DEF 14A 1 tv488002-def14a.htm DEF 14A

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549



 

SCHEDULE 14A
(RULE 14a-101)

SCHEDULE 14A INFORMATION

Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No.   )



 
Filed by the Registrant x
Filed by a Party other than the Registrant o

Check the appropriate box:

o Preliminary Proxy Statement
o Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2))
x Definitive Proxy Statement
o Definitive Additional Materials
o Soliciting Material Pursuant to §240.14a-12

SUSSEX BANCORP

(Name of Registrant as Specified In Its Charter)

(Name of Person(s) Filing Proxy Statement, if other than the Registrant)

Payment of Filing Fee (Check the appropriate box):

x No fee required.
o Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:

(2) Aggregate number of securities to which transaction applies:

(3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined):

(4) Proposed maximum aggregate value of transaction:

(5) Total fee paid:

o Fee paid previously with preliminary materials.
o Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:

(2) Form, Schedule or Registration Statement No.:

(3) Filing Party:

(4) Date Filed:


 
 

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[GRAPHIC MISSING]

March 27, 2018

Dear Shareholder:

You are cordially invited to attend the Annual Meeting of Shareholders of Sussex Bancorp, the holding company for Sussex Bank, to be held on April 25, 2018, at 10:00a.m, Eastern time, at the office of Sussex Bancorp, located at 100 Enterprise Drive, Suite 700, Rockaway, New Jersey 07866.

The attached Notice of Annual Meeting of Shareholders and proxy statement describe the formal business that we will transact at the Annual Meeting.

The Board of Directors of Sussex Bancorp has determined that an affirmative vote on each matter to be considered at the Annual Meeting is in the best interest of Sussex Bancorp and its shareholders and unanimously recommends a vote “FOR” all such matters considered at the Annual Meeting.

Please complete, sign and return the enclosed proxy card promptly, whether or not you plan to attend the Annual Meeting. Your vote is important regardless of the number of shares you own. Voting by proxy will not prevent you from voting in person at the Annual Meeting, but will assure that your vote is counted if you cannot attend.

On behalf of the Board of Directors and the employees of Sussex Bancorp and Sussex Bank, we thank you for your continued support and look forward to seeing you at the Annual Meeting.

Sincerely yours,
 
[GRAPHIC MISSING]

Anthony Labozzetta
President and Chief Executive Officer

IF YOU HAVE ANY QUESTIONS, PLEASE CALL US AT (844) 256-7328


 
 

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SUSSEX BANCORP
100 Enterprise Drive, Suite 700
Rockaway, New Jersey 07866

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

 
DATE   Wednesday, April 25, 2018
TIME   10:00 a.m. Eastern time
PLACE   Sussex Bancorp
100 Enterprise Drive, Suite 700
Rockaway, New Jersey 07866
ITEMS OF BUSINESS  

(1)

Election of the four nominees named in the attached proxy statement as directors to serve on the Board of Directors for a three-year term.

    

(2)

Ratification of the appointment of BDO USA, LLP as our independent registered public accounting firm for the fiscal year ending December 31, 2018.

    

(3)

Consideration and approval of a non-binding advisory resolution on the compensation of our named executive officers.

    

(4)

Consideration and approval of an amendment to our Restated Certificate of Incorporation to change the name of our Company from Sussex Bancorp to SB One Bancorp.

    

(5)

Consideration of any other business properly brought before the Annual Meeting, or at any adjournment or postponement thereof.

RECORD DATE   The record date for the Annual Meeting is March 1, 2018. Only shareholders of record at the close of business on that date may vote at the Annual Meeting or any adjournment thereof.
PROXY VOTING   You are cordially invited to attend the Annual Meeting in person. Whether or not you expect to attend the Annual Meeting, please submit the enclosed proxy or voting instructions by mail. A return envelope (which is postage prepaid if mailed in the United States) is enclosed for your convenience. Submitting a proxy or voting instructions will not prevent you from attending the Annual Meeting and voting in person. Please note, however, that if your shares are held of record by a broker, bank or other nominee and you wish to vote at the Annual Meeting, you must obtain a proxy issued in your name from that record holder.

By Order of the Board of Directors,
[GRAPHIC MISSING]

Linda Kuipers
Secretary
Rockaway, New Jersey
March 27, 2018

IMPORTANT NOTICE REGARDING THE AVAILABILITY OF PROXY MATERIALS FOR
THE SHAREHOLDER MEETING TO BE HELD ON APRIL 25, 2018.

This proxy statement and our Annual Report on Form 10-K for the fiscal year ended December 31, 2017 are available free of charge at http://www.snl.com/irweblinkx/GenPage.aspx?IID=4015338&GKP=203214.


 
 

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  Page
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING     1  
PROPOSAL 1 ELECTION OF DIRECTORS     5  
Vote Required     5  
Our Recommendation     5  
INFORMATION ABOUT OUR BOARD OF DIRECTORS     6  
Nominees     6  
Continuing Directors     7  
INFORMATION ABOUT OUR EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS     9  
CORPORATE GOVERNANCE     10  
Board of Directors     10  
Board of Directors Independence     10  
Code of Ethics and Corporate Governance Guidelines     11  
Board Leadership Structure and Role in Risk Oversight     11  
Committees of the Board of Directors     12  
AUDIT COMMITTEE REPORT(1)     14  
Shareholder Communications with Our Board of Directors     16  
COMPENSATION DISCUSSION AND ANALYSIS     17  
EXECUTIVE COMPENSATION     23  
DIRECTOR COMPENSATION     31  
Meeting Fees     31  
Director Deferred Compensation Agreement     31  
Director Compensation Table     31  
TRANSACTIONS WITH RELATED PERSONS     33  
Certain Related-Person Transactions     33  
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT     34  
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE     36  
SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS     36  
PROPOSAL 2 RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM     37  
Vote Required     37  
Our Recommendation     37  
Independent Registered Public Accounting Firm Fees and Services     37  
PROPOSAL 3 NON-BINDING ADVISORY RESOLUTION ON THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS     38  
Vote Required     38  
Our Recommendation     38  
General     38  
PROPOSAL 4 AMENDMENT TO OUR RESTATED CERTIFICATE OF INCORPORATION TO CHANGE THE COMPANY’S NAME     39  
Vote Required     39  
Our Recommendation     39  
HOUSEHOLDING OF PROXY MATERIALS     40  
OTHER MATTERS     40  

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SUSSEX BANCORP
100 Enterprise Drive, Suite 700
Rockaway, New Jersey 07866
(844) 256-7328
  

PROXY STATEMENT FOR THE
2018 ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 25, 2018

QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING

Why am I receiving these materials?

We have sent you this proxy statement and the enclosed proxy card because the Board of Directors, or the Board, of Sussex Bancorp is soliciting your proxy to vote at the 2018 Annual Meeting of Shareholders. This proxy statement and proxy card are being mailed to shareholders on or about March 27, 2018. As used in this proxy statement, “we,” “us,” “our” and “Company” refer to Sussex Bancorp and/or its subsidiaries, depending on the context. The term “Annual Meeting,” as used in this proxy statement, means the 2018 annual meeting of shareholders and includes any adjournment or postponement of such meeting.

Who can vote at the Annual Meeting?

Only shareholders of record as of the close of business on March 1, 2018 will be entitled to vote at the Annual Meeting. On this date, there were 7,926,308 shares of common stock issued and outstanding and entitled to vote.

Shareholder of Record: Shares Registered in Your Name

If on March 1, 2018, your shares were registered directly in your name with our transfer agent, American Stock Transfer and Trust Company, then you are a shareholder of record. As a shareholder of record, you may vote in person at the Annual Meeting or vote by proxy. Whether or not you plan to attend the Annual Meeting, we urge you to fill out and return the enclosed proxy card by mail to ensure your vote is counted.

Beneficial Owner: Shares Registered in the Name of a Broker or Bank

If on March 1, 2018, your shares were held not in your name but rather in an account at a brokerage firm, bank, dealer or other similar organization, then you are the beneficial owner of shares held in “street name” and these proxy materials are being forwarded to you by that organization. The organization holding your account is considered to be the shareholder of record for purposes of voting at the Annual Meeting.

As a beneficial owner, you have the right to direct your broker or other agent regarding how to vote the shares in your account. Simply complete and mail the proxy card and voting instructions to ensure that your vote is counted. Alternatively, you may vote by telephone or over the Internet as instructed by your broker or bank, if applicable. To vote in person at the Annual Meeting, you must obtain a valid proxy from your broker, bank or other agent. Follow the instructions from your broker or bank included with these proxy materials, or contact your broker or bank to request a proxy form.

What is the quorum requirement?

A quorum of shareholders is necessary to hold a valid meeting. A quorum will be present if shareholders holding at least a majority of our outstanding shares entitled to vote at the Annual Meeting are present at the Annual Meeting in person or represented by proxy.

Your shares will be counted towards the quorum only if you submit a valid proxy (or one is submitted on your behalf by your broker, bank or other nominee) or if you vote in person at the Annual Meeting. Abstentions and broker non-votes will be counted towards the quorum requirement. If there is no quorum, the holders of a majority of shares present at the Annual Meeting in person or represented by proxy may adjourn the Annual Meeting to another date.

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What am I voting on and how many votes are needed to approve each proposal?

Proposal 1: Election of Directors.  Directors will be elected by a plurality of the votes cast at the Annual Meeting by the holders of shares present in person or represented by proxy and entitled to vote on the election of directors. Plurality means that the individuals who receive the largest number of “FOR” votes cast are elected as directors up to the maximum number of directors to be chosen at the Annual Meeting. Accordingly, the four nominees receiving the most “FOR” votes will be elected as directors. Abstentions and broker non-votes will not affect the outcome of the election of directors. You may not vote your shares cumulatively for the election of directors.

Proposal 2: Ratification of Appointment of Independent Registered Public Accounting Firm.  The ratification of BDO USA, LLP, or BDO, as our independent registered public accounting firm for the fiscal year ending December 31, 2018 will require “FOR” votes from a majority of the votes cast at the Annual Meeting by the holders of shares present in person or represented by proxy and entitled to vote on this proposal. Abstentions are not counted as votes cast and they will have no effect on the vote. Similarly, broker non-votes will have no effect on the vote.

Proposal 3: Consideration and Approval of a Non-binding Advisory Resolution on the Compensation of Our Named Executive Officers.  The approval of the non-binding advisory resolution on the compensation of our named executive officers will require “FOR” votes from a majority of the votes cast at the Annual Meeting by the holders of shares present in person or represented by proxy and entitled to vote on this proposal. Abstentions are not counted as votes cast and they will have no effect on the vote. Brokers do not have discretionary authority to vote shares on this proposal without direction from the beneficial owner. Therefore, broker non-votes will have no effect on the vote.

Proposal 4: Consideration and approval of an amendment to our Restated Certificate of Incorporation to change the name of our Company from Sussex Bancorp to SB One Bancorp.  The approval of the amendment to our Restated Certificate of Incorporation to change the name of our Company from Sussex Bancorp to SB One Bancorp will require “For” votes from a majority of the votes cast at the Annual Meeting by the holders of shares present in person or represented by proxy and entitled to vote on this proposal. Abstentions are not counted as votes cast and they will have no effect on the vote. Similarly, broker non-votes will have no effect on the vote.

What are broker non-votes?

Broker non-votes occur when a beneficial owner of shares held in “street name” does not give instructions to the broker or nominee holding the shares as to how to vote on matters deemed “non-routine.” Generally, if shares are held in street name, the beneficial owner of the shares is entitled to give voting instructions to the broker or nominee holding the shares. If the beneficial owner does not provide voting instructions, the broker or nominee may vote the shares with respect to matters that are considered to be “routine,” but may not vote the shares with respect to “non-routine” matters. The election of directors is no longer considered “routine.” Proposals 1, 3 and 4 are considered “non-routine” and Proposal 2 is considered “routine” under The NASDAQ Marketplace Rules, or the NASDAQ Listing Rules.

How does the Board recommend that I vote my shares?

Unless you give other instructions on your proxy card, the persons named as proxies on the card will vote in accordance with the recommendations of the Board. The Board’s recommendation for each proposal, together with the description of each proposal, are set forth in this proxy statement. The Board recommends a vote:

“FOR” the election of the four nominees to the Board;
“FOR” the ratification of the appointment of BDO as our independent registered public accounting firm for the fiscal year ending December 31, 2018;
“FOR” the approval of the non-binding advisory resolution on the compensation of our named executive officers; and
“FOR” the approval of an amendment to our Restated Certificate of Incorporation to change the name of our Company from Sussex Bancorp to SB One Bancorp.

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With respect to any other matter that properly comes before the Annual Meeting, the proxies will vote as recommended by the Board or, if no recommendation is given, in their own discretion in the best interest of the Company and its shareholders. As of the date of this proxy statement, the Board had no knowledge of any business other than that described herein that would be presented for consideration at the Annual Meeting.

How do I vote?

For Proposal 1, you may either vote “FOR” all the nominees to the Board or you may “WITHHOLD” your vote for any nominee you specify. For any other matter to be voted on, you may vote “FOR” or “AGAINST” or abstain from voting. The procedures for voting are as follows:

Shareholder of Record: Shares Registered in Your Name

If you are a shareholder of record, you may (a) vote in person at the Annual Meeting or (b) vote by proxy using the enclosed proxy card, in each case as described below. Whether or not you plan to attend the Annual Meeting, we urge you to vote by proxy to ensure your vote is counted. You may still attend the Annual Meeting and vote in person even if you have already voted by proxy.

To vote in person, come to the Annual Meeting and we will give you a ballot when you arrive.
To vote by proxy, simply complete, sign and date the enclosed proxy card and return it promptly in the envelope provided. If you return your signed proxy card to us before the Annual Meeting, the designated proxy holders will vote your shares as you direct.

If you sign the proxy card but do not make specific choices, your proxy will vote your shares “FOR” Proposals 1, 2, 3 and 4 as set forth in the Notice of Annual Meeting of Shareholders.

If any other matter is presented at the Annual Meeting, the proxies will vote as recommended by the Board or, if no recommendation is given, in their own discretion in the best interest of the Company and its shareholders. As of the date of this proxy statement, we know of no other matters that may be presented at the Annual Meeting, other than those listed in the Notice of Annual Meeting of Shareholders.

Beneficial Owner: Shares Registered in the Name of Broker or Bank

If you are a beneficial owner of shares registered in the name of your broker, bank or other agent, you should have received a proxy card and voting instructions with these proxy materials from that organization rather than from us. Simply complete and mail the proxy card and voting instructions to ensure that your vote is counted. Alternatively, you may vote by telephone or over the Internet as instructed by your broker or bank, if applicable. To vote in person at the Annual Meeting, you must obtain a valid proxy from your broker, bank or other agent. Follow the instructions from your broker or bank included with these proxy materials, or contact your broker or bank to request a proxy form.

May I change my vote after submitting my proxy card?

Yes. You may revoke your proxy at any time before the final vote at the Annual Meeting. If you are the shareholder of record of your shares, you may revoke your proxy in any one of the following three ways:

filing a timely written revocation of the proxy with our Secretary;
submitting a signed proxy card bearing a later date; or
attending the Annual Meeting and voting in person.

If your shares are not registered in your own name, you will need appropriate documentation from the shareholder of record to vote personally at the Annual Meeting. Examples of such documentation include a broker’s statement, letter or other document that will confirm your ownership of the shares. If your shares are held by your broker, bank or another party as a nominee or agent, you should follow the instructions provided by such party.

Your personal attendance at the Annual Meeting does not revoke your proxy. Your last vote, prior to or at the Annual Meeting, is the vote that will be counted.

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Who will bear the expense of soliciting proxies?

We will bear the cost of solicitation of proxies, including preparation, assembly, printing and mailing of this proxy statement, the proxy card and any additional information furnished to shareholders. Copies of solicitation materials will be furnished to banks, brokerage houses, fiduciaries and custodians holding in their names shares of our common stock beneficially owned by others to forward to such beneficial owners. We may reimburse persons representing beneficial owners of our common stock for their costs of forwarding solicitation materials to such beneficial owners. Original solicitation of proxies by mail may be supplemented by telephone, telegram or personal solicitation by our directors, officers or other regular employees. No additional compensation will be paid to directors, officers or other regular employees for such services.

When are shareholder proposals due for the 2019 Annual Meeting of Shareholders?

If you wish to submit proposals to be included in our proxy statement for the 2019 annual meeting of shareholders, we must receive them on or before November 22, 2018, pursuant to the proxy soliciting regulations of the Securities and Exchange Commission, or the SEC. Nothing in this paragraph shall be deemed to require us to include in our proxy statement and proxy card for such meeting any shareholder proposal which does not meet the requirements of the SEC in effect at the time. Any such proposal will be subject to Rule 14a-8 of the Securities Exchange Act of 1934, as amended, or the Exchange Act.

In addition, under our Amended and Restated By-laws, if you wish to nominate a director for the 2019 annual meeting of shareholders, the following criteria must be met: (i) you must be a shareholder of record; (ii) you must have given timely notice in writing to our Secretary; and (iii) your notice must contain specific information required in Section 3.23 of our Amended and Restated By-laws. To be timely, a shareholder’s notice to the Secretary must be delivered to or mailed and received at our principal executive offices between December 27, 2018 and January 25, 2019; provided, however, that in the event that the 2019 annual meeting of shareholders is called for a date that is not within 30 days before or after the anniversary date of the Annual Meeting, notice by the shareholder in order to be timely must be so received not later than the close of business on the 10th day following the day on which such notice of the date of the 2019 annual meeting was mailed or such public disclosure of the date of the 2019 annual meeting was made, whichever first occurs. For additional information about our director nomination requirements, please see our Amended and Restated By-laws.

Obtaining an Annual Report on Form 10-K

We will provide a copy of our Annual Report on Form 10-K for the year ended December 31, 2017 (without exhibits) without charge, upon written request, to any registered or beneficial owner of common stock entitled to vote at the Annual Meeting. Requests should be made in writing to Linda Kuipers, Secretary, Sussex Bancorp, 100 Enterprise Drive, Suite 700, Rockaway, New Jersey 07866. The Annual Report on Form 10-K is also available on the SEC’s website at www.sec.gov and on our website at www.sussexbank.com by clicking on “Investors — SEC Filings.”

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PROPOSAL 1
  
ELECTION OF DIRECTORS

Upon the recommendation of the Nominating and Corporate Governance Committee, our Board has nominated the four individuals listed in the table below for election as directors at the Annual Meeting. If you elect the nominees listed below, they will hold office until the annual meeting of shareholders in 2021 or until their successors have been duly elected and qualified. All nominees are currently serving on our Board and have consented to being named in this proxy statement and to serve if elected.

If for any reason these nominees prove unable or unwilling to stand for election or cease to qualify to serve as directors, the Board will nominate alternates or reduce the size of the Board to eliminate the vacancies. If any nominee is unable or does not qualify to serve, you or your proxy may vote for another nominee proposed by the Board. The Board has no reason to believe that any of the nominees would prove unable to serve if elected. There are no arrangements or understandings between us and any nominee, pursuant to which such person was nominated to be a director.

   
Nominees   Term Expires   Position(s) Held
Dominick J. D’Agosta   2021   Director
Mark J. Hontz   2021   Director
Walter E. Loeffler   2021   Director
Peter A. Michelotti   2021   Director

Vote Required

Directors are elected by a plurality of the votes cast at the Annual Meeting by the holders of shares present in person or represented by proxy and entitled to vote on the election of directors. The four nominees receiving the highest number of “FOR” votes will be elected. Shares represented by executed proxies will be voted, if authority to do so is not withheld, for the election of the four nominees named above. If any nominee becomes unavailable for election as a result of an unexpected occurrence, your shares will be voted for the election of a substitute nominee proposed by our Board. Abstentions and broker non-votes will not affect the outcome of the election of directors. You may not vote your shares cumulatively for the election of directors.

Our Recommendation

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE ELECTION OF EACH OF THE NOMINEES SET FORTH ABOVE.

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INFORMATION ABOUT OUR BOARD OF DIRECTORS

Our Board currently consists of 11 directors. Mr. Timothy Marvil resigned effective January 21, 2018. Effective January 4, 2018 upon consummation of the merger of Community Bank of Bergen County, NJ with and into Sussex Bank, the Board appointed Mr. Dominick J. D’Agosta, Mr. Walter E. Loeffler and Mr. Peter A. Michelotti. Set forth below are the names, ages and length of service of each of the members of our Board.

       
Nominees   Age(1)   Term Expires   Position(s) Held   Director Since
Dominick J. D’Agosta   76   2021   Director   2018
Mark J. Hontz   51   2021   Director   1998
Walter E. Loeffler   69   2021   Director   2018
Peter A. Michelotti   49   2021   Senior Executive Vice
President and Chief
Operating Officer;
Director
  2018

       
Continuing Directors   Age(1)   Term Expires   Position(s) Held   Director Since
Richard Branca   70   2019   Director   2005
Katherine H. Caristia   64   2019   Director   2010
Anthony Labozzetta   54   2019   President and Chief
Executive Officer;
Director
  2010
Robert McNerney   59   2019   Director   2011
Patrick E. Brady   64   2020   Director   2005
Edward J. Leppert   57   2020   Chairman of the Board
  2001
Michael X. McBride   64   2020   Director   2017

(1) At March 1, 2018.

The principal occupation, education and business experience, where applicable, of each nominee for election as a director and each continuing and retiring director are set forth below. Unless otherwise indicated, principal occupations shown for each director have extended for five or more years.

Nominees

Mr. Dominick J. D’Agosta is retired and a banking industry veteran who began his career in 1959 at First Jersey National Bank. Over the course of nearly 55 years, Mr. D’Agosta has held senior management positions with various financial institutions (many of which have merged or consolidated), including National Westminster Corporation, Summit Bank Corporation, Fleet Bank Boston, Bank of America and Capital One. Mr. D’Agosta continues to serve the community through non-profit work. Currently, he is the Chairman of Youth Consultation Services (YCS) in Hackensack, New Jersey. He was past Chairman of both the Hudson County and Meadowlands Chambers of Commerce, and he is a Board Member, and past Chair, for the Hudson/Bergen County Workforce Investment Board. Mr. D’Agosta previously held Chair positions with the New Jersey City University Foundation and the Bon Secours Health Systems NJ with hospitals in Jersey City and Hoboken.

Mr. Mark J. Hontz is a partner in the Newton, New Jersey based law firm of Hollander, Strelzik, Pasculli, Hinkes, Wojcik, Gacquin, Vandenberg & Hontz, L.L.C. and has been a practicing lawyer since 1992. His experience counseling various clients and business entities has given him insight into many of the issues we deal with, including risk mitigation and corporate governance.

Mr. Walter E. Loeffler is a certified public accountant and managing member of Walter E. Loeffler, CPA, LLC, a CPA firm since 1986. Mr. Loeffler’s is also the President of Business Valuation Associates, Inc. since 1995. Mr. Loeffler’s experience includes consulting services for closely-held corporations, business valuations, forensic and traditional accounting services as well as tax return preparation. Mr. Loeffler’s was a Board member of Community Bank of Bergen Couny, NJ and the Chairman of their Audit Committee.

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Mr. Peter A. Michelotti has been our Chief Operating Officer and Senior Executive Vice President since January 2018. He is a certified financial planner and he was previously the President and Chief Executive Officer as well as a Board member of Community Bank of Bergen Couny, NJ since January 2009. He held various other positions with Community Bank Bank of Bergen Couny, NJ since 1987. He also has held several officer and director positions with banking related associations. Mr. Michelotti has more than 30 years of banking experience, including strategic planning, lending, regulatory compliance, risk management and operations.

Continuing Directors

Mr. Patrick E. Brady has been the Chief Executive Officer of Heath Alliance for Care of Hackettstown, New Jersey, a not for profit corporation providing housing and services for the elderly, since 1995. Heath Alliance for Care, Inc. is parent to Heath Village, Inc. and Canterbury Village, Inc. Mr. Brady was also formerly a trustee of Cathedral Healthcare Systems. As a Chief Executive Officer, Mr. Brady has experience in many of the issues we deal with, including financial and strategic planning, technology and government relations.

Mr. Richard Branca is the owner and President of Bergen Engineering Company, East Rutherford, New Jersey. He is also the President of Branca Properties, which owns and manages over 1.3 million square feet of office, warehouse and retail space. Mr. Branca also serves as a Principal of Concord Hospitality, an entity which owns or operates over 84 full and select service hotels throughout the United States and Canada. Mr. Branca’s broad based business experience has provided him with insight and understanding of many of the same issues that both our small business customers and we deal with today, including financial and strategic planning, capital allocation and management development.

Ms. Katherine H. Caristia is a certified public accountant and has served as the Chief Operating Officer/Chief Financial Officer of the Jan Group of Companies of Randolph, New Jersey since 2001. She was previously the Controller of the Jan Group of Companies. Her accounting and prior business positions have given Ms. Caristia experience in the service, retail and financial sectors. Ms. Caristia’s financial and accounting background allow her to provide insight to the Board on many of the issues we deal with on a daily basis. In addition, Ms. Caristia’s accounting experience qualifies her to serve on our Audit Committee.

Mr. Anthony Labozzetta has been our President and Chief Executive Officer since January 2010. He was previously an Executive Vice President of TD Bank from 2006 to 2010. Prior to joining TD Bank, Mr. Labozzetta served as the Senior Executive Vice President and COO of Interchange Financial Services Corporation until its acquisition by TD Bank in 2006. Mr. Labozzetta also previously served as the Chief Financial Officer of Interchange Financial Services Corporation. He was formerly a certified public accountant with Deloitte & Touche. With more than 30 years of banking experience, including strategic planning and growth, regulatory compliance, investor relations, risk management, mergers and acquisitions and management development, Mr. Labozzetta has extensive and diverse knowledge of the banking business.

Mr. Edward J. Leppert is a certified public accountant and founder of Leppert Group LLC, and has been in public practice since 1986. Effective January 1, 2012, he was elected Chairman of the Board of both the Company and Sussex Bank. He previously served as Vice Chairman of the Board and has also served as the Chairman of the Audit, Executive, and Nominating and Corporate Governance Committees. His experience with financial and corporate governance matters and knowledge of the customers and communities in the northern New Jersey marketplace are beneficial to us.

Mr. Michael X. McBride, Esq. is an attorney and partner at Connell Foley LLP (“Connell Foley”) in Roseland, New Jersey. His practice focuses on real estate and construction. From 2010 through 2015, Mr. McBride served as Connell Foley’s Managing Partner. He is admitted to the New York State Bar and the New Jersey State Bar. He is a graduate of Stanford University and Georgetown University Law Center. Mr. McBride’s knowledge of the customers and communities in the northern New Jersey marketplace are beneficial to us and provides us valuable insight into the current market.

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Mr. Robert McNerney has been the owner of a real estate company, McNerney & Associates, Inc., since 1981. McNerney & Associates, Inc. provides appraisal, management, brokerage and development services throughout northern New Jersey and New York. He is a licensed appraiser and real estate broker in NJ and NY and holds an MAI and SRA designation from the Appraisal Institute. He holds a CRE designation from the Counselors of Real Estate, which is awarded to individuals nominated by their peers who possess extensive experience in the commercial real estate business. Mr. McNerney’s extensive experience in the real estate markets and as a business owner provides us valuable insight into the current market.

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INFORMATION ABOUT OUR EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS

The following are our executive officers who are not also members of the Board and therefore are not listed above:

Mr. Steven M. Fusco, age 51, has served as Chief Financial Officer and Senior Executive Vice President since 2010. Mr. Fusco also has served as the Chief Financial Officer of Sussex Bank since June 2010. Mr. Fusco has over 30 years of banking experience, including managing accounting and treasury functions, strategic planning, risk management, regulatory compliance, operations, mergers and acquisitions and consulting. Prior to joining the Company and Sussex Bank, Mr. Fusco served as a Vice President and Treasury Manager with Investors Bank and as the Chief Financial and Operating Officer and Executive Vice President of Mariner’s Bancorp and Mariner’s Bank. Mr. Fusco also served as the Treasurer and First Vice President for Interchange Bank during his 10 years at the bank. Mr. Fusco also serves on two non-profit Boards, including being Vice Chairman of the Board for Financial Managers Society, Inc., which services financial professionals from community banks, thrifts, and credit unions.

Mr. George Lista, age 58, has served as the President and Chief Executive Officer of our subsidiary, Tri-State Insurance Agency, since 2001. Mr. Lista joined Sussex Bank when we acquired Tri-State Insurance Agency in 2001. Mr. Lista served as Chief Operating Officer of Tri-State prior to its acquisition. Mr. Lista has 37 years of experience in the insurance industry.

Mr. Vito Giannola, age 41, has served as Senior Executive Vice President and Chief Banking Officer of Sussex Bank since March 2018 and has been with the Bank since September 2010. Mr. Giannola has over 16 years of experience in retail, small business and government banking. Prior to joining Sussex Bank, Mr. Giannola served as Retail Market Manager and Senior Vice President with TD Bank, where he held various positions throughout the bank. Mr. Giannola also held various positions with Chase and First Union (Wells Fargo).

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CORPORATE GOVERNANCE

Board of Directors

The Board oversees our business and monitors the performance of our management. In accordance with our corporate governance procedures, the Board does not involve itself in our day-to-day operations. Our executive officers and management oversee the day-to-day operations. Our directors fulfill their duties and responsibilities by attending regular meetings of the Board, which are held on a monthly basis. Our directors also discuss business and other matters with the Chairman, the President and Chief Executive Officer, other key executives and our principal external advisers (legal counsel, auditors, financial advisors and other consultants).

The Board held 4 regularly scheduled meetings and 8 special meetings during the year ended December 31, 2017. Each incumbent director attended at least 75% of the total of (i) the meetings of the Board held during the period for which he or she has been a director and (ii) the meetings of the committee(s) on which that particular director served during such period.

It is our policy to encourage directors and nominees to attend the Annual Meeting. At the 2017 annual meeting of shareholders, all members then serving on the Board were in attendance.

Board of Directors Independence

Rule 5605 of the NASDAQ Listing Rules requires that independent directors compose a majority of a listed company’s board of directors. In addition, the NASDAQ Listing Rules require that, subject to specified exceptions, each member of a listed company’s audit, compensation, and nominating and corporate governance committees be independent and that audit committee members also satisfy independence criteria set forth in Rule 10A-3 under the Exchange Act. Compensation committee members must also satisfy independence criteria set forth in Rule 10C-1 under the Exchange Act. Under Rule 5605(a)(2) of the NASDAQ Listing Rules, a director will only qualify as an “independent director” if, in the opinion of our Board, that person does not have a relationship that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director. In order to be considered independent for purposes of Rule 10A-3 under the Exchange Act, a member of an audit committee of a listed company may not, other than in his or her capacity as a member of the audit committee, the board of directors or any other board committee: (i) accept, directly or indirectly, any consulting, advisory or other compensatory fee from the listed company or any of its subsidiaries; or (ii) be an affiliated person of the listed company or any of its subsidiaries. In addition to satisfying general independence requirements under the NASDAQ Listing Rules, members of a compensation committee must also satisfy independence requirements set forth in Rule 10C-1 under the Exchange Act and NASDAQ Listing Rule 5605(d)(2). Pursuant to Rule 10C-1 under the Exchange Act and NASDAQ Listing Rule 5605(d)(2), in affirmatively determining the independence of a member of a compensation committee of a listed company, the board of directors must consider all factors specifically relevant to determining whether that member has a relationship with the company which is material to that member’s ability to be independent from management in connection with the duties of a compensation committee member, including: (a) the source of compensation of such member, including any consulting, advisory or other compensatory fee paid by the company to such member; and (b) whether such member is affiliated with the company, a subsidiary of the company or an affiliate of a subsidiary of the company.

The Board consults with our legal counsel to ensure that the Board’s determinations are consistent with relevant securities and other laws and regulations regarding the definition of “independent,” including those set forth in pertinent NASDAQ Listing Rules, as in effect from time to time. Consistent with these considerations, the Board has affirmatively determined that all of its directors, including the director nominees, satisfy general independence requirements under the NASDAQ Listing Rules, other than Messrs. Labozzetta and Michelotti, and Mr. Ursin, who resigned from the board effective January 22, 2017. In making this determination, the Board found that none of the directors, other than Messrs. Labozzetta, Michelotti and Ursin, had a material or other disqualifying relationship with us that would interfere with the exercise of independent judgment in carrying out the responsibilities of a director, and that each director, other than Messrs. Labozzetta, Michelotti and Ursin, is “independent” as that term is defined under Rule 5605(a)(2) of the NASDAQ Listing Rules. The Board determined that Mr. Labozzetta, our President and Chief Executive Officer, and Mr. Michelotti, our Senior Executive Vice President and Chief Operating Officer, are not

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independent directors by virtue of their respective current or former employment with us. Mr. Ursin was not an independent director due to certain related-person transactions in excess of $120,000 for 2013 which are described in more detail under the section entitled “Transactions with Related Persons” found elsewhere in this proxy statement. The Board also determined that each member of the Audit, Compensation, and Nominating and Corporate Governance Committees satisfies the independence standards for such committees established by the SEC and the NASDAQ Listing Rules, as applicable.

Code of Ethics and Corporate Governance Guidelines

We have a Code of Conduct, which applies to all our directors, officers and employees. We also have a Senior Management Code of Ethics, which applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions for us, and which requires compliance with the Code of Conduct. The Senior Management Code of Ethics meets the requirements of a “code of ethics” as defined by Item 406 of Regulation S-K.

We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding an amendment to, or a waiver from, a provision of our Code of Ethics that applies to our principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions, by posting such information on our website at the internet address set forth below. We did not amend or grant any waivers of a provision of our Code of Ethics during 2017.

The Board adopted Corporate Governance Guidelines to assure that it will have the necessary authority and practices in place to review and evaluate our business operations as needed and to make decisions that are independent of our management. The Corporate Governance Guidelines are also intended to align the interests of directors and management with those of our shareholders. The Corporate Governance Guidelines set forth the practices the Board intends to follow with respect to Board independence, composition and selection, Board meetings and involvement of senior executives, senior executive performance evaluation and succession planning, and Board committees and compensation.

The Code of Conduct, the Senior Management Code of Ethics and the Corporate Governance Guidelines are available on our website at www.sussexbank.com. The inclusion of our website address here and elsewhere in this proxy statement does not include or incorporate by reference the information on our website into this proxy statement.

Board Leadership Structure and Role in Risk Oversight

Board Leadership Structure

The Board does not have a formal policy on separating the roles of Chairman of the Board and Chief Executive Officer and, if separate, whether the Chairman of the Board should be a non-employee director or an employee. The Board believes that no single, one-size fits all, board leadership model is universally or permanently appropriate. The Board prefers to retain the flexibility to structure its leadership from time to time in any manner that is in our best interest and that of our shareholders. The positions of our Chairman of the Board and Chief Executive Officer are currently separated. Separating these positions allows our Chief Executive Officer to focus on our day-to-day business, while allowing the Chairman of the Board to lead our Board in its fundamental role of providing advice to and independent oversight of management. The Board recognizes the time, effort and energy that our Chief Executive Officer must devote to his position in the current business environment, as well as the commitment required to serve as our Chairman, particularly as the Board’s oversight responsibilities continue to grow. The Board also believes that this structure ensures a greater role for the independent directors in the oversight of the Company and active participation of the independent directors in setting agendas and establishing priorities and procedures for the work of our Board. The Board recognizes that depending on the circumstances other leadership models, such as combining the role of Chairman of the Board with the role of Chief Executive Officer, might be appropriate. Accordingly, our Board may periodically review its leadership structure.

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Board’s Role in Risk Oversight

Risk is an inherent part of the business of banking. Risks faced by us include credit risk relating to our loans and interest rate risk related to our balance sheet. The Board oversees these risks through the adoption of policies and by delegating oversight to certain Board committees, including the loan and asset-liability committees. These committees exercise oversight by establishing a corporate environment that promotes timely and effective disclosure, fiscal accountability and compliance with all applicable laws and regulations.

Committees of the Board of Directors

The Board has established three committees: an Audit Committee, a Compensation Committee and a Nominating and Corporate Governance Committee. The following table provides membership and meeting information for the year ended December 31, 2017, for each Board committee:

     
Name   Audit   Compensation   Nominating and
Corporate Governance
Patrick E. Brady     X       X           
Richard Branca              X           
Katherine H. Caristia**     X                X  
Dominick J. D’Agosta                           
Mark J. Hontz     X       X*       X  
Edward J. Leppert**     X                 X*  
Walter E. Loeffler**                           
Timothy Marvil***      X*                    
Robert McNerney                       X  
Michael X. McBride              X       X  
Total meetings in 2017     6       6       2  

* Committee Chair
** Financial Expert
*** Effective January 21, 2018, upon the resignation of Messr. Marvil, Messr. Leppert assumed the role Chairman of the Audit Committee.

Below is a description of each committee of the Board.

Audit Committee

During 2017, the Audit Committee was chaired by Messr. Marvil with Ms. Caristia, Messrs. Brady, Hontz and Leppert as members. Effective January 21, 2018, upon the resignation of Messr. Marvil, Messr. Leppert assumed the role Chairman of the Audit Committee. Effective January 24, 2018, Mr. Loeffler was appointed to the Audit Committee. The purpose of the Audit Committee is to assist the Board’s oversight of our accounting and financial reporting process, including our internal audit function and the audits of our financial statements.

The primary duties and responsibilities of the Audit Committee are to:

oversee and monitor the financial reporting process, internal audit function and internal controls and procedures;
appoint, compensate and oversee the work of the independent auditors;
review and evaluate the audited financial statements with management and the independent auditors and report any substantive issues found during the audit to the Board;
review and approve all transactions with related persons; and
provide an open avenue of communication among the independent auditors, financial and senior management, the internal audit department and the Board.

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The Audit Committee is also responsible for the pre-approval of all audit, review, attest and non-audit services provided by our independent auditors. The Audit Committee pre-approved 100% of the services performed by the independent registered public accounting firm during 2017.

The Audit Committee may form and delegate authority to one or more subcommittees (including a subcommittee consisting of a single member), as it deems appropriate from time to time under the circumstances. Any decision of a subcommittee to pre-approve audit, review, attest or non-audit services shall be presented to the full Audit Committee at its next scheduled meeting.

The Board reviews the definition of independence for Audit Committee members on an annual basis and has determined that all members of our Audit Committee are independent (as independence is currently defined in Rule 5605(a)(2) of the NASDAQ Listing Rules and Rule 10A-3 under the Exchange Act). The Board has also determined that Ms. Caristia qualifies as an “audit committee financial expert” as defined in applicable SEC rules. The Audit Committee has a written charter, which is available on our website at www.sussexbank.com.

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AUDIT COMMITTEE REPORT(1)

The Audit Committee has reviewed and discussed the audited financial statements as of and for the fiscal year ended December 31, 2017 with management and our independent registered public accounting firm, BDO. The Audit Committee has discussed with BDO the matters required to be discussed by Statement on Auditing Standards No. 61, as amended (AICPA, Professional Standards, Vol. 1. AU Section 380), as adopted by the Public Company Accounting Oversight Board, or PCAOB, in Rule 3200T. The Audit Committee has also received the written disclosures and the letter from BDO required by applicable requirements of the PCAOB regarding BDO’s communications with the Audit Committee concerning independence, and has discussed with BDO the firm’s independence. Based on the foregoing, the Audit Committee recommended to the Board of Directors that the consolidated audited financial statements be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, for filing with the Securities and Exchange Commission.

Sussex Bancorp
Audit Committee

Edward J. Leppert, Chair
Katherine H. Caristia
Patrick E. Brady
Mark Hontz
Walter Loeffler

(1) The material in this report is not “soliciting material,” is not deemed “filed” with the SEC and is not to be incorporated by reference in any filing we make under either the Securities Act of 1933, as amended, or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

Compensation Committee

During 2017, the Compensation Committee was chaired by Mr. Hontz, with Messrs. Brady, Branca and McBride as members. The purpose of the Compensation Committee is to review senior management’s performance and determine compensation, and review and set guidelines for compensation of all employees.

The primary duties and responsibilities of the Compensation Committee are to:

annually review and approve corporate and/or individual goals and objectives relevant to the compensation of the President and Chief Executive Officer, evaluate performance in light of those goals and objectives, and recommend to the Board the compensation level based on this evaluation;
annually review and recommend to the Board for the President and Chief Executive Officer and the senior executives (i) annual base salary, (ii) any annual and long-term incentives, and (iii) any special or supplemental benefits;
make recommendations to the Board with respect to profit sharing and equity-based compensation plans; and
review and adopt any necessary or desirable amendments or changes to any and all benefit, incentive compensation and equity-based plans.

The Compensation Committee has the authority to delegate its authority to subcommittees as it deems appropriate; provided, that any such subcommittee shall report to the entire Compensation Committee on its activities. The Compensation Committee also has the sole authority to retain compensation consultants to assist in its evaluation of executive and director compensation, including the authority to approve the consultant’s reasonable fees and other retention terms. During the past fiscal year, the Compensation Committee engaged BFS Group, a compensation consulting firm, to advise the Compensation Committee on executive SERP plans. The compensation consulting firm is reviewing SERPs for certain executive officers.

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The Board reviews the definition of independence for Compensation Committee members on an annual basis and has determined that all members of our Compensation Committee are independent (as independence is currently defined in Rule 5605(a)(2) of the NASDAQ Listing Rules and Rule 10C-1 under the Exchange Act). The Compensation Committee has a written charter, which is available on our website at www.sussexbank.com.

Nominating and Corporate Governance Committee

During 2017, the Nominating and Corporate Governance Committee was chaired by Mr. Leppert, with Ms. Caristia and Messrs. Hontz, McBride and McNerney as members. The purpose of the Nominating and Corporate Governance Committee is to identify and evaluate individuals qualified to become directors, and periodically review our organizational documents and corporate governance policies.

The primary duties and responsibilities of the Nominating and Corporate Governance Committee are to:

identify, review and evaluate candidates to serve as directors (consistent with criteria approved by the Board);
recommend to the Board for selection candidates for election to the Board;
review and evaluate incumbent directors;
develop and oversee annual evaluations of the Board and its members, its committees and the Chief Executive Officer; and
annually review our corporate governance guidelines and insider trading policies and procedures.

The Nominating and Corporate Governance Committee is responsible for reviewing with the Board the appropriate skills and characteristics required of Board members in the context of the current make-up of the Board. When we have an opening on the Board, we will always look at a diverse pool of candidates. It is the policy of the Nominating and Corporate Governance Committee to select individuals as director nominees who shall have the highest personal and professional integrity, who shall have demonstrated exceptional ability and judgment and who shall be most effective, in conjunction with the other nominees to the Board, in collectively serving the long-term interests of the shareholders. When considering candidates for the Board, the Nominating and Corporate Governance Committee takes into account the candidate’s diversity, skills, such as an understanding of financial statements, financial reporting systems and our market area, and independence from management. We view and define diversity in its broadest sense, which includes gender, ethnicity, education, experience and leadership qualities. If the Nominating and Corporate Governance Committee believes a candidate would be a valuable addition to the Board, it will recommend to the full Board that candidate’s election. The Nominating and Corporate Governance Committee also has the authority to retain any search firm to assist in the identification of director candidates. However, the Nominating and Corporate Governance Committee has not retained any such search firm, and we do not pay a fee to any third party to identify or evaluate director candidates.

The Nominating and Corporate Governance Committee will consider qualified nominations for directors recommended by shareholders. All shareholder recommendations are evaluated on the same basis as any recommendation from members of our Board or management. Recommendations should be sent to Linda Kuipers, Secretary, Sussex Bancorp, 100 Enterprise Drive, Suite 700, Rockaway, New Jersey 07866. Director nominations by shareholders should be received by the Secretary between December 27, 2018 and January 25, 2019 for the 2019 annual meeting of shareholders. For additional information about our director nomination requirements, please see our Amended and Restated By-laws. As of the date of this proxy statement, the Nominating and Corporate Governance Committee and the Secretary had not received any shareholder nominations or recommendations for nominees in connection with the Annual Meeting. All nominees were nominated by the Nominating and Corporate Governance Committee.

The Board reviews the definition of independence for Nominating and Corporate Governance Committee members on an annual basis and has determined that all members of our Nominating and Corporate Governance Committee are independent (as independence is currently defined in Rule 5605(a)(2) of the NASDAQ Listing Rules). The Nominating and Corporate Governance Committee has a written charter, which is available on our website at www.sussexbank.com.

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Shareholder Communications with Our Board of Directors

Shareholders wishing to communicate directly with the independent members of the Board may send correspondence to Edward J. Leppert, Chairman of the Board, One County Road 560, Sandyston, New Jersey 07826.

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COMPENSATION DISCUSSION AND ANALYSIS

This Compensation Discussion and Analysis section is intended to help our shareholders understand the Company’s compensation philosophy, objectives, components and practices. This section also describes the Committee’s decisions made during 2017 as they relate to the compensation of our named executive officers (NEO). Their compensation is set forth in the Summary Compensation Table and other compensation tables contained in this Proxy Statement.

The following officers have been identified as our named executive officers:

   
Anthony Labozzetta     President and Chief Executive Officer
Steven M. Fusco     Senior Executive Vice President and Chief Financial Officer
George Lista     Chief Executive Officer, Tri-State Insurance Agency
Sergio Mussacchio(1)     Executive Vice President and Chief Lending Officer

(1) Mr. Mussacchio separated employment with the Company effective December 31, 2017. The terms of separation included salary continuation for the lesser of nine months or Mr. Mussachio being employed with another company. In addition, the Company would pay for medical benefits for that term.

2017 Key Strategic and Financial Highlights

The Company continues to execute its strategic goals driven by strong organic growth in each of our key business lines. Fiscal year 2017 represented the fifth consecutive year of successive increase in operating earnings and performance measures (e.g. ROA and ROE). The Company continued to achieve higher performance results driven by commercial lending growth, core deposit growth, market expansion, fee income driven by our insurance agency and further expanding and penetrating the northern NJ and metro NY markets. We are extremely proud of the following key Strategic and Financial highlights for 2017:

Key Strategic Highlights:

Announced the signing of a definitive merger agreement with Community Bank of Bergen County, NJ that would increase assets by approximately 40% and was projected to be accretive to both earnings per share and tangible book value. The transaction closed on January 4, 2018.
Raised over $28 million in a common stock offering, which such offering was oversubscribed.
Continued market expansion into northern New Jersey and metro New York markets.

Key Financial Highlights:

Adjusted for merger related expenses and the impact from the enactment of the Tax Cut and Jobs Act, operating results for the year ended December 31, 2017 increased by 40% as compared to the prior year.
Adjusted for merger related expenses and the impact from the enactment of the Tax Cut and Jobs Act, operating earnings per diluted share for the year ended December 31, 2017 was $1.42 as compared to $1.19 for the same period last year.
Total assets grew 15.4% to $979 million by the end of 2017; total loans and deposits organically grew 18.0% and 15.4%, respectively.
Continued strong growth of 18% in pre-tax income from our insurance subsidiary.
Declared cash dividends to common shareholders totaling $0.24 per share.

Executive Compensation Philosophy and Objectives

The Committee believes the success of the Company is driven through the attraction and retention of qualified executives who deliver on our strategic vision, embrace our culture and drive shareholder value. Our executive compensation program is designed to motivate and reward high performance in a manner that is fiscally responsible, ensures regulatory compliance and motivates executives without encouraging undue risk-taking, which could materially threaten the safety and soundness of the Company or any individual business unit.

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The executive compensation program is designed to offer a competitive mix of both cash and equity compensation and benefits that will attract, motivate and retain highly qualified and talented executives who will help maximize the Company’s short and long term performance and shareholder value. The executive compensation program comprises competitive base salaries, cash and equity based incentive and benefits that are designed to be competitive with market and that result in compensation that is commensurate with our performance.

Role of the Compensation Committee, Management and the Compensation Consultant in the Executive Compensation Process

Role of the Compensation Committee

The Compensation Committee is appointed by the Company’s Board of Directors to discharge the Board’s responsibilities relating to compensation of the Company’s executive officers. Four members of our Board of Directors sit on the Committee, each of whom is an independent director under the NASDAQ Stock Market listing requirements. To fulfill its responsibilities, the Committee meets at least quarterly throughout the year (met six times in 2017). The Chair of the Committee reports on Committee actions at meetings of the Board of Directors. Written minutes of Committee meetings are prepared, presented to and accepted by the Board.

The Committee has overall responsibility for evaluating and approving the compensation plans, policies and programs of the Company applicable to its CEO and other key executive officers. In discharging its responsibilities, the Committee establishes the compensation philosophy and oversees the development and implementation of the Company’s executive compensation programs and related policies.

In order to discharge its responsibilities, the Committee has the authority and is provided the resources to obtain advice and assistance from internal or external legal, compensation, human resource, accounting and other advisors or consultants as it deems necessary or appropriate. These services are provided as a matter of practice as requested by the Committee and such advisors report directly to the Committee.

Details on the Committee’s functions are more fully described in its charter. As part of its responsibilities, the Committee reviews its charter in the development of an annual work plan and recommends any proposed changes to the Board for approval. The Compensation Committee has a written charter, which is available on our website at www.sussexbank.com.

Role of the Compensation Consultant

The Committee has the authority to hire, terminate, and seek the services of compensation consulting and advisory firms as it deems appropriate. These advisors serve as independent counsel and report directly to the Committee, with such fees and retention terms determined at the authority of the Committee.

During the past fiscal year, the Compensation Committee engaged BFS Group, a compensation consulting firm, to advise the Compensation Committee on certain executive SERP plans.

The last benchmark review was conducted in 2015 by Meyer-Chatfield Compensation Advisors who was engaged by the Compensation Committee and provided recommendations regarding the levels of compensation of executive officers and directors relative to our industry peers. The Compensation Committee took into account the recommendation and utilized information, including peer data, regarding the compensation of our executives and directors in determining compensation levels for 2016.

In December 2017, the Committee engaged Meridian Compensation Partners, LLC (“Meridian”), as its independent advisor. Meridian specializes in executive and board compensation and reports directly to the Committee. The Committee assessed, and determined that Meridian is independent and that their engagement complies with the standards adopted by the SEC and by NASDAQ with regard to compensation advisor independence. The analysis for executive and Board compensation will be conducted by Meridian and will be used as reference for 2018 pay decisions.

Role of Management

Although the Committee exercises its independent judgment in reaching compensation decisions, it may request information or perspective from the Company’s executive or senior management. Information and input from senior management is helpful to ensuring the Committee and its advisors have the information

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needed to make informed decisions. Executives may provide insight, suggestions or recommendations regarding executive compensation. However, only Committee members vote on decisions regarding executive compensation. In all cases, no executive officer shall be present at meetings at which their compensation or performance is discussed or determined by the Committee.

Competitive Benchmarking

The Committee last conducted its competitive benchmarking in 2015. In late 2017, the Committee engaged its new consultant to conduct a comprehensive benchmarking review in early 2018. As a result, there was no peer group or competitive benchmarking used for 2017. Details of our most recent analysis will be reported in our 2018 proxy.

Executive Compensation Program Components and 2017 Pay Decisions

The compensation program consists of four components: base salary, annual (cash incentives), long-term (equity incentives) and benefits. The table below summarizes the actual NEO compensation paid for the 2017 performance year, which consists of base salary, annual (cash) incentives and equity grants. Additional details related to these components follow this table.

   
Anthony Labozzetta     President and Chief Executive Officer
Steven M. Fusco     Senior Executive Vice President and Chief Financial Officer
George Lista     Chief Executive Officer, Tri-State Insurance Agency
Sergio Mussacchio     Executive Vice President and Chief Lending Officer

       
Executive   Base
Salary
($)
  Annual Incentive
Award (Cash)
($)
  Restricted
Stock Grant
($)
  Total Direct
Compensation
($)
Anthony Labozzetta     437,908       165,567       165,567       769,042  
Steven M. Fusco     238,341       72,224       72,224       382,789  
George Lista     185,633       36,164       36,164       257,961  
Sergio Mussacchio     220,000                   220,000  

Below we summarize our programs and 2017 pay decisions.

Base Salary

The Committee believes the purpose of base salary is to provide competitive and fair base compensation that recognizes the executives’ role, responsibilities, experience and performance. Base salary represents fixed compensation that is targeted to be competitive with the practices of comparable banks similar in size and region.

Typically, the Committee sets base salary for each executive in the first quarter of each year effective January 1. Salaries are determined in consideration of the competitive market for similar roles, as well as each individual’s experience, performance and contributions. Input from the Company’s Chief Executive Officer is considered in setting executive salaries, while the Committee is solely responsible for recommending the Company’s Chief Executive Officer’s salary.

Below is a summary of the salaries approved by the Compensation Committee:

     
Executive   2016 Base Salary
($)
  2017 Base Salary
($)
  %
Increase
Anthony Labozzetta     394,671       441,511       11.8  
Steven M. Fusco     209,463       240,747       15.4  
George Lista     174,412       185,974       6.6  
Sergio Mussacchio     220,000       220,000        

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The salary increases from 2016 to 2017 were a result of the Company’s growth, strong performance and was supported by the 2015 Meyer Chatfield executive compensation review.

Executive Incentive Plan

The objective of the Company’s executive incentive plan is to motivate and reward key members of executive management for achieving specific performance goals that support the Company’s strategic plan through the use of cash awards and restricted stock. Awards under this plan represent compensation that must be earned based upon performance. Awards for the CEO and CFO are paid 50% in cash and 50% in equity with subsequent 3 year vesting and the awards for the CEO of Tri-State Insurance Agency is paid 100% in cash with the potential of discretionary stock awards.

The performance goals are developed in conjunction with the annual business plan, approved by the Compensation Committee and presented to the full Board for final approval.

The incentive target opportunities and performance measures for the 2017 compensation year are described below.

Award Opportunity:  The table below summarizes the 2017 incentive award opportunities (expressed as a percentage of base salary) available under our annual executive incentive plan and paid only upon achievement of the performance goals. The total incentive opportunity is allocated in cash (and equity in the case of the CEO, CLO and CFO) in accordance with the table below. The Committee believes payment in stock provides additional retention and deferral of compensation that reinforces our desire to align pay with shareholder interests and provide long-term compensation.

                 
  Total Incentive Opportunity
(% of Salary)
  Cash Portion
(% of Salary)
  Restricted Stock Portion
(% of Salary)
     Threshold   Target   Maximum   Threshold   Target   Maximum   Threshold   Target   Maximum
Chief Executive Officer     25.0 %      50.0 %      75.0 %      12.5 %      25.0 %      37.5 %      12.5 %      25.0 %      37.5 % 
Chief Financial Officer     20.0 %      40.0 %      60.0 %      10.0 %      20.0 %      30.0 %      10.0 %      20.0 %      30.0 % 
Chief Executive Officer, Tri-State Insurance Agency     10.0 %      20.0 %      30.0 %      10.0 %      20.0 %      30.0 %                   
EVP, Chief Lending Officer     20.0 %      40.0 %      60.0 %      10.0 %      20.0 %      30.0 %      10.0 %      20.0 %      30.0 % 

Performance Measures:  The 2017 performance measures require our Company to achieve increased levels of profitability and achieve other key goals aligned with our business strategy. All participants have at least 50% of their incentive based on Net Income (Corporate or Division) to reinforce our goal to fund incentives based on earnings. Corporate Net Income was adjusted for significant extraordinary events (including acquisition costs and the impact of tax reform – deferred tax asset write down; see footnote below table for details).

Weightings for performance goals can vary by participant. For the CEO and CFO, performance is strictly formulaic, with 50% of the incentive determined by Corporate Net Income and 50% based on 3-Year Average Return on Equity (ROE). We believe a rolling view of ROE as measured for the prior 3 years is an effective way to reward and motivate sustained performance. The CEO, Tri-State Insurance Agency is measured based on the Business Unit goals: Net Income Before Taxes, Total Commissions Revenue and Efficiency Ratio. The Committee believed these measures would drive the appropriate focus by the executive team on overall performance of the Company. In addition to corporate goals, the CLO is measured on Business Unit goals.

The performance measures and goals were established by the Committee and approved unanimously in January 2017. The following tables summarize the measures, weightings and goals at threshold, target and stretch levels. The last column indicates the 2017 performance results for each goal.

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Dollars are in thousands.

Corporate Officers (Chief Executive Officer and Chief Financial Officer)

         
  Weighting   Performance Goals
Performance Measure   Threshold   Target   Max   Actual
Net Income     50 %    $ 4,928     $ 5,476     $ 6,571     $ 7,699  
3-Year Average ROE     50 %      6.94 %      7.19 %      7.69 %      8.30 % 

Reported Net income (GAAP) for Fiscal Year 2017 was $5,691 and ROE was 7.17%, which included significant items that impacted financial results. Those items included the following:

   
Fiscal Year 2017   Net
Income
  ROE
Reported GAAP   $ 5,691       7.17 % 
Adjustments for significant extraordinary events:
                 
Merger related expenses net of tax   $ 1,021       1.29 % 
S-3 Registration filing expenses, net of tax   $ 45       0.06 % 
Impact of tax reform – deferred tax asset write down   $ 942       1.19 % 
Total Adjustments   $ 2,008       2.54 % 
Non-GAAP results   $ 7,699       9.71 % 

The 3-Year Average ROE 8.30% (adjusted for significant events in 2017) as compared to the reported result of 7.46%. The Non-GAAP results were utilized for the incentive measurement.

Chief Executive Officer, Tri-State Insurance Agency

         
  Weighting   Performance Goals
Performance Measure   Threshold   Target   Max   Actual
Net Income Before Taxes     60 %    $ 1,294     $ 1,438     $ 2,156     $ 1,413  
Total Commissions Revenue     20 %    $ 4,721     $ 5,246     $ 7,869     $ 5,421  
TSIA: Efficiency Ratio     20 %      73.3 %      72.6 %      63.2 %      73.9 % 

2017 Performance and Awards:  For 2017, the Corporate performance measures used for the CEO and CFO incentive awards both exceeded the maximum and resulted in a payout equivalent to 120% of target. Performance for the Chief Executive of Tri-State Insurance Agency was determined to be 19.4% of base salary. The Chief Lending Officer was not entitled to any 2017 awards. The executive incentive plan administration guidelines state a participant must be active and on payroll at the time of award. Due to the CLO’s separation from the Company on December 31, 2017, he was no longer an eligible plan participant when awards were processed in early 2018 and therefore received no award under the plan.

The following table summarizes the total 2017 annual incentive awards paid pursuant to the executive incentive plan. Payouts were made in March 2018 to the Chief Executive Officer and the other named executive officers.

           
  Total   Cash
(50% of Total)
  Rest Stock
(50% of Total)
     % of
Salary
  Amount
$
  % of
Salary
  Amount
$
  % of
Salary
  Amount
$
Chief Executive Officer     75.0       331,133       37.5       165,567       37.5       165,567  
Chief Financial Officer     60.0       144,448       30.0       72,224       30.0       72,224  
Chief Executive Officer, Tri-State Insurance Agency     19.4       36,164       19.4       36,164              
EVP, Chief Lending Officer                                    
Executive Benefits

The Company’s executive compensation program include base salary, annual cash incentive awards, long-term incentive awards and other benefit and perquisites, such as retirement programs.

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The Company provides select executives certain benefits and perquisites, which the Committee believes are reasonable and consistent with the Company’s overall compensation philosophy. The Committee regularly reviews and refines executive benefits to ensure market competitiveness.

Executive Perquisites.  The Company provides a limited number of perquisites to key executives that the Committee believes are necessary for conducting business are reasonable and enable us to attract and retain high performing employees for our key senior management positions. These benefits also allow our executives to maintain direct contact and involvement with current and prospective customers, as well as non-profit organizations in the communities in which we do business. The Committee periodically reviews the levels of perquisites and other personal benefits provided to the named executive officers.

The primary perquisites are: corporate owned automobiles for certain executives, club memberships for certain executives and life insurance programs. These perquisites represent a relatively insignificant portion of the total compensation of each named executive officer. The aggregate incremental cost to the Company for these perquisites is set forth in the Summary Compensation Table under the “All Other Compensation” column and elated notes.

Risk Management

The Compensation Committee annually reviews our executive compensation program to ensure it does not encourage unnecessary or excessive risk taking. In reviewing the program for risk, the goal of the Committee is to design an executive compensation program that encourages prudent risk management and discourages inappropriate risk-taking by granting balanced portfolio of executive compensation that includes fixed and variable pay, annual and long-term pay, cash and equity.

Compensation Committee Report on Executive Compensation

The Compensation Discussion and Analysis (CD&A) section of this proxy statement is management’s report on the Company’s executive compensation programs and decisions for 2017. The Compensation Committee has reviewed and discussed the CD&A with management and recommended to the Board that the CD&A be included in this Proxy Statement.

Respectfully Submitted,
The Compensation Committee
Mark J. Hontz, Chair
Patrick E. Brady
Richard Branca
Michael X. McBride
Edward J. Leppert, Ex-Officio

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EXECUTIVE COMPENSATION TABLES

2017 Summary Compensation Table

The table below sets forth the compensation paid to our Chief Executive Officer, Chief Financial Officer and the two other most highly compensated executive officers, or collectively, the named executive officers, during each of the last three completed fiscal years (or the completed fiscal years during which the executive was a named executive officer, if less).

             
Name and Principal Position   Year   Salary
($)
  Stock
Awards(1)
($)
  Option
Awards(1)
($)
  Non-equity Incentive Plan Compensation
($)
  All Other
Compensation(2)
($)
  Total
($)
Anthony Labozzetta,
President and Chief Executive Officer
    2017       437,908       165,567             165,567       106,383       875,425  
    2016       393,105       357,512       37,777       148,001       96,079       1,032,474  
    2015       375,877       140,956       23,233       140,954       91,445       772,465  
Steven M. Fusco,
Senior Executive Vice President and Chief Financial Officer
    2017       238,341       72,224             72,224       8,127       390,916  
    2016       208,632       178,054       20,209       62,839       2,352       472,086  
    2015       199,489       59,850       15,596       59,847       5,996       340,778  
George Lista,
Chief Executive Officer,
Tri-State Insurance Agency
    2017       185,633       36,164             36,164       170,871       428,832  
    2016       176,218       83,800             46,975       167,602       474,595  
    2015       169,332       12,830             36,081       178,005       396,248  
Sergio Mussacchio,
Executive Vice President and Chief Lending Officer
    2017       220,000                         966       220,966  
                                                              

(1) The amounts set forth represent the aggregate grant date fair value of the stock awards and option awards, computed in accordance with FASB ASC Topic 718. These amounts do not correspond to the actual value that the named executive officers will recognize. Assumptions used in the calculation of these amounts are included in Note 17 — Stock Incentive Plans to our fiscal year 2017 consolidated financial statements, which is included in our Annual Report on Form 10-K filed with the SEC on March 15, 2018.
(2) Amounts in this column are set forth in the table below and include life insurance premiums, 401(k) employer contributions, health savings account, or HSA, contributions, Supplemental Executive Retirement Plan, or SERP, contributions and commissions. The named executive officers participate in certain group life, health, disability insurance and medical reimbursement plans not disclosed in the Summary Compensation Table that are generally available to salaried employees and do not discriminate in scope, terms and operation. In addition, for 2017, the named executive officers were provided certain non-cash perquisites and personal benefits that did not exceed $10,000 in the aggregate for any individual, and are not included in the reported figures.

           
Name   Life
Insurance
Premiums
($)
  401(k)
Employer
Contributions
($)
  HSA
Contributions
($)
  SERP
Contributions
($)
  Commissions
($)
  Total
($)
Anthony Labozzetta     1,301       7,950             97,132             106,383  
Steven M. Fusco     977       7,150                         8,127  
George Lista     2,171       7,950       1,250             159,500       170,871  
Sergio Mussacchio     966                               966  

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2017 Grants of Plan-Based Awards Table

                 
Name   Grant
Date
  Estimated Future Payouts Under Non-Equity Incentive Plan Awards   Estimated Future Payments Under Equity Incentive Plan Awards   All Other Stock Awards: # of shares of Stock   Grant Date Fair Value of Stock and Option Awards
($)
  Threshold
($)
  Target
($)
  Maximum
($)
  Threshold
($)
  Target
($)
  Maximum
($)
Anthony Labozzetta     1/25/17       55,189       110,378       165,567       55,189       110,378       165,567             165,567  
Steven M. Fusco     1/25/17       24,075       48,149       72,224       24,075       48,149       72,224             72,224  
George Lista     1/25/17       18,686       37,372       56,058                         1,222       36,164  
Sergio Mussacchio(1)     1/25/17       22,000       44,000       66,000       22,000       44,000       66,000              

(1) Mussacchio was not awarded anything under the non-equity and equity incentive plans due to his separation effective December 31, 2017.

Long-term Incentive Compensation

Long-term incentives are provided to the named executive officers through awards made under the equity plans established by the Company and Sussex Bank from time to time.

Amended and Restated Executive Incentive and Deferred Compensation Plan.  Under the Sussex Bank Amended and Restated Executive Incentive and Deferred Compensation Plan, or the Plan, our executives who are selected to participate in the Plan may earn awards paid in both cash and shares of our common stock; provided, that certain Company-wide and/or individual performance criteria are met. The Compensation Committee annually determines performance criteria for each participating executive. Grants of common stock are subject to a three-year vesting requirement, and all awards are subject to repayment in the event that it is subsequently determined that the performance metrics on which the award is based are subsequently determined not to have been satisfied, due to a financial restatement or otherwise. Participants in the Plan have the option to defer some or all of their compensation or cash incentive awards. Amounts so deferred will earn interest at a rate equal to the average interest rate earned by Sussex Bank on its investment portfolio.

2013 Equity Incentive Plan.  Effective April 24, 2013, our shareholders approved the 2013 Equity Incentive Plan, or the Equity Plan. All employees, directors and other service providers are eligible to be granted awards under the Equity Plan. The Equity Plan provides for the issuance of “incentive stock options” qualified under Section 422 of the Internal Revenue Code of 1986, as amended, or the Code, and “non-qualified stock options.” In addition, the Equity Plan may grant restricted stock awards, restricted stock units and unrestricted stock awards. The Equity Plan is administered by the Company’s Compensation Committee, which has the authority to select the employees, directors and other service providers who will be awarded stock-based incentives and determine the amount and other conditions of such awards subject to the terms of the Equity Plan.

No option issued under the Equity Plan is exercisable after the 10th anniversary from the date it was granted. During the optionee’s lifetime, only the optionee can exercise the option. The optionee cannot transfer or assign any option other than by will or in accordance with the laws of descent and distribution. Pursuant to Section 422 of the Code as to incentive stock options, the aggregate fair market value of the stock for which any employee may be granted options, which first become exercisable in any calendar year, generally may not exceed $100,000. In addition, no grant may be made to any employee owning more than 10% of our shares unless the exercise price is at least 110% of the share’s fair market value and such option is not exercisable more than five years following the option grant.

We will receive no monetary consideration for the granting of awards under the Equity Plan. Upon the exercise of options, we receive payment from optionees in exchange for shares issued. During the last fiscal year, we did not adjust or amend the exercise price of stock options previously awarded.

In the event of any increase or decrease in the number of outstanding shares of common stock, or in the event such shares are changed into or exchanged for a different number or kind of shares or other securities of ours on account of any recapitalization, reclassification, stock split, reverse split, combination of shares, exchange of shares, stock dividend or other distribution payable in capital stock, the Compensation Committee

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will adjust, among other award terms, the number and kind of shares or property that may be delivered in connection with awards and the exercise price, grant price or purchase price relating to any award in such manner as the Compensation Committee determines to be necessary to prevent dilution or enlargement of the rights of participants.

We may reserve the right in an award agreement to cause a forfeiture of the gain realized by a grantee with respect to an award on account of actions taken by, or failed to be taken by, such grantee in violation or breach of, or in conflict with, any employment agreement, non-competition agreement, agreement prohibiting solicitation of employees or clients of the Company or any affiliate, confidentiality obligations with respect to the Company or any affiliate, or otherwise in competition with the Company or any affiliate, to the extent specified in such award agreement. We may annul an outstanding award if the grantee thereof is an employee and is terminated for “Cause” as defined in the applicable award agreement or the Equity Plan, as applicable.

Employment Agreements and Other Material Agreements

Employment Agreement with Anthony Labozzetta.  The Company and Sussex Bank are parties to an employment agreement with Mr. Labozzetta, pursuant to which he will serve as President and Chief Executive Officer of the Company and Sussex Bank. The employment agreement provides for a three-year term which is automatically extended for an additional year annually unless either party provides written notice terminating the automatic extension. The employment agreement provides that Mr. Labozzetta will receive a base salary of at least $315,000, subject to increase or decrease as determined by the Board. Pursuant to the terms of his employment agreement, Mr. Labozzetta was granted 50,000 shares of our common stock, subject to forfeiture and restricted from transfer during the “Restricted Period,” as such term is defined in the employment agreement. 80% of these shares were vested as of January 1, 2016 and the remaining 20% vested on January 1, 2017. He is also entitled to receive customary fringe benefits, including an automobile, consistent with his position as President and Chief Executive Officer of the Company and Sussex Bank.

Employment Agreement with Steven M. Fusco.  The Company and Sussex Bank entered into an employment agreement, dated June 23, 2010, with Mr. Fusco, pursuant to which he will serve as Executive Vice President and Chief Financial Officer of the Company and Sussex Bank. The employment agreement provides for a two-year term; provided, that at the end of the term, and each year thereafter, the term of the employment agreement shall automatically be renewed for an additional year until either party, by written notice provided at least 90 days prior to the end of the term, elects not to renew. Mr. Fusco’s employment agreement has been automatically renewed for an additional year beginning June 23, 2014. The employment agreement provides that Mr. Fusco will receive a base salary of at least $160,000, subject to increase or decrease as determined by the Board. Mr. Fusco is also entitled to receive customary fringe benefits, including the use of a Company automobile.

Employment Agreement with George Lista.  In September 2006, our Tri-State Insurance Agency subsidiary entered into an employment agreement with Mr. Lista. Under Mr. Lista’s employment agreement, he was to serve as the Chief Executive Officer of Tri-State Insurance Agency for an initial term of five years ending December 31, 2011. The term of the employment agreement will automatically renew for two additional one-year periods unless either Mr. Lista or Tri-State Insurance Agency provides notice of an intention not to renew. Accordingly, Mr. Lista’s employment agreement has been renewed such that it will expire no earlier than December 31, 2018. Mr. Lista currently receives a base salary of $185,974 annually, which is to be adjusted each January 1 to reflect the increase in the consumer price index. Mr. Lista is also entitled to receive commissions on insurance products sold by him, and he is also entitled to participate in our Executive Incentive and Deferred Compensation Plan.

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2017 Outstanding Equity Awards at Fiscal Year-End Table

The table below sets forth information regarding our named executive officers’ stock options and stock awards outstanding at December 31, 2017, whether granted in 2017 or earlier, including awards that have been transferred other than for value.

               
  Option Awards   Stock Awards
Name   Grant
Date
  Number of
Securities
Underlying
Unexercised
Options (#)
Exercisable
  Number of
Securities
Underlying
Unexercised
Options (#) Unexercisable
  Option
Exercise
Price
  Option
Expiration
Date
  Grant
Date
  Number of
Shares or
Units of
Stock That
Have Not
Vested
(#)
  Market
Value of
Shares or
Units of
Stock That
Have Not Vested(1)
($)
Anthony Labozzetta(2)     2/24/2016       2,243       8,973       12.83       2/23/2026       1/25/2017       17,065       458,195  
    2/6/2015       2,610       3,916       10.25       2/6/2025       2/9/2016       7,458       200,247  
    11/5/2014       10,800       7,200       9.97       11/5/2024       2/6/2015       2,352       63,151  
Steven M. Fusco(3)     2/24/2016       1,200       4,800       12.83       2/23/2026       1/25/2017       8,499       228,198  
    2/6/2015       1,752       2,629       10.25       2/6/2025       2/9/2016       3,167       85,034  
    11/5/2014       5,400       3,600       9.97       11/5/2024       2/6/2015       956       25,669  
George Lista(4)                                   1/25/2017       4,000       107,400  
                                                 2/24/2016       667       17,909  
                                                 2/6/2015       284       7,625  
Sergio Musacchio(5)                                   3/8/2017       1,050       28,193  
                                                 2/24/2016       2,398       64,386  

(1) Market value is calculated on the basis of $26.85 per share, which is the closing sales price for our common stock on December 29, 2017, the final trading day of the year.
(2) 2,352 shares will vest February 6, 2018; 10,000 shares will vest over five years beginning January 25, 2018; 7,065 shares will vest over three years beginning January 25, 2018 and 7,458 shares will vest over two years beginning February 9, 2018.
(3) 956 shares will vest on February 6, 2018; 5,500 shares will vest over five years beginning January 25, 2018; 2,999 shares will vest over three years beginning January 25, 2018 and 3,167 shares will vest over two years beginning February 9, 2018.
(4) 284 shares will vest on February 6, 2018; 4,000 shares will vest over five years beginning January 25, 2018 and 667 shares will vest over two years beginning February 24, 2018.
(5) 1,050 shares will vest over three years beginning March 8, 2018 and 2,398 shares will vest over two years beginning July 18, 2018.

2017 Option Exercises and Stock Vested Table

The following table sets forth information with respect to the aggregate number of options exercised and stock awards vesting during the last fiscal year and the value realized (no stock options were exercised in 2017):

   
  Stock Awards
Name   Number of Shares
Acquired on
Vesting
(#)
  Value Realized
on Vesting
($)
Anthony Labozzetta     19,800       416,712  
Steven M. Fusco     3,495       74,472  
George Lista     950       22,248  
Sergio Musacchio     1,199       28,896  

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2017 Nonqualified Deferred Compensation Table

The following table provides details regarding the named executive officers’ participation in the Company’s nonqualified deferred compensation plans as of December 31, 2017:

         
Name   Executive
Contributions in
Last FY
($)
  Registrant
Contributions in
Last FY
($)
  Aggregate
Earnings in
Last FY
($)
  Aggregate
Withdrawals/
Distributions
($)
  Aggregate
Balance at
Last FYE
($)
Anthony Labozzetta           86,828       10,094             425,663  
Steven M. Fusco                              
George Lista     23,488             5,177             210,398  
Sergio Musacchio                              

Mr. Labozzetta’s SERP

On July 20, 2011, we entered into a SERP, a non-qualified defined contribution pension plan that provides supplemental retirement income for Mr. Labozzetta. The SERP was effective as of January 1, 2011. Based on the attainment of certain annual performance targets, we will make annual contributions up to a maximum of 22% of Mr. Labozzetta’s annual base salary to the SERP for the benefit of Mr. Labozzetta. Any amounts credited to the SERP will accrue interest equal to that paid by U.S. 10-year Treasury Notes for each applicable year. The SERP provides for the benefits to be paid monthly over a five-year period commencing the first day of the month following the later of Mr. Labozzetta’s 65th birthday, normal retirement age or termination of employment.

Amended and Restated Executive Incentive and Deferred Compensation Plan

As mentioned above, under the Plan, participants in the Plan (including our named executive officers) have the option to defer some or all of their compensation or cash incentive awards. Amounts so deferred will earn interest at a rate equal to the average interest rate earned by Sussex Bank on its investment portfolio.

Potential Payments Upon Termination or Change-in-Control

The following table shows the estimated benefits payable to our named executive officers in the event of the named executive officer’s termination of employment under various scenarios or upon a change in control of the Company. The amounts shown assume a termination of employment or change in control on December 31, 2017. Market values of equity awards were determined by multiplying the applicable number of shares of stock or units by $26.85, the per share closing price of the Company’s common stock on December 29, 2017, the last trading day of the year. The amounts shown do not include payments or benefits provided under insurance or other plans that are generally available to all salaried employees. The actual amounts to be paid can only be determined at the time of the named executive officer’s separation from the Company or upon the occurrence of a change in control. Mr. Mussachio separated employment with the Company effective December 31, 2017 and will be paid salary continuation and provided medical benefits for the lesser of (i) nine months or (ii) until Mr. Mussachio is employed with another company. If salary continuation and medical benefits are provided for the full nine month period, the value of each would be $165,000 and $22,045, respectively.

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  Termination by Company
Without Cause or
Resignation by Executive
for Good Reason
(before a Change In Control)
  Termination by Company
Without Cause or
Resignation by Executive
for Good Reason
(after a Change In Control)
Anthony Labozzetta
                 
Cash severance   $ 437,908     $ 1,804,309  
SERP   $ 425,663     $ 425,663  
Acceleration of Restricted Stock and Options(1)         $ 1,033,936  
Welfare Benefits(2)   $ 29,846     $ 89,539  
Tax Gross-up(3)         $ 956,100  
Total   $ 893,417     $ 4,309,547  
Steven Fusco
                 
Cash severance   $ 238,341     $ 476,682  
Acceleration of Restricted Stock and Options(1)         $ 510,606  
Welfare Benefits(4)   $ 29,972     $ 59,944  
Total   $ 268,313     $ 1,047,232 (6) 

   
  Termination by Company
Without Cause or
Resignation by Executive
for Good Reason
(before a Change In Control)
  Termination by Company
Without Cause or
Resignation by Executive
for Good Reason
(after a Change In Control)
George Lista
                 
Cash severance   $ 345,133     $ 345,133  
Acceleration of Restricted Stock and Options
        $ 132,934  
Welfare Benefits(5)   $ 7,427     $ 7,427  
Total   $ 352,560     $ 485,494  

(1) These figures represent, based on the closing price of the Company’s common stock on December 29, 2017 ($26.85 per share), the aggregate value of outstanding shares of restricted stock and stock options awarded to each officer, to the extent the vesting of which would accelerate in the event of an involuntary termination of such officer’s employment under the circumstances presented. All such awards vest in full in the event of a “Change in Control Event”.
(2) Mr. Labozzetta is entitled to continued hospital, health, medical and life insurance and any like benefits in effect at the time of such termination without cause for the greater of one year or for the remainder of the applicable “Contract Period” or under a Change in Control event for three years.
(3) This figure represents an estimate of the “tax gross-up” amount Mr. Labozzetta would be entitled to under his employment agreement to the extent that the payments or benefits to which he becomes entitled would be subject to a 20% excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended. Such estimate is based on a number of assumptions, including that the full value of the restricted stock and stock options that vest would be considered a change in control payment for purposes of the excise tax. Facts and circumstances at the time of any change in control transaction and termination thereafter as well as changes in Mr. Labozzetta compensation history preceding such a transaction could materially impact whether and to what extent an excise tax would be imposed and therefore the amount of any potential tax gross-up.
(4) Mr. Fusco is entitled to continued hospital, health, medical and life insurance and any like benefits in effect at the time of such termination without cause for the greater of one year or for the remainder of the applicable “Contract Period” or under a Change in Control event for two years.
(5) Mr. Lista is entitled to continued hospital, health, medical and life insurance and any like benefits in effect at the time of such termination without cause for the remainder of the applicable “Contract Period”.
(6) Payments due for Mr. Fusco under Change in Control Agreement is subject to reduction to the extent

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necessary to ensure that no portion of the payments they are to receive will be non-deductible by the Company under Code Section 280G or will be subject to an excise tax under Code Section 4999.

Equity Plan

Subject to the exceptions described below, upon the occurrence of a “change in control,” as defined in the Equity Plan, all outstanding shares of restricted stock and all stock units will become immediately vested, and the shares of stock subject to outstanding stock units will be delivered immediately before the occurrence of the change in control. In addition, either of the following two actions will be taken:

15 days before the scheduled completion of the change in control, all options will become immediately exercisable and will remain exercisable for a period of 15 days, which exercise will be effective upon the consummation of the change in control; or
instead of providing for accelerated vesting in awards under the Equity Plan in connection with the change in control, the Compensation Committee may provide that awards, whether or not exercisable, will be terminated and the holders of awards will receive a cash payment, or the delivery of shares of stock, other securities or a combination of cash, stock and securities equivalent to such cash payment, equal to the value of the award.
In general, a “change in control” means:
º a person or group becomes the beneficial owner of more than 50% of the combined voting power of our voting stock on a fully diluted basis;
º a merger or consolidation of our Company, other than any such transaction in which the holders of our voting securities prior to the transaction own at least a majority of the voting power of the surviving entity immediately after the transaction;
º a sale of substantially all of our assets to another person or entity; or
º the dissolution or liquidation of our Company.

If we are the surviving entity in any reorganization, merger or consolidation of our Company with one or more other entities that does not constitute a change in control, any option outstanding under the Equity Plan will apply to the securities to which a holder of the number of shares of common stock subject to the option would have been entitled immediately following the transaction, with a corresponding proportionate adjustment of the option exercise price.

The Compensation Committee may provide in any agreement under the Equity Plan for different provisions to apply to an award under the Equity Plan than those described above.

Employment Agreements and Other Material Agreements

Employment Agreement with Anthony Labozzetta.  Mr. Labozzetta’s employment agreement permits us to terminate him for cause (as defined in the agreement) at any time. In the event Mr. Labozzetta is terminated for any reason other than cause, or in the event Mr. Labozzetta resigns his employment because he is reassigned to a position of lesser rank or status than President and Chief Executive Officer, his place of employment is relocated by more than 50 miles from its location on the date of the employment agreement, or his compensation or other benefits are reduced, Mr. Labozzetta, or in the event of his death, his beneficiary, will be entitled to receive his base salary at the time of such termination or resignation for the remaining term of the employment agreement, or one year, whichever is greater. In addition, we will continue to provide Mr. Labozzetta with certain insurance and other benefits through the end of the term of the employment agreement.

Mr. Labozzetta’s employment agreement also contains a change in control provision which would entitle Mr. Labozzetta to receive an amount equal to the base salary he would have received had the employment agreement terminated according to its term, except that after the fifth anniversary of Mr. Labozzetta’s employment, he will be entitled to a payment equal to 2.99 times his then current base salary and 2.99 times the greater of the last bonus actually paid to him or his current bonus eligibility, assuming he performed at the targeted level. Mr. Labozzetta’s employment agreement also contains a “gross-up payment” in the event any excise tax is imposed on the benefits payable to Mr. Labozzetta upon a change in control. Mr. Labozzetta would also be entitled to continuation of his health, medical, hospital and life insurance benefits for a period of three years.

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Mr. Labozzetta’s SERP.  If Mr. Labozzetta’s employment is terminated before normal retirement age, absent a change in control and other than by us for cause, the amount of the benefit payable to Mr. Labozzetta would be a 100% vested interest in his account if he completed at least 10 years of plan participation. If Mr. Labozzetta is terminated by us without cause or as a result of Mr. Labozzetta’s Resignation for Good Reason (as defined in the SERP), Mr. Labozzetta would be entitled to a 100% vested interest in his account regardless of the number of years of plan participation. If Mr. Labozzetta is employed by us at the time of a Change of Control (as defined in the SERP), Mr. Labozzetta would automatically be entitled to a 100% vested interest in his account regardless of the number of years of plan participation. If Mr. Labozzetta would become disabled or die before reaching normal retirement age, either he or his beneficiary would be entitled to a 100% vested interest in his account. The SERP also contains a restrictive covenant conditioning Mr. Labozzetta’s receipt of the benefits on his compliance with the non-compete provisions as defined in his employment agreement.

Employment Agreement with Steven M. Fusco.  Mr. Fusco’s employment agreement permits us to terminate his employment for cause (as defined in the agreement) at any time. In the event Mr. Fusco is terminated for any reason other than cause, or in the event Mr. Fusco resigns his employment because he is reassigned to a position of lesser rank or status than Chief Financial Officer, his place of employment is relocated by more than 50 miles from its location on the date of the employment agreement, or his compensation or other benefits are reduced, Mr. Fusco, or in the event of his death, his beneficiary, will be entitled to receive a lump sum payment equal to his base salary at the time of such termination or resignation for the remaining term of the employment agreement, or one year, whichever is greater. In addition, we will continue to provide Mr. Fusco with certain insurance and other benefits for the remaining term of the employment agreement, or one year, whichever is greater.

Mr. Fusco’s employment agreement also provides that upon the occurrence of a change in control, as such term is defined in the employment agreement, and in the event Mr. Fusco is subsequently terminated for reasons other than cause or in the event Mr. Fusco, within 18 months of the change in control, resigns his employment for good cause, he will be entitled to receive a lump sum severance payment equal to two times his then current base salary, which may be reduced, if necessary, to an amount which is one dollar ($1.00) less than an amount equal to three times Mr. Fusco’s “base amount,” as determined in accordance with such Section 280G of the Code.

Employment Agreement with George Lista.  Pursuant to the terms of Mr. Lista’s employment agreement, in the event his employment is terminated other than for cause, he will be entitled to receive his then-current base salary and insurance benefits for the remaining term of the employment agreement, which currently expires on December 31, 2018.

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DIRECTOR COMPENSATION

Meeting Fees

Our non-employee directors receive an annual retainer of $12,500, except for the Chairman of the Board who receives an annual retainer of $65,000. In addition, non-employee directors, other than the Chairman of the Board, receive a per-meeting fee of $500. Members of our committees also receive fees for committee service or for serving as the Chair of a committee. The Chair of our Audit Committee receives a per-meeting fee of $1,500 and committee members receive a per-meeting fee of $1,000. The Chair of our Compensation Committee receives a per-meeting fee of $1,500, and committee members receive a per-meeting fee of $750. All members of the Nominating and Corporate Governance Committee receive a per-meeting fee of $300.

Director Deferred Compensation Agreement

The Board originally adopted a Director Deferred Compensation Agreement, or DDCA, for both Sussex Bank and the Company in July 2006, which has subsequently been amended. Under the terms of the DDCA, a director may elect to defer all or a portion of his fees for the coming year. In June 2016, the Board of Directors adopted an amendment to the DDCA which supersedes the prior amendment from September 2015. The amendment, effective July 1, 2016, allows the Company’s Directors to elect to defer part or all of their fees into a stock account, consisting of the Company’s common stock, which is administered through a rabbi trust. The Company is responsible for submitting each Director’s deferral to the trustee of the rabbi trust to be used for the purchase of the Company’s common stock. Distributions from the Director’s stock account shall be made in the same medium, the Company’s common stock. The DDCA also provides an option to defer into a cash account that is credited with earnings at a rate equal to the average interest rate earned by us on our investment portfolio. The election of either stock or cash is completed by each director in advance of the year in which the fees are earned and cannot be changed for amounts deferred once the election is made for that year.

The participant’s benefit will be distributed to the participant or his beneficiary upon a change in control of the Company, the termination of the DCA, the occurrence of an unforeseeable emergency, the termination of service or the participant’s death or disability. Upon distribution, a participant’s benefit will be paid in monthly installments over a period of ten years. Upon distribution, a participant’s benefit will be paid in cash to the extent such deferred amounts were credited with the average interest rate and in stock to the extent such deferred amounts were credits with the total return on our common stock.

2017 Director Compensation Table

The table below sets forth information regarding compensation accrued or paid to our non-employee directors during the last fiscal year for their service on our Board. Directors who are also our employees receive no additional compensation for their service as directors and are not set forth in the table below. Mr. D’Agosta and Mr. Loeffler were appointed in 2018 and did not earn and were not paid any fees for the period ending December 31, 2017.

       
Name   Fees Earned
or Paid in
Cash(1)
($)
  Stock
Awards(2)(3)
($)
  Option
Awards(2)(3)
($)
  Total
($)
Patrick E. Brady(4)     33,350       15,995             49,345  
Richard Branca(4)     33,850       15,995             49,845  
Katherine H. Caristia(4)     33,800       15,995             49,795  
Mark J. Hontz(4)     47,700       15,995             63,695  
Edward J. Leppert     65,000       35,009             100,009  
Timothy Marvil(4)     36,600       15,995             52,595  
Robert McNerney(4)     30,900       15,995             46,895  
Michael X. McBride(4)     26,750       15,995             42,745  
John E. Ursin(5)     800                   800  

(1) Includes retainer payments, meeting fees and committee and/or chairmanship fees earned during the fiscal year, whether such fees were paid currently or deferred.

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(2) Reflects the aggregate grant date fair value computed in accordance with FASB ASC Topic 718 with respect to restricted stock awards and option awards granted to our directors. These amounts do not correspond to the actual value that the directors will recognize. Assumptions used in the calculation of these amounts are included in Note 17 — Stock Incentive Plans to our fiscal year 2017 consolidated financial statements, which is included in our Annual Report on Form 10-K filed with the SEC on March 15, 2018.
(3) The following table lists the aggregate number of shares of restricted stock and options outstanding at year-end for each director:

   
Name   Restricted
Stock
(#)(4)
  Options
(#)
Patrick E. Brady     1,370        
Richard Branca     1,370        
Katherine H. Caristia     1,370        
Mark J. Hontz     1,370        
Edward J. Leppert     2,126       4,000  
Timothy Marvil     1,370        
Robert McNerney     1,370        
Michael X. McBride     636        
John E. Ursin            
(4) Messrs. Brady, Branca, Hontz, Marvil, McNerney, McBride, and Ms. Caristia deferred $33,350, $33,850 $9,540, $6,025, $30,900, $26,750, and $33,800, respectively, of their fees pursuant to the DDCA.
(5) Resigned in January 2017.

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TRANSACTIONS WITH RELATED PERSONS

We have made in the past and, assuming continued satisfaction of generally applicable credit standards, expect to continue to make loans to directors, executive officers and their associates (i.e. corporations or organizations for which they serve as officers or directors or in which they have beneficial ownership interests of 10% or more). These loans have all been made in the ordinary course of our business on substantially the same terms, including interest rates and collateral, as those prevailing at the time for comparable transactions with other persons and do not involve more than the normal risk of collectability or present other unfavorable features.

Other than the ordinary course lending transactions described above, which must be approved by our Board under bank regulatory requirements, all related-person transactions are reviewed and approved by our Audit Committee. This authority is provided to our Audit Committee under its written charter. In reviewing these transactions, our Audit Committee seeks to ensure that each transaction is no less favorable than a transaction with an unaffiliated third party.

Compensation arrangements for our directors and named executive officers are described above under the sections entitled “Director Compensation” and “Executive Compensation.”

Certain Related-Person Transactions

Other than ordinary course lending transactions and compensation arrangements, the following is a description of transactions since January 1, 2016 to which we were a participant or will be a participant, and in which:

the amounts involved exceeded or will exceed $120,000; and
any of our directors, executive officers or holders of more than 5% of our common stock, or any member of the immediate family of the foregoing persons, had or will have a direct or indirect material interest.

We rent our Augusta, New Jersey office location from a real estate management company of which our executive officer, Mr. Lista, is a 50% owner. The lease expired in July 2017. The Company paid to the real estate management company $148,188 and 147,588 for the years ended December 31, 2017 and 2016.

Mr. Ursin, a former director who resigned effective January 25, 2017, is a partner of Schenk, Price, Smith & King LLP, a firm that renders various legal services to us. During 2017 and 2016, Schenck, Price, Smith & King LLP received fees for legal services of $77,765 and $10,070, respectively.

Mr. McBride is a partner of Connell Foley, a firm that renders various legal services to us. During 2017, Connell Foley received fee’s for legal services of $19,213.

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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The table below sets forth information regarding the beneficial ownership of shares of our common stock as of March 1, 2018, by (i) each director and nominee for director, (ii) each named executive officer, (iii) all our directors and executive officers as a group and (iv) each person who is known by us to beneficially own 5% or more of our outstanding common stock. Other than as set forth in this table, we are not aware of any individual or group that holds in excess of 5% of our outstanding common stock. Unless otherwise indicated, the address for each of the shareholders in the table below is c/o Sussex Bancorp, 100 Enterprise Drive, Suite 700, Rockaway, New Jersey 07866.

   
Name of Beneficial Owner   Amount and
Nature of
Beneficial
Ownership(1)
  Percentage of
Common
Stock
Outstanding
Directors and Named Executive Officers:
                 
Patrick E. Brady(2)     34,094      
Richard Branca(3)     74,821       1.0 % 
Katherine H. Caristia(4)     29,114      
Dominick J. D’Agosta(5)     2,115      
Mark J. Hontz(6)     19,653      
Edward J. Leppert(7)     130,149       1.7 % 
Walter E. Loeffler(8)     3,959      
Michael X. McBride(9)     5,899      
Robert McNerney(10)     15,401      
Anthony Labozzetta(11)     269,154       3.4 % 
George Lista(12)     79,656       1.0 % 
Steven M. Fusco(13)     91,682       1.2 % 
Peter Michelotti(14)     37,612      
Directors & Officers as a Group (14 persons)     846,358       10.5 % 
Other Shareholders:
                 
Basswood Capital Management LLC(15)
645 Madison Avenue, 10th Floor
New York, NY 10022
    594,167       7.5 % 
Banc Funds Company, LLC(16)
20 North Wacker Drive
Chicago, Illinois 60606
    534,877       6.8 % 

* Less than 1% of the total outstanding shares of common stock.
(1) This table is based solely upon information supplied by officers, directors and principal shareholders and Schedules 13D and 13G filed with the SEC. Unless otherwise indicated in the footnotes to this table and subject to community property laws where applicable, we believe that each of the shareholders named in this table has sole voting and investment power with respect to the shares indicated as beneficially owned. Applicable percentages are based on 7,926,308 shares outstanding on March 1, 2018, plus any shares of common stock such person or group has the right to acquire within 60 days of March 1, 2018.
(2) Consists of: a) 16,165 shares as to which Mr. Brady has sole voting and investment power; b) 1,370 unvested shares of restricted stock as to which he has sole voting power; and c) 16,559 shares issuable pursuant to the DDCA.
(3) Consists of: a) 59,915 shares as to which Mr. Branca has sole voting and investment power; b) 1,370 unvested shares of restricted stock as to which he has sole voting power; and c) 13,536 shares issuable pursuant to the DDCA.
(4) Consists of: a) 21,505 shares as to which Ms. Caristia has sole voting and investment power; b) 1,370 unvested shares of restricted stock as to which she has sole voting power; and c) 6,239 shares issuable pursuant to the DDCA.

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(5) Consists of: a) 2,108 shares as to which Mr. D’Agosta has sole voting and investment power and b) 7 shares issuable pursuant to the DDCA.
(6) Consists of: a) 9,197 shares as to which Mr. Hontz has sole voting and investment power; b) 1,370 unvested shares of restricted stock as to which he has sole voting power; c) 4,062 shares issuable pursuant to the DDCA; and d) 5,024 shares held in an IRA for Mr. Hontz’s benefit as to which he has sole voting and investment power.
(7) Consists of: a) 43,207 shares as to which Mr. Leppert has sole voting and investment power; b) 1,370 unvested shares of restricted stock as to which he has sole voting power; c) 34,680 shares held in an IRA for Mr. Leppert’s benefit as to which he has sole voting and investment power; d) 9,055 shares held in an IRA for his spouse which he has no voting or investment power; e) 40,237 shares issuable pursuant to the DDCA and f) 1,600 shares issuable pursuant to options exercisable within 60 days of February 27, 2017.
(8) Consists of: a) 3,868 shares as to which Mr. Loeffler has sole voting and investment power and b) 91 shares issuable pursuant to the DDCA.
(9) Consists of: a) 4,166 shares as to which Mr. McBride has sole voting and investment power; b) 636 unvested shares of restricted stock as to which he has sole voting power; and c) 1,097 shares issuable pursuant to the DDCA.
(10) Consists of: a) 6,928 shares as to which Mr. McNerney has sole voting and investment power; b) 1,370 unvested shares of restricted stock as to which he has sole voting power; and c) 7,103 shares issuable pursuant to the DDCA.
(11) Consists of: a) 206,324 shares as to which Mr. Labozzetta has sole voting and investment power; b) 32,574 unvested shares of restricted stock as to which he has sole voting power; c) 7,246 shares held for the benefit of his sons as to which he has sole voting and investment power; d) 3,809 shares held in an IRA for his spouse which he has no voting or investment power; and e) 19,201 shares issuable pursuant to options exercisable within 60 days of March 1, 2018.
(12) Consists of: a) 73,602 shares as to which Mr. Lista has sole voting and investment power; b) 4,951 unvested shares of restricted stock as to which he has sole voting power; and c) 1,103 shares held in an IRA for Mr. Lista’s benefit as to which he has sole voting and investment power.
(13) Consists of: a) 41,374 shares as to which Mr. Fusco has sole voting and investment power; b) 15,108 unvested shares of restricted stock as to which he has sole voting power; c) 23,722 shares held in an IRA for Mr. Fusco’s benefit as to which he has sole voting and investment power; d) 1,050 shares held for the benefit for his daughters as to which he has sole voting and investment power; and e) 10,428 shares issuable pursuant to options exercisable within 60 days of March 1, 2018.
(14) Consists of: a) 13,675 shares as to which Mr. Michelotti has sole voting and investment power; b) 2,000 shares held in an IRA for Mr. Michelotti’s benefit as to which he has sole voting; c) 90 shares held in an IRA for his spouse which he has no voting or investment power; and d) 21,847 shares held in the name of P. Michelotti and Sons as to which he has shared voting power with Lawrence Michelotti, Jr.
(15) Consists of: 594,167 shares held by Basswood Capital Management LLC.
(16) Consists of: 534,877 shares held by Banc Funds Company, LLC.

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SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

Section 16(a) of the Exchange Act requires our directors and executive officers, and persons who own more than 10% of our common stock, to report to the SEC their initial ownership of our common stock and any subsequent changes in that ownership. Specific due dates for these reports have been established by the SEC and we are required to disclose in this proxy statement any late filings or failures to file.

Based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons that no other reports were required during the fiscal year ended December 31, 2017, we believe that, during the 2017 fiscal year, all of our directors and executive officers complied with all Section 16(a) filing requirements applicable to them.

SECURITIES AUTHORIZED FOR ISSUANCE UNDER EQUITY COMPENSATION PLANS

Set forth below is certain information, as of December 31, 2017, regarding our equity compensation plans for which we have previously obtained shareholder approval and our equity compensation plans for which we have not previously obtained shareholder approval.

     
Plan Category   Number of
securities to be
issued upon
exercise of
outstanding
options, warrants
and rights
(#)
  Weighted-average
exercise price of
outstanding
options, warrants
and rights
($)
  Number of
securities
remaining
available for
future issuance
under equity
compensation plans
(excluding
securities reflected
in column (a))
(#)
     (a)   (b)   (c)
Equity compensation plans approved by shareholders:
                          
2001 Stock Option Plan                  
2004 Equity Incentive Plan                  
2013 Equity Incentive Plan     69,123       11.10       82,229  
Equity compensation plans not approved by shareholders:                  
Total     69,123       11.10       82,229  

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PROPOSAL 2
 
RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

The Audit Committee has appointed BDO to act as our independent registered public accounting firm and to audit our consolidated financial statements for the fiscal year ending December 31, 2018. This appointment will continue at the pleasure of the Audit Committee and is presented to the shareholders for ratification as a matter of good corporate governance. In the event that this appointment is not ratified by our shareholders, the Audit Committee will consider that fact when it selects our independent auditors for the following fiscal year.

During our two most recently completed fiscal years, and through the date of our engagement of BDO, neither we nor anyone acting on our behalf has consulted with BDO with respect to (i) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on our financial statements, and neither a written report nor oral advice was provided by BDO to us that BDO concluded was an important factor considered by us in reaching a decision as to any accounting, auditing or financial reporting issue or (ii) any matter that was either the subject of a “disagreement” or “reportable event” as those terms are defined in Item 304(a)(1) of Regulation S-K.

One or more representatives of BDO will be present at the Annual Meeting, and will have the opportunity to make a statement if they desire to do so, and such representatives will be available to respond to appropriate questions from shareholders.

Vote Required

The ratification of the appointment of BDO as our independent registered public accounting firm for the year ending December 31, 2018 will require “FOR” votes from a majority of the votes cast at the Annual Meeting by the holders of shares present in person or represented by proxy and entitled to vote on this proposal. Abstentions are not counted as votes cast and they will have no effect on the vote. Similarly, broker non-votes will have no effect on the vote.

Our Recommendation

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE APPOINTMENT OF BDO AS OUR INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM.

Independent Registered Public Accounting Firm Fees and Services

During the fiscal years ended December 31, 2017 and 2016, we retained and paid BDO to provide audit and other services as follows:

   
  2017   2016
Audit Fees(1)   $ 243,154     $ 157,896  
Audit-Related Fees(2)     137,846        
Tax Fees(3)     26,500       28,812  
All Other Fees            
Total   $ 407,500     $ 186,708  

(1) Includes professional services rendered for the audit of our annual financial statements and review of financial statements included in Forms 10-Q, or services normally provided in connection with statutory and regulatory filings (i.e., attest services required by FDICIA or Section 404 of the Sarbanes-Oxley Act), including out-of-pocket expenses.
(2) Assurance and related services reasonably related to the performance of the audit or review of financial statements include the following: employee benefit plan audits, due diligence related to mergers and acquisitions, accounting consultations and audits in connection with acquisitions and other attest services not required by statute or regulation.
(3) Tax fees include the following: preparation of state and federal tax returns, PA Bankshare tax return and assistance with calculating estimated tax payments.

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PROPOSAL 3
 
NON-BINDING ADVISORY RESOLUTION ON THE COMPENSATION
OF THE NAMED EXECUTIVE OFFICERS

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 requires us to provide our shareholders an opportunity to vote to approve, on a non-binding, advisory basis, the compensation of our named executive officers as disclosed in this proxy statement, or Say-on-Pay. This vote does not address any specific item of compensation, but rather the overall compensation of our named executive officers as disclosed in this proxy statement. At the 2013 annual meeting of shareholders, our shareholders recommended that we hold an advisory vote on executive compensation each year. The Board affirmed the shareholders’ recommendation and will hold Say-on-Pay advisory votes on an annual basis until the next required shareholder vote on the frequency of the Say-on-Pay advisory vote, which is scheduled to be held at the 2019 annual meeting of shareholders.

Vote Required

The approval of the non-binding advisory resolution on the compensation of our named executive officers will require “FOR” votes from a majority of the votes cast at the Annual Meeting by the holders of shares present in person or represented by proxy and entitled to vote on this proposal. Abstentions are not counted as votes cast and they will have no effect on the vote. Brokers do not have discretionary authority to vote shares on this proposal without direction from the beneficial owner. Therefore, broker non-votes will have no effect on the vote.

Our Recommendation

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE NON-BINDING ADVISORY RESOLUTION ON THE COMPENSATION OF THE NAMED EXECUTIVE OFFICERS.

General

The compensation of our named executive officers is disclosed in the Summary Compensation Table and the other related tables and narrative disclosure contained elsewhere in this proxy statement. As discussed in those disclosures, the Board believes that our executive compensation provides a strong link between each named executive officer’s compensation and our short and long-term performance. The objective of our executive compensation program is to provide compensation that is competitive based on our performance and aligned with the long-term interests of our shareholders.

We are asking our shareholders to indicate their support for our named executive officer compensation as described in this proxy statement. This proposal will be presented at the Annual Meeting as a resolution in substantially the following form:

RESOLVED, on an advisory basis, that the compensation paid to the Company’s named executive officers, as disclosed pursuant to Item 402 of Regulation S-K, including the compensation tables and narrative discussion, is hereby APPROVED.

Your vote on this Proposal 3 is advisory and therefore not binding on us, the Compensation Committee or the Board. Your advisory vote will serve as an additional tool to guide the Board and the Compensation Committee in continuing to align our executive compensation with our best interest and that of our shareholders.

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PROPOSAL 4
 
AMENDMENT TO OUR RESTATED CERTIFICATE OF INCORPORATION TO CHANGE THE COMPANY’S NAME

On January 24, 2018, the Board unanimously adopted a resolution recommending that our Restated Certificate of Incorporation be amended to change the name of the Company from “Sussex Bancorp” to “SB One Bancorp.” The Board believes that the change in the Company’s name is an important component of management’s strategic plan to create better alignment between our corporate and product brands.

Vote Required

The approval of the amendment of our Restated Certificate of Incorporation to change the name of the Company will require “For” votes from a majority of the votes cast at the Annual Meeting by the holders of shares present in person or represented by proxy and entitled to vote on this proposal. Abstentions are not counted as votes cast and they will have no effect on the vote. Similarly, broker non-votes will have no effect on the vote.

Our Recommendation

THE BOARD UNANIMOUSLY RECOMMENDS A VOTE “FOR” THE APPROVAL OF THE AMENDMENT TO OUR RESTATED CERTIFIATE OF INCOROPRATION TO CHANGE THE NAME OF THE COMPANY.

Proposed Amendment

If the proposed amendment is approved, Article I of our Restated Certificate of Incorporation will be amended in its entirety to read as follows:

ARTICLE I

Corporate Name
The name of the Corporation is SB One Bancorp.

Effect of the Proposed Amendment

If approved by our shareholders, the proposed amendment will become effective upon the filing of a certificate of amendment with the State of New Jersey Department of Treasury. Upon approval of this proposal and the filing of the certificate of amendment, the Board will amend our Bylaws to replace any reference to “Sussex Bancorp” with “SB One Bancorp.”

Our common stock is currently listed for trading on NASDAQ under the symbol “SBBX.” If the amendment is approved and the name change becomes effective, our common stock will continue to be listed on NASDAQ. We expect that our common stock will still be trading with the same symbol.

If the name change becomes effective, the rights of shareholders holding certificated shares under currently outstanding stock certificates and the number of shares represented by those certificates will remain unchanged. The name will not affect the validity or transferability of any currently outstanding stock certificates nor will it be necessary for shareholders with certificated shares to surrender any stock certificates they currently hold as a result of the name change.

If the name change is not approved, the proposed amendment to our Restated Certificate of Incorporation will not be made and the name of the Company and our ticker symbol for trading our common stock on NASDAQ will remain unchanged. In making this recommendation, the Board is retaining the ability to, without further vote by our shareholders, delay or abandon the proposed name change at any time if the Board concludes that such action would be in our best interest and that of our shareholders.

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HOUSEHOLDING OF PROXY MATERIALS

The SEC has adopted rules that permit companies and intermediaries (e.g., brokers) to satisfy the delivery requirements for proxy statements and annual reports with respect to two or more shareholders sharing the same address by delivering a single proxy statement addressed to those shareholders. This process, which is commonly referred to as “householding,” potentially means extra convenience for shareholders and cost savings for companies.

This year, a number of brokers with account holders who are our shareholders will be “householding” our proxy materials. A single proxy statement will be delivered to multiple shareholders sharing an address unless contrary instructions have been received from the affected shareholders. Once you have received notice from your broker that they will be “householding” communications to your address, “householding” will continue until you are notified otherwise or until you revoke your consent. If, at any time, you no longer wish to participate in “householding” and would prefer to receive a separate proxy statement and annual report, please notify your broker.

You may also request an additional proxy statement and annual report by sending a written request to:

Sussex Bancorp
Attn: Linda Kuipers, Secretary
100 Enterprise Drive
Suite 700
Rockaway, New Jersey 07866

Shareholders who currently receive multiple copies of the proxy statement at their addresses and would like to request “householding” of their communications should contact their brokers.

OTHER MATTERS

The Board is not aware of any other matters that may come before the Annual Meeting. However, in the event such other matters come before the Annual Meeting, it is the intention of the persons named in the proxy to vote on any such matters in accordance with the recommendation of the Board.

By Order of the Board of Directors,
[GRAPHIC MISSING]
Linda Kuipers
Secretary
Rockaway, New Jersey
March 27, 2018

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