EMPLOYMENT AGREEMENT

EMPLOYMENT AGREEMENT (this “Agreement”) made as of this 1st_____ day of
_____September________________, 2006__ by and between TRI-STATE INSURANCE
AGENCY, INC., a New Jersey corporation ("Employer"), and George Lista, an
individual residing at 123 Holland Road, Wantage, NJ 07461, (the "Executive").
 
W I T N E S S E T H:
 
WHEREAS, Employer is a subsidiary of Sussex Bank (“Sussex”);
 
WHEREAS, Executive has heretofore been employed by Employer pursuant to a
certain Employment Agreement dated the 28th day of September, 2001 (the "2001
Agreement");
 
WHEREAS, the parties wish to enter into this Agreement commencing on January 1,
2007 (the "Effective Date") in accordance with the terms and conditions as
contained herein;
 
WHEREAS, the parties agree to extend the employment of Executive by Employer
pursuant to the 2001 Agreement until December 31, 2006 (the "Extension Period");
 
NOW, THEREFORE, in consideration of the mutual promises and undertakings herein
contained, the parties hereto, intending to be legally bound, agree as follows:
 
1.     Extension of 2001 Employment Agreement.
 
Employer agrees to extend the 2001 Agreement from the 28th day of September,
2001 until December 31, 2006, according to the terms and conditions thereof with
the exception of Section 3 (c) (the "Bonus") which terminates on September 28,
2006.
 
2.    Employment and Term.
 
(a) Employer hereby employs the Executive as the Chief Executive Officer (“CEO”)
of the Employer (the "Position") and the Executive agrees to serve in the
Position from and after January 1, 2007 (the "Effective Date") for a term of
five (5) years (the "Term"), and which, subject to Section 2(b), hereof, shall
terminate on December 31, 2011, unless extended

 
 

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pursuant to the terms hereof. Unless either Executive or Employer give written
notice at least twelve (12) months prior to the end of the Term of their
intention not to have this Agreement renew, this Agreement shall automatically
renew for two additional one (1) year terms (the “Additional Terms”) at the
expiration of the Term. For purposes of this Agreement, each Additional Term
shall be considered to be a part of the Term hereof.
 
(b) Employer shall have the right to terminate the Executive's employment
hereunder prior to the expiration of the Term hereof; provided, however, that
unless such termination is for "cause", as defined below, Executive shall be
entitled to receive his Base Salary (as defined herein) and all insurance
benefits provided on the date of such termination for the remaining term of this
Agreement. In addition, to the extent such termination is without Cause, for the
remaining term of this Agreement, Executive shall be entitled to an annual
payment equal to the commissions earned by Executive under Section 4(b) hereof
for the proceeding fiscal year. Such payments shall be made in accordance with
Employer's normal payroll practices. If such termination is for "cause",
Executive shall not be entitled to receive any compensation from and after the
date of such termination; provided, however, that Executive shall be entitled to
payments for periods, or partial periods, that occurred prior to the date of
termination and for which Executive has not yet been paid. For purposes of this
Agreement, "cause" means (i) the Executive's willful and continued failure
substantially to perform the duties of the Position, (ii) fraud,
misappropriation or other deliberate dishonesty of Executive with respect to
Employer's business or property or that of Sussex, (iii) the Executive's plea of
guilty to or conviction of, or plea of nolo contendere to, any felony that, in
the reasonable judgment of the Board of Directors of Employer (the "Board"),
adversely affects Employer's reputation or the Executive's ability to perform
his duties hereunder; or (iv) Executive's willful violation of (A) any law, rule
or regulation relating to the business of Employer and Sussex or (B) final
cease-

 
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and-desist order issued by or regulatory consent agreement with any regulatory
agency having jurisdiction over Employer or Sussex.
 
(c) This Agreement shall terminate upon Executive's death or his disability, as
defined herein. Upon Executive's death or his disability, the obligation of
Employer hereunder to pay Executive the compensation called for under Section 4
hereof shall terminate, and Employer’s only obligation shall be to pay Executive
any and all benefits to which Executive was entitled at the time of such death
or disability under any benefit plans of Employer then in place. For purposes of
this Agreement, the term "disability" shall mean Executive's inability to
substantially perform his material duties as prescribed in this Agreement due to
his incapacity or disability, physical or mental, for a period of six (6)
consecutive months. The determination of whether a disability exists will be
made by the Board in its good faith discretion.
 
3.     Duties.
 
(a) Subject to the ultimate reasonable control and discretion of the Board of
Directors of Employer, the Executive shall serve in the position and perform all
the duties and services as CEO of the Employer. In such capacity, Executive
shall have full authority over the day to day business operations of the
Employer, shall have the authority to retain and terminate personnel, set
compensation, determine the product lines offered by the Employer and insurance
companies with whom Employer conducts business, establish and maintain
competitive product lines by adding carriers, support negotiations in new agency
acquisitions, hire new producers consistent with the annual budget requirements
and policies of the Employer and Sussex, coordinate the regulatory compliance of
the Employer under its industry specific rules and regulations, oversee the
origination and maintenance of all records of activity on client accounts
including reconciling and reporting activity for the books of original entry for
all financial activities resulting from Employer's operation, sales of personal
line and commercial line,

 
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property and casualty, life, health and disability insurance policies; review
and monitor claims, policy changes, and audits; collecting and processing direct
payment premiums to the Employer and generally have the authority to manage the
operations of the Employer as its CEO. The CEO shall report to the Sussex Chief
Executive Officer and the Board.
 
(b) In addition to the above defined duties, the Executive shall participate in
the development of a cross-selling plan by and among Sussex, Employer and their
affiliates and its implementation and execution in cooperation with Sussex
executives, with direct responsibility for the cross-selling between loan
officers and insurance producers and development of a program to monitor
specific sales goals and objectives.
 
(c) The Executive shall devote all of the Executive's professional time and
attention to the performance of the Executive's duties hereunder and, during the
term of the Executive's employment hereunder, shall not engage in any other
business enterprise which, in the reasonable, good faith opinion of the Board,
interferes with Executive’s performance of the duties set forth in subparagraph
(a) above. The foregoing shall not prevent the Executive's purchase, ownership
or sale of investment securities or of any interest in, any business which
competes with the business of Employer, provided that such ownership or
investment constitutes not more than five percent 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, or the
Executive's involvement in charitable or community activities, provided that the
time and attention which the Executive devotes to such activities does not
materially interfere with the performance of the Executive's duties hereunder.

 
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4.    Compensation pursuant to this Agreement
 
(a) For all services to be rendered by the Executive under this Agreement,
Employer agrees to pay the Executive a salary of $140,000 annually, to be paid
in bi-weekly installments (the “Base Salary”), said base salary to be adjusted
annually on January 1st for applicable CPI increase;
 
(b) In addition to the compensation provided for under subparagraph (a) hereof,
Executive shall be entitled to receive personal commissions on the sale of
insurance products actually placed by Executive as the agent of record of 40% of
the gross commissions earned by Employer on such sales.
 
(c) In addition to the compensation provided for under subsections (a) and (b)
hereof, Executive shall be entitled to a bonus (the “Bonus”) as a participant in
the Sussex Executive Incentive and Deferred Compensation Plan (the “Plan”), as
it may be amended from time to time. Executive's participation in such plan will
commence as of January 1, 2007, and Executive shall execute such plan agreements
as may be necessary to evidence his participation on such plan. Executive’s
initial bonus calculation formula shall be as set forth on Exhibit B hereto,
although Executive acknowledges that pursuant to the Plan, the Plan
Administrators and the Compensation Committee of Sussex Bancorp have authority
to alter the terms of the Plan.
 
(d) In addition to the compensation provided for under subsections (a), (b) and
(c), Executive shall be entitled to participate in those employee benefit plans
generally made available to executive officers of Sussex and its Parent.
 
5.    Additional Covenants.
 
(a) Confidential Information. Except as required in the performance of his
duties hereunder, the Executive shall not use or disclose to any third party any
Confidential Information (as hereinafter defined) or any know-how or experience
related thereto without the express prior written authorization of Sussex,
either during the term of this Agreement or thereafter. Upon termination of his
employment, the Executive shall leave with Employer all documents and other
items in his possession which contain Confidential Information, and shall be
prohibited from disclosing to any third party any Confidential Information. For
purposes of

 
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this Section 5(a), the term "Confidential Information" shall mean all
information about Employer and Sussex or relating to any of their respective
services or any phase of their respective operations not generally known to any
of their competitors and which is treated by Employer and Sussex as confidential
information, and shall specifically include all customer lists of Employer and
Sussex.
 
The term “Confidential Information” shall not include any of the foregoing which
(i) is in the public domain, (ii) is in Executive’s lawful possession prior to a
disclosure thereof and not subject to a confidentiality agreement or (iii) is
hereafter lawfully disclosed to Executive by a third party who or which did not
acquire the information under an obligation of confidentiality to Employer.
 
(b) Non-Compete. Executive hereby agrees that for the Covenant Term (as defined
below), he will not work for any entity which is engaged in competition with
Employer and Sussex during the Term of this Agreement and as of the date of its
termination nor himself so engage during such Covenant Term, directly or
indirectly, as principal, agent, partner, shareholder, consultant, or employee,
in any such business in competition with Employer and Sussex during the Term of
this Agreement and as of the date of its termination; provided, however, that
the parties agree that those positions listed on Schedule A hereto shall not be
deemed to be in competition with Employer and Sussex and shall not be prohibited
hereunder. For purposes of this provision, the “Covenant Term” shall mean the
Term of this Agreement and a period of six (6) months thereafter. ; further
provided, however, that in the event Executive's employment is terminated
without Cause pursuant to Section 2(b) hereof, the Covenant Term shall be
extended to run contemporaneously with the period during which Executive
receives payments under Section 4(b ) and for six months thereafter.
 
(c) Non-Solicitation.

 
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(i)            Executive agrees that for a period of six months following the
termination of this Agreement, he will not recruit for employment or induce to
terminate his or her employment with Employer and Sussex, any person who is, at
the time of such solicitation, or who was within thirty (30) days of such
solicitation, an employee of Employer or Sussex.

 
(ii)
Executive agrees that for a period of six months following the termination of
this Agreement, he will not directly or indirectly solicit, cause any other
person to solicit, or assist any other person with soliciting any customer,
depositor or borrower of Employer and Sussex to become a customer, depositor or
borrower of another financial institution.

(d) Modification. If a court of competent jurisdiction determines that the
scope, time duration or other limitations of any of the restrictive covenants
contained in this Section 5 are not reasonably necessary to protect the
legitimate business interests of Employer and Sussex, then such scope, time
duration or other limitations will be deemed to become and thereafter will be
the maximum time period or scope which such court deems reasonable and
enforceable. 
 
(e) Definitions. For purposes of this Section 5, to act "directly or indirectly"
means to act personally or through an associate, affiliate, family member or
otherwise, as proprietor, partner, shareholder, director, officer, employee,
agent, consultant or in any other capacity or manner whatsoever.
 
(f) Specific Performance. Employer and the Executive agree that in the event of
a breach of the provisions of this Section 5, the injury which would be suffered
by Employer and Sussex would be of a character which could not be fully
compensated for solely by a recovery of monetary damages. Accordingly, Executive
agrees that in the event of a breach of the terms of this Section 5, in addition
to and not in lieu of any other remedies which Employer may pursue, Employer
shall have the right to equitable relief, including issuance of a temporary

 
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or permanent injunction by any court of competent jurisdiction against the
commission or continuance of any breach of this Section 5.
 
6. Notices. Any and all notices, demands or requests required or permitted to be
given under this Agreement shall be given in writing and sent, (i) by registered
or certified U.S. mail, return receipt requested, (ii) by hand, (iii) by
overnight courier or (iv) by telecopier addressed to the parties hereto at their
addresses set forth above or such other addresses as they may from time-to-time
designate by written notice, given in accordance with the terms of this Section,
together with copies thereof as follows:
 
In the case of Executive, with a copy to:
 
Tri-State Insurance Agency
96 Highway 206
Augusta, New Jersey 07822
Telecopier No. (973) 579-0111
Attention: George Lista

In the case of Employer, with a copy to:
 
Windels Marx Lane & Mittendorf, LLP
120 Albany Street, 6th Floor
New Brunswick, New Jersey 08901
Telecopier No. (732) 846-8877
Attention: Robert A. Schwartz

Notice given as provided in this Section shall be deemed effective: (i) on the
date hand delivered, (ii) on the first business day following the sending
thereof by overnight courier, (iii) on the seventh calendar day (or, if it is
not a business day, then the next succeeding business day thereafter) after the
depositing thereof into the exclusive custody of the U.S. Postal Service or (iv)
on the date telecopied.
 
7. Assignability. The services of the Executive hereunder are personal in
nature, and neither this Agreement nor the rights or obligations of Executive
hereunder may be assigned,
 
 
 
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whether by operation of law or otherwise. This Agreement shall be binding upon,
and inure to the benefit of, Employer and its Successors and assigns. This
Agreement shall inure to the benefit of the Executive's heirs, executors,
administrators and other legal representatives.
 
8. Waiver. The waiver by Employer or the Executive of a breach of any provision
of this Agreement by the other shall not operate or be construed as a waiver of
any subsequent or other breach hereof.
 
9. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey without giving effect to
principles of conflict of laws.
10. Entire Agreement. This Agreement contains the entire agreement of the
parties hereto with respect to the subject matter hereof and may not be amended,
waived, changed, modified or discharged, except by an agreement in writing
signed by the parties hereto.
 
11. Counterparts. This Employment Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which taken
together shall constitute one and the same instrument.
 
12.  Amendment. This Employment Agreement may be modified or amended only by an
amendment in writing signed by both parties.
 
13.  Severability. If any provision of this Employment Agreement shall be held
invalid or unenforceable, such invalidity or unenforceability shall attach only
to such provision, only to the extent it is invalid or unenforceable, and shall
not in any manner affect or render invalid or unenforceable any other severable
provision of this Agreement, and this Agreement shall be carried out as if any
such invalid or unenforceable provision were not contained herein.
 
 
 
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14.  Section Headings. The headings contained in this Agreement are solely for
convenience of reference and shall be given no effect in the construction or
interpretation of this Employment Agreement.
 
15.  Fees and Expenses. If any party to this Employment Agreement institutes any
action or proceeding to enforce this Employment Agreement, the prevailing party
in such action or proceeding shall be entitled to recover from the
non-prevailing party all legal costs and expenses incurred by the prevailing
party in such action, including, but not limited to, reasonable attorneys’ fees
and other reasonable legal costs and expenses.

IN WITNESS WHEREOF, the parties hereto have executed this Agreement under their
respective hands and seals as of the day and year first above written.

ATTEST:
 
TRI-STATE INSURANCE AGENCY, INC.
                   
By:
       
DONALD L. KOVACH, CHAIRMAN
                       
WITNESS:
 
EXECUTIVE:
                         
GEORGE LISTA

 
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SCHEDULE A

Present and continuing outside activities and business interests:

George Lista & George Harper combined:

·
TSI Leasing, Inc. - Small Auto & Equipment Leasing Company

·
Harlis Company, Inc. - Bermuda Re-Insurance Rent-A-Captive

George Lista Only:

·
President of Rainbows of Learning Day Care Center

·
Sasse Glass Shop, Inc. - Flat Glass, 4 Employees

·
BBC Custom Builders LLC - Custom Home Building Company

 
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EXHIBIT B

The Bonus will be based upon Net Profit Before Taxes, total revenue and
commissions and fees per producers. Each year, Sussex shall determine the
Incentive Award amount using the following formula or such other criteria of
performance as Sussex determines:
 

 
i.
NBP/T. Sussex shall calculate the NPB/T portion of the Incentive Award as
follows:

 
a.
Calculate the NPB/T for the current Plan Year

 
b.
Determine the average of the NPB/T for the last five (5) years

 
c.
Calculate percent (a divided by b)

 
ii.
Total Revenue. Sussex shall calculate the Total Revenue portion of the Incentive
Award as follows:

 
a.
Calculate the Total Revenue for the current Plan Year

 
b.
Determine the average of the Total Revenue for the last five (5) years

 
c.
Calculate percent (a divided by b)

 
iii.
Commissions and fees per Non-Executive Producers. Sussex shall calculate the
Commissions and fees per Non-Executive Producers portion of the Incentive Award
as follows:

 
a.
Calculate the Commissions and fees per Non-Executive Producers for the current
Plan Year

 
b.
Determine the average of the Commissions and fees per Non-Executive Producers
for the last five (5) years

 
c.
Calculate percent (a divided by b)

 
iv.
Determination of Incentive Award. Using the percentages calculated in steps (i)
through (iii) above, determine the Incentive Award percentages according to the
following schedule:

Percentage Award Schedule

Performance
Relative to Average 5 Year Highest
 
Weight
 
Lista
     
Net Profit before NPB/T
40%
12.0%
 
Below 90%
Threshold = 90%
Target = 100%
Stretch = 150%
 
 
0.0%
6.00%
12.00%
18.00%
Total Income
30%
4.0%
 
Below 90%
Threshold = 90%
Target = 100%
Stretch = 150%
 
 
0.0%
2.00%
4.00%
6.00%
Commission and Fees per
Non-Executive Producers
 
30%
 
4.0%
 
Below 90%
Threshold = 90%
Target = 100%
Stretch = 150%
 
 
0.0%
2.00%
4.00%
6.00%
Below Threshold
 
0%
Threshold Opportunity
 
10.00%
Target Opportunity
 
20.00%
Stretch Opportunity
 
30.00%

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