SUPPLEMENTAL EXECUTIVE RETIREMENT AGREEMENT
FOR ANTHONY J. LABOZZETTA

This Supplemental Executive Retirement Agreement (the “Agreement”) is made this
20th day of July, 2011, by and between Sussex Bancorp, an Employer having its
principal place of business at Franklin, New Jersey (the “Employer”) and Anthony
J. Labozzetta (the “Participant”).

1.
Nature and Purpose of Agreement The Participant currently serves as the Chief
Executive Officer of the Employer and the Employer hereby wishes to provide the
Participant with an incentive-driven deferred compensation vehicle that will
provide him the opportunity to accumulate significant retirement funds in the
event the Participant achieves the specified goals and meets the requirements
set forth herein. The Agreement hereinafter set forth is intended to conform to
the requirements of Section 409A.

2.
Definitions  The following definitions shall apply:

 
(a)
“Account” shall mean the Participant’s interest in the Agreement as represented
by the sum of the amounts described in Paragraphs (i) and (ii):

(i)       the sum of the Employer contributions made in accordance with Section
3;

(ii) the sum of the interest credited to the amounts specified under Paragraph
(i) in accordance with Section 4.

 
(b)
“Agreement Year” shall mean the Fiscal Year that commences on the Effective Date
and each Fiscal Year thereafter.

 
(c)
“Beneficiary” shall mean the beneficiary or beneficiaries designated by the
Participant in writing prior to his death or, failing such designation, the
Participant’s estate.

 
(d)
“Board” shall mean the Board of Directors of the Employer.

 
(e)
“Bona Fide Leave of Absence” shall mean a leave of absence for which there shall
be a reasonable expectation that the employee shall return to perform services
for the Employer. If the period of leave exceeds six months and the individual
does not retain a right to reemployment under an applicable statute or by
contract, the employment relationship shall be deemed to terminate on the first
date immediately following such six-month period. Notwithstanding the foregoing,
where a leave of absence shall be due to 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 six months, where such impairment
causes the employee to be unable to perform the duties of his or her position of
employment or any substantially similar position of employment, a 29-month
period of absence may be substituted for such six-month period.

 
(f)
“Cause” shall mean

 
 
 

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(i)
intentional and egregious neglect of duty or dishonesty by the Participant;

 
(ii)
any act of fraud, embezzlement or theft by the Participant;

 
(iii)
indictment of a felony by the Participant if such felony is in connection with a
crime against the Employer; or

 
 
(iv)
conviction of a felony by the Participant if such felony is in connection with a
crime not related to the Employer.

 
 
(g)
“Code” shall mean the Internal Revenue Code of 1986, as amended from time.

 
(h)
“Committee" shall mean the Board or the person or persons appointed by the Board
to administer the Plan.

 
(i)
“Controlled or Affiliated Service Group” shall mean

(i) 
"Controlled Group" - Any group of business entities under common control,
including but not limited to proprietorships and partnerships, or a controlled
group of corporations within the meaning of Sections 414(b), (c) and (o) of the
Code.

(ii) 
"Affiliated Service Group" - Any group of business entities within the meaning
of Section 414(m) of the Code.

 
(j)
“Disability” shall mean any medically determinable physical or mental impairment
which:

 
(i)
causes the Participant to be unable to engage in any substantial gainful
activity and can be expected to result in death or can be expected to last for a
continuous period of not less than 12 months; or

 
 
(ii)
can be expected to result in death or can be expected to last for a continuous
period of not less than 12 months and for which the Participant is receiving
income replacement benefits for a period of not less than three months under an
accident and health plan covering employees of the Employer.

 
 
The Participant shall be deemed to have incurred a Disability if determined to
be totally disabled by the Social Security Administration or if determined to be
disabled in accordance with a disability insurance program, provided that the
definition of disability applied under such disability insurance program
complies with the requirements of the foregoing Paragraphs (i) or (ii).

 
(k)
“Effective Date” shall mean January 1, 2011.

 
(l)
“Employer and its Affiliates” shall mean the Employer and any other business
entity in a Controlled or Affiliated Service Group which includes the Employer.

(m)
“Fiscal Year” shall mean the Employer’s fiscal year, which begins on each
January 1 and ends on the subsequent December 31.

 
 
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(n)
“Incentive Plan” shall mean the Employer’s Executive Incentive Compensation
Plan.

    
 
(o)
“Normal Retirement Date” shall mean the first day of any month coinciding with
or next following the date the Participant attains age 65.

 
(p)
“Resignation for Good Reason” shall mean the Participant’s resignation from the
Employer, provided that

 
(i)
the Participant is not in breach of his employment agreement with the Employer;

 
(ii)
the resignation is being tendered in response to the Employer (A) reassigning
the Participant to a position of lesser rank or status than Chief Executive
Officer, (B) relocating the Participant’s principal place of employment by more
than fifty miles from its location on the date hereof, or (C) reducing the
Participant’s compensation or other benefits below the level specified in the
Participant’s employment agreement.

 
(iii)
upon the occurrence of any of the events specified in Paragraph (ii), the
Participant provides the Employer with written notice of his intention to resign
within thirty days of the applicable event.

 
(q)
“Salary” shall mean the Participant’s base salary and shall not include any
bonuses, incentive pay, fringe benefits or any other special forms of
compensation.

 
(r)
“Section 409A” shall mean Section 409A of the Code, as the same may be amended
from time to time, and any successor statute to such section of the Code.
References to Section 409A or any requirement under Section 409A, as the same
may be interpreted, construed or applied to this Agreement at any particular
time, shall be deemed to mean and include, to the extent then applicable and
then in force and effect (but not to the extent overruled, limited or
superseded), published rulings and similar announcements issued by the Internal
Revenue Service under or interpreting Section 409A, regulations issued by the
Secretary of the Treasury under or interpreting Section 409A, decisions by any
court of competent jurisdiction involving a Participant or a beneficiary and any
closing agreement made under Section 7121 of the Code that shall be approved by
the Internal Revenue Service and involves a Participant, all as determined by
the Committee in good faith, which determination may (but shall not be required
to) be made in reliance on the advise of such tax counsel or other tax
professional(s) with whom the Committee from time to time may elect to consult
with respect to any such matter.

 
(s)
“Specified Employee” shall mean a Participant who, as of the date of the
Participant’s Termination of Employment, is a key employee of an Employer and
its Affiliates any stock of which is “publicly traded on an established
securities market” or otherwise. For purposes of this Paragraph (s), a
Participant is a key employee if the Participant 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 12-month period

 
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ending on a Specified Employee identification date. If a Participant is a key
employee as of a Specified Employee identification date, the Participant shall
be treated as a Specified Employee for purposes of this paragraph (s) for the
entire 12-month period beginning on the Specified Employee effective date.

  
 
For purposes of this Paragraph (s), the following definitions and rules shall
apply:

 
(i)
Definition of “stock of which is publicly traded on an established securities
market”.  In addition to stock that is traded on established U.S. markets, this
term also includes stock that is publicly traded only on a foreign exchange or
is traded on a U.S. exchange only as American depositary receipts or American
depositary shares (ADRs).

 
(ii)
Definition of compensation. For purposes of identifying a Specified Employee by
applying the requirements of Section 416(i)(1)(A)(i), (ii), and (iii), the
definition of compensation under Section 1.415(c)-2(a) shall be used, applied as
if the Employer and its Affiliates were not using any safe harbor provided in
Section 1.415(c)-2(d), were not using any of the special timing rules provided
in Section 1.415(c)-2(e), and were not using any of the special rules provided
in Section 1.415(c)-2(g). Notwithstanding the foregoing, an Employer and its
Affiliates may elect to use any available definition of compensation under
Section 415 and the regulations thereunder in accordance with the election
requirements set forth in Paragraph (iv) of this section, including any
available safe harbor and any available election under the timing rules or
special rules, provided that the definition shall be applied consistently to all
employees of the Employer and its Affiliates for purposes of identifying
Specified Employees. An Employer and its Affiliates may elect to use such an
alternative definition regardless of whether another definition of compensation
is being used for purposes of a qualified plan sponsored by the Employer and its
Affiliates.  However, once a list of Specified Employees has become effective,
the Employer and its Affiliates cannot change the definition of compensation for
purposes of identifying Specified Employees for the period with respect to which
such list is effective.

 
(iii)
Specified Employee identification date. Unless another date shall be designated
in accordance with the requirements of Paragraphs (iv) and (v) of this section,
the Specified Employee identification date shall be December 31. An Employer and
its Affiliates may designate in accordance with the requirements of Paragraph
(iv) of this Section any other date as the Specified Employee identification
date, provided that an Employer and its Affiliates must use the same Specified
Employee identification date with respect to all nonqualified deferred
compensation plans, and any change to the Specified Employee identification date
may not be effective for a period of at least 12 months. The Employer and its
Affiliates may designate a Specified Employee identification date in each plan
or in a separate document applicable to all plans, provided that the Employer
and its Affiliates shall not be treated as having designated a Specified
Employee identification date before the designation shall be legally binding on
the Employer and its Affiliates and all affected Participants.

 
 
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(iv)
Specified Employee effective date. Unless another date shall be designated in
accordance with the requirements of this Paragraph (iv) and Paragraph (v) of
this section, the Specified Employee effective date shall be the first day of
the fourth month following the Specified Employee identification date. An
Employer and its Affiliates may designate in accordance with the requirements of
this Paragraph (iv) any date following the Specified Employee identification
date as the Specified Employee effective date, provided that such date may not
be later than the first day of the fourth month following the Specified Employee
identification date, and provided further that an Employer and its Affiliates
must use the same Specified Employee effective date with respect to all
nonqualified deferred compensation plans, and any change to the Specified
Employee effective date may not be effective for a period of at least 12 months.
The Employer and its Affiliates may designate a Specified Employee effective
date through inclusion in each plan document or through a separate document
applicable to all plans, provided that the Employer and its Affiliates shall not
be treated as having designated a Specified Employee effective date on any date
before the designation shall be legally binding on the Employer and its
Affiliates and all affected Participants.

 
(v)
Elections affecting the identification of Specified Employees. The elections
described in the foregoing paragraphs of this section are effective only as of
the date that all necessary corporate action has been taken to make such
elections binding for purposes of all affected nonqualified deferred
compensation plans in which the Participants of the Employer and its Affiliates
that would become a Specified Employee due to the application of such election
participate.   In the event the Employer attempts to make an election under one
of the foregoing paragraphs of this section but such election shall be not
binding on all the affected nonqualified deferred compensation plans and applied
consistently to all such Participants, the election shall be not effective and
the rule under the applicable Paragraph that would apply absent an election
shall be applicable for identifying Specified Employees.

 
(t)
“Termination of Employment” shall mean the Participant’s separation from service
from the Employer and its Affiliates determined in accordance with the following
guidelines: whether a separation from service has occurred shall be determined
based on whether the facts and circumstances indicate that the Employer and the
participant reasonably anticipated that no further services would be performed
after a certain date or that the level of bona fide services the participant
would perform after such date (whether as an employee or as an independent
contractor) would permanently decrease to no more than 20 percent of the average
level of bona fide services performed (whether as an employee or an independent
contractor) over the immediately preceding 36-month period (or the full period
of services to the Employer if the participant has been providing services to
the Employer less than 36 months).  Facts and circumstances to be considered in
making this determination include, but are not limited to, whether

 
(i)
the participant continues to be treated as an employee for other purposes (such
as continuation of salary and participation in employee benefit programs);

 
 
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(ii)
similarly situated Participants have been treated consistently, and

 
(iii)
the Participant is permitted, and realistically available, to perform services
for other Companies in the same line of business.

A participant shall be presumed to have separated from service where the level
of bona fide services performed decreases to a level equal to 20 percent or less
of the average level of services performed by the participant during the
immediately preceding 36-month period. A participant shall be presumed not to
have separated from service where the level of bona fide services performed
continues at a level that is 50 percent or more of the average level of service
performed by the participant during the immediately preceding 36-month period.
No presumption applies to a decrease in the level of bona fide services
performed to a level that is more than 20 percent and less than 50 percent of
the average level of bona fide services performed during the immediately
preceding 36-month period. The presumption shall be rebuttable by demonstrating
that the Employer and the participant reasonably anticipated that as of a
certain date the level of bona fide services would be reduced permanently to a
level less than or equal to 20 percent of the average level of bona fide
services provided during the immediately preceding 36-month period or full
period of services provided to the Employer if the participant has been
providing services to the Employer for a period of less than 36 months (or that
the level of bona fide services would not be so reduced).  For purposes of this
Paragraph, for periods during which an participant is on a paid Bona Fide Leave
of Absence and has not otherwise terminated employment, the participant shall be
treated as providing bona fide services at a level equal to the level of
services that the participant would have been required to perform to receive the
compensation paid with respect to such leave of absence. Periods during which a
participant is on an unpaid Bona Fide Leave of Absence and has not otherwise
terminated employment, are disregarded for purposes of this Paragraph (including
for purposes of determining the applicable 36-month (or shorter) period.

 
(u)
"Year of Plan Participation" shall mean each full Agreement Year during which
Participant is actively employed by the Employer.

 
(v)
"Valuation Date" shall mean the last day of each Agreement Year.

3.
Employer Contributions

(a)       
At the end of each Agreement Year, the Participant’s performance shall be
reviewed using the same performance measures as the Incentive Plan.  For
purposes of this review the following definitions shall be applicable:

(i)     
“Actual ROE” shall mean the actual return on equity for the Employer for the
Agreement Year of reference as determined by the Employer’s Chief Financial
Officer in accordance with generally accepted accounting principles and as
approved by the Board.

(ii)    
“Actual NI” shall mean the actual net income of the Employer for the Agreement
Year of reference as determined by the Employer’s Chief

 
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Financial Officer in accordance with generally accepted accounting principles
and as approved by the Board.

 
(iii)   
“Target ROE” shall mean the budgeted return on equity for the Employer for the
Agreement Year of reference as determined in accordance with Subsection (b).

(iv)  
“Target NI” shall mean the budgeted net income for the Employer for
the Agreement Year of reference as determined in accordance with Subsection (b).

(b)      
Determination of Target Amounts: In accordance with its annual corporate budget
preparation, the Employer shall establish a “Target ROE” and “Target NI” and
communicate such Targets to the Participant in writing during the first calendar
quarter of the Agreement Year of reference.  Once established, such Targets
shall be used to calculate the Participant’s ROE, NI and Overall Performance
Percentages for the Agreement Year of reference in accordance with Subsections
(c), (d) and (e) unless and until new Targets are established as a result of the
Board, in its sole discretion, revising the Employer’s corporate budget during
the course of the Agreement Year.  In the event that such revision occurs, the
new Targets shall be used.

(c)     
Calculation of ROE Performance Percentage:

(i)            
Commencing with 2013 and each year thereafter, the “ROE Performance Percentage”
for the Agreement Year of reference shall equal (A) divided by (B):

 
(A)
the average of the Actual ROE for the Agreement Year of reference and the two
preceding years;

 
(B)
the average of the Target ROE for the Agreement Year of reference and the two
preceding years.

(ii)           
For 2012, the “ROE Performance Percentage” shall equal (A) divided by (B):

 
(A)
the average of the Actual ROE for 2012 and the two preceding years;

 
(B)
the average of the Target ROE for 2012, the Target ROE for 2011 and the Actual
ROE for 2010.

(iii)          
For 2011, the “ROE Performance Percentage” shall equal (A) divided by (B):

 
(A)
the average of the Actual ROE for 2011 and the Actual ROE for 2010;

 
(B)
the average of the Target ROE for 2011 and the Actual ROE for 2010.

 
 
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(d)      
Calculation of NI Performance Percentage: the NI Performance Percentage for the
Agreement Year of reference shall equal (i) divided by (ii):

(i)            
the Actual NI for the Agreement Year of reference;

(ii)           
the Target NI for the Agreement Year of reference.

(e)      
Calculation of the Overall Performance Percentage: the Overall Performance
Percentage for the Agreement Year of reference shall equal the sum of (i) and
(ii):

(i)            
50% of the ROE Performance Percentage for the Agreement Year of reference; plus

(ii)           
50% of the NI Performance Percentage for the Agreement Year of reference.

(f)     
Relationship of Overall Performance Percentage to Contribution Levels: There
shall be separate Contribution Levels for which the Participant may be eligible
depending on his Overall Performance Percentage for the Agreement Year of
reference as follows:

(i)            
if his Overall Performance Percentage for the Agreement Year of reference is
less than 90%, no contribution will be made.

(ii)           
if his Overall Performance Percentage for the Agreement Year of reference is 90%
or more but less than 100%, the Participant will receive a contribution equal to
a percentage of 5% or more but less than 15% of Salary.

Interpolation shall be used to determine the exact contribution percentage
(e.g., an Overall Performance Percentage of 97% shall result in a contribution
of 12% of Salary).

(iii)          
if his Overall Performance Percentage for the Agreement Year of reference
is  100% or more but less than 120%, the Participant will receive a contribution
equal to 15% or more but less than 22% of Salary.

Interpolation shall be used to determine the exact contribution percentage
(e.g., an Overall Performance Percentage of 110% shall result in a contribution
of 18.5% of Salary).

(iv)          
if his Overall Performance Percentage for the Agreement Year of reference is
equal to or greater than 120%, the Participant will receive a contribution equal
to 22% of Salary.

(g)      
The Employer contribution for the Agreement Year of reference determined in
accordance with Sections (a), (b), (c), (d), (e) and (f) shall be allocated to
the Participant’s Account on the last business day of such Agreement Year,
provided he is in the employ of the Employer on such day.  Notwithstanding the
foregoing provision, a Participant shall be entitled to a share of the Employer
contributions for

 
 
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the Agreement Year of (i) his Retirement or death, (ii) the commencement or end
of a Leave of Absence authorized by the Employer or (iii) his transfer to
another business entity to which such Participant had been transferred by the
Employer, even if the Participant is not in the employ of the Employer on the
last business day of such Plan Year.

    
4.
Valuation of Account and Allocation of Earnings and Expenses

(a)      
For purposes of valuing the Participant's Account, deemed investment experience
shall be credited in accordance on each Valuation date with the US 10-year
Treasury Note rate in effect on the first business day of the Agreement Year of
reference.

(b)      
On the basis of the valuation as of a Valuation Date, the Participant’s Account
shall be (i) adjusted to reflect the deemed investment earnings in accordance
with Subsection (a) and (ii) directly adjusted to reflect all other applicable
transactions during the Plan Year attributable to such Account including, but
not limited to, any allocations or distributions.

(c)      
In addition to its allocations, the Employer shall pay all the administrative
expenses of the Plan and all fees and retainers of the Plan's accountants,
counsel, consultant, administrator or other specialist so long as the Plan
remains in effect.

5.
Vesting of Employer Contributions

 
(a)
Upon Normal Retirement

Upon eligibility for Normal Retirement, a Participant shall have a 100% vested
interest in his Account.

 
(b)
Upon Disability

Upon Disability, a Participant shall have a 100% vested interest in his Account.

 
(c)
Upon Death

Upon the death of a Participant prior to Normal Retirement, Disability or other
termination of employment, such Participant's Beneficiary shall be entitled to a
100% vested interest in the Participant's Account.

 
(d)
Upon Other Termination of Employment

(i)           
Subject to Subsections (iii), (iv) and (v), upon the Participant's Termination
of Employment prior to his Normal Retirement, Disability or death, he shall be
entitled to a 100% vested interest in his Account, provided he has completed at
least 10 Years of Plan Participation.

(ii)          
Subject to Subsection (v), upon the Participant's Termination of Employment
prior to his Normal Retirement, Disability or death and before completing at
least 10 Years of Plan Participation, the

 
 
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Participant’s entire Account shall be forfeited, there shall be no benefits
payable and the Employer shall have no further obligations under the Agreement.

  
(iii)         
In the event that a Participant violates the Employer’s “non-compete
provisions”, his entire Account shall be forfeited, there shall be no benefits
payable and the Employer shall have no further obligations under the
Agreement.  For purposes of the Agreement, “non-compete provisions” shall refer
to the non-compete provisions set forth in the Participant’s employment
agreement with the Employer.

(iv)         
In the event that a Participant is terminated by the Employer for Cause; or
within a reasonable time following a Participant’s Termination of Employment
(not to exceed 18 months), the Employer determines that there were facts and
circumstances in existence but unknown at the time of the Participant’s
termination that would have justified the termination of the Participant’s
employment for Cause, and the Employer deems cause to be an adequate reason for
dismissal, such Participant shall not be eligible to receive any benefit under
the Plan.  In the event that a Participant has already received his distribution
from the Plan, then, in addition to any other rights or remedies that the
Employer may have against such former Participant with respect to such
distribution, the Employer shall have the right to use self-help and reduce any
amount otherwise payable by the Employer to the former Participant in order to
recover the amount distributed to the Participant from the Plan.

(v)          
Notwithstanding the foregoing Subjections (i) and (ii) but subject to
Subsections (iii) and (iv), upon the Participant's Termination of Employment

 
(A)
by the Employer without Cause; or

 
(B)
as the result of the Participant’s Resignation for Good Reason

the Participant shall have a 100% vested interest in his Account, regardless of
the number of Years of Plan Participation completed as of the Participant's
Termination of Employment.

 
(e)
Upon Change in Control

Subject to Subsections (d)(iii) and (d)(iv), a Participant shall have a 100%
vested interest in his Account upon a Change in Control of the Employer.   For
purposes of this Paragraph (e), a “Change in Control” shall mean

(i)           
a reorganization, merger, consolidation or sale of all or substantially all of
the assets of the Employer, or a similar transaction,  in any case in which the
holders of the voting stock of the Employer prior to such transaction do not
hold a majority of the voting power of the resulting entity; or

 
 
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(ii)          
individuals who constitute the Incumbent Board (as herein defined) of the
Employer cease for any reason, within a 12 month period, to constitute a
majority thereof; or

(iii)         
Without limitation, a change in control shall be deemed to have occurred at such
time as (i) any "person" (as the term is used in Section 13(d) and 14(d) of the
Exchange Act) other than the Employer or the trustees or any administration of
any employee stock ownership plan and trust, or any other employee benefit
plans, established by Employer from time-to-time in is or becomes a "beneficial
owner" (as defined in Rule 13-d under the Exchange Act) directly or indirectly,
of securities of the Employer representing 35% or more of the Employer's
outstanding securities ordinarily having the right to vote at the election of
directors; or

(iv)         
A tender offer is made for 35% or more of the voting securities of the Employer
and the shareholders owning beneficially or of record 35% or more of the
outstanding securities of the Employer have tendered or offered to sell their
shares pursuant to such tender and such tendered shares have been accepted by
the tender offeror.

For these purposes, "Incumbent Board" means the Board of Directors of the
Employer on the date hereof, provided that any person becoming a director
subsequent to the date hereof whose election was approved by a voting of at
least three-quarters of the directors comprising the Incumbent Board, or whose
nomination for election by members or stockholders was approved by the same
nominating committee serving under an Incumbent Board, shall be considered as
though he were a member of the Incumbent Board.

6.
Form of Payments

(a)         Normal Form of Payment

 
Except as provided in Subsections (b), (c) and the last sentence of
Subsection 7(d)(ii), distribution of the Participant’s Account shall be paid to
the Participant over five years in the form of 60 equal monthly payments.  The
Participant’s vested Account balance as of the commencement date determined in
accordance with Subsection 7(a) shall be actuarially converted to the 60 monthly
payments using the U.S. Treasury rate in effect on the first day of the calendar
year containing the commencement date.  Such conversion shall be performed
without any adjustments for mortality.

 
The Employer may purchase and retain ownership of an annuity from an insurance
company in order to provide for such payments from the Employer to the
Participant.

 
(b)
Lump Sum Cash-Out Threshold

Notwithstanding the foregoing, in the event that the Participant’s Account does
not exceed the applicable dollar amount under Section 402(g)(1)(B) at the time
the benefit is to commence, then the Employer, at its sole discretion, may
direct that
 
 
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such Account be paid to the Participant or to the Participant’s Beneficiary in
lieu of a monthly benefit.  Such lump-sum payment shall result in a complete
settlement of the Participant’s rights under the Plan.  This Subsection (b)
shall only apply if the payment results in the termination and liquidation of
the entirety of the Participant’s interest under the plan, including all
agreements, methods, programs, or other arrangements with respect to which
deferrals of compensation are treated as having been deferred under a single
nonqualified deferred compensation plan under Section 1.409A-1(c)(2).
    
 
(c)
Death Prior to Commencement of Benefits

 
LUMP SUM OPTION

In the event that the Participant dies prior to the commencement of benefits,
distribution of the Participant’s Account shall be paid to his Beneficiary in a
single lump sum.  If the Participant’s Beneficiary predeceases the Participant,
the death benefits shall be payable to the Participant’s estate.

 
INSTALLMENT OPTION

In the event that the Participant dies prior to the commencement of benefits,
distribution of the Participant’s Account shall be paid to his Beneficiary (or
upon the Beneficiary’s death to the Participant’s estate) the over five years in
the form of 60 equal monthly payments determined in the same manner as described
under Subsection 6(a).  Such death benefit shall continue to the Participant’s
Beneficiary (or upon the Beneficiary’s death to the Participant’s estate)
beginning on the first day of the month following the Participant’s death and
continuing until the remaining balance of the 60 monthly payments is made.

 
(d)
Death Subsequent to Commencement of Benefits

In the event that the Participant dies subsequent to the commencement of
benefits but prior to the Participant having received 60 monthly payments, the
payments described in Subsection 6(a) shall continue to the Participant’s
Beneficiary beginning on the first day of the month following the Participant’s
death and continuing until the remaining balance of the 60 monthly payments are
made.  If the Participant is not survived by a Beneficiary or if the Beneficiary
dies before 60 monthly payments are made, payments shall continue to the
Participant’s estate until the remainder of the 60 monthly payments is
distributed.

7.
Time of Payments

 
(a)
Subject to Subsections (b), (c) and (d), the payments described in Section 6,
shall commence to the Participant on the first day of the month following the
later of the Participant’s Termination of Employment or his Normal
Retirement Date.

 
(b)
Notwithstanding the foregoing, in the event that the Employer is publicly-traded
at the time of the Participant’s Termination of Employment and the benefit is
being distributed as a result of the Participant’s Termination of Employment,
payment shall be deferred until the first business day following the six-month
anniversary of the Participant’s Termination of Employment (“Mandatory

 
 
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Deferred Payment Date”), if the Employer determines that such Participant is a
Specified Employee.  In the event that the provisions of the preceding sentence
apply and the provisions of Subsection (b) are not applicable, on his Mandatory
Deferred Payment Date the Participant shall receive retroactive annuity
payments, without interest, to make up for the six-month delay in the starting
date for such payments.

  
Such six-month delay shall not apply in the event that the Participant’s benefit
is being distributed as a result of death or the incurrence of a Disability.

 
(c)
In the event the Participant incurs a Disability, the payments described in
Section 6, shall commence to the Participant on the first day of the month
following such Disability.

 
(d)
In the event of the Participant’s death

 
(i)
prior to the commencement of benefits in accordance with Subsection (a), the
payment described in Subsection 6(c) shall be distributed to the Participant’s
Beneficiary (or, upon the Beneficiary’s death, to the Participant’s estate) on
the first day of the month following his death.

 
(ii)
after the commencement of benefits in accordance with Subsection (a) but prior
to the Participant having received 60 monthly payments, the payments described
in Subsection 6(a) shall continue to the Participant’s Beneficiary beginning on
the first day of the month following his death and continuing until the
remaining balance of the 60 monthly payments are made to the Beneficiary or,
upon the Beneficiary’s death, to the Participant’s estate.

8.
Supplemental Executive Retirement Payments to be Unfunded

Notwithstanding any other provision of this Agreement, the Employer shall not be
required to fund its nonqualified retirement obligations under this Agreement in
any manner, whether by purchase of insurance or endowment contracts, or deposits
to an escrow account, or otherwise; and if the Employer does choose to do so,
then the Participant shall not have any right or interest in such contract,
deposit, or account, but may look only to the Employer’s unsecured promise to
pay in accordance with the provisions of the Agreement.

9.
Interest in Agreement is Nonassignable

 
(a)
Except as otherwise provided in Subsection (b), no right or claim to any benefit
hereunder shall be assignable by any Participant or Beneficiary, nor subject to
garnishment, attachment, execution or levy of any kind and no part of the
amounts payable hereunder or any insurance policy referred to herein shall be
subject to seizure by any creditor of the Participant, his spouse or any other
beneficiary, by a proceeding at law or in equity, and no such benefit shall be
transferable by operation of law in the event of bankruptcy, insolvency or death
of the Participant, his spouse, or any other beneficiary hereunder.  Any attempt
to assign, transfer, pledge, encumber, commute or anticipate payment of benefits
hereunder shall be void.

 
 
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(b)
Notwithstanding Subsection (a), the Agreement shall permit a distribution that
is necessary to

(i)   fulfill a “domestic relations order” as defined in Section 414(b)(1)(B) of
the Code;

(ii)   prevent conflicts of interest as described below:

(A)      
to the extent necessary for any Federal officer or employee in the executive
branch to comply with an ethics agreement with the Federal government.

(B)       
to the extent necessary to avoid the violation of an applicable Federal, state,
local, or foreign ethics law or conflicts of interest law (including where such
payment is reasonably necessary to permit the Participant to participate in
activities in the normal course of his or her position in which the Participant
would otherwise not be able to participate under an applicable rule). A payment
is reasonably necessary to avoid the violation of a Federal, state, local, or
foreign ethics law or conflicts of interest law if the payment is a necessary
part of a course of action that results in compliance with a Federal, state,
local, or foreign ethics law or conflicts of interest law that would be violated
absent such course of action, regardless of whether other actions would also
result in compliance with the Federal, state, local, or foreign ethics law or
conflicts of interest law. For this purpose, a provision of foreign law shall be
considered applicable only to foreign earned income (as defined under Section
911(b)(1) without regard to Section 911(b)(1)(B)(iv) and without regard to the
requirement that the income be attributable to services performed during the
period described in Section 911(d)(1)(A) or (B)) from sources within the foreign
country that promulgated such law.

 
(iii)
pay the Federal Insurance Contributions Act (FICA) tax imposed under Section
3101, Section 3121(a) and Section 3121(v)(2), where applicable, on compensation
deferred under the arrangement (the FICA Amount);

 
(iv)
pay the income tax at source on wages imposed under Section 3401 or the
corresponding withholding provisions of applicable state, local, or foreign tax
laws as a result of the payment of the FICA Amount, and to pay the additional
income tax at source on wages attributable to the pyramiding Section 3401 wages
and taxes.  However, the total payment under Subparagraph (iii) and this
Subparagraph (iv) must not exceed the aggregate of the FICA Amount, and the
income tax withholding related to such FICA Amount; and

 
(v)
pay any taxes due as a result of the Plan failing to meet the requirements of
Section 409A.  Any such payment may not exceed the amount required to be
included in income as a result of the failure to comply with the requirements of
Section 409A.

 
 
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10.
Amendment and Termination  During the lifetime of the Participant, this
Agreement may be amended by the Board at any time or times, in whole or in part,
only by the mutual written agreement of the Participant and the Board.  Although
the Employer expects to continue the Agreement indefinitely, it expressly
reserves the right to terminate it in whole or in part at any time by an
instrument in writing delivered to the Participant, effective on the date
specified in such instrument, provided, however, that the Participant’s accrued
benefit, calculated as of the time of such termination, shall not be reduced
without the Participant’s consent, and shall remain payable in accordance with
Sections 6 and 7 at the same time and in the same form as would have been
applicable in the event that termination of the Agreement had not
occurred.  Earlier payment of benefits under the Agreement upon termination of
the Agreement shall be permitted at the discretion of the Employer only in the
event that such accelerated payment is made in accordance with the Employer’s
termination and liquidation of the Plan under (a), (b), (c) or (d):

 
(a)
within 12 months of a corporate dissolution taxed under Section 331, or with the
approval of a bankruptcy court pursuant to 11 U.S.C. Section 503(b)(1)(A),
provided that the amounts deferred under the plan are included in the
participants’ gross incomes in the latest of the following years (or, if
earlier, the taxable year in which the amount is actually or constructively
received),

(i)       The calendar year in which the Plan termination occurs;

(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 payment is administratively
practicable.

 
(b)
pursuant to irrevocable action taken by the Employer’s within the 30 days
preceding or the 12 months following a change in control event (as defined in
Treasury Regulation Section 1.409A-3(i)(5)), provided that this paragraph shall
only apply to a payment under a plan if all agreements, methods, programs, and
other arrangements sponsored by the Employer’s immediately after the time of the
change in control event with respect to which deferrals of compensation are
treated as having been deferred under a single plan under Treasury Regulation
Section 1.409A-1(c)(2) are terminated and liquidated with respect to each
participant that experienced the change in control event, so that under the
terms of the termination and liquidation all such participants are required to
receive all amounts of compensation deferred under the terminated agreements,
methods, programs, and other arrangements within 12 months of the date
the  Employer irrevocably takes all necessary action to terminate and liquidate
the agreements, methods, programs, and other arrangements. Solely for purposes
of this paragraph, where the change in control event results from an asset
purchase transaction, the applicable  Employer with the discretion to liquidate
and terminate the agreements, methods, programs, and other arrangements is
the  Employer that is primarily liable immediately after the transaction for the
payment of the deferred compensation.

 
(c)
at the Employer’s discretion, provided that

 
 
(i)
the termination and liquidation does not occur proximate to a downturn in the
financial health of the Employer.

 
 
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(ii)
the Employer terminates and liquidates all agreements, methods, programs, and
other arrangements sponsored by the  Employer that would be aggregated with any
terminated and liquidated agreements, methods, programs, and other arrangements
under Treasury Regulation Section 1.409A-1(c) if the Participant had deferrals
of compensation under all of the agreements, methods, programs, and other
arrangements that are terminated and liquidated;

 
(iii)
no payments in liquidation of the Plan are made within 12 months of the date the
Employer takes all necessary action to irrevocably terminate and liquidate the
Plan other than payments that would be payable under the terms of the Plan if
the action to terminate and liquidate the Plan had not occurred;

 
 

 
(iv)
All payments are made within 24 months of months of the date the  Employer takes
all necessary action to irrevocably terminate and liquidate the Plan; and

 
(v)
the Employer does not adopt a new plan that would be aggregated with any
terminated and liquidated plan under Treasury Regulation Section 1.409A-1(c) if
the Participant participated in both plans, at any time within three years
following the date the Employer takes all necessary action to irrevocably
terminate and liquidate the Plan.

 
(d)
Such other events and conditions as the Commissioner may prescribe in generally
applicable guidance published in the Internal Revenue Bulletin (see Section
601.601(d)(2)) in compliance with Code Section 409A.

11.
Execution and Duplicate  This Agreement may be executed in duplicate, each copy
when so executed and delivered shall be an original, but each copy together
shall constitute one and the same instrument.

12.
Waiver of Breach  Any waiver of any breach of this Agreement shall not be
construed to be a continuing waiver or consent to any subsequent breach on the
part of either party.

13.
Reaffirmation of the Agreement Except as the Agreement is expressly modified,
amended, or revised as set forth in the foregoing provisions of this amendment
and restatement, the Agreement is hereby affirmed and ratified in its entirety
and shall continue in full force and effect between the Participant and the
Employer.

14.
Claims

 
(a)
A claim for Benefits under the Plan must be made to the Committee in writing by
a Participant or his Beneficiary (or a duly authorized representative of a
Participant or Beneficiary).  Oral communications shall not be recognized as a
formal claim for Benefits.

  
 
(b)
Except as provided below with respect to a claim for disability benefits, the
Committee (or its delegatee) shall deliver a reply with respect to a claim for

 
 
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Benefits under the Plan within 90 days; provided that the Committee or its
delegatee) may extend the reply period for an additional 90 days if
necessary.  To the extent required by law, if a claim is for disability
benefits, a reply with respect to the claim shall be delivered by the Committee
(or its delegatee) within 45 days, unless one or two 30-day extensions are
required, in which event a reply shall be provided by the end of the period(s)
of extension.  Any extension notice shall indicate the special circumstances
requiring the extension and the date on which the reviewer expects to render a
decision on the claim.  If the claim is denied in whole or in part, the
Committee (or its delegatee) shall issue a denial of the claim with the notice
of denial  (i) setting forth the specific reasons for such denial; (ii) specific
references to pertinent provisions of the Plan on which such denial is based;
(iii) additional material or information a description of any additional
material or information necessary for the claimant to perfect the claimant’s
claim and an explanation why such material or such information is necessary; and
(iv) appropriate information as to the steps to be taken if the claimant wishes
to submit the claim for review, and the time limits for requesting such a
review.

 
(c)
Within 60 days (180 days regarding disability benefits, to the extent required
by law), after the receipt by the claimant of the written determination
described in Subsection (b) above, the claimant (or his duly authorized
representative) may request in writing that the Committee (or its delegatee)
review the initial claim denial.  The claimant or claimant’s duly authorized
representative may, but need not, review the pertinent documents and submit
issues and comments in writing for consideration by the Committee (or its
delegatee).  If the claimant does not request a review of the initial claim
determination within the 60 day period (180 day period in the case of a
disability claim, to the extent required by law) described in Subsection (b),
the claimant shall be barred and estopped from challenging the initial claim
determination, and the initial claim determination shall be final.

 
(d)
If within 60 days (45 days in the case of a disability claim, to the extent
required by law) after the Committee’s receipt of a request for a review, the
Committee (or its delegatee) shall review the determination. To the extent the
claim relates to disability benefits, the review should be made by a reviewer
who is not the initial claim reviewer, nor his subordinate, and should otherwise
comply with legal requirements.  After considering all materials presented by
the claimant, the Committee (or its delegatee) shall render a written
determination, written in a manner calculated to be understood by the claimant,
setting forth the specific reasons for the decision and containing specific
references to the pertinent provisions of the Plan on which the decision is
based.  If special circumstances require that the 60-day time period (45-day
period in the case of a disability claim, to the extent required by law) be
extended, the Committee (or its delegatee) shall so notify a claimant and shall
render the decision as soon as practicable, but not later than 120 days (90 days
in the case of a disability claim, to the extent required by law) after receipt
of the request for review.

 
(e)
The Secretary of the Employer shall be the agent for service of legal process.

15.
Separate Agreement Benefits contained herein are a matter of separate agreement
and not in lieu of salary or any other compensation for services.

 
 
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16.
Participant Rights The establishment of this Agreement, its amendments and the
granting of a benefit pursuant to the Agreement shall not give the Participant
the right to continued employment with the Employer, or limit the right of the
Employer to dismiss or impose penalties upon the Participant or modify the terms
of employment of the Participant.

17.
Incapacity If, in the opinion of the Board or committee, the Participant is
unable to care for his affairs because of illness, accident or any other reason
at the time benefits are payable under the terms of the Agreement, any payment
due the Participant, unless prior claim therefor shall have been made by a duly
qualified guardian or other duly appointed and qualified representative of such
person, may be paid to some member of the person’s family, or to some party who,
in the opinion of the Board or committee, has incurred expense for such
person.  Any such payments shall be payments for the account of such person and
shall be a complete discharge of the Employer’s liability under the Agreement.

18.
Misstated Information If any information has been misstated on which the
Participant’s benefit under the Agreement was based, such benefit shall not be
invalidated but the amount of the benefit shall be adjusted to the proper amount
as determined on the basis of the correct information.  Overpayments, if any,
with interest as determined by the Administrator shall be charged against any
payments accruing with respect to the Participant.  The Administrator reserves
the right to require proof of age of any person entitled to a benefit under this
Agreement.

19.
Tax Withholding The Employer shall withhold the amount of any federal, state or
local income tax or other tax required to be withheld by the Employer under
applicable law with respect to any amount payable under the Plan.

20.
Governing Law The Plan shall be governed and construed according to the laws of
the State of New Jersey.

IN WITNESS WHEREOF, Anthony J. Labozzetta has signed his name to this Agreement
and the Chairman of the Board of Sussex Bancorp on behalf of its Board of
Directors has caused this Agreement to be executed, effective as of the date
first mentioned above.
 
 
 

 
SUSSEX BANCORP
    Date: July 20, 2011 By:  Donald L. Kovach                       
Title:  Chairman of the Board     Date: July 20, 2011
PARTICIPANT
      By:  Anthony J. Labozzetta                 Anthony J. Labozzetta

 
 
 
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