

	
(a)  

	
Amount of Benefit.  The benefit under this Section 3.2 is the Annual Benefit as set forth on Schedule A, which is attached to this Plan.

	
(b)  

	
Payment of Benefit.  The Bank shall pay the Annual Benefit to the Executive in 12 equal monthly installments payable on the first day of each month, beginning in the month immediately after the Executive’s Termination of Employment.  The Early Retirement Annual Benefit shall be paid to the Executive for 15 years (180 monthly payments).

	
3.3  

	
Termination of Employment Prior to Early Retirement Age.  For Termination of Employment prior to the Early Retirement Age for reasons other than death, disability,  Cause or after a Change in Control, the Bank shall pay to the Executive the benefit described in this Section 3.3 instead of any other benefit under this Plan.

	
(a)  

	
Amount of Benefit.  The benefit under this Section 3.3 is the Annual Benefit as set forth on Schedule A, which is attached to this Plan.

	
(b)  

	
Payment of Benefit.  The Bank shall pay the Annual Benefit to the Executive in 12 equal monthly installments payable on the first day of each month, beginning in the month immediately after the Executive’s Normal Retirement Age.  This Annual Benefit shall be paid to the Executive for 15 years (180 monthly payments).

6  

  

  

	
3.4  

	
Disability Benefit.  In the event the Executive incurs a Disability before Normal Retirement Age, the Bank shall pay to the Executive the benefit described in this Section 3.4 instead of any other benefit under this Plan.

	
(a)  

	
Amount of Benefit.  The benefit under this Section 3.4 is the Annual Benefit as set forth on Schedule A.

	
(b)  

	
Payment of Benefit.  The Bank shall pay the Annual Benefit to the Executive in 12 equal monthly installments payable on the first day of each month, beginning in the month immediately after the Executive incurs a Disability.  The Annual Benefit shall be paid to the Executive for 15 years (180 monthly payments).

	
3.5  

	
Change in Control Benefit.  If the Executive’s employment with the Bank terminates involuntarily within 24 months after a Change in Control, or if the Executive terminates employment voluntarily for Good Reason within 24 months after a Change in Control, the Bank shall pay to the Executive the benefit described in this Section 3.5 instead of any other benefit under this Plan.

	
(a)  

	
Amount of Benefit.  The lump sum benefit under this Section 3.5 is $2,753,175 ($183,545 times 15).

 

	
(b)  

	
Payment of Benefit.  The Bank shall pay the benefit to the Executive in a single lump sum within three days after the Executive’s Termination of Employment.

	
(c)  

	
Change in Control Payout of Normal Retirement Benefit or Early Retirement Benefit.  If a Change in Control occurs at any time during the payment period and if at the time of that Change in Control the Executive is receiving a benefit provided by this Plan, or entitled to a benefit pursuant to Section 3.3 of this Plan, the Bank shall pay the full amount of the remaining payments (or the full amount of the payments the Executive is entitled to pursuant to Section 3.3 of this Plan) to the Executive in a single lump sum within three days after the Change in Control.

ARTICLE IV

DEATH BENEFITS

	
4.1  

	
Death During Active Service.  If the Executive dies while in active service to the Bank and before a Termination of Employment, the Bank shall pay to the Executive’s Beneficiary a lump sum cash payment in the amount of $2,753,175.  The lump sum cash payment will be made no later than sixty (60) days following the date of death.

	
4.2  

	
Death after Termination of Employment.  If the Executive dies after Termination of Employment and while receiving payments (or entitled to receive payments) under this Plan, the Bank shall pay to the Executive’s Beneficiary a lump sum cash payment equal to the remaining payments to be made.  The lump sum cash payment will be made no later than sixty (60) days following the date of death.

7  

  

  

ARTICLE V

BENEFICIARY DESIGNATION

	
5.1  

	
Beneficiary Designations.  The Executive shall have the right to designate at any time a Beneficiary to receive any benefits payable under this Plan upon the death of the Executive.  The Beneficiary designated under this Plan may be the same as or different from the beneficiary designation under any other benefit plan of the Bank in which the Executive participates.

	
5.2  

	
Beneficiary Designation:  Change.  The Executive shall designate a Beneficiary by completing and signing the a beneficiary designation form and delivering it to the Bank or its designated agent.  The Executive’s Beneficiary designation shall be deemed automatically revoked if the Beneficiary predeceases the Executive or if the Executive names a spouse as Beneficiary and the marriage is subsequently dissolved.  The Executive shall have the right to change a Beneficiary by completing, signing, and otherwise complying with the terms of the beneficiary designation form and the Bank’s rules and procedures, as in effect from time to time.  Upon the acceptance by the Bank of a new beneficiary designation form, all Beneficiary designations previously filed shall be cancelled.  The Bank shall be entitled to rely on the last beneficiary form filed by the Executive and accepted by the Bank before the Executive’s death.

	
5.3  

	
Acknowledgment.  No designation or change in designation of a Beneficiary shall be effective until received, accepted, and acknowledged in writing by the Bank or its designated agent.

	
5.4  

	
No Beneficiary Designation.  If the Executive dies without a valid beneficiary designation, or if all designated Beneficiaries predecease the Executive, then the benefits shall be paid to the Executive’s estate.

	
5.5  

	
Facility of Payment.  If a benefit is payable to a minor, to a person declared incapacitated, or to a person incapable of handling the disposition of his or her property, the Bank may pay such benefit to the guardian, legal representative, or person having the care or custody of the minor, incapacitated person, or incapable person.  The Bank may require proof of incapacity, minority, or guardianship as it may deem appropriate before distribution of the benefit.  Distribution shall completely discharge the Bank form all liability for the benefit.

ARTICLE VI

GENERAL LIMITATIONS

	
6.1

	
Termination for Cause.  Notwithstanding any provision of this Plan to the contrary, the Bank shall not pay any benefit under this Plan and this Plan shall terminate if Termination of Employment is a result of Termination of Employment for Cause.

8  

  

  

	
6.2

	
12 U.S.C. § 1828(k).  Notwithstanding anything herein contained to the contrary, any payments made to the Executive by the Bank, whether pursuant to this Plan 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, including FDIC regulation 12 C.F.R. Part 359, Golden Parachute and Indemnification Payments.

	
6.3

	
Restriction on Commencement of Distributions.  Notwithstanding any provision of this Plan to the contrary, if the Executive is considered a Specified Employee (within the meaning of Treasury Regulation 1.409A-1(i)), the provisions of this Section 6.3 shall govern the timing of all distributions under this Plan.  In the event the Executive is a Specified Employee, and to the extent necessary to avoid penalties under Section 409A of the Code, payments to the Executive shall not commerce until the lapse of six months after the date of the Termination of Employment.  Any distribution which would otherwise be paid to the Executive during such period shall be accumulated and paid to the Executive in a lump sum on the first day of the month following the lapse of six months after the date of the Termination of Employment.  All subsequent distributions shall be paid in the manner specified.

	
6.4

	
Covenant Not To Compete.  The Executive hereby covenants and agrees that, in the event he is entitled to any benefits under this Plan, for a period of two (2) years following the date of his Termination of Employment, 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, credit union or 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 (collectively a “Financial Institution”), that entails working within 35 miles of an area in which the Company or the Bank maintains an office; provided, however, that this section shall not apply if the Executive’s Termination of Employment occurs on or after a Change in Control.

ARTICLE VII

EXECUTIVE’S RIGHT TO ASSETS:

ALIENABILITY AND ASSIGNMENT PROHIBITION

At no time shall Executive be deemed to have any lien, right, title or interest in or to any specific investment or asset of the Bank. Neither Executive nor any Beneficiary under this Plan shall have any power or right to transfer, assign, anticipate, hypothecate, mortgage, commute, modify or otherwise encumber in advance any of the benefits payable hereunder, nor shall any of said benefits be subject to seizure for the payment of any debts, judgments, alimony or separate maintenance owed by Executive or his Beneficiary, nor be transferable by operation of law in the event of bankruptcy, insolvency or otherwise.

9  

  

  

ARTICLE VIII

ERISA PROVISIONS

	
8.1  

	
Administrator.  The Bank shall be the administrator of this Plan. As administrator, the Bank shall be responsible for the management, control and administration of the Plan as established herein. The Bank may delegate to others certain aspects of the management and operational responsibilities of the Plan.

	
8.2  

	
Claims Procedure and Arbitration.  In the event that benefits under this Plan are not paid to  Executive (or to his Beneficiary in the case of Executive’s death) and such claimants feel they are entitled to receive such benefits, then a written claim must be made to the administrator within sixty (60) days from the date payments are refused. The administrator shall review the written claim and, if the claim is denied, in whole or in part, it shall provide in writing, within thirty (30) days of receipt of such claim, its specific reasons for such denial, reference to the provisions of this Plan, and any additional material or information necessary for such claimants to perfect the claim. Such writing by the administrator shall further indicate the additional steps which must be undertaken by claimants if an additional review of the claim denial is desired.

If claimants desire a second review, they shall notify the administrator in writing within thirty (30) days of the first claim denial. Claimants may review this Plan or any documents relating thereto and submit any issues and comments, in writing, they may feel appropriate. In its sole discretion, the administrator shall then review the second claim and provide a written decision within thirty (30) days of receipt of such claim. This decision shall state the specific reasons for the decision and shall include reference to specific provisions of this Plan upon which the decision is based.

No claimant shall institute any action or proceeding in any state or federal court of law or equity or before any administrative tribunal or arbitrator for a claim for benefits under the Plan until the claimant has first exhausted the provisions set forth in this Section.

 

ARTICLE IX

MISCELLANEOUS

	
9.1  

	
No Effect on Employment Rights.  Nothing contained herein will confer upon Executive the right to be retained in the service of the Bank nor limit the right of the Bank to discharge or otherwise deal with Executive without regard to the existence of the Plan.

	
9.2  

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

	
9.3   

	
Severability and Interpretation of Provisions.  In the event that any of the provisions of this Plan or portion hereof are held to be inoperative or invalid by any court of competent jurisdiction, or in the event that any provision is found to violate Code Section 409A and would subject Executive to additional taxes and interest on the amounts deferred hereunder, or in the event that any legislation adopted by any governmental body having jurisdiction over the Bank would be retroactively applied to invalidate this Plan or any provision hereof or cause the benefits hereunder to be taxable, then: (1) insofar as is reasonable, effect will be given to the intent manifested in the provisions held invalid or inoperative, and (2) the validity and enforceability of the remaining provisions will not be affected thereby.  In the event that the intent of any provision shall need to be construed in a manner to avoid taxability, such construction shall be made by the administrator in a manner that would manifest to the maximum extent possible the original meaning of such provisions.

10  

  

  

	
9.4   

	
   Effect on Other Corporate Benefit Plans.  Nothing contained in this Plan shall affect the right of Executive to participate in or be covered by any qualified or nonqualified

   pension, profit sharing, group, bonus or other supplemental compensation or fringe benefit Plan constituting a part of the Bank’s existing or future compensation 

   structure.

	
9.5  

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

   administrators, and Beneficiaries.

	
9.6  

	
   Successors to the Company and/or the Bank.  The Company or the Bank, as applicable, will 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 or the Bank to assume expressly and agree to perform the duties

   and obligations under this Plan in the same manner and to the same extent as the Company or the Bank would be required to perform it if no such succession had 

   taken place.

	
9.7    

	
 Legal Fees.  In the event that Executive retains legal counsel to enforce any of the terms of the Plan, the Bank will pay his legal fees and related expenses reasonably

 incurred by him, but only if the Executive prevails in an action seeking legal and/or equitable relief against the Bank.

	
9.8  

	
   Withholding.  To the extent required by the law in effect at the time payment under the Plan is made, the Bank shall withhold from such payment any taxes or other amounts 

    required by law to be withheld.

ARTICLE X

AMENDMENT/TERMINATION

	
10.1  

	
  Amendment of Plan.  Subject to Section 10.2 of this Plan, (a) this Plan may be amended solely by a written Plan signed by the Bank and by the Executive, and (b) except for

  termination occurring under Section 10.2, this Plan may be terminated solely by a written Plan signed by the Bank and by the Executive.  Except as provided in Section 10.2,

  the termination of this Plan shall not cause a distribution of benefits under this Plan.  Notwithstanding anything to the contrary herein, the Plan may be amended to the extent 

   necessary to comply with existing tax laws or changes to existing tax laws.

11  

  

  

	
10.2  

	
     Termination of Plan.

Notwithstanding anything to the contrary in Section 10.1 of this Plan, the Bank may irrevocably terminate this Plan without the Executive’s consent in the following circumstances:

	
  

	
(a)

	
Within thirty (30) days before a Change in Control, provided that all distributions are made no later than twelve (12) months following such irrevocable termination of this Plan and further provided that all of the arrangements sponsored by the Bank that would be aggregated with this Plan under Treasury Regulation §1.409A-1(c)(2) are terminated so the Executive and all Executives under the other aggregated arrangements are required to receive all amounts of compensation deferred under the terminated arrangements within twelve (12) months of the date the Bank irrevocably takes all necessary action to terminate such arrangements;

(b)           With twelve (12) months of a dissolution of the Bank taxed under Section 331 of the Code or with the approval of a bankruptcy court pursuant to 11 U.S.C. §503(b)(1)(A), provided that the amounts deferred under this Plan are included in the Executive's gross income in the latest of (i) the calendar year in which this Plan terminates; (ii) the calendar year in which the amount is no longer subject to a substantial risk of forfeiture; or (iii) the first calendar year in which the distribution is administratively practicable; or

(c)           Upon the Bank’s termination of this and all other arrangements that would be aggregated with this Plan pursuant to Treasury Regulation §1.409A-1(c) if the Executive participated in such arrangements (“Similar Arrangements”), provided that (i) the termination and liquidation does not occur proximate to a downturn in the financial health of the Bank, (ii) no payments are made within twelve (12) months of the termination of the arrangements other than payments that would be payable under the terms of the arrangements if the termination had not occurred, (iii) all termination distributions are made no later than twenty-four (24) months following such termination, and (iv) the Bank does not adopt any new arrangement that would be a Similar Arrangement for a minimum of three (3) years following the date the Bank takes all necessary action to irrevocably terminate and liquidate the Plan;

provided that, in all cases, the Bank distributes the benefit under the Plan, determined as of the date of the termination of this Plan, to the Executive in a lump sum subject to the above terms.

12  

  

  

ARTICLE XI

EXECUTION

	
11.1

	
This Plan sets forth the entire understanding of the Bank and the Executive with respect to the transactions contemplated hereby, and any previous Plans or understandings between them regarding the subject matter hereof are merged into and superseded by this Plan.

	
11.2

	
This Plan shall be executed in duplicate, each copy of which, when so executive and delivered, shall be an original, but both copies shall together constitute one and the same instrument.

                                                            13                                                             

  

  

  

IN WITNESS WHEREOF, the Bank has caused this Plan to be executed as of January 25, 2017.

 

	
ATTEST:

	
LAKE SHORE SAVINGS BANK

	  	  
	  	  
	
/s/ Wendy J. Harrington                                                      

	
By: /s/ Gary W. Winger                                                                

	
Secretary

	
Title: Chairman of the Board

	  	  
	
ATTEST:

	
EXECUTIVE

	  	  
	  	  
	
/s/ Wendy J. Harrington                                                      

	
By: /s/ Daniel Reininga                                                                

	
Secretary

	
Title: President and Chief Executive Officer

	  	  

                                                  14                                                      

  

  

  

	
SCHEDULE A

	
ANNUAL BENEFIT SCHEDULE

	
Calendar Year Employment Terminates

	
Annual Benefit

	
2017

	
$55,064

	
2018

	
$73,418

	
2019

	
$91,773

	
2020

	
$110,127

	
2021

	
$128,482

	
2022

	
$146,836

	
2023

	
$156,013

	
2024

	
$165,191

	
2025

	
$174,368

	
11/17/2025 and later

	
$183,545

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00266-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00266-of-00352.parquet"}]]