THIRD AMENDMENT TO THE SUSSEX BANK SALARY CONTINUATION AGREEMENT DATED MAY 15, 2000 FOR DONALD L. KOVACH
Exhibit
10.3
THIRD
AMENDMENT TO THE SUSSEX BANK SALARY CONTINUATION AGREEMENT
DATED
MAY 15, 2000 FOR ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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 ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ (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:
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1.9a
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“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.
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Section
1.11 of the Agreement shall be deleted in its entirety and replaced by the
following:
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1.11
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“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:
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2.1
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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.
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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:
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2.5
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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.
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2.6
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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.
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2.7
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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:
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(d)
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may
not accelerate the time or schedule of any distribution, except as
provided in Section 409A of the Code and the regulations
thereunder;
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(e)
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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
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(f)
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must
take effect not less than twelve (12) months after the election is
made.
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Article
7 of the Agreement shall be deleted in its entirety and replaced by the
following:
Article
7
Amendments
and Termination
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7.1
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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
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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.
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7.3
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Plan
Terminations Under Section 409A. Notwithstanding anything
to the contrary in Section 7.2, if this Agreement terminates in the
following circumstances:
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(a)
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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;
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(b)
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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
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(c)
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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
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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:
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8.11
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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.
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IN
WITNESS OF THE ABOVE, the Company
and the Executive hereby consent to this THIRD Amendment.
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EXECUTIVE:
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SUSSEX
BANK:
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By:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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By:
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
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▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
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▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇
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President
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