ex10-3.htm


    


    Exhibit
      10.3

    


    THIRD
      AMENDMENT TO THE SUSSEX BANK SALARY CONTINUATION AGREEMENT

    DATED
      MAY 15, 2000 FOR DONALD L. KOVACH

    


    


    THIS
      THIRD AMENDMENT is adopted this
      17th day of October, 2007,

    effective
      as of January 1, 2005, by and between Sussex Bank, a state-chartered commercial
      bank located in Franklin, New Jersey (the “Company”) and Donald L. Kovach (the
“Executive”).

    


    The
      Company and the Executive executed
      the Salary Continuation Agreement effective as of May 15, 2000 (the
“Agreement”), executed an Addendum to the Agreement on June 11, 2002, and
      executed a Second Amendment to the Agreement on January 7, 2004.

    


    The
      undersigned hereby amend the
      Agreement for the purpose of bringing the Agreement into compliance with Section
      409A of the Internal Revenue Code.  Therefore, the following changes
      shall be made:

    


    The
      following Section 1.9a shall be added to the Agreement immediately following
      Section 1.9:

    


    
      	
              1.9a

            	
              “Specified
                Employee” means an employee who at the time of Termination of
                Employment is a key employee of the Bank, if any stock of the Bank
                is
                publicly traded on an established securities market or
                otherwise.  For purposes of this Agreement, an employee is a key
                employee if the employee 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 ending on December 31 (the “identification
                period”).  If the employee is a key employee during an
                identification period, the employee is treated as a key employee
                for
                purposes of this Agreement during the twelve (12) month period that
                begins
                on the first day of April following the close of the identification
                period.

            


    

    


    Section
      1.11 of the Agreement shall be deleted in its entirety and replaced by the
      following:

     

    
      
        	
                1.11

              	
                “Termination
                  of Employment” means termination of the Executive’s employment with
                  the Bank for reasons other than death.  Whether a Separation
                  from Service has occurred is determined in
                  accordance with the requirements of Code Section 409A and is based
                  on whether the facts and circumstances indicate that the Bank and
                  the
                  Executive reasonably anticipated that no further services would
                  be
                  performed after a certain date or that the level of bona fide services
                  the
                  Executive would perform after such date (whether as an employee
                  or as an
                  independent contractor) would permanently decrease to no more than
                  twenty
                  percent (20%) of the average level of bona fide services performed
                  (whether as an employee or an independent contractor) over the
                  immediately
                  preceding thirty-six (36) month period (or the full period of services
                  to
                  the Bank if the Executive has been providing services to the Bank
                  less
                  than thirty-six
                  (36)  months).

              


      

      


    


    
      
         

      

      
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    Section
      2.1 of the Agreement shall be deleted in its entirety and replaced by the
      following:

    


    
      	
              2.1

            	
              Normal
                Retirement Benefit.  Upon May 1, 2008, 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 May 1, 2008.

    


    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 May 1, 2008.  The annual benefit shall be paid
      to the Executive for 15 years.

    


    The
      following Sections 2.5, 2.6 and 2.7 shall be added to the Agreement immediately
      following Section 2.4.2:

    


    
      	
              2.5

            	
              Restriction
                on Timing of Distributions. Notwithstanding any provision of this
                Agreement to the contrary, if the Executive is considered a Specified
                Employee, the provisions of this Section 2.5 shall govern all
                distributions hereunder.  If benefit distributions which would
                otherwise be made to the Executive due to a Termination of Employment
                are
                limited because the Executive is a Specified Employee, then such
                distributions shall not be made during the first six (6) months following
                Termination of Employment.  Rather, any distribution which would
                otherwise be paid to the Executive during such period shall be accumulated
                and paid to the Executive in a lump sum on the first day of the seventh
                month following the Termination of Employment.  All subsequent
                distributions shall be paid in the manner
                specified.

            


    

    


    
      	
              2.6

            	
              Distributions
                Upon Income Inclusion Under Section 409A of the Code.  Upon
                the inclusion of any amount into the Executive’s income as a result of the
                failure of this non-qualified deferred compensation plan to comply
                with
                the requirements of Section 409A of the Code, to the extent such
                tax
                liability can be covered by the amount the Company has accrued with
                respect to the Company’s obligations hereunder, a distribution shall be
                made as soon as is administratively practicable following the discovery
                of
                the plan failure.

            


    

    


    
      	
              2.7

            	
              Change
                in Form or Timing of Distributions.  All changes in the
                form or timing of distributions hereunder must comply with the following
                requirements.  The
                changes:

            


    

    


    
      	
               

            	
              (d)

            	
              may
                not accelerate the time or schedule of any distribution, except as
                provided in Section 409A of the Code and the regulations
                thereunder;

            


    

    
      	
               

            	
              (e)

            	
              must,
                for benefits distributable under Sections 2.1, 2.2 and 2.4, delay
                the
                commencement of distributions for a minimum of five (5) years from
                the
                date the first distribution was originally scheduled to be
                made;  and

            


    

    
      	
               

            	
              (f)

            	
              must
                take effect not less than twelve (12) months after the election is
                made.

            


    

    


    


    Article
      7 of the Agreement shall be deleted in its entirety and replaced by the
      following:

    


    Article
      7

    Amendments
      and Termination

    


    
      	
              7.1

            	
              Amendments.  This
                Agreement may be amended only by a written agreement signed by the
                Company
                and the Executive.  However, the Company may unilaterally amend
                this Agreement to conform with written directives to the Company
                from its
                auditors or banking regulators or to comply with legislative changes
                or
                tax law, including without limitation Section 409A of the Code and
                any and
                all Treasury regulations and guidance promulgated
                thereunder.

            


    


    
      
         

      

      
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              7.2

            	
              Plan
                Termination Generally.  The Company and
                Executive may terminate this Agreement at any
                time.  The benefit hereunder shall be the amount the Company has
                accrued with respect to the Company’s obligations
                hereunder.  Except as provided in Section 7.3, the termination
                of this Agreement shall not cause a distribution of benefits under
                this
                Agreement.  Rather, after such termination benefit distributions
                will be made at the earliest distribution event permitted under Article
                2
                or Article 3.

            


    

    


    
      	
              7.3

            	
              Plan
                Terminations Under Section 409A.  Notwithstanding anything
                to the contrary in Section 7.2, if this Agreement terminates in the
                following circumstances:

            


    

    


    
      	
               

            	
              (a)

            	
              Within
                thirty (30) days before or twelve (12) months after a change in the
                ownership or effective control of the Company, or in the ownership
                of a
                substantial portion of the assets of the Company as described in
                Section
                409A(2)(A)(v) of the Code, provided that all distributions are made
                no
                later than twelve (12) months following such termination of the Agreement
                and further provided that all the Company's arrangements which
                are substantially similar to the Agreement are terminated so the
                Executive
                and all participants in the similar arrangements are required to
                receive all amounts of compensation deferred under the terminated
                arrangements within twelve (12) months of the termination of the
                arrangements;

            


    

    
      	
               

            	
              (b)

            	
              Upon
                the Company’s dissolution or with the approval of a bankruptcy court
                provided that the amounts deferred under the Agreement are included
                in the
                Executive's gross income in the latest of (i) the calendar year in
                which
                the Agreement terminates; (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 distribution is administratively practical;
                or

            


    

    
      	
               

            	
              (c)

            	
              Upon
                the Bank’s termination of this and all other arrangements that would be
                aggregated with this Agreement pursuant to Treasury Regulations Section
                1.409A-1(c) if the Executive participated in such arrangements (“Similar
                Arrangements”), provided that (i) the termination and liquidation does not
                occur proximate to a downturn in the financial health of the Bank,
                (ii)
                all termination distributions are made no earlier than twelve (12)
                months
                and no later than twenty-four (24) months following such termination,
                and
                (iii) the Bank does not adopt any new arrangement that would be a
                Similar
                Arrangement for a minimum of three (3) years following the date the
                Bank
                takes all necessary action to irrevocably terminate and liquidate
                the
                Agreement

            


    

    


    the
      Company may distribute the amount the Company has accrued with respect to the
      Company’s obligations hereunder, determined as of the date of the termination of
      the Agreement, to the Executive in a lump sum subject to the above
      terms.

    


    The
      following Section 8.11 shall be added to the Agreement immediately following
      Section 8.10:

    


    
      	
              8.11

            	
              Compliance
                with Section 409A.  This Agreement shall at all times be
                administered and the provisions of this Agreement shall be interpreted
                consistent with the requirements of Section 409A of the Code and
                any and
                all regulations thereunder, including such regulations as may be
                promulgated after the Effective Date of this
                Agreement.

            


    

    


    IN
      WITNESS OF THE ABOVE, the Company
      and the Executive hereby consent to this THIRD Amendment.

    


    


    
      	
              EXECUTIVE:

            	
              SUSSEX
                BANK:

            
	 	 
	
              By:
                /s/ Donald L. Kovach

            	
              By:
                /s/ Terry H. Thompson

            
	
              DONALD
                L. KOVACH

            	
              TERRY
                H. THOMPSON

            
	 	
              President

            


    

     

     

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