Document:

Document

Exhibit 10.1

SECURED PROMISSORY NOTE AND SECURITY AGREEMENT
															
	$16,500,000.00				March 11, 2022

FOR VALUE RECEIVED, the undersigned NOVAN, INC., a Delaware corporation (“Borrower”), promises to pay to the order of EVENING POST GROUP, LLC, a South Carolina limited liability company (“Lender”), the principal sum of Sixteen Million Five Hundred Thousand and 00/100 Dollars ($16,500,000.00) (the “Principal Amount”), together with interest on the unpaid Principal Amount according to the terms and subject to the conditions set forth in this Secured Promissory Note and Security Agreement (this “Note”).  This Note is issued in connection with that certain Unit Purchase Agreement dated as of the date hereof (as the same may be amended, modified or supplemented from time to time in accordance with its terms, the “Purchase Agreement”), by and among Lender, Borrower and EPI Health, LLC, a South Carolina limited liability company (the “Guarantor”).  Capitalized terms used and not otherwise defined herein shall have the meanings assigned to them in the Purchase Agreement.
1.Term and Payment.  The term of this Note shall be twenty-four (24) months and                        shall be payable as follows:
(a)Interest shall accrue at the rates specified in Section 2 below, and such accrued interest shall be due and payable in arrears on the last Business Day of each calendar month, commencing on March 31, 2022.
(b)The outstanding Principal Amount, all accrued and unpaid interest on the Principal Amount and all other amounts owing hereunder shall be due and payable on March 11, 2024 (the “Maturity Date”).
2.Interest.  Interest on the unpaid Principal Amount outstanding hereunder from time to time shall accrue at the rate of (a) five percent (5%) per annum commencing on the date hereof through and including June 9, 2022, (b) fifteen percent (15%) per annum commencing on June 10, 2022, through and including June 10, 2023, and (c) eighteen percent (18%) commencing on June 11, 2023 through and including the Maturity Date (or, if less, the highest rate then permitted under applicable law).  Interest on the Principal Amount from time to time outstanding will be computed on the basis of a 365-day year but shall be calculated for the actual number of days in the period for which interest is charged. 
3.Form of Payment; Optional Prepayment.  Principal and interest shall be paid in lawful money of the United States of America at the principal office of Lender or at such other place as Lender hereof shall have designated to the undersigned in writing.  Borrower may, at its sole option at any time, prepay this Note, without penalty or premium, in whole or in part, together with interest on the Principal Amount so prepaid to the date of such prepayment.
4.Mandatory Prepayments.  Promptly (but in any event within one (1) Business Day) following a Change of Control (as hereinafter defined), Borrower shall prepay this Note, together with interest on the Principal Amount so prepaid to the date of such prepayment. “Change of Control” means, with respect to Borrower: (a) the sale of all or substantially all of Borrower’s assets; (b) a merger, reorganization or consolidation involving Borrower in which the voting securities of Borrower outstanding immediately prior thereto cease to represent at least fifty percent (50%) of the combined voting power of the surviving entity immediately after such merger, reorganization, or consolidation; or (c) a person or entity, or group of persons or entities acting in concert, acquire more than fifty percent (50%) of the voting equity securities or management control of Borrower.

5.Default. Any one of the following occurrences shall constitute an “Event of Default” under this Note:
(a)The failure of Borrower to make payment of any amount owing under this Note within three (3) Business Days of the date same becomes due and payable in accordance with the terms hereof
(b)Borrower’s or Guarantor’s failure to perform or comply (or cause performance or compliance) with any other covenant or provision of this Note or any other Financing Document, which failure continues more than thirty (30) days after the earlier of either Borrower’s knowledge thereof or Lender delivers written notice thereof to Borrower or Guarantor, as applicable.
(c)The dissolution, termination of existence, insolvency, appointment of a receiver, assignment for the benefit of creditors by, or the commencement of any proceeding under applicable bankruptcy or insolvency laws by or against Borrower or Guarantor; provided, that if any such proceeding is instituted without the consent of Borrower or Guarantor, then an Event of Default shall not occur unless such proceeding continues dismissed or unstayed for sixty (60) calendar days.
6.Remedies for Default.  Upon the occurrence of any Event of Default hereunder:  (i) the entire unpaid principal balance and all unpaid interest thereon, together with fees and costs, including reasonable attorneys’ fees, for enforcement and collection with respect thereto and in connection with any proceedings thereon, shall, at the option of Lender and without notice or demand of any kind to Borrower or any other person, immediately become due and payable with interest on the unpaid principal amount of this Note accruing at the Default Rate of twenty percent (20%) per annum (or such lesser rate as permitted by applicable law), from and after the date of the Event of Default; (ii) Lender may exercise all the remedies then available to it under the Uniform Commercial Code as in effect in the State of Delaware (the “UCC”); and (iii) Lender shall have and may exercise any and all rights and remedies available at law or in equity, or provided in any Financing Document or any other instrument or documents delivered in connection with this Note or the indebtedness evidenced by this Note.
In furtherance of the foregoing, Borrower hereby consents to the transfer of the Collateral to Lender or its nominee following the occurrence and during the continuance of an Event of Default and to the substitution of Lender or its nominee as a member under the limited liability company agreement of Guarantor, in any case, as heretofore and hereafter amended.  Furthermore, Borrower as the holder of equity interests in Guarantor, hereby (i) waives all rights of first refusal, rights to purchase, and rights to consent to transfer any Collateral (to Lender or to any purchaser resulting from the exercise of Lender’s remedy provided hereunder or under applicable laws) and (ii) in the event that Lender enforces its rights and remedies under this Note that results in the assignment, sale or other disposition (each a “Transfer”) of any Pledged Interests to Lender or any other person (each an “Assignee”) in accordance herewith, Borrower shall take such actions under the limited liability company agreement of Guarantor as are necessary to give effect to the Transfer of such Pledged Interests to Assignee.
7.        Security Interest.  To secure the payment, performance and observance of its obligations hereunder, Borrower hereby pledges and grants to Lender a continuing security interest in, right of setoff against, and an assignment to Lender of all of Borrower’s right, title and interest in, to and under, all of the following, whether now owned or hereafter acquired by Borrower, and wherever located and whether now owned or hereafter existing or arising (collectively, the “Collateral”): (a) all Pledged Interests (as hereinafter defined), (b) the certificates representing the Pledged Interests, if any, (c) stock resulting from (or in connection with the exercise of) stock splits, reclassifications, warrants, options, non-cash dividends, and all 

other distributions or payments (whether similar or dissimilar to the foregoing) on or with respect to, or on account of, any Pledged Interests or other rights or interests constituting Collateral, and (d) all Proceeds (as defined in the UCC) from the Pledged Collateral described in clauses (a) through (c) of this Section 7.  “Pledged Interests” means (a) all membership interests of the Guarantor as described in Schedule I hereto, (b) all other membership interests or other equity interests (in each case, of the Guarantor) hereafter acquired by, or otherwise issued to, Borrower; (c) all registrations, certificates, articles, by-laws, regulations, limited liability company agreements or constitutive agreements governing or representing any such interests; and (d) all options and other rights, contractual or otherwise (including all voting rights and books and records relating to any of the forgoing), at any time existing with respect to such interests, in each case as such interests are amended, modified, or supplemented from time to time, and together with any interests taken in extension or renewal thereof or substitution therefor.
8.    Further Acts and Covenants. 
(a)    Without the express written consent of Lender, Borrower shall not (i) change its capital structure, (ii) merge or consolidate with any entity, (iii) amend or change its certificate of formation, operating agreement or other governing instruments in a manner materially adverse to Lender (provided, that Borrower shall provide Lender with not less than 10 Business Days’ prior written notice of any change in its name or jurisdiction of organization) or (iv) sell, lease, transfer or otherwise dispose of or sell and leaseback, any Collateral or all or any substantial portion of its assets, whether now owned or hereafter acquired (it being agreed that this Note shall not restrict any lien or security interest on any of Borrower’s assets other than the Collateral).
(b)    Borrower shall have and maintain commercially reasonable insurance at all times with respect to the Collateral. 
(c)    Borrower will not sell or otherwise transfer or grant or allow the imposition of a lien or security interest upon the Collateral, will not allow any third party to gain control of all or any part of the Collateral, and will not use any portion thereof in any manner inconsistent with this Note or with the terms and conditions of any policy of insurance thereon. 
(d)    Borrower irrevocably authorizes Lender to execute and file against Borrower one or more financing, continuation or amendment statements describing the Collateral pursuant to the UCC.  Borrower will execute any other documentation reasonably necessary for Lender to obtain and maintain perfection of its security interests in the Collateral.
(e)    Borrower acknowledges and agrees that Lender shall have the right to appoint a single representative who shall: (i) receive written notice of all meetings (both regular and special) of the Board of Directors, if any, of Borrower and each committee of any such Board of Directors (such notice to be delivered or mailed as specified in Section 10 at the same time as notice is given to the members of any such Board of Directors, if any, and/or committee); (ii) be entitled to attend (or in the case of telephone meetings, monitor) all such meetings in a nonvoting observer capacity; and (iii) receive all notices, information, materials, reports or other information (including minutes of prior meetings of such Board of Directors, if any) which are furnished to the members of any such board (or similar body) and/or committee at the same time, and in the same manner as the same is furnished to such members, except that the representative may be excluded from access to any material or meeting or portion thereof if the Board of Directors determines in good faith, upon advice of counsel, that such exclusion is reasonably necessary to preserve the attorney-client privilege, to protect highly confidential proprietary information, or for other similar reasons. Promptly upon receipt of an invoice therefor, Borrower shall reimburse the designated representative (or the employer of such representative) for the documented out-of-pocket costs and expenses of such representative in attending such meeting.  

For the avoidance of doubt, the rights described herein shall terminate and be of no further force or effect upon such time as this Note is repaid in full.
9.    Reimbursement by Borrower.  During the continuance of an Event of Default, Lender may discharge taxes, liens, security interests or such other encumbrances as may attach to the Collateral, may pay for required insurance on the Collateral and may pay for the maintenance, appraisal or reappraisal, and preservation of the Collateral, as determined by Lender to be reasonably necessary.  Borrower will reimburse Lender on demand for any such payment made or expense incurred by Lender pursuant to the foregoing authorization, and the Collateral may be used to secure any such advances or payments made or expenses incurred by Lender.
10.   Notices.  All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given (and shall be deemed to have been duly given upon receipt) by delivery in person, by email, by nationally-recognized overnight courier or, if only to be given within the United States, also by overnight U.S. mail (postage prepaid, return receipt requested) as follows:
if to Borrower:
Novan, Inc. 
4020 Stirrup Creek Drive, Suite 110
Durham, North Carolina 27703
Attention:  Paula Brown Stafford and John M. Gay 
Email:  [***] 

with a copy (which shall not constitute notice) to:
Smith, Anderson, Blount, Dorsett, Mitchell & Jernigan, L.L.P.
150 Fayetteville Street, Suite 2300
Raleigh, North Carolina 27609
Attention:  Gerald F. Roach
Email:  [***] 

if to Lender:
Evening Post Group, LLC
174 Meeting Street
Suite 200
Charleston SC 29401
Attn:  Joe Waring, EVP and CFO
Email: [***]
with a copy (which shall not constitute notice) to:
Blank Rome LLP
1271 Avenue of the Americas
New York, NY 10020
Attention: Jennifer Daniels
Email:  [***]
or to such other address as the Person to whom notice is given may have previously furnished to the others in writing in the manner set forth above. All notices and other communications under this Note will be deemed duly given (a) on the date of delivery if delivered personally, or if by e-

mail, on the date sent, (b) on the first Business Day following the date of dispatch if delivered utilizing a next-day service by a recognized next-day courier or (c) on the earlier of confirmed receipt or the fifth Business Day following the date of mailing if delivered by registered or certified mail, return receipt requested, postage prepaid.
11.    Entire Agreement.  This Note (including the documents and instruments referred to herein) constitutes the entire agreement and supersedes all other prior agreements and understandings, both written and oral, between the parties with respect to the subject matter hereof. 
12.    Headings.  The headings preceding the text of the paragraphs hereof are inserted solely for convenience of reference and shall not constitute a part of this Note nor shall they affect its meaning, construction or effect.
13.    Governing Law; Jurisdiction; Service of Process; Waiver of Jury Trial.  The terms and provisions of Section 9.6 (Governing Law; Jurisdiction; Service of Process; Waiver of Jury Trial) of the Purchase Agreement are hereby incorporate by reference and shall apply to this Note and the parties hereto mutatis mutandis as if fully set forth herein.
14.    Non-Negotiability; Non-Transferability.  This Note shall not be negotiable, assignable or transferable by Borrower, and no such negotiation, assignment or transfer shall be effective, absent the prior written consent of Lender.  
15.    Expenses.  Borrower shall, within three (3) Business Days of demand therefor, pay (a) all reasonable out-of-pocket expenses incurred by Lender (including the fees, charges and disbursements of legal counsel to Lender), in connection with any amendments, modifications or waivers of the provisions of this Note and the other Financing Documents, and (b) all reasonable out-of-pocket expenses incurred by Lender (including the fees, charges and disbursements of legal counsel to Lender) in connection with the enforcement or protection of its rights in connection with this Note and the other Financing Documents.
16.    Tax Treatment.  All payments under this Note shall be treated for income tax purposes as payments of additional Purchase Price under the Purchase Agreement, except to the extent such amounts are required to be treated as interest under Section 483 of the Code or any analogous provision of the Code or state, local or other tax laws.
17.    Withholding.  All payments hereunder and under this Note must, except as required by applicable law, be made without setoff, offset, deduction or counterclaim, free and clear of all taxes (other than those based on the income of Lender), levies, imports, duties, fees and charges, and without any withholding, restriction or conditions imposed by any governmental authority (it being understood that, if any payment hereunder or thereunder is required by applicable law to be subject to any setoff, offset, deduction or counterclaim, tax (other than those based on the income of Lender), levy, import, duty, fee, charge or withholding (each of such items is referred to herein as a “Deduction”), Borrower shall, at such time as any payment hereunder or thereunder is so reduced by a Deduction, pay to Lender an amount necessary to place Lender in the same position the Lender would have been had such payment not been subject to a Deduction).
18.    Miscellaneous.
(a)    The undersigned expressly agrees that this Note or any payment under this Note may be extended by Lender from time to time without in any way affecting the liability of the undersigned hereunder.

(b)    If any provision or any word, term, clause, or part of any provision of this Note shall be invalid for any reason, the same shall be ineffective, but the remainder of this Note and of the provision shall not be affected and shall remain in full force and effect.
(c)    With the written consent of Lender, any covenant, agreement or condition contained in this Note may be waived (either generally or in a particular instance and either retroactively or prospectively), and Lender and Borrower may from time to time enter into written agreements for the purpose of amending any covenant, agreement or condition of this Note or changing in any manner the rights of Lender.  Any such amendment or waiver shall be binding upon each future payee of this Note and upon Borrower.

IN WITNESS WHEREOF, the undersigned has caused this Note to be executed as of the day and year first written above. 

												
		NOVAN, INC.		
				
			By:	/s/ Paula Brown Stafford
			Name:	Paula Brown Stafford
			Title:	Chief Executive Officer
				
		Agreed to and accepted by:		
				
		EVENING POST GROUP, LLC		
				
			By:	/s/ Terrance Hurley
			Name:	Terrance Hurley
			Title:	Chief Executive Officer
				

SCHEDULE I

PLEDGED INTERESTS

															
	Pledgor	Pledged Interests Issuer	% of Limited Liability
Company Interests Pledged
	Type of Limited Liability
Company Interests Pledged
	Cert. #
	Novan, Inc.	EPI Health, LLC	100%	Membership Units	N/Acarter-ex10111xvbax2021e

Exhibit 10.11.1  NON-QUALIFIED DEFERRED COMPENSATION PLAN FOR EXECUTIVES  (As Restated Effective January 1, 2018)  ADOPTION AGREEMENT    (Updated Form January 1, 2020)    This Adoption Agreement is the companion document that allows an employer to sponsor and adopt the Virginia Bankers Association  Model Non-Qualified Deferred Compensation Plan for Executives (the “Plan”).  Each Employer named below hereby adopts the Plan  through this Adoption Agreement (the “Adoption Agreement”), to be effective as of the date(s) specified below, and elects the following  specifications and provides the following information relating thereto.    In completing this Adoption Agreement, if additional space is required, insert additional sheets.     Adoption Agreement Contents   Page   Option 1 Employer(s) Adopting Plan................................................................................................... 1   Option 2 General Plan Information ...................................................................................................... 1   Option 3 Status of Plan and Effective Date(s) ..................................................................................... 2   Option 4 Definitions and Other Optional Provisions ........................................................................... 3   Option 5 Employer Contributions ........................................................................................................ 8   Option 6 Vesting .................................................................................................................................. 10   Option 7 Retirement Dates ................................................................................................................... 11   Option 8 Time and Form of Payments ................................................................................................. 12   Option 9  Hardship Withdrawals  .......................................................................................................... 15   Option 10 Participant Deemed Investment Direction ............................................................................ 15      1. EMPLOYER(S) ADOPTING PLAN.     (a) Name of Plan Sponsor:  Carter Bank & Trust  (b) Plan Sponsor’s Telephone   Number:   276-629-3331   (c) Address of Plan Sponsor:  9112 Virginia Avenue  Bassett, VA 24055-4859  (d) Plan Sponsor’s EIN:   20-5539935  (e) Plan Sponsor’s Tax Year   End:   12/31   (f) Other Participating Employers Adopting the Plan:      (1) All Affiliates are automatically participating Employers in the Plan, except for the following:        .      (2) Each participating Employer is listed individually on the attachment captioned “List of Participating  Employers,” which shall be updated as needed from time to time in compliance with ARTICLE XV of the  basic plan document.       2. GENERAL PLAN INFORMATION.     (a) Name of Plan:  Carter Bank & Trust Nonqualified Deferred Compensation Plan  (b) Name, Address and EIN of Plan Administrator(s):  [If other than Plan Sponsor, appointment must be by resolution]      

 

2      3. STATUS OF PLAN AND EFFECTIVE DATE(S).     (a) Effective Date of Plan:  The Effective Date of the Plan is  October      1  ,   2020 .     (b) Plan Status.  The adoption of the Plan through this Adoption Agreement is:      (1) Initial Establishment.  The initial adoption and establishment of the Plan.      (2) Restated Plan.  An amendment and restatement of the Plan (a Restated Plan).    (A) Effective Date of this Restatement.  The Effective Date of this Restatement is   January 1, 2022 .     (B) Prior Plan.  The Plan was last maintained under document dated     ,    and was known as the                  .    (C) 409A Transitional Provisions (grandfathering election):         Election NOT to Grandfather Pre-January 1, 2005 Vested Balances.  If this Option is elected,  all Deferral Accounts shall be subject to the rules set forth in the post-December 31, 2004  restatements.       If the Option is not elected, the Deferral Accounts attributable to transfers from predecessor  plans prior to December 31, 2004 and contributions that are vested as of December 31, 2004  shall be segregated from the Deferral Accounts attributable to contributions that are not  vested as of December 31, 2004 and to contributions and transfers made on and after January  1, 2005.  The terms of the Plan in effect on and after January 1, 2005 shall only apply to  transfers and contributions that are not vested as of December 31, 2004 and to contributions  and transfers made on and after January 1, 2005.        (3) Special or Other Transitional Provisions.  [Use attachment if additional space is needed]      [Enter any special provisions including alternate definitions or other transitional provisions relating  to any Predecessor Plan Account and the Plan as restated]                                                          (c) If elected, this Plan is intended to be paired with a qualified cash or deferred arrangement as described in subparagraph  3.1(d) of the basic plan document.      If Elected – Name of the paired plan                 

 

3    4. DEFINITIONS AND OTHER OPTIONAL PROVISIONS.    (a)  Compensation   Paragraph 1.10  Compensation is used throughout the basic plan document for different purposes.   The following specific rules apply.     (1) General Definition.  The Compensation definition in paragraph 1.10 of  the basic plan document is modified as follows:      (A) Salary.  Base salary and base wages subject to the following  modifications or limitations:                                                              [Consider whether to fix the date for determining Salary.  Consider  whether to revise to exclude reductions for 401(k) and cafeteria plan  contributions.  Other revisions may be desired.]    (B) Discretionary or Other Bonus.  All discretionary or other  Bonuses unless otherwise provided:                                                              [List excluded bonus or incentive programs.  The Plan Sponsor may elect  a Special Deferral Election Period for Performance-Based  Compensation.]    (2) Specific Definitions.  When used with respect to each type of  contribution under the Plan, Compensation shall include:    (A) Employee Deferral Contributions.  [Check all that apply]      (a) Salary.            (b) Bonuses.        (c) Commissions.      (d) Other.  Annual Score Card Cash Bonus   [Describe – In defining Compensation for  deferral purposes, please note that elections to  defer compensation generally must be made in  the year prior to performance period for which  the right to the compensation arises.   Plan  Sponsors should consult with counsel in  determining the types of compensation and  any special timing rules.]        

 

4    (B) Employer Non-Elective Contributions.  [Check all that apply]      (a) Salary.            (b) Bonuses.        (c) Commissions.      (d) Other.  ____________________________________  [Describe – In defining Compensation for  deferral purposes, please note that elections to  defer compensation generally must be made in  the year prior to performance period for which  the right to the compensation arises.   Plan  Sponsors should consult with counsel in  determining the types of compensation and  any special timing rules.]    (C) Employer Matching Contributions.  [Check all that apply]      (a) Salary.            (b) Bonuses.        (c) Commissions.      (d) Other.  ____________________________________  [Describe – In defining Compensation for  deferral purposes, please note that elections to  defer compensation generally must be made in  the year prior to performance period for which  the right to the compensation arises.   Plan  Sponsors should consult with counsel in  determining the types of compensation and  any special timing rules.]    (b) Eligible Employee Eligible Employee shall mean only the following:   Paragraph 1.17    (1) Determination by Board.  Any individual who is designated as  an Eligible Employee by resolution of the  Plan Sponsor’s      Employer’s Board.  A copy of the resolution shall be  attached to and incorporated by reference into the Plan.       (2) Determination by CEO.  Any individual who is designated in  writing as an Eligible Employee by resolution of the  Plan  Sponsor’s  Employer’s Chief Executive Officer.  A copy of  the Chief Executive Officer’s designation shall be attached to  and incorporated by reference into the Plan.       (3) Determined by Classification or Grade.  Any individual who is  classified under the Employer’s personnel practices and  policies as employed in the following grades or classifications:                     

 

5           [List executive classification to be included in plan coverage]     (4) Determined by Position or Title.  Any individual who is  employed in the following positions with the Employer:   Executive Management Team                                                   [List the executive positions to be included in plan coverage]    (c) Plan Year   Paragraph 1.24     In the case of a Restated Plan which prior to the Effective Date of this Restatement  was maintained on the basis of a Plan Year beginning on a date other than January  1, the Plan Year shall begin on           , ____ and end on    , ______,  with the short Plan Year beginning on      ,  _______ and ending on December 31, ________.  Thereafter, the Plan Year shall  be the 12-month period beginning each January 1.  (d) Effective Date   of Coverage   Paragraph 2.1  The effective date of coverage for an Eligible Employee shall be [Check one]   (1) Immediate.  The first day of the first payroll period beginning  on or after the date the individual became an Eligible Employee.     (2) Monthly.  The first day of the first payroll period beginning on  or after the first day of _________  [Complete with 1st, 2nd, or  other] month next following the date the individual became an  Eligible Employee.     (3) Semi-Annually.  The first day of the Plan Year or the first day  of the seventh month of the Plan Year on or next following the  date the individual became an Eligible Employee.     (4) Annually.  The first day of the Plan Year on or next following  the date the individual became an Eligible Employee.       (e) Special Election Period   for Performance-Based    Compensation   Subparagraph 3.2(d)  If this Option is elected, the Plan Sponsor may permit Eligible Employees to make  Deferred Compensation Elections with respect to Performance-Based  Compensation prior to the annual filing deadline established by the Administrator  which deadline shall be no later than six (6) months prior to the end of the period  for which such Bonus is earned, as described in subparagraph 3.2(d) of the basic  plan document.      Otherwise, except for new participants, all Deferred Compensation Elections for  all Bonuses must be made prior to the annual filing deadline established by the  Administrator, which deadline shall be no later than the end of the calendar year or  end of the Plan Sponsor’s fiscal year, immediately preceding the applicable year to  which the Bonus relates.            

 

6  In order to be Performance-Based Compensation, (i) the Bonus must be earned  over a period of at least twelve (12) months, (ii) the Bonus must be based on pre- established organizational or individual performance criteria for which the  outcome is substantially uncertain at the time of establishment, (iii) such criteria  are established in writing no later than ninety (90) days after the beginning of the  period of service to which the Bonus and performance relate, and (iv) such criteria  are not substantially certain to be met at the time established.  See more specific  definition in Treas. Reg. 1.409A-1(e).     (f) Cancellation of    Deferred Compensation    Election For Disability    Paragraph 3.5   If this Option is elected, the Plan Sponsor:     (1) Mandatory Cancellation.  Will cancel the Deferred  Compensation Election of an Eligible Employee who  experiences a Disability as defined in subparagraph 3.5(b).     (2) Optional Cancellation.  May permit an Eligible Employee who  experiences a Disability as defined in subparagraph 3.5(b) to  cancel his Deferred Compensation Election.    If this Option is not selected, no cancellation will be required or  permitted upon the occurrence of a Disability.     (g) Rules Relating to    “Specified Employee”   Delay   Subparagraph 9.1(c)  For purposes of applying the 6-month delay required by Section 409A for a  Participant who is a “specified employee” (i.e., a “key employee” of any publicly- traded company):     (1) Specified Employee Identification Date.  Specified employees shall be  identified in the following manner:  [Check one of the following and  complete, if applicable]      (A) Established By Board Action or Other Document of  Plan Sponsor.  The identification date and its effective date shall  be established by the Plan Sponsor through the document set  forth below, which may be an action of its Board or other  written document:                [Describe document establishing specified employee  identification date]      (B) Default Dates in Regulations.  The identification date  shall be December 31 and effective for distributions to be made  during the 12-month period beginning on or after the following  April 1, as provided in Treas. Reg. 1.409A-1(i).      (C) Alternative Identification Date.  The identification  date shall be _________________ (identification date) and  effective for distributions to be made during the 12-month  period beginning on or after the following  __________________ [enter date not later than the first day of  the 4th month following the identification date]    The Specified Employee Identification Date must be the same date  for all deferred compensation plans, programs, and agreements of  the Plan Sponsor and its Affiliates.      

 

7  (2)  Compensation to be Used in Determining Specified Employees.   Specified employees are (A) the 50 highest paid officers (or if less, the  greater of 3 or 10% of employees) with compensation in excess of  $175,000 (for 2017) (as adjusted from time to time), (B) 1% owners with  compensation in excess of $150,000, or (C) 5% owners.  The definition  of compensation for this purpose shall be determined in the following  manner:  [Check one of the following and complete, if applicable]      (A) Board Action or Other Document of Plan Sponsor.   The compensation used to identify specified employees shall be  established by the Plan Sponsor though the document set forth  below which may be an action of its Board or other written  document that applies to all deferred compensation plans,  programs, and agreements of the Plan Sponsor and its  Affiliates.                  [Describe document establishing compensation definition]      (B) VBA Plan.  The compensation used to identify  specified employees shall be the Total Compensation definition  elected under the VBA Plan.     (C) Alternative Compensation Definition.  The  compensation used to determine specified employees shall be  determined in the following manner                [Describe the document establishing  compensation definition or describe compensation based on an  acceptable definition under Section 415 of the Code]     (3) Payment Rules Following Required Delay Period.  Upon the expiration  of the required 6-month delay:  [Check one of the following]      (A) Catch-Up Missed Payments.  Payments to which a  specified employee would otherwise have been entitled during  the 6-month delay will be accumulated and paid on the first day  of the 7th month following the date of Separation from Service  for reasons other than death.      (B) Each Payment Delayed.  Each payment to which a  specified employee would otherwise have been entitled during  the 6-month delay will be delayed for 6 months.    

 

8   (h) Rules Relating to    Final Check of Year    If this Option is elected, Compensation payable after the last day of the calendar  year solely for services performed during the final payroll period which  contains the last day of the year will be treated as Compensation for services  performed in the taxable year in which the payroll period began.      If this Option is not elected, Compensation payable after the last day of the  calendar year solely for services performed during the final payroll period  which contains the last day of the year will be treated as Compensation for  services performed in the subsequent taxable year in which the payment is  made.      Any change in election relating to the final check of the Participant’s taxable  year may not be effective for 12 months from the date the amendment is adopted  and executed.       5. EMPLOYER CONTRIBUTIONS.    (a) Employer Contributions The following contributions by the Employer are elected:   Paragraph 4.1    (1) None.  Employer contributions are not permitted.     (2) Employer Non-Elective Contribution.       (A) Amount.  Each Employer shall make an Employer Non- Elective Contribution for each Plan Year in such amount, if any,  which the Employer shall determine.      (i) Flexible Formula - Such amount, if any, which the  Board of the Employer shall determine by resolution.      (ii) Compensation Formula - ______% [Insert percentage]  of the Compensation for such Plan Year, plus any  additional amount that the Board of the Employer shall  determine by resolution.      (iii) Fixed Amount - $    [Insert  amount], plus any additional amount that the Board of  the Employer shall determine by resolution.      (iv) Other -                                                (B) Participants Entitled to Employer Non-Elective Contribution.   The Employer Non-Elective Contribution shall be allocated to  the Employer Non-Elective Deferral Account of Participants  who [Select applicable provisions which shall apply  conjunctively unless otherwise noted]       

 

9    (i) Are employed as Eligible Employees for at least  ___________________ [Insert number of months]  full calendar months in such Plan Year.      (ii) Are Eligible Employees at any time during such Plan  Year.      (iii) Are Eligible Employees on the last day of such Plan  Year.      (iv) If they died while Eligible Employees or retired on a  Disability, Early, Normal or Delayed Retirement Date  while an Eligible Employee during such Plan Year  [Check one]       (a) But only if they are employed as an Eligible  Employee for at least    [Insert  number of months] full calendar months in  such Plan Year.     (b) Regardless of the number of months  employed during such Plan Year.      (v) Other - :                                               (3) Employer Matching Contributions.      (A) Amount.  Each Employer shall make an Employer Matching  Contribution for each Plan Year in an amount equal to the  following percentage(s) of each Participant’s Deferral  Contribution for such Plan Year [Check one]     (i) Straight Percentage - ______% [Insert percentage] of  his Compensation contributed to the Plan (up to a  maximum of ______% of such Compensation).     (ii) Contribution Weighted Percentages - ______% [Insert  percentage] of the first ______% [Insert percentage]  of his Compensation contributed to the Plan and  ______% of his Compensation contributed to the Plan  (up to a maximum of ______% of such  Compensation).       (iii) Other - :                                            

 

10     (B) Participants Entitled to Employer Matching Contribution.  The  Employer Matching Contribution shall be allocated to the  Employer Matching Deferral Account of Participants who  [Select applicable provisions which shall apply conjunctively  unless otherwise noted]     (i) Are employed as an Eligible Employee for at least  ________ [Insert number of months] full calendar  months in such Plan Year.     (ii) Are Eligible Employees at any time during such Plan  Year.     (iii) Are Eligible Employees on the last day of such Plan  Year.     (iv) If they died while an Eligible Employee or retired on  a Disability, Early, Normal or Delayed Retirement  Date while an Eligible Employee during such Plan  Year [Check one]     (a) But only if they are employed as an Eligible  Employee for at least _____ [Insert number  of months] full calendar months in such Plan  Year.     (b) Regardless of the number of months  employed during such Plan Year.      (v) Other - :                                                6. VESTING.    (a) Vesting Schedule The following vesting schedule shall apply to the Employer Deferral Account   Paragraphs 6.2 and 6.3 [Check one, and complete where applicable]     (1) Employer Non-Elective Deferral Account.  The following  vesting schedule shall apply to the Employer Non-Elective  Deferral Account [Check one, and complete where applicable]      (A) Apply Rules Described in Qualified Plan.  A  Participant is vested in his Employer Non-Elective Deferral  Account under the Plan in the same manner and applying the  same rules applicable to employer profit sharing or other non- matching contributions under the following qualified retirement  plan maintained by the Employer:                      

 

11     (B) Always 100% Vested.  A Participant shall always have  a non-forfeitable right to 100% of his Employer Non-Elective  Deferral Account.     (C) Other Applicable Rules.  A Participant shall be vested  in his Employer Non-Elective Deferral Account in accordance  with the following rules:                         [Describe vesting provisions, including automatic vesting  provisions, applicable schedule and rules for counting service]     (2) Employer Matching Deferral Account.  The following vesting  schedule shall apply to the Employer Matching Deferral  Account [Check one, and complete where applicable]      (A) Apply Rules Described in Qualified Plan.  A  Participant is vested in his Employer Matching Deferral  Account under the Plan in the same manner and applying the  same rules applicable to matching contributions made under the  following qualified retirement plan maintained by the  Employer:                            (B) Always 100% Vested.  A Participant shall always have  a non-forfeitable right to 100% of his Employer Matching  Deferral Account.     (C) Other Applicable Rules.  A Participant shall be vested  in his Employer Matching Deferral Account in accordance with  the following rules:                         [Describe vesting provisions, including automatic vesting  provisions, applicable schedule and rules for counting service]      7. RETIREMENT DATES.     (a) Normal Retirement Date   Paragraph 8.1    A Participant’s Normal Retirement Date shall be the day the Participant  reaches age  62   .    (b) Early Retirement Date   Paragraph 8.3  [Select and complete applicable provision(s)]    (1) None.     (2) No age requirement.     (3) Age requirement of     years.     (4) No service requirement.    

 

12   (5) Service requirement of     years of  continuous full-time service with the Employer.    (c) Disability Retirement Date [Select and complete applicable provision(s)]    Paragraph 8.4   (1) No age requirement.     (2) Age requirement of     years.     (3) No service requirement.     (4) Service requirement of     years of  continuous full-time service with the Employer.      8. TIME AND FORM OF PAYMENTS.     (a) Time of Payment   Paragraph 9.1     The Employer Non-Elective Deferral Account shall be paid on the Participant’s  Separation from Service.  The Benefit Commencement Date for all other benefits  will be determined as follows:     [Check one, and complete where applicable]     (1) Selected By Plan Sponsor.  The Plan Sponsor selects the  following time of payment:  [Select one]      (A) Normal Retirement Date.  The later of the  Participant’s Normal Retirement Date under the Plan or his  Separation from Service (for reasons other than death).      (B) Separation from Service.  The Participant’s Separation  from Service for whatever reason.      (C) Six Months Following Separation from Service.  Six  months following the Participant’s Separation from Service  (for reasons other than death).     If elected here , the Plan Sponsor elects for payment to be  accelerated upon a Change in Control, but only with respect to  contributions made after this Adoption Agreement is executed,  unless the Plan Sponsor previously made such an election under  Option 3(b)(3).     (2) Selected By Participant.  The date selected by the Participant in  accordance with the following:    (A) Participant’s Options.  The Participant may elect that  his Benefit Commencement Date be based on:     (i) The later of his Normal Retirement Date or  his  Separation from Service (for reasons  other than death) or  six months following  his Separation from Service (for reasons  other than death).  [Select one]   

 

13   (ii)  His Separation from Service (for reasons  other than death), or  six months following  his Separation from Service (for reasons  other than death).  [Select one]       (iii) A date certain stated clearly in his Deferred  Compensation Election form which shall be  without regard to when his employment with  the Employer ends.      (iv) The earlier of a date certain or  his  Separation from Service (for reasons other  than death) or  six months following his  Separation from Service (for reasons other  than death).  [Select one]       (v) Change in Control.  The Participant may  elect to have payment accelerated upon a  Change in Control.    (b) Form of Payment to Participant The Employer Non-Elective Deferral Account shall be paid in a single lump   Paragraph 9.2  sum.  The form of payment to the Participant for all other benefits will be    determined as follows:   [Check one, and complete where applicable]     (1) Selected By Plan Sponsor.  The Plan Sponsor selects the  following form of payment:  [Select one]      (A) Lump Sum.  Deferral Benefits will be paid to the  Participant in a single, lump-sum payment.       (B) Periodic Installments.  Deferral Benefits will be paid  to the Participant in annual periodic installment payments made  over the following period:  [Select one]       (i) Five (5) years.       (ii) Ten (10) years.       (iii) Fifteen (15) years.       (iv) Twenty (20) years.     (2) Selected By Participant.  The Participant may elect from among  the following forms of payment [Select options to be available  to Participants]     (A) Lump Sum.  Deferral Benefits may be paid to the  Participant in a single, lump-sum payment.    

 

14   (B) Periodic Installments.  Deferral Benefits may be paid  to the Participant in annual periodic installment  payments made over the following periods:       (i) Five (5) years.       (ii) Ten (10) years.       (iii) Fifteen (15) years.       (iv) Twenty (20) years.    (c) Form of Payment to Beneficiary  Any unpaid portion of the Employer Non-Elective Deferral Account shall be    Paragraph 9.2  paid in a single lump sum to the Beneficiary.  The form of payment to the    Beneficiary for all other unpaid benefits will be determined as follows:    [Check one, and complete where applicable]     (1) Selected By Plan Sponsor.  The Plan Sponsor selects the  following form of payment to the Beneficiary:  [Select one]      (A) Lump Sum.  Deferral Benefits will be paid to the  Beneficiary in a single, lump-sum payment.       (B) Periodic Installments.  Deferral Benefits will be paid  to the Beneficiary in annual periodic installment payments  made over the following period: [select one]        (i) Five (5) years.        (ii) Ten (10) years.       (iii) Fifteen (15) years.       (iv) Twenty (20) years.     (2) Selected By Participant.  The Participant may elect the form of  payment to the Beneficiary from among the following forms of  payment [Select options to be available to Participants]     (A) Lump Sum.  Deferral Benefits may be paid to the  Beneficiary in a single, lump-sum payment.     (B) Periodic Installments.  Deferral Benefits may be paid  to the Beneficiary in annual periodic installment  payments made over the following periods:       (i) Five (5) years.       (ii) Ten (10) years.       (iii) Fifteen (15) years.       (iv) Twenty (20) years.     

 

15      9. HARDSHIP WITHDRAWALS.    (a) Availability Generally A Participant [Check one]   Paragraph 10.1   (1) Not Permitted.  May not make Hardship Withdrawals.        (2) Permitted.  May make a Hardship Withdrawal for an  Unforeseeable Emergency from the following accounts  [Check  one or more]     (A) Employee Deferral Account.     (B) Employer Matching Deferral Account.     (C) Employer Non-Elective Deferral Account.     (D) Predecessor Plan Account.      10. PARTICIPANT DEEMED INVESTMENT DIRECTION.     (a) Availability Generally A Participant [Check one]   Paragraph 5.2   (1) Not Permitted.  May not make deemed investment directions.        (2) Permitted.  May make deemed investment directions for the  following accounts  (“directable accounts”) [Check one or  more]     (A) Employee Deferral Account.     (B) Employer Matching Deferral Account.     (C) Employer Non-Elective Deferral Account.     (D) Predecessor Plan Account.    (b) Permissible Investments  Unless the Plan Sponsor elects a different option below, a Participant’s directable  accounts may be invested in the investment funds which are designed to mirror  the investment options available under the VBA Plan as adopted by the Plan  Sponsor, to the extent legally practical, with alternate funds designated where  collective investment funds may not be offered under a nonqualified plan.     (1) VBA Plan Plus Company Stock.  In addition to the funds  available under the VBA Plan, a Company Stock Fund will also  be available for directed investment.       (2) VBA Plan Without Company Stock.  Regardless of whether a  Company Stock Fund is available under the VBA Plan, no  Company Stock Fund will be available for directed investment.      

 

16   (3) Company Stock Only.  In lieu of the funds available under the  VBA Plan, a Company Stock Fund will be the only fund  available for directed investment.              IN WITNESS WHEREOF, each Employer, by its duly authorized representatives, has executed this Adoption  Agreement this  26  day of  October , 2021 .      Carter Bank & Trust      [Enter Name of Plan Sponsor]       By  /s/ Bradford Langs       Its  President and Chief Strategy Officer      [SEAL]    ATTEST:       Its        Carter Bank & Trust      [Enter Name of Employer]    By  /s/ Paul Carney        Its  Chief Human Resources Officer      [SEAL]    ATTEST:       Its               [Enter Name of Employer]    By           Its            [SEAL]    ATTEST:       Its

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