LAKE SHORE SAVINGS BANK
EMPLOYMENT AGREEMENT
This Employment Agreement (the “Agreement”)
is made and entered into, effective as of the 16th day of July, 2024 (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 Kim C. Liddell, a resident of the Commonwealth of Virginia (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 serving as President and Chief Executive Officer of the Bank and the Company; and
WHEREAS, the Bank desires to continue to employ the Executive, and the Executive desires to continue to remain
employed by the Bank, 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 the third anniversary of the date hereof (the “Term”). Commencing on the first anniversary of the date hereof, and on each anniversary 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 ninety (90) 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 sixty (60) 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 and the Company shall each 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 of the Company 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) The Company shall nominate the Executive for election as a director at such times as necessary so that the Executive will, if elected by shareholders, remain a director of the
Company throughout the Term. The Executive hereby consents to serving as a director and to being named as a director of the Company in documents filed with the Securities and Exchange Commission. The Company’s board of directors shall (i) cause
the Bank to seek regulatory approval for the initial appointment of the Executive and, if such approval is obtained, (ii) undertake reasonable efforts to ensure that he continues throughout the term of employment to be elected or reelected as a
director of the Bank for so long as the Executive retains his position as the President and Chief Executive Officer of the Bank or the Company.
(e) 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, an annual base salary (“Base Salary”) at the rate of Five Hundred
Fifty Thousand Dollars ($550,000) 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.
(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 of up to 35% of his Base Salary if the Bank achieves certain performance criteria established by the Board each year and set forth in a written cash
incentive plan approved by the Board or the Compensation Committee of the Board. The plan will contain tiered incentive targets if certain performance criteria are achieved at four levels: threshold (90% of goal met), target (100% of goal met),
maximum (110% of goal met), or superior (125% of goal met), which if the Executive achieves these levels, the annual incentive payments would be 10%, 20%, 35% and 45% of his Base Salary, respectively. Any such incentive compensation earned shall be
payable in cash in the year following the year in which the compensation is earned in accordance with the Bank’s normal practices for the payment of short-term incentive compensation and the payment of any such amounts shall be subject to any
approvals or non-objections required by the OCC.
(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, specifically including participation in the Company’s ESOP and other equity
incentive plans. At least annually, the Compensation Committee shall consider awarding long-term incentive compensation to the Executive.
(d) Supplemental Executive Retirement Plan. The Bank shall provide Employee with a
Supplemental Executive Retirement Plan attached to this Agreement as Exhibit A.
(e) 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, which shall not be less than four weeks per year. The Executive shall be entitled to an
executive perquisites allotment of Twenty-Six Thousand Four Hundred Dollars ($26,400) 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.
(f) Housing Allowance. For remainder of calendar year 2023, the Bank shall pay the
Executive a cash allowance of $2,500 per month, which shall be payable in accordance with the customary payroll practices of the Bank.
(g) 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).
(h) Apportionment of Payments. The obligations for the payment of the amounts otherwise
payable pursuant to this Section 3 shall be apportioned between the Company and the Bank as they may agree from time to time in their sole discretion notwithstanding any provision of this Agreement to the contrary.
4. Business Expenses. The Bank shall reimburse the Executive for all reasonable travel,
cell phone 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 clubs and 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.
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. Upon termination of the Executive based due to his death, no amounts or benefits shall be due the Executive’s estate under this Agreement, provided that the Executive’s
estate shall be entitled to benefits under any retirement plan of the Bank or the Company and other plans to which the Executive is a party.
(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:
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(i)
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Failure of the Bank to continue the Executive in the positions of President and Chief Executive Officer (other than a
change in position to which the Executive consents) during the Term;
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(ii)
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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;
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(iii)
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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;
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(iv)
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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
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(v)
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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.
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“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.
(a) Termination by the Bank for Cause. At any time during the Term, the Bank may terminate
the Executive’s employment hereunder for Cause if at a meeting of the Board called and held for such purpose (after notice to the Executive and an opportunity for him to be heard before the Board, which notice shall specify the basis for a
proposal to terminate the Executive’s employment for “Cause”) a majority of Board determines in good faith that the Executive is guilty of conduct that constitutes “Cause” as defined herein. Only the following shall constitute “Cause” for such termination:
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(iii)
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breach of fiduciary duty involving personal profit;
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(iv)
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intentional and material failure to perform stated duties;
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(v)
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willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order; or
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(vi)
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material breach by Executive of Section 9 of this
Agreement.
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(vii)
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willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease-and-desist order; or
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(viii)
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material breach by Executive of any provision of this Agreement.
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provided, however, that any purported termination of this Agreement by Bank shall be presumed to be other than
for Cause unless Bank first provides a written notice to Executive that includes a copy of a resolution duly adopted by the Board at a meeting of the Board called and held for the purpose of considering such termination and that finds Cause to
exist and specifies the particulars of such conduct.
provided, however, that any purported termination of this Agreement by Bank shall be presumed to be other than for
Cause unless Bank first provides a written notice to Executive that includes a copy of a resolution duly adopted by the Board at a meeting of the Board called and held for the purpose of considering such termination and that finds Cause to exist and
specifies the particulars of such conduct.
(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, and (D) any earned but unpaid short-term and long-term incentive compensation for the year immediately preceding 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) and to compliance with the tax-related provisions in Section 8, the Bank shall provide the benefits listed in sub-sections 6(b)(i) to (ii) below (the “Severance Benefits”) to the Executive:
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(i)
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Severance Payments. The Bank
shall pay the Executive a severance payment in an amount equal to 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
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year and ends in a second calendar year, the payment of the Severance Amount shall commence in the second calendar
year.
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(ii)
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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 twelve (12) 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.
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The Bank may condition the provision of the Severance Benefits payable under Sections 6 or 7 of this Agreement on the Executive
signing a Release Agreement in the form provided by the Bank (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
(A) such termination of employment occurs within three (3) months before or twelve (12) months after the occurrence of the first event constituting a Change in Control and (B) at such time the Bank and the Company are no longer in “troubled
condition” as defined in 12 C.F.R. § 359.1(f)(1)(ii). These provisions shall terminate and be of no further force or effect beginning twelve (12) months after the occurrence of a Change in Control.
(a) Change in Control. During the Term, and if at such time as the Bank and the Company
are no longer in “troubled condition” as defined in 12 C.F.R. § 359.1(f)(1)(ii), if within three (3) months before or twelve (12) 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, subject to compliance with the tax-related provisions in Section 8, the
Executive shall be entitled to the following:
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(i)
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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;
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(ii)
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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.
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(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:
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(i)
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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;
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(ii)
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Acquisition of Significant Share Ownership: There
is filed, or is required to be filed, a report on Schedule 13D or another form or schedule (other than Schedule 13G) required under Sections 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended, if the schedule discloses that
the filing person or persons acting in concert has or have become the beneficial owner of 25% or more of a class of the Company’s or the Bank’s voting securities; provided, however, this clause (ii) shall not apply to beneficial ownership
of the Company’s or the Bank’s voting shares held in a fiduciary capacity by an entity of which the Company directly or indirectly beneficially owns 50% or more of its outstanding voting securities;
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(iii)
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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
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(iv)
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Sale of Assets: The Company or the Bank sells to a
third party all or substantially all of its assets.
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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. Code Sections 409A and 280G.
(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.
(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.
(d) The parties intend that the severance payments and other compensation provided for herein are reasonable compensation for Executive’s services to the Bank and shall not
constitute “excess parachute payments” within the meaning of Section 280G of the Code. If the Bank’s independent accounting firm or independent tax counsel appointed by the Bank (“Tax Counsel”) determine that any or the aggregate value (as determined pursuant to Section 280G of the Code) of all payments, distributions, accelerations of vesting, awards and provisions of benefits by the Bank to
or for the benefit of the Executive (whether paid or payable, distributed or distributable, accelerated, awarded or provided pursuant to the terms of this Agreement or otherwise), (a “Payment”) would constitute an excess parachute payment and be subject to the excise tax imposed by Section 4999 of the Code (the “Excise
Tax”), such Payment shall be reduced to the least extent necessary so that no portion of the Payment shall be subject to the Excise Tax, but only if, by reason of such reduction, the net after-tax benefit received by the Executive as
a result of
such reduction will exceed the net after-tax benefit that would have been received by the Executive if no such reduction were made.
The Payment shall be reduced by the Bank pursuant to the foregoing sentence in a manner that Tax Counsel determines maximizes the Executive’s economic position. In applying this principle, the reduction shall be made in a manner consistent with the
requirements of Section 409A of the Code, and where Tax Counsel determines that two economically equivalent amounts are subject to reduction but payable at different times, such amounts shall be reduced on a pro rata basis but not below zero. If,
however, such Payment is not reduced as described above, then such Payment shall be paid in full to the Executive and the Executive shall be responsible for payment of any Excise Taxes relating to the Payment. All calculations and determinations
under this Section 8 shall be made by Tax Counsel whose determinations shall be conclusive and binding on the Bank and the Executive for all purposes. For purposes of making the calculations and determinations required by this Section 8, Tax Counsel
may rely on reasonable, good faith assumptions and approximations concerning the application of Section 280G and Section 4999 of the Code. The Bank and the Executive shall furnish Tax Counsel with such information and documents as Tax Counsel may
reasonably request in order to make its determinations under this Section. The Bank shall bear all costs Tax Counsel may reasonably incur in connection with its services. In connection with making determinations under this Section, Tax Counsel shall
take into account the value of any reasonable compensation for services to be rendered by the Executive before or after the Change in Control, including without limitation, the Executive’s agreement to refrain from performing services pursuant to a
covenant not to compete or similar covenant, and the Bank shall cooperate in good faith in connection with any such valuations and reasonable compensation positions.
(e) At such time as the Bank and the Company are not in “troubled condition” as defined in 12 C.F.R. § 359.1(f)(1)(ii), the following paragraph in this Section 8(e) shall automatically and without further action be substituted for Section 8(d):
“The parties intend that the severance payments and other compensation provided for herein are reasonable
compensation for Executive’s services to the Bank and shall not constitute “excess parachute payments” within the meaning of Section 280G (or any successor provision)
of the Code. If the Bank’s independent accounting firm or independent tax counsel appointed by the Bank (“Tax Counsel”) determines that any or the aggregate
value (as determined pursuant to Section 280G of the Code) of all payments, distributions, accelerations of vesting, awards and provisions of benefits by the Bank to or for the benefit of the Executive (whether paid or payable, distributed or
distributable, accelerated, awarded or provided pursuant to the terms of this Agreement or otherwise), (a “Payment”) would constitute an excess parachute
payment and be subject to the excise tax imposed by Section 4999 (or any successor provision) of the Code (the “Excise Tax”), then the Bank shall pay the Executive an additional payment (a “Gross-Up Payment”) such that after payment
by Executive of all taxes (including any interest or penalties imposed with respect to such taxes, including any Excise Tax imposed upon the Gross-Up Payment), Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon
the Payment. The intent of the parties is that the Bank shall be solely responsible for, and shall pay, any Excise Tax on the Payments and Gross-Up Payment and any income and employment taxes (including, without limitation, penalties and interest)
imposed on any Gross-Up Payment payable hereunder. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay federal income tax and employment taxes at the highest marginal rate of federal income and
employment taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of the Executive’s domicile for income tax purposes on the date
the Gross-Up Payment is made
For purposes of this Agreement, the terms “excess parachute payment” and “parachute payments” shall have the
meanings assigned to them in Section 280G (or any successor provision) of the Code and such “parachute payments” shall be valued as provided therein. Present value for purposes of this Agreement shall be calculated in accordance with Section
1274(b)(2) (or any successor provision) of the Code. All calculations and determinations under this Section 8 shall be made by Tax Counsel whose determinations shall be conclusive and binding on the Bank and the Executive for all purposes. Subject
to the terms and conditions of this paragraph, for purposes of making the calculations and determinations required by this Section 8, Tax Counsel may rely on reasonable, good faith assumptions and approximations concerning the application of Section
280G (or any successor provision) and Section 4999 (or any successor provision) of the Code. The Bank and the Executive shall furnish Tax Counsel with such information and documents as Tax Counsel may reasonably request in order to make its
determinations under this Section. The Bank shall bear all costs Tax Counsel may reasonably incur in connection with its services. In connection with making determinations under this Section, Tax Counsel shall take into account the value of any
reasonable compensation for services to be rendered by the Executive before or after the Change in Control, including without limitation, the Executive’s agreement to refrain from performing services pursuant to a covenant not to compete or similar
covenant, and the Bank shall cooperate in good faith in connection with any such valuations and reasonable compensation positions.”
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 one year 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 one year 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).
(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, including
confidential supervisory information (as defined in 12 CFR §4.32) (“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. Execution of this Agreement by the Executive shall constitute his written agreement per 12 CFR §4.37 that he will treat the confidential supervisory information in accordance with 12 CFR §4.37.
(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.
(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. The Bank agrees to indemnify the Executive in his capacity as an
officer of the Bank 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. 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 11 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. 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.
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) 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.
(b) 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.
(c) 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.
(d) 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.
(e) 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 20 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.
(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. Transmission by facsimile, email, or other form of electronic transmission of an executed counterpart
of this Agreement shall be deemed to constitute due and sufficient delivery of such counterpart.
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. 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.
24. Compliance with Dodd–Frank Wall Street Reform and Consumer
Protection Act. Notwithstanding anything to the contrary herein, any incentive payments to the Executive shall be limited to the extent required under the Dodd–Frank Wall Street Reform and Consumer Protection Act (the “Act”),
including, but not limited to, clawbacks for such incentive payments as required by the Act. The Executive agrees to such amendments, agreements, or waivers that are required by the Act or requested by the Bank to comply with the terms of the Act.
[Signature Page Follows]
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument by the Bank, by its duly authorized officers, and by the
Executive, as of the first date written above.
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ATTEST:
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LAKE SHORE SAVINGS BANK
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By: /s/ Eric Hohenstein
Corporate Secretary
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By: /s/ Kevin M. Sanvidge
Chairman of the Board
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ATTEST:
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LAKE SHORE BANCORP, INC.
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By: /s/ Eric Hohenstein
Corporate Secretary
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By: /s/ Kevin M.
Sanvidge
Chairman of the Board
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EXECUTIVE
/s/ Kim C. Liddell
Kim C. Liddell
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LAKE SHORE SAVINGS BANK
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN AGREEMENT
This Supplemental Executive Retirement Plan Agreement (the “Agreement”) is made and entered into this 16th day of July, 2023, 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 Kim C. Liddell, a resident of the Commonwealth of Virginia (the
“Executive”). Any reference to the “Company” shall mean Lake Shore Bancorp, Inc., the parent corporation of the Bank.
The purpose of this Agreement is to provide specified benefits to the Executive, a member of a select group of management or highly
compensated employees who contribute materially to the continued growth, development and future business success of the Bank. This Agreement shall be unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act
of 1974 (“ERISA”), as amended from time to time. The Executive is fully advised of the Bank’s financial status.
Article 1
Definitions
Whenever used in this Agreement, the following words and phrases shall have the meanings specified:
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1.1
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“Accrual Balance” means the liability that should be
accrued by the Bank under generally accepted accounting principles (“GAAP”), as consistently applied in accordance with past practices at the Bank, for the Bank’s obligation to the Executive under this Agreement.
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1.2
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“Annuity Contract” means the following: For purposes
of satisfying its obligations to provide benefits under the Agreement and any Amendment, the Bank has invested in Deferred Annuity Contracts as provided for in Exhibit
A to this Agreement, (the “Annuity Contracts”), which includes lifetime benefit riders or similar lifetime benefit
features. The Bank is the sole owner of the Annuity Contracts and shall have the right to exercise all incidents of ownership, shall be the beneficiary of any death proceeds and shall at all times be entitled to the Annuity Contract's cash
surrender value. Notwithstanding any provision hereof to the contrary, the Bank shall have the right to sell or surrender any Annuity Contract without terminating the Agreement and any Amendments, provided the Bank replaces the Annuity
Contract with a comparable annuity policy or asset of comparable value which provides for a similar lifetime benefit feature. Without limitation, the Annuity Contracts at all times shall be the exclusive property of the Bank and shall be
subject to the claims of the Bank's creditors.
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1.3
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“Beneficiary” means each designated person or entity,
or the estate of the deceased Executive, entitled to any benefits upon the death of the Executive pursuant to Article 4.
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1.4
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“Beneficiary Designation Form” means the form
established from time to time by the Plan Administrator that the Executive completes, signs and returns to the Plan Administrator to designate one or more Beneficiaries.
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1.5
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“Board” means the Board of Directors of the Bank as
from time to time constituted.
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1.6
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“Change in Control” shall have the meaning specified
in any effective severance or employment agreement existing on the date hereof or hereafter entered into between the Executive and the Bank and/or Lake
Shore Bancorp, Inc. If the Executive is not a party to a severance or employment
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agreement containing a definition for change in control, then Change in Control, for purposes of this Agreement, means a change in the
ownership or effective control of the Bank or the Company, or in the ownership of a substantial portion of the assets of the Bank or the Company, as such change is defined in Code Section 409A and regulations thereunder.
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1.7
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“Code” means the Internal Revenue Code of 1986, as
amended, and all regulations and guidance thereunder, including such regulations and guidance as may be promulgated after the Effective Date.
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1.8
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“Disability” shall have the meaning specified in any
effective severance or employment agreement existing on the date hereof or hereafter entered into between the Executive and the Bank and/or Lake Shore
Bancorp, Inc. If the Executive is not a party to a severance or employment agreement containing a definition for termination for disability, then Disability, for purposes of this Agreement, means the Executive: (i) is unable to engage in
any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; or (ii)
is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits
for a period of not less than three (3) months under an accident and health plan covering employees or directors of the Bank. Medical determination of Disability may be made by either the Social Security Administration or by the provider of
disability insurance covering employees or directors of the Bank provided that the definition of “disability” applied under such insurance program complies with the requirements of the preceding sentence. Upon the request of the Plan
Administrator, the Executive must submit proof to the Plan Administrator of the Social Security Administration’s or the provider’s determination.
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1.9
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“Early Termination” means Separation from Service
before attainment of Normal Retirement Age except when such Separation from Service occurs within twelve (12) months following a Change in Control or due to death, Disability or Termination for Cause.
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1.10
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“Effective Date” means April 19, 2023.
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1.11
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“Normal Retirement Age” means age sixty-seven (67).
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1.12
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“Plan Administrator” means the Board of the Bank or
such committee or person as the Board shall appoint.
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1.13
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“Plan Year” means each twelve (12) month period
commencing on January 1 and ending on December 31 of each year. The initial Plan Year shall commence on the Effective Date of this Agreement and end on the following December 31.
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1.14
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“Separation from Service” means termination of the
Executive’s employment with the Bank for reasons other than death. Whether a Separation from Service has occurred is determined in accordance with the requirements of Code Section 409A based on whether the facts and circumstances indicate
that the Bank and 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 no more than twenty percent (20%) of the average level of bona fide services performed (whether as an employee or an independent contractor) over the immediately
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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).
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1.15
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“Schedule A” means the schedule attached to this
Agreement and made a part hereof. Schedule A shall be updated upon a change in any of the benefits under Article 2 or 3.
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1.16
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“Specified Employee” means an employee who at the time
of Separation from Service is a key employee of the Bank, if any stock of the Bank is publicly traded on an established securities market or otherwise. For purposes of this Agreement, an employee is a key employee if the employee meets the
requirements of Code Section 416(i)(1)(A)(i), (ii), or (iii) (applied in accordance with the regulations thereunder and disregarding section 416(i)(5)) at any time during the twelve (12) month period ending on December 31 (the
“identification period”). If the employee is a key employee during an identification period, the employee is treated as a key employee for purposes of this Agreement during the twelve (12) month period that begins on the first day of April
following the close of the identification period.
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1.17
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“Termination for Cause” shall have the meaning
specified in any effective severance or employment agreement existing on the date hereof or hereafter entered into between the Executive and the Bank and/or Lake
Shore Bancorp, Inc. If the Executive is not a party to a severance or employment agreement containing a definition for termination for cause, then Termination for Cause, for purposes of this Agreement, means the Bank and/or Lake Shore
Bancorp, Inc. terminates the Executive’s employment causing a Separation from Service for any of the following reasons –
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(a)
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Gross negligence or gross neglect of duties to the Bank;
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(b)
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Conviction of a felony or of a gross misdemeanor involving moral turpitude in connection with the Executive’s employment with the Bank; or
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(c)
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Fraud, disloyalty, dishonesty or willful violation of any law or significant Bank policy committed in connection with the Executive’s employment
and resulting in a material adverse effect on the Bank.
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Article 2
Distributions During Lifetime
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2.1
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Normal Retirement Benefit. Upon Separation from
Service after attaining Normal Retirement Age, the Bank shall distribute to the Executive the benefit described in this Section 2.1 in lieu of any other benefit under this Article, if at such time the Bank and the Company are not in
“troubled condition” as defined in 12 C.F.R. § 359.1(f)(1)(ii).
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2.1.1
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Amount of Benefit. The annual benefit under this
Section 2.1 is the annual amount that is paid from the Annuity Contracts, as defined herein, through the lifetime benefit rider or similar lifetime benefit feature as of the date of Separation from Service.
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2.1.2
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Distribution of Benefit. The Bank shall distribute the
annual benefit to the Executive in twelve (12) equal monthly installments commencing on the first day of the month following Separation from Service. The annual benefit shall be distributed to the Executive for fifteen (15) years, unless
extended pursuant to Section 2.8 hereof.
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2.2
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Early Termination Benefit. If Early Termination
occurs, the Bank shall distribute to the Executive the benefit described in this Section 2.2 in lieu of any other benefit under this Article, if at such
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time the Bank and the Company are not in “troubled condition” as defined in 12 C.F.R. § 359.1(f)(1)(ii). |
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2.2.1
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Amount of Benefit. The annual benefit under this
Section 2.2 is an amount equal to a percentage of the amount that is paid from the Annuity Contracts, as defined herein, through the lifetime benefit rider or similar lifetime benefit feature. The percentage is the ratio of the accrued
liability on the books of the Bank on the date of Separation from Service to the projected accrued liability at Normal Retirement Age. This percentage is then applied to the amount that is paid from the Annuity Contracts through the
lifetime benefit rider as of the date of Separation from Service.
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|
2.2.2
|
Distribution of Benefit. The Bank shall distribute the
annual benefit to the Executive in twelve (12) equal monthly installments commencing on the first day of the month following Separation from Service. The annual benefit shall be distributed to the Executive for fifteen (15) years, unless
extended pursuant to Section 2.8 hereof.
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|
2.3
|
Disability Benefit. If the Executive experiences a
Disability prior to Normal Retirement Age which results in Separation from Service, the Bank shall distribute to the Executive the benefit described in this Section 2.3 in lieu of any other benefit under this Article.
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2.3.1
|
Amount of Benefit. The annual benefit under this
Section 2.3 is an amount equal to a percentage of the amount that is paid from the Annuity Contracts, as defined herein, through the lifetime benefit rider or similar lifetime benefit feature. The percentage is the ratio of the accrued
liability on the books of the Bank on the date of Separation from Service to the projected accrued liability at Normal Retirement Age. This percentage is then applied to the amount that is paid from the Annuity Contracts through the
lifetime benefit rider as of the date of Separation from Service.
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|
2.3.2
|
Distribution of Benefit. The Bank shall distribute the
annual benefit to the Executive in twelve (12) equal monthly installments commencing on the first day of the month following Separation from Service. The annual benefit shall be distributed to the Executive for fifteen (15) years, unless
extended pursuant to Section 2.8 hereof.
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|
2.4
|
Change in Control Benefit. If a Change in Control
occurs prior to Normal Retirement Age and is followed within twelve (12) months by the Executive’s Separation from Service without Cause or for Good Reason (as that term is defined in any effective severance or employment agreement existing
on the date hereof or hereafter entered into between the Executive and the Bank and/or Lake Shore Bancorp, Inc.), the Bank shall distribute to the Executive
the benefit described in this Section 2.4 in lieu of any other benefit under this Article, if at such time the Bank and the Company are not in “troubled condition” as defined in 12 C.F.R. § 359.1(f)(1)(ii).
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|
2.4.1
|
Amount of Benefit. The annual benefit under this
Section 2.4 is an amount equal to the greater of (a) Two Hundred Seventy-Five Thousand Nine Hundred Seventy-Eight Dollars ($275,978); or (b) the amount that is payable from the Annuity Contracts, as defined herein, through the lifetime
benefit rider or similar lifetime benefit feature.
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|
2.4.2
|
Distribution of Benefit. The Bank shall distribute the
annual benefit to the Executive in twelve (12) equal monthly installments commencing on the first day of the month following Separation from Service. The annual benefit shall be distributed to the Executive for fifteen (15) years, unless
extended pursuant to Section 2.8 hereof.
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|
2.5
|
Restriction on Commencement of Distributions.
Notwithstanding any provision of this Agreement to the contrary, if the Executive is considered a Specified Employee, the provisions of this Section 2.5 shall govern all distributions hereunder. If benefit distributions which would
otherwise be made to the Executive due to Separation from Service are limited because the Executive is a Specified Employee, then such distributions shall not be made during the first six (6) months following Separation from Service.
Rather, 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 seventh month following Separation from Service. All subsequent
distributions shall be paid in the manner specified.
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|
2.6
|
Distributions Upon Taxation of Amounts Deferred. If,
pursuant to Code Section 409A, the Federal Insurance Contributions Act or other state, local or foreign tax, the Executive becomes subject to tax on the amounts deferred hereunder, then the Bank may make a limited distribution to the
Executive in a manner that conforms to the requirements of Code section 409A. Any such distribution will decrease the Executive’s benefits distributable under this Agreement.
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|
2.7
|
Change in Form or Timing of Distributions. For
distribution of benefits under this Article 2, the Executive and the Bank may, subject to the terms of Section 8.1, amend this Agreement to delay the timing or change the form of distributions. Any such amendment:
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|
(a)
|
may not accelerate the time or schedule of any distribution, except as provided in Code Section 409A;
|
|
(b)
|
must, for benefits distributable under Sections 2.1, 2.2, 2.3 and 2.4, delay the commencement of distributions for a minimum of five (5) years
from the date the first distribution was originally scheduled to be made; and
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|
(c)
|
must take effect not less than twelve (12) months after the amendment is made.
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| 2.8 |
Extension of Benefits. In the event that benefits become payable in
accordance with the Agreement under Sections 2.1, 2.2, 2.3 or 2.4 and (i) if such benefit payments have been paid for a total of One Hundred Eighty (180) payments (the “Original Payment Period”) and (ii) the Executive is currently living at the end of the Original Payment Period, then such benefit payments shall continue beyond the Original Payment Period for the remainder of the
Executive’s life. Such additional benefit payments will be made in equal monthly installments commencing on the first day of the month following the final payment of the Original Payment Period. The Bank and Executive both acknowledge that
the continuation of benefits hereunder beyond the Original Payment Period is a new and separate benefit and such benefit shall only be payable following the Original Payment Period if the Executive is alive at such time and shall cease at the
Executive’s death.
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Article 3
Distribution at Death
|
3.1
|
Death During Active Service. If the Executive dies
prior to Separation from Service, the Bank shall distribute to the Beneficiary the benefit described in this Section 3.1. This benefit shall be distributed in lieu of any benefit under Article 2.
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|
3.1.1
|
Amount of Benefit. The annual benefit under this
Section 3.1 is the Pre-Retirement Death Annual Benefit set forth on Schedule A. If death occurs in the middle of a Plan Year, the annual benefit amount shall be increased by a pro-rated amount relative to the Executive’s
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service during such partial Plan Year. This amount will be added to the Annual Benefit amount at the end of the preceding Plan Year on
Schedule A.
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3.1.2
|
Distribution of Benefit. The Bank shall distribute the
annual benefit to the Executive in twelve (12) equal monthly installments commencing on the first day of the fourth month following the Executive’s death. The annual benefit shall be distributed to the Beneficiary for fifteen (15) years.
The Beneficiary shall be required to provide to the Bank the Executive’s death certificate.
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|
3.2
|
Death During Distribution of a Benefit. If the
Executive dies after any benefit distributions have commenced under this Agreement but before receiving all such distributions, the Bank shall distribute to the Beneficiary the remaining benefits at the same time and in the same amounts
they would have been distributed to the Executive had the Executive survived.
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Article 4
Beneficiaries
|
4.1
|
In General. The Executive shall have the right, at any
time, to designate a Beneficiary to receive any benefit distributions under this Agreement upon the death of the Executive. The Beneficiary designated under this Agreement may be the same as or different from the beneficiary designated
under any other plan of the Bank in which the Executive participates.
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|
4.2
|
Designation. The Executive shall designate a
Beneficiary by completing and signing the Beneficiary Designation Form and delivering it to the Plan Administrator or its designated agent. If the Executive names someone other than the Executive’s spouse as a Beneficiary, the Plan
Administrator may, in its sole discretion, determine that spousal consent is required to be provided in a form designated by the Plan Administrator, executed by the Executive’s spouse and returned to the Plan Administrator. 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 Plan Administrator’s rules and procedures. Upon the acceptance by the Plan Administrator of a new Beneficiary
Designation Form, all Beneficiary designations previously filed shall be cancelled. The Plan Administrator shall be entitled to rely on the last Beneficiary Designation Form filed by the Executive and accepted by the Plan Administrator
prior to the Executive’s death.
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|
4.3
|
Acknowledgment. No designation or change in
designation of a Beneficiary shall be effective until received, accepted and acknowledged in writing by the Plan Administrator or its designated agent.
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|
4.4
|
No Beneficiary Designation. If the Executive dies
without a valid beneficiary designation, or if all designated Beneficiaries predecease the Executive, then the Executive’s spouse shall be the designated Beneficiary. If the Executive has no surviving spouse, any benefit shall be paid to
the Executive’s estate.
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|
4.5
|
Facility of Distribution. If the Plan Administrator
determines in its discretion that a benefit is to be distributed to a minor, to a person declared incompetent or to a person incapable of handling the disposition of that person’s property, the Plan Administrator may direct distribution of
such benefit to the guardian, legal representative or person having the care or custody of such minor, incompetent person or incapable person. The Plan Administrator may require proof of incompetence, minority or guardianship as it may deem
appropriate prior to distribution of the
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|
benefit. Any distribution of a benefit shall be a distribution for the account of the Executive and the Beneficiary, as the case may be, and shall completely discharge any liability under this
Agreement for such distribution amount. |
Article 5
General Limitations
|
5.1
|
Termination for Cause. Notwithstanding any provision
of this Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if the Executive’s employment with the Bank is terminated by the Bank or an applicable regulator due to a Termination for Cause.
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|
5.2
|
Suicide or Misstatement. No benefit shall be
distributed if the Executive commits suicide within two (2) years after the Effective Date, or if an insurance company which issued a life insurance policy covering the Executive and owned by the Bank denies coverage (i) for material
misstatements of fact made by the Executive on an application for such life insurance, or (ii) for any other reason.
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|
5.3
|
Removal. Notwithstanding any provision of this
Agreement to the contrary, the Bank shall not distribute any benefit under this Agreement if the Executive is subject to a final removal or prohibition order issued by an appropriate federal banking agency pursuant to Section 8(e) of the
Federal Deposit Insurance Act.
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|
5.4
|
Regulatory Restrictions. Notwithstanding anything
herein to the contrary, any payments made to the Executive pursuant to this Agreement, or otherwise, shall be subject upon compliance with 12 U.S.C. 1828 and FDIC Regulation 12 CFR Part 359, Golden Parachute Indemnification Payments and any
other regulations or guidance promulgated thereunder.
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|
5.5
|
Forfeiture Provision. The Executive shall forfeit any
non-distributed benefits under this Agreement if within twelve (12) months following a Separation from Service, the Executive, violates the applicable restrictive covenants found in any effective severance or employment agreement existing
on the date hereof or hereafter entered into between the Executive and the Bank and/or Lake Shore Bancorp, Inc. If the Executive is not a party to a
severance or employment agreement containing a definition for change in control, then the Executive shall forfeit any non-distributed benefits under this Agreement if within twelve (12) months following a Separation from Service, the
Executive, directly or indirectly, either as an individual or as a proprietor, stockholder, partner, officer, director, employee, agent, consultant or independent contractor of any individual, partnership, corporation or other entity
(excluding an ownership interest of three percent (3%) or less in the stock of a publicly-traded company):
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(i) becomes employed by, participates in, or becomes connected in any manner with the ownership, management, operation or control of any bank, savings and loan or other similar
financial institution if the Executive’s responsibilities will include providing banking or other financial services in any city, town or county in which the Executive’s normal business office is located or the Bank or the Company has an office or
has filed an application for regulatory approval to establish an office, determined as of the date of the termination of the Executive’s employment;
(ii) participates
in any way in hiring or otherwise engaging, or assisting any other person or entity in hiring or otherwise engaging, on a temporary, part-time or permanent basis, any individual who was employed by the Bank as of the date of termination of the
Executive’s employment;
(iii) assists,
advises, or serves in any capacity, representative or otherwise, any third party in any action against the Bank or transaction involving the Bank;
(iv) sells, offers to sell, provides banking
or other financial services, assists any other person in selling or providing banking or other financial services, or solicits or otherwise competes for, either directly or indirectly, any orders, contract, or accounts for services of a kind or
nature like or substantially similar to the financial services performed or financial products sold by the Bank (the preceding hereinafter referred to as “Services”), to or from any person or entity from whom the Executive or the Bank, to the
knowledge of the Executive provided banking or other financial services, sold, offered to sell or solicited orders, contracts or accounts for Services during the one (1) year period immediately prior to the termination of the Executive’s
employment;
(v) divulges, discloses, or communicates to
others in any manner whatsoever, any confidential information of the Bank, to the knowledge of the Executive, including, but not limited to, the names and addresses of customers or prospective customers, of the Bank, as they may have existed from
time to time, of work performed or services rendered for any customer, any method and/or procedures relating to projects’ or other work developed for the Bank, earnings or other information concerning the Bank. The restrictions contained in this
subparagraph (v) apply to all information regarding the Bank, regardless of the source who provided or compiled such information. Notwithstanding anything to the contrary, all information referred to herein shall not be disclosed unless and until
it becomes known to the general public from sources other than the Executive.
Article 6
Administration of Agreement
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6.1
|
Plan Administrator Duties. The Plan Administrator
shall administer this Agreement according to its express terms and shall also have the discretion and authority to (i) make, amend, interpret and enforce all appropriate rules and regulations for the administration of this Agreement and
(ii) decide or resolve any and all questions, including interpretations of this Agreement, as may arise in connection with this Agreement to the extent the exercise of such discretion and authority does not conflict with Code Section 409A.
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|
6.2
|
Agents. In the administration of this Agreement, the
Plan Administrator may employ agents and delegate to them such administrative duties as the Plan Administrator sees fit, including acting through a duly appointed representative, and may from time to time consult with counsel who may be
counsel to the Bank.
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|
6.3
|
Binding Effect of Decisions. Any decision or action of
the Plan Administrator with respect to any question arising out of or in connection with the administration, interpretation or application of this Agreement and the rules and regulations promulgated hereunder shall be final and conclusive
and binding upon all persons having any interest in this Agreement.
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|
6.4
|
Indemnity of Plan Administrator. The Bank shall
indemnify and hold harmless the Plan Administrator against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Agreement, except in the case of willful misconduct by
the Plan Administrator.
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|
6.5
|
Bank Information. To enable the Plan Administrator to
perform its functions, the Bank shall supply full and timely information to the Plan Administrator on all matters relating to the date and circumstances of the Executive’s death, Disability or Separation from Service, and such other
pertinent information as the Plan Administrator may reasonably require.
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|
6.6
|
Annual Statement. The Plan Administrator shall provide
to the Executive, within one hundred twenty (120) days after the end of each Plan Year, a statement setting forth the benefits to be distributed under this Agreement.
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Article 7
Claims And Review Procedures
|
7.1
|
Claims Procedure. An Executive or Beneficiary
(“claimant”) who has not received benefits under this Agreement that he or she believes should be distributed shall make a claim for such benefits as follows:
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|
7.1.1
|
Initiation — Written Claim. The claimant initiates a
claim by submitting to the Plan Administrator a written claim for the benefits. If such a claim relates to the contents of a notice received by the claimant, the claim must be made within sixty (60) days after such notice was received by
the claimant. All other claims must be made within one hundred eighty (180) days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the claimant.
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|
7.1.2
|
Timing of Plan Administrator Response. The Plan
Administrator shall respond to such claimant within ninety (90) days after receiving the claim. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the Plan Administrator can
extend the response period by an additional ninety (90) days by notifying the claimant in writing, prior to the end of the initial ninety (90) day period, which an additional period is required. The notice of extension must set forth the
special circumstances and the date by which the Plan Administrator expects to render its decision.
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|
7.1.3
|
Notice of Decision. If the Plan Administrator denies
part or all of the claim, the Plan Administrator shall notify the claimant in writing of such denial. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set
forth:
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|
(a)
|
The specific reasons for the denial;
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|
(b)
|
A reference to the specific provisions of this Agreement on which the denial is based;
|
|
(c)
|
A description of any additional information or material necessary for the claimant to perfect the claim and an explanation of why it is needed;
|
|
(d)
|
An explanation of this Agreement’s review procedures and the time limits applicable to such procedures; and
|
|
(e)
|
A statement of the claimant’s right to bring a civil action under ERISA Section 502(a) following an adverse benefit determination on review.
|
|
7.2
|
Review Procedure. If the Plan Administrator denies
part or the entire claim, the claimant shall have the opportunity for a full and fair review by the Plan Administrator of the denial as follows:
|
|
7.2.1
|
Initiation — Written Request. To initiate the review,
the claimant, within sixty (60) days after receiving the Plan Administrator’s notice of denial, must file with the Plan Administrator a written request for review.
|
|
7.2.2
|
Additional Submissions — Information Access. The
claimant shall then have the opportunity to submit written comments, documents, records and other information relating to the claim. The Plan Administrator shall also provide the claimant, upon request and free of charge, reasonable access
to, and copies of, all documents, records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits.
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|
7.2.3
|
Considerations on Review. In considering the review,
the Plan Administrator shall take into account all materials and information the claimant submits relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.
|
|
7.2.4
|
Timing of Plan Administrator Response. The Plan
Administrator shall respond in writing to such claimant within sixty (60) days after receiving the request for review. If the Plan Administrator determines that special circumstances require additional time for processing the claim, the
Plan Administrator can extend the response period by an additional sixty (60) days by notifying the claimant in writing, prior to the end of the initial sixty (60) day period, which an additional period is required. The notice of extension
must set forth the special
circumstances and the date by which the Plan Administrator expects to render its decision.
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|
7.2.5
|
Notice of Decision. The Plan Administrator shall
notify the claimant in writing of its decision on review. The Plan Administrator shall write the notification in a manner calculated to be understood by the claimant. The notification shall set forth:
|
|
(a)
|
The specific reasons for the denial;
|
|
(b)
|
A reference to the specific provisions of this Agreement on which the denial is based;
|
|
(c)
|
A statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents,
records and other information relevant (as defined in applicable ERISA regulations) to the claimant’s claim for benefits; and
|
|
(d)
|
A statement of the claimant’s right to bring a civil action under ERISA Section 502(a).
|
7.3 Disability Claims Procedure.
|
7.3.1 |
Each person having or claiming an interest in this Agreement shall have the right to submit a claim with respect to a benefit under this Section 7.3 if the benefit is
Disability-related or under Section 7.1 if not Disability-related. Such claim shall be in writing addressed to the Bank and shall be delivered personally or by certified or registered mail, return receipt requested. The claim shall state with
particularity:
|
|
(b)
|
the provisions of the Agreement upon which the claimant relies in support of his claim; and
|
|
(c)
|
all facts believed to be relevant in connection with such claim.
|
Within forty-five (45) days from receipt of the claim, a decision on the merits thereof shall be reached and communicated to the
claimant. An extension of up to thirty (30) days beyond the initial 45-day period may be made if the Bank determines that such extension of time is required. Failure to so notify the claimant shall be deemed to be a denial of the claim.
|
7.3.2 |
In the event that the decision amounts to a denial of the claim in whole or in part, such decision shall be in writing, written in a culturally and linguistically
appropriate manner, addressed to the claimant and shall be delivered personally or by certified or registered mail, return receipt requested, setting forth the following:
|
|
(a)
|
the reason or reasons for rejection of the claim;
|
|
(b)
|
the particular provisions of the Agreement relied upon in reaching such adverse benefit determination and including specific internal rules,
guidelines, protocols, standards or other similar criteria of the Agreement relied upon in making the adverse benefit determination;
|
|
(c)
|
a description of any additional information needed from the claimant to perfect such claim and the reason as to why such additional information
is needed;
|
|
(d)
|
a statement outlining the review procedure available hereunder; and
|
|
(e)
|
a discussion of the decision, including an explanation of the basis for disagreeing with or not following:
|
|
(i)
|
the views presented by the claimant to the Bank of health care professionals treating the claimant and vocational professionals who evaluated the
claimant;
|
|
(ii)
|
the view of medical or vocational experts whose advice was obtained on behalf of the Bank in connection with a claimant’s adverse benefit
determination, without regard to whether the advice was relied upon in making the benefit determination; and
|
|
(iii)
|
a disability determination regarding the claimant presented by the claimant to the Bank and made by the Social Security Administration.
|
The decision will include a statement as to whether or not an internal rule, guideline, protocol, or other similar criterion was relied
upon in making the adverse benefit determination, and if so relied upon, either the specific rule, guideline, protocol, or other similar criterion shall be provided to the claimant free of charge, or the claimant shall be informed that such rule,
guideline, protocol, or other criterion shall be provided free of charge upon request. If the adverse benefit determination is based on an exclusion or limit (such as a medical necessity requirement or an experimental treatment exclusion), the
claimant shall be provided with an explanation of the scientific or clinical judgment, applying the terms of the Agreement to the claimant’s circumstances, or the claimant shall be informed that such explanation shall be provided free of charge upon
request.
The decision will include a statement that the claimant is entitled to receive (free of charge) copies of all documents, records, and
other information relevant to the claimant’s claim for benefits.
|
7.3.3 |
Where a claim has been rejected, or where the claimant has not received notice of a decision as provided under Section 7.3.2 within the forty-five (45) day period (and
any extension thereof) specified in Section 7.3.2, the claimant shall have the right, within forty-five (45) days after either the date he receives the notice that his claim has been rejected in whole or in part or the last day of the
forty-five (45) day period if he received no notice (provided that this shall not release the Bank from the duty to give such notice):
|
|
(a)
|
to appeal therefrom by delivering a written request to the Bank, either personally or by certified or registered mail, return receipt requested;
|
|
(b)
|
to request pertinent documents; and
|
|
(c)
|
to submit issues and comments in writing.
|
|
7.3.4 |
The Bank shall fully and fairly review the claim and shall have complete discretion to render a decision with respect to the merits of the claim and a notice of the
decision, written in a culturally and linguistically appropriate manner, shall be delivered personally or by certified or registered mail, return receipt requested, to the claimant. The entire review will be completed within a 45-day period.
An extension of up to forty-five (45) days beyond the initial 45-day period may be made if the Bank determines that such extension of time is required. The decision shall include:
|
|
(a)
|
the specific reason or reasons for the adverse benefit determination;
|
|
(b)
|
reference to the specific Agreement provisions on which the benefit determination is based;
|
|
(c)
|
a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents,
records, and other information relevant to the claimant’s claim for benefits;
|
|
(d)
|
a statement of the claimant’s right to bring an action under Section 502(a) of ERISA and a description of any applicable contractual limitations
period that applies to the claimant’s right to bring to such an action, including the calendar date on which the contractual limitations period expires for the claim;
|
|
(e)
|
a discussion of the decision, including an explanation of the basis for disagreeing with or not following:
|
|
(i)
|
the views presented by the claimant to the Bank of health care professionals and vocational professionals who evaluated the claimant;
|
|
(ii)
|
the views of medical or vocational experts whose advice was obtained on behalf of the Bank in connection with a claimant’s adverse benefit
determination, without regard to whether the advice was relied upon in making the benefit determination; and
|
|
(iii)
|
a disability determination regarding the claimant presented by the claimant to the Bank and which was made by the Social Security Administration.
|
If a claim is denied due to medical judgment, the reviewer will consult with a healthcare professional who has appropriate training and
experience in the field of medicine involved in the medical judgment. The healthcare professional consulted will not be the same person consulted in connection with the initial benefit decision (nor be the subordinate of that person). The decision on
review also will identify any medical or vocational experts who advised the reviewer in connection with the benefit decision, even if the advice was not relied upon in making the decision. The decision will include a statement as to whether or not an
internal rule, guideline, protocol, or other similar criterion was relied upon in making the adverse benefit determination, and if so relied upon, either the specific rule, guideline, protocol, or other similar criterion shall be provided to the
claimant free of charge, or the claimant shall be informed that such rule, guideline, protocol, or other criterion shall be provided free of charge upon request. If the adverse benefit determination is based on an exclusion or limit (such as medical
necessity requirement or an experimental treatment exclusion), the claimant shall be provided with an explanation of the scientific or clinical judgment, applying the terms of the Agreement to the claimant’s circumstances, or the claimant shall be
informed that such explanation shall be provided free of charge upon request.
Notwithstanding the foregoing, the Bank will provide the claimant, prior to issuing an adverse benefit determination on appeal, any new
or additional evidence or any new or additional rationale considered, relied upon, or generated by the Bank, an insurer, or other person making the benefit determination in connection with the claim sufficiently in advance of the date of
determination to provide the claimant a reasonable opportunity to respond.
|
7.3.5 |
If the claimant believes the Bank has failed to adhere to the requirements of this section with respect to his claim, and that the claimant should be relieved of any
duty to exhaust all administrative remedies, then the claimant may request a written explanation of the violation from the Bank, to be provided by the Bank within ten (10) days of receipt of the request.
|
|
7.3.6 |
For purpose of this Section 7.3 and Sections 7.1 and 7.2, the term “adverse benefit determination” has the meaning provided under the applicable law or regulation.
|
Article 8
Amendments and Termination
|
8.1
|
Amendments. This Agreement may be amended only by a
written agreement signed by the Bank and the Executive. However, the Bank may unilaterally amend this Agreement to conform with written directives to the Bank from its auditors or banking regulators or to comply with legislative changes or
tax law, including without limitation Code Section 409A.
|
|
8.2
|
Plan Termination Generally. This Agreement may be
terminated only by a written agreement signed by the Bank and the Executive. The benefit shall be the Accrual Balance as of the date this Agreement is terminated. Except as provided in Section 8.3, the termination of this Agreement shall
not cause a distribution of benefits under this Agreement. Rather, upon such termination benefit distributions will be made at the earliest distribution event permitted under Article 2 or Article 3.
|
|
8.3
|
Plan Terminations Under Code Section 409A.
Notwithstanding anything to the contrary in Section 8.2, if the Bank terminates this Agreement in the following circumstances:
|
|
(a) |
Simultaneously with or within twelve (12) months after a Change in Control, provided that all distributions are made no later than twelve (12) months following such
termination of this Agreement and further provided that all the Bank’s arrangements which are substantially similar to this Agreement are terminated so the Executive and all participants in the similar arrangements are required to receive all
amounts of compensation deferred under the terminated arrangements within twelve (12) months of such termination. Upon such a termination, the Bank shall distribute the benefit set forth in Section 2.4 to the Executive in a lump sum subject
to the above terms; or
|
|
(b)
|
Upon the Bank’s dissolution or with the approval of a bankruptcy court provided that the amounts deferred under this Agreement are included in
the Executive’s gross income in the latest of (i) the calendar year in which this Agreement 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 practical. Upon such a termination, the Bank shall distribute the Accrual Balance, determined as of the date of the termination of this Agreement, to the Executive in a lump sum subject to the
above terms; or
|
|
(c)
|
Upon the Bank’s termination of this and all other arrangements that would be aggregated with this Agreement pursuant to Treasury Regulations
Section 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) all
termination distributions are made no earlier than twelve (12) months and no later than twenty-four (24) months following such termination, and (iii) 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 Agreement. Upon such a termination, the Bank shall distribute the Accrual Balance, determined as of the date of the
termination of this Agreement, to the Executive in a lump sum subject to the above terms.
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Article 9
Miscellaneous
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9.1
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Binding Effect. This Agreement shall bind the
Executive and the Bank and their beneficiaries, survivors, executors, administrators and transferees.
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9.2
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No Guarantee of Employment. This Agreement is not a
contract for employment. It does not give the Executive the right to remain as an employee of the Bank nor interfere with the Bank’s right to discharge the Executive. It does not require the Executive to remain an employee nor interfere
with the Executive’s right to terminate employment at any time.
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9.3
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Non-Transferability. Benefits under this Agreement
cannot be sold, transferred, assigned, pledged, attached or encumbered in any manner.
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9.4
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Tax Withholding and Reporting. The Bank shall withhold
any taxes that are required to be withheld, including but not limited to taxes owed under Code Section 409A from the benefits provided under this Agreement. The Executive acknowledges that the Bank’s sole liability regarding taxes is to
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forward any amounts withheld to the appropriate taxing authorities. The Bank shall satisfy all applicable reporting requirements,
including those under Code Section 409A.
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9.5
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Applicable Law. This Agreement and all rights
hereunder shall be governed by the laws of the State of New York, except to the extent preempted by the laws of the United States of America.
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9.6
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Unfunded Arrangement. The Executive and the
Beneficiary are general unsecured creditors of the Bank for the distribution of benefits under this Agreement. The benefits represent the mere promise by the Bank to distribute such benefits. The rights to benefits are not subject in any
manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, attachment or garnishment by creditors. Any insurance on the Executive’s life or other informal funding asset is a general asset of the Bank to which the
Executive and Beneficiary have no preferred or secured claim.
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9.7
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Reorganization. The Bank shall not merge or
consolidate into or with another bank, or reorganize, or sell substantially all of its assets to another bank, firm or person unless such succeeding or continuing bank, firm or person agrees to assume and discharge the obligations of the
Bank under this Agreement. Upon the occurrence of such an event, the term “Bank” as used in this Agreement shall be deemed to refer to the successor or survivor entity.
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9.8
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Entire Agreement. This Agreement constitutes the
entire agreement between the Bank and the Executive as to the subject matter hereof. No rights are granted to the Executive by virtue of this Agreement other than those specifically set forth herein.
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9.9
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Interpretation. Wherever the fulfillment of the intent
and purpose of this Agreement requires and the context will permit, the use of the masculine gender includes the feminine and use of the singular includes the plural.
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9.10
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Alternative Action. In the event it shall become
impossible for the Bank or the Plan Administrator to perform any act required by this Agreement due to regulatory or other constraints, the Bank or Plan Administrator may perform such alternative act as most nearly carries out the intent
and purpose of this Agreement and is in the best interests of the Bank, provided that such alternative act does not violate Code Section 409A.
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9.11
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Headings. Article and section headings are for
convenient reference only and shall not control or affect the meaning or construction of any provision herein.
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9.12
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Validity. If any provision of this Agreement shall be
illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining parts hereof, but this Agreement shall be construed and enforced as if such illegal or invalid provision had never been included herein.
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9.13
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Notice. Any notice or filing required or permitted to
be given to the Bank or Plan Administrator under this Agreement shall be sufficient if in writing and hand-delivered or sent by registered or certified mail to the address below:
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Lake Shore Savings Bank
128 East Fourth Street
Dunkirk, New York 14048
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Such notice shall be deemed given as of the date of delivery or, if delivery is made by mail, as of the date shown
on the postmark on the receipt for registration or certification.
Any notice or filing required or permitted to be given to the Executive under this Agreement shall be sufficient if in writing and
hand-delivered or sent by mail to the last known address of the Executive.
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9.14
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Deduction Limitation on Benefit Payments. If the Bank
reasonably anticipates that the Bank’s deduction with respect to any distribution under this Agreement would be limited or eliminated by application of Code Section 162(m), then to the extent deemed necessary by the Bank to ensure that the
entire amount of any distribution from this Agreement is deductible, the Bank may delay payment of any amount that would otherwise be distributed under this Agreement. The delayed amounts shall be distributed to the Executive (or the
Beneficiary in the event of the Executive’s death) at the earliest date the Bank reasonably anticipates that the deduction of the payment of the amount will not be limited or eliminated by application of Code Section 162(m).
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9.15
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Compliance with Section 409A. Each payment made under Section 2 shall be treated as a “separate payment”, as defined in Treasury Regulation 1.409A-2(b)(2), for purposes of Code Section 409A. None of the
payments under this Agreement are intended to result in an inclusion in Executive’s federal gross income on account of a failure under Section 409A(a)(1) of the Code. The parties intend to administer and interpret this Agreement to carry
out such intentions. However, the Bank does not represent, warrant or guarantee that any payments that may be made pursuant to this Agreement will not result in inclusion in the Executive’s gross income, or any penalty, pursuant to Section
409A(a)(1) of the Code or any similar state statute or regulation.
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IN WITNESS WHEREOF, the Executive and a duly authorized representative of the Bank have signed this Agreement.
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EXECUTIVE
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LAKE SHORE SAVINGS BANK
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/s/ Kim Liddell
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By:
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/s/ Kevin M. Sanvidge
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Kim Liddell
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Title:
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Chairman of the Board
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