Exhibit 10.3

June 12, 2009

Mr. Ronald E. Schwarz

250 Oak Ridge Road

Oak Ridge, NJ 07438

Dear Mr. Schwarz,

Lakeland Bancorp, Inc. (the “Company”) previously entered into a Securities
Purchase Agreement (the “Participation Agreement”), with the United States
Department of Treasury (“Treasury”) in connection with the Company’s
participation in the Treasury’s TARP Capital Purchase Program (the “CPP”). If
the Company ceases at any time to participate in the CPP, this letter shall be
of no further force and effect.

In connection with the Company’s participation in the CPP and as a condition of
the Participation Agreement, the Company has established specified standards for
incentive compensation to its senior executive officers and to make changes to
its compensation arrangements. To comply with these requirements, and in
consideration of the benefits that you will receive as a result of the Company’s
participation in the CPP, you agree as follows:

(1)    No Golden Parachute Payments. The Company is prohibiting any golden
parachute payment to you during any “CPP Covered Period”. A “CPP Covered Period”
is any period during which (A) you are a senior executive officer and
(B) Treasury holds an equity or debt position acquired from the Company in the
CPP.

(2)    Recovery of Bonus and Incentive Compensation. Any bonus and incentive
compensation paid to you during the CPP Covered Period is subject to recovery or
“clawback” by the Company if the payments were based on materially inaccurate
financial statements or any other materially inaccurate performance metric
criteria.

(3)    Compensation Program Amendments. Each of the Company’s compensation,
bonus, incentive and other benefit plans, arrangements and agreements (including
golden parachute, severance and employment agreements) (collectively, “Benefit
Plans”) with respect to you is hereby amended to the extent necessary to give
effect to provisions (1) and (2). For reference, certain affected Benefit Plans
are set forth in Appendix A to this letter.

In addition, the Company is required to review its Benefit Plans to ensure that
they do not encourage senior executive officers to take unnecessary and
excessive risks that threaten the value of the Company. To the extent any such
review requires revisions to any Benefit Plan with respect to you, you and the
Company agree to negotiate such changes promptly and in good faith.

(4)    Definitions and Interpretation. This letter shall be interpreted as
follows:

“Senior executive officer” means the Company’s “senior executive officers” as
defined in subsection 111(b)(3) of EESA.

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“Golden parachute payment” is used with same meaning as in subsection
111(b)(2)(C) of EESA.

“EESA” means the Emergency Economic Stabilization Act of 2008 as implemented by
guidance or regulation issued that has been issued and in effect as of the
“Closing Date” as defined in the Participation Agreement, as amended.

The term “Company” includes any entities treated as a single employer with the
Company under 31 C.F.R.§ 30.1(b) (as in effect on the Closing Date). You are
also delivering a waiver pursuant to the Participation Agreement, and, as
between the Company and you, the term “employer” in that waiver will be deemed
to mean the Company as used in this letter.

The term “CPP Covered Period” shall be limited by, and interpreted in a manner
consistent with, 31 C.F.R. § 30.11 (as in effect on the Closing Date).

Provisions (1) and (2) of this letter are intended to, and will be interpreted,
administered and construed to, comply with Section 111 of EESA and, to the
maximum extent consistent with the preceding, to permit operation of the Benefit
Plans in accordance with their terms before giving effect to this letter.

(5) Miscellaneous. To the extent not subject to federal law, this letter will be
governed by and construed in accordance with the laws of New Jersey. This letter
may be executed in two or more counterparts, each of which will be deemed to be
an original. A signature transmitted by facsimile will be deemed an original
signature.

The Board of Directors of the Company appreciates the concessions you are making
and looks forward to your continued leadership during these financially
turbulent times.

 

Yours sincerely,

 

LAKELAND BANCORP, INC.

By:   /s/    Thomas J. Shara  

Name: Thomas J. Shara

Title: President and CEO

 

Intending to be legally bound, I agree with and accept the foregoing terms on
the date set forth below.

/s/    Ronald E. Schwarz

RONALD E. SCHWARZ

Date:  

June 12, 2009

 

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Appendix A to Executive Waiver Agreement

Change in Control Agreement

2009 Equity Compensation Program

 

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