Exhibit 10.8

 
SUSSEX COUNTY STATE BANK
SALARY CONTINUATION AGREEMENT

THIS AGREEMENT is as of this 15th day of May, 2000, by and between SUSSEX COUNTY
STATE BANK, a state-chartered commercial bank located in Franklin, New Jersey
(the “Company”) and DONALD L. KOVACH (the “Executive”).

INTRODUCTION

To encourage the Executive to remain an employee of the Company, the Company is
willing to provide salary continuation benefits to the Executive. The Company
will pay the benefits from its general assets.

AGREEMENT

The Executive and the Company agree as follows:

Article 1
Definitions

Whenever used in this Agreement, the following words and phrases shall have the
meanings specified:

1.1           “Change of Control” shall mean:

 
(a)
a reorganization, merger, consolidation or sale of all or substantially all of
the assets of the Company, or a similar transaction in which the Company is not
the resulting entity;

 
(b)
individuals who constitute the Incumbent Board (as herein defined) of the
Company cease for any reason to constitute a majority thereof;

 
(c)
an event of a nature that would be required to be reported in response to Item I
of the current report on Form 8-K, as in effect on the date hereof, pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”);
or

 
(d)
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 Company or the trustees or any administration of
any employee stock ownership plan and trust, or any other employee benefit
plans, established by the Company from time to time is or becomes a “beneficial
owner” (as defined in Rule 13-d under the Exchange Act) directly or indirectly,
of securities of the Company representing 25% or more of the Company’s
outstanding securities ordinarily having the right to vote at the election of
directors; or

 
(e)
A proxy statement soliciting proxies from stockholders of the Company is
disseminated by someone other than the current management of the Company,
seeking stockholder approval of a plan of reorganization, merger or
consolidation of the Company or similar transaction with one or more
corporations as a result of which the outstanding shares of the class of
securities then subject to the plan or transaction are exchanged or converted
into cash or property or securities not issued by the Company;

 
 

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(f)
A tender offer is made for 25% or more of the voting securities of the Company
and the shareholder owning beneficially or of record 25% or more of the
outstanding securities of the Company have tendered or offered to sell their
shares pursuant to such tender and such tendered shares have been accepted by
the tender offeror.

1.2           “Code” means the Internal Revenue Code of 1986, as amended.

1.3           “Disability” means, if the Executive is covered by a Company
sponsored disability policy, total disability as defined in such policy without
regard to any waiting period. If the Executive is not covered by such a policy,
Disability means the Executive suffering a sickness, accident or injury which,
in the judgment of a physician satisfactory to the Company, prevents the
Executive from performing substantially all of the Executive’s normal duties for
the Company. As a condition to receiving any Disability benefits, the Company
may require the Executive to submit to such physical or mental evaluations and
tests as the Company’s Board of Directors deems appropriate.

1.4           “Effective Date” means May 15, 2000.

1.5           “Final Pay” means the average of the reported base pay (W-2
compensation) paid to the Executive by the Company for the last five (5) full
calendar years.

1.6           “Incumbent Board” means the Board of Directors 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.

1.7           “Normal Retiremcnt Age” means the Executive’s 70th birthday.

1.8           “Normal Retirement Date” means the later of the Normal Retirement
Age or Termination of Employment.

1.9           “Plan Year” means a twelve-month period commencing on May 15, 2000
and ending on May 14, 2000 of each year. The initial Plan Year shall commence on
the effective date of this Agreement.

1.10          “Termination for Cause” See Article 5.

1.11          “Termination of Employment” means that the Executive ceases to be
employed by the Company for any reason whatsoever other than by reason of a
leave of absence, which is approved by the Company.

1.12          “Voluntary Early Termination” means that the Executive, prior to
Normal Retirement Age, has terminated employment with the Company for reasons
other than Termination for Cause, Disability, Change of Control or Involuntary
Early Termination.

 
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1.13           “Involuntary Early Termination” means that the Executive, prior
to Normal Retirement Age, has been notified in writing, that employment with the
Company is terminated for reasons other than an approved leave of absence,
Termination for Cause, Disability, Change of Control or Voluntary Early
Termination.

Article 2
Lifetime Benefits

2.1           Normal Retirement Benefit.  Upon Termination of Employment on or
after the Normal Retirement Age for reasons other than death, the Company shall
pay to the Executive the benefit described in this Section 2.1 in lieu of any
other benefit under this Agreement.

Amount of Benefit.  The annual benefit under this Section 2.1 is 35 percent of
Final Pay, as defined in Article 1.5, at the Normal Retirement Date.

Payment of Benefit.  The Company shall pay the annual benefit to the Executive
in 12 equal monthly installments payable on the first day of each month
commencing with the month following the Executive’s Normal Retirement Date. The
annual benefit shall be paid to the Executive for 15 years.

2.2           Involuntary Early Termination Benefit.  Upon Involuntary Early
Termination, the Company shall pay to the Executive the Involuntary Early
Termination benefit described in this Section 2.2 in lieu of any other benefit
under this Agreement.

Amount of Benefit. The annual benefit under this Section 2.2 is 35 percent of
Final Pay, as defined in Article 1.5, at Termination of Employment.

Payment of Benefit. The Company shall pay the annual benefit to the Executive in
12 equal monthly installments payable on the first day of each month commencing
with the month following Termination of Employment. The annual benefit shall be
paid to the Executive for 15 years.

2.3           Voluntaiy Early Termination.  Upon Voluntary Early Termination,
the Executive shall receive no benefit under this Agreement.

2.4           Disability Benefit.  If the Executive terminates employment due to
Disability prior to Normal Retirement Age, the Company shall pay to the
Executive the benefit described in this Section 2.4 in lieu of any other benefit
under this Agreement.

2.4.1           Amount of Benefit.  The annual benefit under this Section 2.4 is
35 percent of Final Pay, as defined in Article 1.5, at Termination of
Employment.

2.4.2           Payment of Benefit.  The Company shall pay the annual benefit
amount to the Executive in 12 equal monthly installments payable on the first
day of each month commencing with the month following the Termination of
Employment. The annual benefit shall be paid to the Executive for 15 years.

 
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Article 3
Death Benefits

3.1           Death During Active Service. If the Executive dies while in the
active service of the Company, the Company shall pay to the Executive’s
beneficiary the benefit described in this Section 3.1.  This benefit shall be
paid in lieu of the benefits under Article 2.

3.1.1           Amount of Benefit.  The annual benefit under this Section 3.1 is
35 percent of Final Pay, provided, however, in determining the Final Pay for
purposes of this section, Executive’s salary in his last full calendar year of
employment shall be increased by 4% per year for each year from such last full
year of employment through the Executive’s Normal Retirement Age, and the
Executive’s Final Pay shall be determined based upon the average of the
Executive’s pay for five years assuming that Executive had worked each year
until his Normal Retirement Age and that his compensation had been increased by
such 4% amount annually. By way of example and not by way of limitation of the
forgoing, assume Executive dies at age 67 with a current annual salary of
$160,000, and having had an annual salary of $155,000 in the prior year. For
purposes of calculating his Final Pay, Executive’s compensation shall be deemed
to have increased 4% for each of the three remaining years until his Normal
Retirement Age. His Final Pay will therefor be the average of $155,000,
$160,000, $166,400, $173,056 and $179,978, for a Final Pay of $166,886.

3.1.2           Payment of Benefit.  The Company shall pay the annual benefit to
the Executive’s beneficiary in 12 equal monthly installments payable on the
first day of each month commencing with the month following the Executive’s
death. The annual benefit shall be paid to the Executive’s beneficiary for 15
years.

3.2           Death During Payment of a Lifetime Benefit.  If the Executive dies
after any Lifetime Benefit payments have commenced under this Agreement but
before receiving all such payments, the Company shall pay the remaining benefits
to the Executive’s beneficiary at the same time and in the same amounts they
would have been paid to the Executive had the Executive survived.

3.3           Death After Termination of Employment But Before Payment of a
Lfetime Benefit Commences.  If the Executive is entitled to a Lifetime Benefit
under this Agreement, but dies prior to the commencement of said benefit
payments, the Company shall pay the same benefit payments to the Executive’s
beneficiary that the Executive was entitled to prior to death except that the
benefit payments shall commence on the first day of the month following the date
of the Executive’s death.

Article 4
Beneficiaries

4.1           Beneficiary Designations.  The Executive shall designate a
beneficiary by filing a written designation with the Company.  The Executive may
revoke or modify the designation at any time by filing a new
designation.  However, designations will only be effective if signed by the
Executive and accepted by the Company during the Executive’s lifetime.  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, if the Executive dies
without a valid beneficiary designation, all payments shall be made to the
Executive’s estate.

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

Article 5
General Limitations

Termination for Cause.  Notwithstanding any provision of this Agreement to the
contrary, the Company shall not pay any benefit under this Agreement if the
Company terminates the Executive’s employment for cause.  As used in this
Agreement, the term “Cause” shall mean the Executive’s personal dishonesty,
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 a material breach of any provision of this Agreement.
Notwithstanding the above, the Executive shall not be deemed to have been
terminated for cause unless and until there shall have been delivered to him a
copy of a resolution duly adopted by the affirmative vote of not less than
three-fourths of the members of the Board of Directors of the Company at a
meeting of its Board called and held for that purpose (after reasonable notice
to the Executive and an opportunity for him, together with counsel, to be heard
before such Board of Directors), finding that in the good faith opinion of the
Board of Directors, the Executive was guilty of conduct justifying termination
for cause and specifying the particulars thereof in detail.

5.2           Suicide or Misstatement.  The Company shall not pay any benefit
under this Agreement if the Executive commits suicide within two years after the
date of this Agreement, or if the Executive has made any material misstatement
of fact on any application for life insurance purchased by the Company.

5.3           Competition After Termination of Employment.  Executive agrees
that during the term of his employment hereunder and for a period of one (1)
year after the termination of his employment, he will not in any way, directly
or indirectly, manage, operate, control, accept employment or a consulting
position with or otherwise advise or assist or be connected with or own or have
any other interest in or right with respect to (other than through ownership of
not more than five percent (5%) of the outstanding shares of a corporation whose
stock is listed on a national securities exchange or on the National Association
of Securities Dealers Automated Quotation System) any enterprise which competes
with the Company in the business of banking in the counties in which the Company
conducts its business on the date of the Executive’s termination. In the event
that this covenant not to compete shall be found by a court of competent
jurisdiction to be invalid or unenforceable as against public policy, such court
shall exercise discretion in reforming such covenant to the end that the
Executive shall be subject to a covenant not to compete that is reasonable under
the circumstances and enforceable by the Company. Executive agrees to be bound
by any such modified covenant not to compete.

Article 6
Claims and Review Procedures

6.1           Claims Procedure.  The Company shall notify any person or entity
that makes a claim under this Agreement (the “Claimant”) in writing, within 90
days of Claimant’s written application for benefits, of his or her eligibility
or noneligibility for benefits under the Agreement. If the Company determines
that the Claimant is not eligible for benefits or full benefits, the notice
shall set forth (1) the specific reasons for such denial, (2) a specific
reference to the provisions of the Agreement on which the denial is based, (3) a
description of any additional information or material necessary for the Claimant
to perfect his or her claim, and a description of why it is needed, and (4) an
explanation of this Agreement’s claims review procedure and other appropriate
information as to the steps to be taken if the Claimant wishes to have the claim
reviewed. If the Company determines that there are special circumstances
requiring additional time to make a decision, the Company shall notify the
Claimant of the special circumstances and the date by which a decision is
expected to be made, and may extend the time for up to an additional 90 days.

 
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6.2           Review Procedure.  If the Claimant is determined by the Company
not to be eligible for benefits, or if the Claimant believes that he or she is
entitled to greater or different benefits, the Claimant shall have the
opportunity to have such claim reviewed by the Company by filing a petition for
review with the Company within 60 days after receipt of the notice issued by the
Company. Said petition shall state the specific reasons which the Claimant
believes entitle him or her to benefits or to greater or different benefits.
Within 60 days after receipt by the Company of the petition, the Company shall
afford the Claimant (and counsel, if any) an opportunity to present his or her
position to the Company verbally or in writing, and the Claimant (or counsel)
shall have the right to review the pertinent documents. The Company shall notify
the Claimant of its decision in writing within the 60-day period, stating
specifically the basis of its decision, written in a manner calculated to be
understood by the Claimant and the specific provisions of the Agreement on which
the decision is based.  If, because of the need for a hearing, the 60-day period
is not sufficient, the decision may be deferred for up to another 60 days at the
election of the Company, but notice of this deferral shall be given to the
Claimant.

Article 7
Amendments and Termination

This Agreement may be amended or terminated only by a written agreement signed
by the Company and the Executive.

Article 8
Miscellaneous

8.1           Binding Effect.  This Agreement shall bind the Executive and the
Company, and their beneficiaries, survivors, executors, successors,
administrators and transferees.

8.2           No Guarantee of Employment.  This Agreement is not an employment
policy or contract. It does not give the Executive the right to remain an
employee of the Company; nor does it interfere with the Company’s right to
discharge the Executive. It also does not require the Executive to remain an
employee nor interfere with the Executive’s right to terminate employment at any
time.

8.3   Non-Transferability.  Benefits under this Agreement cannot be sold,
transferred, assigned, pledged, attached or encumbered in any manner.

8.4   Reorganization.  The Company shall not merge or consolidate into or with
another company, or reorganize, or sell substantially all of its assets to
another company, firm, or person unless such succeeding or continuing company,
firm, or person agrees to assume and discharge the obligations of the Company
under this Agreement. Upon the occurrence of such event, the term “Company” as
used in this Agreement shall be deemed to refer to the successor or survivor
company.

 
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8.5    Tax Withholding.  The Company shall withhold any taxes that are required
to be withheld from the benefits provided under this Agreement.

8.6    Applicable Law.  The Agreement and all rights hereunder shall be governed
by the laws of New Jersey, except to the extent preempted by the laws of the
United States of America provided, however, that with respect to insurance
policies owned by the Company or any insurable interest issues, the laws of
Delaware shall govern.

8.7    Unfunded Arrangement.  The Executive and beneficiary are general
unsecured creditors of the Company for the payment of benefits under this
Agreement. The benefits represent the mere promise by the Company to pay 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 is a general
asset of the Company to which the Executive and beneficiary have no preferred or
secured claim.

8.8    Entire Agreenent.  This Agreement constitutes the entire agreement
between the Company 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.

8.9    Administration.  The Company shall have powers which are necessary to
administer this Agreement, including but not limited to:

Interpreting the provisions of the Agreement;

Establishing and revising the method of accounting for the Agreement;

Maintaining a record of benefit payments; and

Establishing rules and prescribing any forms necessary or desirable to
administer the Agreement.

8.10           Named Fiduciary.  The Company shall be the named fiduciary and
plan administrator under this Agreement. It may delegate to others certain
aspects of the management and operational responsibilities including the
employment of advisors and the delegation of ministerial duties to qualified
individuals.

IN WITNESS WHEREOF, the Executive and the Company have signed this Agreement.

EXEUCTIVE:
 
COMPANY:
         
SUSSEX COUNTY STATE BANK
     
/s/ Donald L. Kovach
 
/s/ Terry H. Thompson
Donald L. Kovach
 
By:  Terry H. Thompson
   
Title: EVP/COO

 
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