EMPLOYMENT AGREEMENT

Exhibit 10.2

E MPLOYMENT A GREEMENT

This E MPLOYMENT A GREEMENT (the “Agreement”) is made and entered into as of                      , 2005 by and between L AKE S HORE S AVINGS B ANK , a federally-chartered savings bank having an office at 128 East 4 ^th Street, Dunkirk, New York 14048 (the “Bank”) and D AVID C. M ANCUSO , an individual residing at [                            ] (the “Executive”).

I NTRODUCTORY S TATEMENT

The Bank has reorganized from a New York-chartered mutual savings and loan association to a federally-chartered stock savings bank and has become a wholly-owned subsidiary of L AKE S HORE B ANCORP , I NC ., a federally-chartered corporation and a mid-tier stock holding company having an office at 128 East 4 ^th Street, Dunkirk, New York 14048 (the “Company”), which is majority owned by L AKE S HORE , MHC , a mutual holding company (the “Reorganization”). In connection with the Reorganization, certain shares of the Company’s common stock were sold in an initial public stock offering. The Executive has served the Bank in an executive capacity for many years and is familiar with the Bank’s operations.

The Board of Directors of the Bank has concluded that it is in the best interests of the Bank and their prospective shareholders to secure a continuity in management following the Reorganization. They also consider it desirable to establish a working environment for the Executive which minimizes the personal distractions that might result from possible business combinations in which the Bank might be involved. For these reasons, the Board of Directors of the Bank has decided to offer to enter into a contract with the Executive for his future services. The Executive has accepted this offer.

The terms and conditions which the Bank and the Executive have agreed to are as follows.

A GREEMENT

The Bank hereby continues to employ the Executive, and the Executive hereby accepts such continued employment, during the period and upon the terms and conditions set forth in this Agreement.

(a) The Bank shall employ the Executive during an initial period of three (3) years beginning on the effective date of the Reorganization (the “Employment Commencement Date”) and ending on the day before the third (3 ^rd ) anniversary of the Employment Commencement Date, and during the period of any additional extensions described in section 2(b) (the “Employment Period”).

(b) The Board of Directors of the Bank shall conduct an annual review of the Executive’s performance on or about each anniversary of the Employment Commencement Date (each, an “Anniversary Date”) and may, on the basis of such review and by written notice to the Executive, offer to extend the Employment Period through the day before the third (3 ^rd ) anniversary of the relevant Anniversary Date. In such event, the Employment Period shall be deemed extended in the absence of objection from the Executive by written notice to the Bank given within ten (10) business days after his receipt of the Bank’s offer of extension.

(c) Except as otherwise expressly provided in this Agreement, any reference in this Agreement to the term “Remaining Unexpired Employment Period” as of any date shall mean the period beginning on such date and ending on the day before the third (3 ^rd ) anniversary of the Employment Commencement Date or, if later, on the day before the third (3 ^rd ) anniversary of the last Anniversary Date as of which the Employment Period was extended pursuant to section 2(b).

(d) Nothing in this Agreement shall be deemed to prohibit the Bank from terminating the Executive’s employment before the end of the Employment Period with or without notice for any reason. This Agreement shall determine the relative rights and obligations of the Bank and the Executive in the event of any such termination. In addition, nothing in this Agreement shall require the termination of the Executive’s employment at the expiration of the Employment Period. Any continuation of the Executive’s employment beyond the expiration of the Employment Period shall be on an “at-will” basis unless the Bank and the Executive agree otherwise.

The Executive shall serve as Chief Executive Officer and President of the Bank, having such power, authority and responsibility and performing such duties as are prescribed by or under the Bank’s By-Laws and as are customarily associated with such positions. The Executive shall devote his full business time and attention (other than during weekends, holidays, approved vacation periods, and periods of illness or approved leaves of absence) to the business and affairs of the Bank and shall use his best efforts to advance their respective best interests.

In consideration for the services to be rendered by the Executive hereunder, the Bank shall pay to him a salary at an initial annual rate of TWO HUNDRED THIRTEEN THOUSAND FIVE HUNDRED FIFTY DOLLARS ($213,550), payable in approximately equal installments in accordance with their respective customary payroll practices for senior officers. The Bank’s Board of Directors shall review the Executive’s annual rate of salary at such times during the Employment Period as it deems appropriate, but not less frequently than once every twelve (12) months, and may, in its discretion, approve a salary increase. In addition to salary, the Executive may receive other cash compensation from the Bank for services hereunder at such times, in such amounts and on such terms and conditions as the Board of Directors of the Bank may determine.

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During the Employment Period, the Executive shall be treated as an employee of the Bank and shall be entitled to participate in and receive benefits under any and all qualified or non-qualified retirement, pension, savings, profit-sharing or stock bonus plans, any and all group life, health (including hospitalization, medical and major medical), dental, accident and long-term disability insurance plans, and any other employee benefit and compensation plans (including, but not limited to, any incentive compensation plans or programs, stock option and appreciation rights plans and restricted stock plans) as may from time to time be maintained by, or cover employees of, the Bank, in accordance with the terms and conditions of such employee benefit plans and programs and compensation plans and programs and consistent with the Bank’s customary practices.

(a) To the maximum extent permitted under applicable law, during the Employment Period and for a period of six years thereafter, the Bank shall cause the Executive to be covered by and named as an insured under any policy or contract of insurance obtained by them to insure their directors and officers against personal liability for acts or omissions in connection with service as an officer or director of the Company or the Bank or service in other capacities at their request. The coverage provided to the Executive pursuant to this section 6 shall be of the same scope and on the same terms and conditions as the coverage (if any) provided to other officers or directors of the Bank.

(b) To the maximum extent permitted under applicable law, during the Employment Period and for a period of six years thereafter, the Bank shall indemnify the Executive against and hold him harmless from any costs, liabilities, losses and exposures to the fullest extent and on the most favorable terms and conditions that similar indemnification is offered to any director or officer of the Bank or any subsidiary or affiliate thereof.

The Executive may serve as a member of the boards of directors of such business, community and charitable organizations as he may disclose to and as may be approved by the Board of Directors of the Bank (which approval shall not be unreasonably withheld); provided, however, that such service shall not materially interfere with the performance of his duties under this Agreement nor shall it violate any applicable laws or regulations. The Executive may also engage in personal business and investment activities which do not materially interfere with the performance of his duties hereunder; provided, however , that such activities are not prohibited under any code of conduct or investment or securities trading policy established by the Bank and generally applicable to all similarly situated executives and that such activities are not prohibited by any applicable laws or regulations.

The Executive’s principal place of employment shall be at the Bank’s executive offices at the address first above written, or at such other location as the Bank and the Executive may mutually agree upon. The Bank shall provide the Executive at his principal place of

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employment with a private office, secretarial services and other support services and facilities suitable to his positions with the Bank and necessary or appropriate in connection with the performance of his assigned duties under this Agreement. The Bank shall reimburse the Executive for his ordinary and necessary business expenses, including, without limitation, fees for memberships in such clubs and organizations that are necessary and appropriate for business purposes as mutually agreed by the Company and the Executive, and his travel and entertainment expenses incurred in connection with the performance of his duties under this Agreement, in each case only if such expenses are presented and approved in accordance with the Bank’s business reimbursement policy then in effect.

The Executive’s employment with the Bank shall terminate, automatically and without any further action on the part of any party to this Agreement, on the date of the Executive’s death. In such event:

(a) The Bank shall pay to the Executive’s estate his earned but unpaid compensation (including, without limitation, salary and all other items which constitute wages under applicable law) as of the date of his termination of employment. This payment shall be made at the time and in the manner prescribed by law applicable to the payment of wages but in no event later than thirty (30) days after the date of the Executive’s termination of employment.

(b) The Bank shall provide the benefits, if any, due to the Executive’s estate, surviving dependents or his designated beneficiaries under the employee benefit plans and programs and compensation plans and programs maintained for the benefit of the officers and employees of the Bank. The time and manner of payment or other delivery of these benefits and the recipients of such benefits shall be determined according to the terms and conditions of the applicable plans and programs.

The payments and benefits described in sections 9(a) and (b) shall be referred to in this Agreement as the “Standard Termination Entitlements.”

The Bank may terminate the Executive’s employment upon a determination, by vote of a majority of the members of the Board of Directors of the Bank, acting in reliance on the written advice of a medical professional acceptable to them, that the Executive is suffering from a physical or mental impairment which, at the date of the determination, has prevented the Executive from performing his assigned duties on a substantially full-time basis for a period of at least one hundred and eighty (180) days during the period of one (1) year ending with the date of the determination or is likely to result in death or prevent the Executive from performing his assigned duties on a substantially full-time basis for a period of at least one hundred and eighty (180) days during the period of one (1) year beginning with the date of the determination. In such event:

(a) The Bank shall pay and deliver to the Executive (or in the event of his death before payment, to his estate and surviving dependents and beneficiaries, as applicable) the Standard Termination Entitlements.

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(b) In addition to the Standard Termination Entitlements, the Bank shall continue to pay the Executive his base salary, at the annual rate in effect for him immediately prior to the termination of his employment, during a period ending on the earliest of: (i) the expiration of one hundred and eighty (180) days after the date of termination of his employment; (ii) the date on which long-term disability insurance benefits are first payable to him under any long-term disability insurance plan covering employees of the Bank (the “LTD Eligibility Date”); (iii) the date of his death; and (iv) the expiration of the Remaining Unexpired Employment Period (the “Initial Continuation Period”). If the end of the Initial Continuation Period is neither the LTD Eligibility Date nor the date of his death, the Bank shall continue to pay the Executive his base salary, at an annual rate equal to sixty percent (60%) of the annual rate in effect for him immediately prior to the termination of his employment, during an additional period ending on the earliest of the LTD Eligibility Date, the date of his death and the expiration of the Remaining Unexpired Employment Period.

A termination of employment due to disability under this section 10 shall be effected by joint notice of termination given to the Executive by the Bank and shall take effect on the later of the effective date of termination specified in such notice or the date on which the notice of termination is deemed given to the Executive.

(a) The Bank may terminate the Executive’s employment during the Employment Period, and such termination shall be deemed to have occurred with “Cause”, only if:

(i) the Board of Directors of the Bank, by majority vote of their entire membership, determine that the Executive should be discharged because of personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, intentional failure to perform stated duties, willful violation of any law, rule or regulation (other than traffic violations or similar offenses) or final cease and desist order, or any material breach of this Agreement; and

(ii) at least forty-five (45) days prior to the votes contemplated by section 11(a)(i), the Bank has provided the Executive with notice of its intent to discharge the Executive for Cause, detailing with particularity the facts and circumstances which are alleged to constitute Cause (the “Notice of Intent to Discharge”); and

(iii) after the giving of the Notice of Intent to Discharge and before the taking of the votes contemplated by section 11(a)(i), the Executive (together with his legal counsel, if he so desires) is afforded a reasonable opportunity to make both written and oral presentations before the Board of Directors of the Bank for the purpose of refuting the alleged grounds for Cause for his discharge; and

(iv) after the votes contemplated by section 11(a)(i), the Bank has furnished to the Executive a notice of termination which shall specify the effective date of his termination of employment (which shall in no event be earlier than the date on which such notice is deemed given) and include a copy of a resolution or resolutions

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adopted by the Board of Directors of the Bank certified by its corporate secretary and signed by each member of the Board of Directors voting in favor of adoption of the resolution(s), authorizing the termination of the Executive’s employment with Cause and stating with particularity the facts and circumstances found to constitute Cause for his discharge (the “Final Discharge Notice”).

(b) If the Executive is discharged during the Employment Period with Cause, the Bank shall pay and provide to him (or, in the event of his death, to his estate, his surviving beneficiaries and his dependents) the Standard Termination Entitlements only. Following the giving of a Notice of Intent to Discharge, the Bank shall temporarily suspend the Executive’s duties and authority and, in such event, shall also suspend the payment of salary and other cash compensation, but not the Executive’s participation in retirement, insurance and other employee benefit plans. If the Executive is not discharged, or is discharged without Cause, within forty-five (45) days after the giving of a Notice of Intent to Discharge, payments of salary and cash compensation shall resume, and all payments withheld during the period of suspension shall be promptly restored. If the Executive is discharged with Cause not later than forty-five (45) days after the giving of the Notice of Intent to Discharge, all payments withheld during the period of suspension shall be deemed forfeited and shall not be included in the Standard Termination Entitlements. If the Bank does not give a Final Discharge Notice to the Executive within ninety (90) days after giving a Notice of Intent to Discharge, the Notice of Intent to Discharge shall be deemed withdrawn and any future action to discharge the Executive with Cause shall require the giving of a new Notice of Intent to Discharge.

The Bank may discharge the Executive at any time during the Employment Period and, unless such discharge constitutes a discharge with Cause:

(a) The Bank shall pay and deliver to the Executive (or in the event of his death before payment, to his estate and surviving dependents and beneficiaries, as applicable) the Standard Termination Entitlements.

(b) During the Remaining Unexpired Employment Period, the Bank shall provide for the Executive and his dependents continued group life, health (including hospitalization, medical and major medical), dental, accident and long-term disability insurance benefits on substantially the same terms and conditions (including any required premium-sharing arrangements, co-payments and deductibles) in effect for similarly situated employees of the Bank. The c