Document:

Exhibit

Exhibit 10.2

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is entered into as of September 23, 2020 (the “Effective Date”) by and between Novan, Inc., a Delaware corporation with its principal place of business in Durham County, North Carolina (the “Company”), and John M. Gay (“Executive”). 

WITNESSETH:

WHEREAS, Executive has been serving as the principal financial officer of the Company and is subject to the terms of the Confidentiality and Assignment of Inventions Agreement and the Noncompetition Agreement, both executed by Executive on May 21, 2018 (collectively the “Restrictive Covenants Agreements”); and

WHEREAS, the Company wishes to appoint Executive as the Chief Financial Officer, and Executive desires to accept such appointment and continued employment with the Company, on the terms described herein. 

NOW, THEREFORE, in consideration of the foregoing, the mutual promises herein contained, and other good and valuable consideration, including the employment of Executive by the Company and the compensation received by Executive from the Company from time to time, the receipt and sufficiency of which are hereby acknowledged, the parties hereto, intending to be legally bound, hereby agree as follows.

1.EMPLOYMENT. As of the Effective Date, Executive shall serve as the Company’s Chief Financial Officer (“CFO”) upon the terms and conditions hereinafter set forth.

2.DUTIES; EXCLUSIVE SERVICE.

(a)Executive shall faithfully discharge his responsibilities and perform all duties prescribed to him by the Company’s Chief Executive Officer (the “CEO”), as well as any duties as are set forth in the Bylaws of the Company related to Executive’s position. In addition, Executive expressly agrees that his services include but are not limited to attendance at scheduled meetings of the Company’s Board of Directors (the “Board”) and all other normal duties associated with the responsibilities of a Chief Financial Officer. Executive agrees to comply with all Company policies, standards and regulations now existing or hereafter promulgated. Executive further agrees to devote all of his working time and attention to the performance of his duties and responsibilities on behalf of the Company and in furtherance of its best interests. Notwithstanding the foregoing, Executive may serve on boards or advisory committees without compensation of non-profit or charitable organizations and, with the prior written consent of the CEO, boards or advisory committees of for-profit organizations or companies, in each case, so long as such service and obligations do not interfere with Executive’s duties at the Company. During the Term, Executive agrees to immediately resign from the board of any company that engages in any business that competes with or represents a conflict with the business of the Company as determined in the reasonable discretion of the Board.

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3. COMPENSATION. Executive’s compensation shall be paid as follows:

(a)Base Salary. Executive shall receive as compensation a base salary at an annual rate of Three Hundred Fifteen Thousand Dollars ($315,000.00) (“Base Salary”), less any federal, state and local payroll taxes and other withholdings legally required or properly requested by Executive.  Base Salary under this Agreement shall be applied retroactively as of June 1, 2020, and the Company shall provide Executive with a make-up payment to cover such retroactive application in the first payroll check following the Effective Date.  Base Salary shall be payable semi-monthly in accordance with the Company’s regular payroll practices and procedures. Base Salary shall be subject to annual review by the Company and adjustment within the Company’s discretion.  

(b)Annual Bonus. For each calendar year during the Term, Executive will be eligible to receive an annual performance-based cash bonus, upon achievement of the annual bonus objectives established by the Company (“Annual Bonus”) pursuant to the Company’s Executive Annual Incentive Plan or another bonus plan established by the Company, with a target Annual Bonus equal to thirty five percent (35%) of Base Salary for achievement of the performance objectives established by the Company.  Executive’s eligibility for an Annual Bonus is contingent on Executive remaining employed through December 31 of the applicable calendar year.  Each Annual Bonus will be paid to Executive no later than March 15 of the calendar year following the calendar year during which performance is measured.  Executive’s Annual Bonus for 2020 will be prorated retroactively as of June 1, 2020 such that 5/12 of the bonus is determined at the target bonus level in effect prior to the Effective Date and 7/12 of the bonus is determined based on the target bonus level described above.

(c)Equity Incentive Plan.  Executive will be eligible to participate in Company’s incentive award plans as may be approved by the Board from time-to-time, including the Novan, Inc. 2016 Incentive Award Plan, at such level and on such terms as shall be approved by the Compensation Committee of the Board, in its sole discretion

(d)Paid Time Off.  Executive is entitled to receive the maximum amount of paid-time-off (“PTO”) allowed under the Company’s policies, which PTO will be accrued and used in accordance with the Company’s policies.

(e)Benefits. Executive shall be entitled to participate in employee benefit plans, programs and arrangements of the Company as are provided generally from time to time to all other similarly situated employees of the Company. All such benefits are subject to the provisions of their respective plan documents in accordance with their terms and are subject to amendment or termination by the Company without Executive’s consent.

(f)Business Expenses. The Company will reimburse all reasonable expenses incurred by Executive in the performance of his duties to the Company, provided Executive complies with the Company’s policies and procedures for reimbursement or advance of business expenses established by the Company. 

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4.EMPLOYMENT AT WILL; TERMINATION. The term of employment under this Agreement (the “Term”) shall commence on the Effective Date and continue until termination as provided in this Section 4, and subject to the terms of Section 6.  Subject to Section 6, Executive’s employment with the Company is at­will, and either party can terminate the employment relationship and/or this Agreement at any time, for any or no cause or reason, and with or without prior notice.

5.EFFECT OF TERMINATION. Upon termination of Executive’s employment hereunder by either party regardless of the cause or reason, the Company shall pay Executive only accrued, unpaid wages through the termination date and reimbursement for unreimbursed business expenses properly incurred by Executive, which shall be subject to and paid in accordance with the Company's expense reimbursement policy (the “Accrued Amounts”). The final payment of wages, less any withholdings required by law or properly requested by Executive, shall be made on the next regular payday of the Company following the termination, in accordance with the Company’s normal payroll procedures. Except as otherwise provided in Section 6 of this Agreement, no other payments, benefits or other remuneration shall be due or payable to Executive.

6.SEVERANCE PROVISIONS.

(a)Definitions. For the purposes of this Agreement, the following terms shall be defined as set out below:

i.“Cause” shall be determined in good faith by the Board (excluding Executive if then a director) and shall mean:

a.Executive’s conviction of, or plea of no contest to, any crime (whether or not involving the Company) that constitutes a felony in the jurisdiction in which Executive is charged, or that involves moral turpitude;

b.Any act of theft, fraud or embezzlement, or any other willful misconduct or materially dishonest behavior by Executive;

c.Executive’s failure to adequately perform his reasonably assigned duties, provided that such failure or refusal is not corrected as promptly as practicable, and in any event within ten (10) calendar days after Executive shall have received written notice from the Company stating the nature of such failure or refusal;

d.Executive’s willful or material violation of any of his obligations contained in any agreement between Executive and the Company, including but not limited to the Confidentiality and Assignment of Inventions Agreement and Noncompetition Agreement executed by Executive;

e.Conduct by Executive that constitutes willful gross neglect or willful gross misconduct in carrying out his duties under this Agreement that results or that may result, as reasonably determined by the Company, in material harm to the Company, including harm to its reputation; and/or 

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f.Any material failure by Executive to comply with the Company's written policies or rules, as they may be in effect from time to time, if such failure causes material/reputational or financial harm to the Company.

ii.“Change in Control” shall have the same meaning given to such term in Section 2.9 of the Company’s 2016 Incentive Award Plan, as amended or restated from time to time. The Board shall have sole discretion to determine conclusively whether a Change in Control has occurred pursuant to the above definition, the date of the occurrence of such Change in Control and all incidental matters relating thereto; provided that any exercise of authority in conjunction with a determination of whether a Change in Control is a “change in control event” as defined in Treasury Regulation Section 1.409A-3(i)(5) shall be consistent with such regulation.

iii. “Disability” shall mean Executive’s inability due to a physical or mental impairment to perform the essential functions of his job, with or without reasonable accommodation, for a period of at least ninety (90) consecutive or non-consecutive days in any twelve-month period.

iv.“Effective Release” is defined as a general release of claims in favor of the Company in a form reasonably acceptable to the Company’s counsel that is executed after the Separation Date and within any consideration period required by applicable law and that is not revoked by Executive within any legally­prescribed revocation period. Failure to provide and have in effect an Effective Release within the sixty (60) day period following the Separation Date shall result in forfeiture of any benefits conditioned upon the existence of an Effective Release.

v.“Good Reason” shall mean the occurrence of any of the following, in each case during the Term without Executive's consent:

a.a material diminution in Executive’s Base Salary or Annual Bonus eligibility (other than in both cases a diminution that is in connection with an across the board reduction in the base salaries or bonus eligibility of the management level employees of the Company);

b.a material, adverse change in Executive's title, authority, duties, or responsibilities (other than temporarily while Executive is physically or mentally incapacitated or as required by applicable law), taking into account the Company's size, status as a public company, and capitalization as of the date of this Agreement; provided, however, that Good Reason shall not exist based on Executive’s appointment to similar positions of a subsidiary or affiliate of the Company;

c.a material change in the geographic location at which Executive must perform services for the Company, not to include regular business travel; or

d.any other action or inaction that constitutes a material breach of the terms of this Agreement by the Company. 

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Notwithstanding the forgoing, “Good Reason” shall not include an event or condition unless (A) Executive notifies the Company within thirty (30) days of the initial existence of one of the adverse events described above, (B) Executive provides the Company with at least thirty (30) days’ written notice of his intent to resign for Good Reason, and (C) the Company fails to correct the adverse event within thirty (30) days of such notice.

vi. “Separation Date” shall mean the date that Executive’s employment is terminated.

(b)“Compensation upon Separation without “Cause” or for “Good Reason” Not in Connection with a Change in Control  Upon termination of employment by the Company without Cause or upon termination of employment by Executive for Good Reason, in each case, only if Executive is not entitled to benefits under Section 6(c) of this Agreement, conditioned upon the existence of an Effective Release and Executive’s continued compliance with the Restrictive Covenants Agreements and the terms thereunder, and subject to Section 8, Executive shall be entitled to, in lieu of any other separation payment or severance benefit available under any plan or otherwise:

i.    Payment of “Severance Pay” in an amount equal to (i) six (6) months of Executive’s current Base Salary, plus (ii) a prorated Annual Bonus calculated at the minimum target level for the calendar year in which the Separation Date occurs based on the percentage of the calendar year actually worked by Executive as of the Separation Date (both (i) and (ii) referred to herein collectively as “Regular Severance Pay”). All applicable withholdings required by law or authorized by Executive shall be withheld from Severance Pay.   Severance Pay shall be paid in equal installments paid over the six-month period (the “Regular Severance Period”) following Executive’s Separation Date pursuant to the Company’s standard payroll practices and procedures applicable to Executive immediately prior to Executive’s separation from service and such payments shall commence on the first such payroll date on or following the 10th day after the date on which the Effective Release becomes effective and non-revocable, as provided in Section 6(a)(iv); provided, however, that if the 60th day following Executive’s termination from employment occurs in the year following the year of Executive’s termination, then the payments shall commence no earlier than January 1 of such subsequent year, and the first such installment payment may include any payments missed due to any delay under this Section 6(b)(i); 

ii.    Vesting as of the Separation Date of any then unvested equity awards that would have otherwise vested through the end of the calendar year in which the Separation Date occurs; and

iii.    If Executive timely and properly elects health continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), the Company shall reimburse Executive during the Regular Severance Period for the difference between the monthly COBRA premium paid by Executive for himself and his dependents and the monthly premium amount paid by similarly situated active executives. Such reimbursement shall be paid to Executive on the 10th business day of the month immediately following the month in which the Executive timely remits the premium payment. Executive shall be eligible to receive such reimbursement until the earliest of: (a) the six-month anniversary of the Separation Date; (b) the date Executive is no 

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longer eligible to receive COBRA continuation coverage; or (c) the date on which Executive becomes eligible to receives substantially similar coverage from another employer or other source. Notwithstanding the foregoing, if the Company's reimbursements under this Section 6(b)(iii) would violate the nondiscrimination rules applicable to non-grandfathered plans under the Affordable Care Act (the "ACA"), or result in the imposition of penalties under the ACA and the related regulations and guidance promulgated thereunder), the parties agree to reform this Section 6(b)(iii) in a manner as is necessary to comply with the ACA.

(c)Compensation upon Separation due to Change in Control. Upon termination of employment by the Company without Cause or upon termination of employment by Executive for Good Reason at the time of, or within twelve (12) months after a Change in Control, and conditioned upon the existence of an Effective Release and Executive’s continued compliance with the Restrictive Covenants Agreements and the terms thereunder, and subject to Section 8, Executive shall be entitled to, in lieu of any other separation payment or severance benefit available under any plan or otherwise (including but not limited to the severance benefits provided for in Section 6(b) hereof):

i.    Payment of severance pay in an amount equal to (i) twelve (12)  months of Executive’s current Base Salary, plus (ii) an amount equal to the Annual Bonus calculated at the minimum target level for the calendar year in which the Separation Date occurs (both (i) and (ii) referred to herein collectively as “CIC Severance Pay”). All applicable withholdings required by law or authorized by Executive shall be withheld from Severance Pay.   Severance Pay shall be paid in equal installments paid over the twelve-month period (the “CIC Severance Period”) following Executive’s Separation Date pursuant to the Company’s standard payroll practices and procedures applicable to Executive immediately prior to Executive’s separation from service and such payments shall commence on the first such payroll date on or following the 10th day after the date on which the Effective Release becomes effective and non-revocable, as provided in Section 6(a)(iv); provided, however, that if the 60th day following Executive’s termination from employment occurs in the year following the year of Executive’s termination, then the payments shall commence no earlier than January 1 of such subsequent year, and the first such installment payment may include any payments missed due to any delay under this Section 6(c)(i);

ii.    Accelerated vesting of the remaining unvested portion of any and all equity awards issued to Executive as of the Separation Date;

iii.    If Executive timely and properly elects health continuation coverage under COBRA, the Company shall reimburse Executive during the CIC Severance Period for the difference between the monthly COBRA premium paid by Executive for himself and his dependents and the monthly premium amount paid by similarly situated active executives. Such reimbursement shall be paid to Executive on the 10th business day of the month immediately following the month in which the Executive timely remits the premium payment. Executive shall be eligible to receive such reimbursement until the earliest of: (a) the twelfth-month anniversary of the Separation Date; (b) the date Executive is no longer eligible to receive COBRA continuation coverage; or (c) the date on which Executive becomes eligible to receives substantially similar coverage from another employer or other source. Notwithstanding the foregoing, if the Company's reimbursements under 

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this Section 6(c)(iii) would violate the nondiscrimination rules applicable to non-grandfathered plans under the ACA, or result in the imposition of penalties under the ACA and the related regulations and guidance promulgated thereunder), the parties agree to reform this Section 6(c )(iii) in a manner as is necessary to comply with the ACA.

(d)Other Termination of Employment. Upon the termination of Executive’s employment by Executive, other than for Good Reason, or due to Executive’s death or Disability, or by the Company for Cause, Executive shall not be entitled to additional compensation under this Agreement beyond the Accrued Amounts. For clarity and the avoidance of doubt, under no circumstances will Executive be entitled to benefits under both Section 6(b) and Section 6(c).

7.SECTION 409A.

(a)Intent of the Parties.  The parties hereby acknowledge and agree that all benefits or payments provided by the Company to Executive pursuant to this Agreement are intended either to be exempt from Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), or to be in compliance with Section 409A, and this Agreement shall be interpreted to the greatest extent possible to be so exempt or in compliance and to incorporate the terms and conditions required by Section 409A. If there is an ambiguity in the language of this Agreement, or if Section 409A guidance indicates that a change to this Agreement is required or desirable to achieve exemption or compliance with Section 409A, notwithstanding any provision of this Agreement to the contrary, the Company reserves the right (without any obligation to do so or to indemnify Executive for failure to do so) to (i) adopt such amendments to this Agreement and or adopt such other policies and procedures, including amendments, policies and procedures with retroactive effect, that the Company determines to be necessary or appropriate to preserve the intended tax treatment of the benefits provided by this Agreement, to preserve the economic benefits of this Agreement and to avoid less favorable accounting or tax consequences for the Company and/or (ii) take such other actions as the Company determines to be necessary or appropriate to exempt the amounts payable hereunder from Section 409A or to comply with the requirements of Section 409A and thereby avoid the application of penalty taxes thereunder. No provision of this Agreement shall be interpreted or construed to transfer any liability for failure to comply with the requirements of Section 409A from Executive or any other individual to the Company or any of its affiliates, employees or agents.

(b)Installments.  If any severance or other payments that are required by this Agreement are to be paid in a series of installment payments, each individual payment in the series shall be considered a separate payment for purposes of Section 409A. To the extent that any reimbursement of expenses or in­kind benefits constitutes “deferred compensation” under Section 409A, such reimbursement or benefit shall be provided no later than December 31 of the year following the year in which the expense was incurred. The amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year. The amount of any in­kind benefits provided in one year shall not affect the amount of in­kind benefits provided in any other year.

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(c)Delay.  If any severance compensation or other benefit provided to Executive pursuant to this Agreement that constitutes “nonqualified deferred compensation” within the meaning of Section 409A is considered to be paid on account of “separation from service” within the meaning of Section 409A, and Executive is a “specified employee” within the meaning of Section 409A, no payments of any such severance or other benefit shall be made for six (6) months plus one (1) day after the Separation Date (the “New  Payment Date”). Amounts payable under this Agreement shall be deemed not to be “nonqualified deferral of compensation” subject to Section 409A to the extent provided in the exceptions in Treasury Regulation § § 1.409A­1(b)(4) (“short­term deferrals”) and (b)(9) (“separation pay plans,” including the exception under subparagraph (iii)) and other applicable provisions of Section 409A. The aggregate of any such payments that would have otherwise been paid during the period between the Separation Date and the New Payment Date shall be paid to Executive in a lump sum on the New Payment Date. 

8.EXCESS PARACHUTE PAYMENTS. In the event amounts payable under this Agreement or otherwise are contingent on a change in control for purposes of Section 280G of the Code, and it is determined by a public accounting firm or legal counsel authorized to practice before the Internal Revenue Service selected by the Company that any payment or benefit made or provided to Executive in connection with this Agreement or otherwise (“Payment” or collectively, the “Payments”) would be subject to the excise tax imposed by Section 4999 of the Code (the “Parachute Tax”), the Payments under this Agreement shall be payable in full or, if applicable, in such lesser amount which would result in no portion of such Payments being subject to the Parachute Tax, whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Parachute Tax, results in Executive’s receipt, on an after-tax basis, of the greatest amount of Payments under this Agreement.  If Payments are reduced pursuant to this paragraph, cash severance payments under Sections 6(b)(i) and 6(b)(iii) or Sections 6(c)(i) and 6(c)(iii), as applicable, shall first be reduced, and the other benefits under this Agreement shall thereafter be reduced, to the extent necessary so that no portion of the Payments is subject to the Parachute Tax. 

9.NOTICES. Any notice required or permitted hereunder shall be made in writing (a) either by actual delivery of the notice into the hands of the party thereto entitled, by messenger, by fax or by over-night delivery service or (b) by the mailing of the notice in the United States mail, certified or registered mail, return receipt requested, all postage pre-paid and addressed to the party to whom the notice is to be given at the party’s respective address set forth below, or such other address as the parties may from time to time designate by written notice as herein provided.

If to Executive:        John M. Gay 
[***]

If to the Company:        Novan, Inc.
4105 Hopson Road
Morrisville, NC 27560
(Fax) (919) 237¬9212
Attn: President and Chief Executive Officer

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The notice shall be deemed to be received, if sent per subsection (a), on the date of its actual receipt by the party entitled thereto and, if sent per subsection (b), on the third day after the date of its mailing.

10.RETURN OF COMPANY PROPERTY. Upon Executive’s separation from employment from the Company for any reason, Executive shall return to the Company all personal property belonging to the Company (“Company Property”) that is in Executive’s possession or control as of the Separation Date, including, without limitation, all records, papers, drawings, notebooks, specifications, marketing materials, software, reports, proposals, equipment, or any other device, document or possession, however obtained, whether or not such Company Property contains confidential information belonging to the Company. Such Company Property shall be returned in the same condition as when provided to Executive, reasonable wear and tear excepted.

11. EMPLOYEE REPRESENTATIONS.

(a)Executive represents that his performance of all of the terms of this Agreement does not and will not breach any arrangement to keep in confidence information acquired by Executive in confidence or in trust prior to Executive’s employment by the Company. Executive represents that he has not entered into, and agrees not to enter into, any agreement either oral or written in conflict herewith.

(b)Executive understands as part of the consideration for this Agreement and for Executive’s employment or continued employment by the Company, that Executive has not brought and will not bring with Executive to the Company, or use in the performance of Executive’s duties and responsibilities for the Company or otherwise on its behalf, any materials or documents of a former employer or other owner which are generally not available to the public, unless Executive has obtained written authorization from the former employer or other owner for their possession and use and has provided the Company with a copy thereof.

(c)Executive understands that during his employment for the Company he is not to breach any obligation of confidentiality that Executive has to a former employer or any other person or entity and agrees to comply with such understanding.

12. INDEMNIFICATION. 

(a)By Executive.  Executive agrees to indemnify and hold harmless the Company, its directors, officers, agents and employees against any liabilities and expenses, including amounts paid in settlement, incurred by any of them in connection with any claim by any of Executive’s prior employers that the termination of Executive’s employment with such employer, Executive’s employment by the Company, or use of any skills and knowledge by the Company is a violation of contract or law or otherwise violates the rights thereof.

(b)By the Company. The Company will indemnify and hold harmless the Executive from any liabilities and expenses arising from Executive’s actions as an officer, director or employee of the Company to the fullest extent permitted by law, excepting any unauthorized 

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acts, intentional or illegal conduct which breaches the terms of this or any other agreement or Company policy, including but not limited to the Restrictive Covenants Agreements. Executive will be covered by the Company’s D&O insurance to the same extent as other executive officers and directors. The indemnification described in this Section 12 is in addition to, and not in lieu of, any right to indemnification provided by the Company to Executive pursuant to any separate written agreement between them, including but not limited to the Indemnification Agreement between the Company and Executive dated as of January 28, 2019 (the “Indemnification Agreement”).  

13.SEVERABILITY. Executive hereby agrees that each provision herein shall be treated as a separate and independent clause, and the unenforceability of any one clause shall in no way impair the enforceability of any of the other clauses herein.

14.WAIVER. Any waiver by the Company of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach of such provision or any other provision hereof.

15.AFFILIATES; ASSIGNMENT; BINDING EFFECT. The term “Company” shall also include any of the Company’s subsidiaries, subdivisions or affiliates. The Company shall have the right to assign this Agreement to its successors and assigns, and all covenants and agreements hereunder shall inure to the benefit of and be enforceable by said successors or assigns. Executive may not assign any of his rights or delegate any of his duties under this Agreement. This Agreement shall be binding upon and shall inure to the benefit of each of the parties hereto, and to their respective heirs, representatives, successors and permitted assigns.
 
16.ENTIRE AGREEMENT. The terms of this Agreement (together with any other agreements and instruments contemplated hereby or referred to herein) are intended by the parties hereto to be the final expression of their agreement with respect to the employment of Executive by the Company and may not be contradicted by evidence of any prior or contemporaneous agreement (including, without limitation, any prior or contemporaneous employment agreement, term sheet or offer letter). The parties hereto further intend that this Agreement shall constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial, administrative or other legal proceeding to vary the terms of this Agreement. No modification of or amendment to this Agreement, nor any waiver of any rights under this Agreement, will be effective unless in writing and signed by each of the parties hereto.

17.GOVERNING LAW; VENUE. This Agreement shall be construed, interpreted, and governed in accordance with and by North Carolina law and the applicable provisions of federal law (“Applicable Federal Law”).  Any and all claims, controversies, and causes of action arising out of or relating to this Agreement, whether sounding in contract, tort, or statute, shall be governed by the laws of the state of North Carolina, including its statutes of limitations, except for Applicable Federal Law, without giving effect to any North Carolina conflict-of-laws rule that would result in the application of the laws of a different jurisdiction. Both Executive and the Company acknowledge and agree that the state or federal courts located in North Carolina have personal jurisdiction over them and over any dispute arising under this Agreement, and both Executive and the Company irrevocably consent to the jurisdiction of such courts. 

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18.COUNTERPARTS. This Agreement may be executed in separate counterparts, each of which is deemed to be an original and all of which taken together constitute one agreement. Counterparts may be transmitted and/or signed by facsimile or electronic mail. The effectiveness of any such documents and signatures shall have the same force and effect as manually signed originals and shall be binding on the parties to the same extent as a manually signed original thereof.
[Signature Page Follows]

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IN WITNESS WHEREOF, the parties have executed this Employment Agreement effective as of the day and year first above written.

	
			
	 
	NOVAN, INC.
	 

	 
	 
	 

	 
	/s/ Paula Brown Stafford
	 

	 
	Paula Brown Stafford
	 

	 
	Chairman, President and Chief Executive Officer
	 

	 
	 
	 

	 
	 
	 

	 
	JOHN M. GAY
	 

	 
	 
	 

	 
	/s/ John M. Gay
	 

[Signature Page for Employment Agreement]EX-10.9

Table of Contents

 Exhibit 10.9 
  

 
 

 
  
 OUTSIDE DIRECTORS’ RETAINER

 CONTINUANCE PLAN 
  

Eastern Bank Confidential 
  

PLAN DOCUMENT 
  

 
 Effective January 1, 2017 

Table of Contents

 EASTERN BANK 

OUTSIDE DIRECTORS’ RETAINER CONTINUANCE PLAN 

Table of Contents 
  

							
	Section 1	  	Definitions	  	 	1	 
			
	Section 2	  	Eligibility	  	 	2	 
			
	   2.1
	  	 Five Years of Service required for participation
	  	 	2	 
	   2.2
	  	 Service with Acquired Companies or as Trustee counts for eligibility
	  	 	3	 
			
	Section 3	  	Plan Benefit	  	 	3	 
			
	   3.1
	  	 For Retirements on or after January 1, 2014
	  	 	3	 
	   3.2
	  	 For Retirements prior to January 1, 20 14
	  	 	3	 
	   3.3
	  	 Section 409A compliance
	  	 	3	 
			
	Section 4	  	Waiver of Unearned Retainer	  	 	4	 
			
	Section 5	  	Death Benefit	  	 	4	 
			
	   5.1
	  	 Death while in payment status
	  	 	4	 
	   5.2
	  	 Death prior to retirement
	  	 	4	 
	   5.3
	  	 Beneficiary designation
	  	 	4	 
	   5.4
	  	 Acceleration
	  	 	4	 
			
	Section 6	  	Change in Control	  	 	4	 
			
	   6.1
	  	 Not a payment event
	  	 	4	 
	   6.2
	  	 Additional Years of Service credit
	  	 	5	 
	   6.3
	  	 Forfeiture of benefit
	  	 	5	 
			
	Section 7	  	Unfunded Plan	  	 	5	 
			
	   7.1
	  	 Unfunded plan
	  	 	5	 
	   7.2
	  	 Use of trust
	  	 	6	 
	   7.3
	  	 Distributions from the trust
	  	 	6	 
			
	Section 8	  	Amendment and Termination	  	 	6	 
			
	   8.1
	  	 Amendment and Plan freezes
	  	 	6	 
	   8.2
	  	 Termination and acceleration of payments
	  	 	6	 
			
	Section 9	  	Administration and claims	  	 	7	 
			
	   9.1
	  	 Action by the Bank
	  	 	7	 
	   9.2
	  	 Committee authority
	  	 	7	 
	   9.3
	  	 Arbitration
	  	 	7	 

  
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Table of Contents

							
	Section 10	  	Miscellaneous	  	 	8	 
			
	 10.1
	  	 No guarantee of continued Board membership
	  	 	8	 
	 10.2
	  	 Nonassignment
	  	 	8	 
	 10.3
	  	 Governing law; severability
	  	 	8	 
	 10.4
	  	 Section 409A compliance
	  	 	8	 

  
 3 

Table of Contents

 EASTERN BANK 

OUTSIDE DIRECTORS’ RETAINER CONTINUANCE PLAN 

Eastern Bank (the “Bank”) maintains the Eastern Bank Outside Directors’ Retainer Continuance Plan (the “Plan”) for
the purpose of providing pension income to outside directors who retire from service. 
 The Plan was previously amended on October 25,
2007 to comply with Section 409A (“Section 409A”) of the Internal Revenue Code of 1986 (“Code”) and to clarify various provisions. It was subsequently amended and then restated effective as of January 1, 2014. 

This restatement, effective as of January 1, 2017, expands the scope of the Plan’s death benefit to persons other than surviving spouses,
provides for eligibility (not benefit) credit for services as a Trustee with the Bank, and makes clear that the Bank’s new retirement policy for Directors does not dictate the timing of payments, which continue to be triggered by an actual
Separation from Service (within the meaning of Section 409A) and death. 
 No benefit shall be reduced due to this restatement. As
restated, the Plan is intended to continue its compliance with Section 409A and shall be interpreted and administered in that manner. 
  

	Section 1	 Definitions. 

Acquired Company means any company which has been acquired by or merged into a member of the Bank Group. 

Bank means Eastern Bank, a Massachusetts business organization, and any successor to substantially all of its assets or business. 

Bank Group means the Bank and any company under common control or affiliated with the Bank, as described in Internal Revenue Code
Section 414. 
 Benefidary means an individual, trust, or entity designated under Section 5 to receive death benefits under
the Plan. 
 Benefit Period is a consecutive period of calendar years following the calendar year of the Participant’s
Retirement or Death. The number of consecutive years is the lesser of 10 or the total Years of Service credited to the Participant. Years of Service with an Acquired Company will not be credited for this purpose. 

Board means the Board of Directors of the Bank. The Board retains authority to amend or terminate the Plan, and may delegate authority
to the Committee. 
 Change in Control is a change in the ownership or effective control of the Bank and shall be interpreted under
Section 409A. 
 Committee means the Nominating and Governance Committee of the Bank. The Committee shall interpret the Plan and
resolve any disputes as provided in Section 9. 
 Committee Agent is the Executive Vice President, Human Resources and
Charitable Giving. 

  
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 Outside Director means an elected director of the Bank who has at no time been an
officer or employee of the Bank Group or of an Acquired Company. 
 Participant is an Outside Director who is eligible for the Plan
under Section 2. 
 Section 409A means Internal Revenue Code Section 409A, including its relevant
regulations and other guidance. 
 Trustee means a member of the Board of Trustees of Eastern Bank Corporation, the parent of the
Bank. 
 Retirement or Retires means a complete and good faith termination of services under a paid affiliation with the Bank
Group and shall be determined under the “separation from service” rules in Section 409A. Payments are not initiated unless services have terminated and there is a good faith determination at the time that a “separation from
service” has occurred. The Retirement Practice for Outside Directors, as in effect from time to time, is an internal rule which requires that Directors retire no late than a “specified date.” The Retirement Practice does not dictate
the timing of payments under this Plan, which are triggered solely by an actual Separation from Service or death. For reference only, the “specified date” under the Retirement Practice is: 

 

	 	•	 	 for Outside Directors first retained on or after January 1,2017, the December 31 of the year in which
occurs the earlier of age 72 or 20 Years of Service, counting for this purpose service as a Trustee as well as Outside Director Service. 

  

	 	•	 	 for Outside Directors retained prior to January 1,2017, December 31 of the year in which occurs the
later of age 70 or 20 Years of Service, (counting for this purpose service as a Trustee as well as Outside Director) but in no event later than December 31 of the year of attaining age 72. 

Total Retainers means the gross total of annual Board retainers for Outside Directors during each calendar year of the Outside
Director’s service as an Outside Director. For any calendar year during which two levels of Board retainer are in effect, the higher level will be used unless the Outside Director retired prior to the implementation of that higher level.
Meeting fees and other retainers and payments in addition to the Board retainer are not included. 
 Year of Service is a period of
twelve continuous months of service as an Outside Director of the Bank or of an Acquired Company, provided that if, upon the date the Outside Director’s service terminates, the time elapsed from the close of the last full Year of Service to the
date of termination is less than 12 months but greater than 6 months, then the Outside Director shall receive credit for a full Year of Service for that final period of service. As provided in Section 2 and in the definition of Benefit Period,
Years of Service with an Acquired Company or as a Trustee are credited solely for purposes of the 5 year waiting period to join the Plan and not for purposes of determining the Plan Benefit or the Benefit Period. 

 

	Section 2	 Eligibility 

  

	2.1	 Five Years of Service required for participation 

Each Outside Director qualifies as a Participant in the Plan after completion of 5 Years of Service. 

  
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	2.2	 Service with Acquired Companies or as Trustee counts for eligibility 

In no event would participation be earlier than the first day of service as an Outside Director. However, solely for purposes of eligibility
for participation, and not for determining the Benefit Period or the Plan Benefit: 
  

	 	(a)	 Years of Service as an Outside Director of an Acquired Company will be credited; 

 

	 	(b)	 Service as a Trustee of the Bank will be credited. 

 

	Section 3	 Plan Benefit 

  

	3.1	 For Retirements on or after January 1,2014 

(a) During each year of the Benefit Period, a payment will be made equal to an amount determined by dividing the Total Retainers by the number
of years in the Benefit Period. 
  

			
	Example:	  	Director retires in 2017 at age 70 with 25 Years of Service. The Total Retainers during those 25 years are $937,500. Her Benefit Period, due to 25 Years of Service, is the maximum 10 years. In each year of the Benefit Period her
payment will be $93,750($937,500/10 = $93,750).
		
	Example:	  	Director retires in 2020 at age 72 with 18 Years of Service. The Total Retainers during those 18 years equals $675,000. Her Benefit Period, due to 18 Years of Service, is the maximum 10 years. In each year of the Benefit Period, her
payment will be $67,500 ($675,000/10 = $67,500).
		
	Example:	  	Director retires in 2020 at age 72 with 3 Years of Service as an Outside Director and 12 years as a Trustee. The Total Retainers for the 3 years as an Outside Director equals $150,000. The combined Trustee and Outside Director
service, totaling 15 years, is greater than the required 5 years for eligibility, thus making this retiring Director eligible as a Participant. Her Benefit Period is 3 years due to 3 Years of Service as an Outside Director. In each year of the
Benefit Period, her payment will be $50,000 ($150,000/3 = $50,000).

 (b) In the case of Directors who were retained by the Bank prior to January 1,2014. the amount paid
during each year of the Benefit Period will be no less than the amount that would have been paid if calculated under the previous Plan retirement formula. 
  

	3.2	 For Retirements prior to January 1,2014 

The amount to be paid in each year of the Benefit Period will be calculated in accordance with the Plan immediately prior to this restatement.

  

	3.3	 Section 409A compliance 

This restatement is not intended to accelerate or make any impermissible change in the timing of payments for benefits accrued prior to
January 1,2014 and shall be interpreted and administered in such manner. The payment practice shall comply in all respects with the Section 409A requirement for 

  
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payments in a designated calendar year. Although the Plan does not permit Participants to defer its payments, if such deferral ever were allowed, payments are deemed to occur for purposes of
Section 409A on January 1 of each scheduled payment year, although they will be made on or about the time the Bank pays its annual retainer for the year unless the Bank elects to pays such amounts at a different time during the calendar
year. 
  

	Section 4	 Waiver of Unearned Retainer 

If a Participant Retires or dies while in service, the Bank waives recovery of any annual retainer fee paid with respect to that calendar year,
and such waived amount shall not offset amounts owed under this Plan. 
  

	Section 5	 Death Benefit 

 

	5.1	 Death while in payment status 

If a Participant dies after payments have started, the Beneficiary shall receive the equivalent yearly amount as a 100% survivor benefit for
the remainder of the Participant’s Benefit Period. 
  

	5.2	 Death prior to retirement 

If a Participant dies prior to Retirement, his or her Beneficiary shall be entitled to a 100% survivor benefit, based on Years of Service and
Total Retainers through the Year of the Participant’s death. Payment of this survivor benefit shall be without actuarial reduction and commence as of the calendar year following the calendar year of the death of the Outside Director, and no
earlier than the calendar year in which the Outside Director would have attained age 50. 
  

	5.3	 Beneficiary designation 

A Participant may designate one or more individuals, trusts, or other entities to receive death benefits under the Plan. An individual
Beneficiary may similarly designate one or more Beneficiaries to receive payments to which he or she was entitled in the event of death. In the event of death without a valid Beneficiary Form, the default Beneficiary under the Plan shall be the
estate of the person entitled to payment, e.g. the estate of the Participant if the Participant has died without a valid Beneficiary form and the estate of the Beneficiary if the Beneficiary has died without a valid Beneficiary form. 

 

	5.4	 Acceleration 

To the extent permitted under Section 409A, a Beneficiary may elect to accelerate payment of a death benefit into a lump sum. 

 

	Section 6	 Change in Control. 

 

	6.1	 Not a payment event 

A Change in Control itself is not a payment event unless the Plan is terminated under Section 8.2(a) and benefit payments are accelerated
in accordance with Section 409A. 

  
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	6.2	 Additional Years of Service credit 

In the event of a Change in Control of the Bank, each Outside Director, including those not yet qualified as Participants will be credited with
additional Years of Service up to 10. 
  

	6.3	 Forfeiture of benefit. 

 

	 	(a)	 Termination for Cause. 

Notwithstanding the above, if a Participant is terminated (or resigns at the request of the Bank) for fraud, embezzlement, criminal
misbehavior, or other cause, including but not limited to violation of the Eastern Bank Corporation / Eastern Bank Code of Conduct as in effect on the date of such violation, or if, subsequent to the Outside Director’s termination, the Bank
determines that such misconduct did occur with respect to any member of the Bank Group, then all rights and interests of the Participant and his spouse under this Plan shall be irrevocably forfeited. 

 

	 	(b)	 Confidentiality and Non-Solicitation of Employees.

 Any benefits under this Plan will be irrevocably forfeited by an Participant and his spouse if the Participant at any
time, prior to or after Retirement, without the express prior written consent of the Board: 
 (1) solicits any officer, trustee, director,
corporator, or employee of the Bank Group to leave his or her employment; or 
 (2) discloses to any other person (except as required by
applicable law or in connection with the performance of the director’s duties and responsibilities), or uses for his or her own benefit or gain, any confidential information of the Bank obtained by him or her incident to service as a director.
The term “confidential information” includes, without limitation, financial information, business plans, prospects, customer lists, and opportunities (such as lending relationships, financial product developments, or possible acquisition
or dispositions of businesses or facilities) which have been discussed or considered by the management of the Bank or the Board, but does not include any information which has become part of the public domain by means other than the
Participant’s nonobservance of the provisions hereunder. 
 If any portion or provision of this provision is determined to be overly
broad or inconsistent with applicable law, it shall be construed so that, to the extent permitted by applicable law, it shall remain valid and enforceable. 
  

	Section 7	 Unfunded Plan. 

 

	7.1	 Unfunded plan 

The Plan shall be “unfunded”, as described in Internal Revenue Service Ruling 60-3. To the
extent that a Participant acquires a right to receive payments from the Bank under this Plan, such right shall not be greater than the right of any unsecured general creditor of the Bank. 

  
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	7.2	 Use of trust 

The Bank may utilize a Trust, which it administers as a “rabbi trust” in material compliance with IRS Revenue Procedure 92-64. Assets of the Trust shall at all times be available to creditors of the Bank. The Trust shall at all times conform with the requirements of Code Section 409A(b). 

 

	7.3	 Distributions from the trust 

The Bank’s obligations under the Plan may be satisfied with Trust assets distributed pursuant to the terms of the Trust, and any such
distribution shall reduce the Bank’s obligations under this Plan. 
  

	Section 8	 Amendment and Termination. 

 

	8.1	 Amendment and Plan freezes 

(a) The Bank may amend this Plan, subject to any required regulatory approval and the provisions of Section 409A. 

(b) No amendment shall alter or impair the rights of any Participant (whether or not in pay status) with respect to Plan Benefits earned
through the year of the amendment, or of any surviving spouse who is currently receiving payments, except with the consent of such party. 

(c) The Bank may freeze this Plan at any time without the consent of any current or retired Participant or any spouse. In the event of a
freeze, the benefits earned by each Participant based on Years of Service as of the date of the freeze shall continue to be a liability of the Bank and shall be administered under the payment terms of this Plan without acceleration or postponement
that would violate Section 409A. 
  

	8.2	 Termination and acceleration of payments 

 

	 	(a)	 Change in Control terminations 

The Bank may require lump sum payouts of the actuarial equivalent of earned benefits if it votes to terminate the Plan due to a Change in
Control for Participants affected thereby and terminates all other plans, methods, programs, and arrangements that would be aggregated under Section 409A. The vote must be irrevocable and occur within the 30 days preceding or 12 months
following the Change in Control. Payouts must be completed within 12 months of the date of Plan termination with respect to all Participants who experience the Change in Control Event. 

 

	 	(b)	 Other terminations 

The Bank may require lump sum payouts after a Plan termination which is not triggered by a Change in Control, but only if: 

(1) The termination does not occur proximate to a material downturn in the financial health of the Bank (interpreted in a manner consistent
with Guidance); and 
 (2) the Bank Group terminates all other plans, methods, programs, and other arrangements that would be aggregated
with this Plan under Section 409A; and 

  
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 (3) No member of the Bank Group adopts a new plan that would be aggregated with any
terminated and liquidated plan under Section 409A at any time within three years following the date the Bank takes all necessary action to irrevocably terminate and liquidate this Plan; and 

(4) during the 12 months year following the Plan termination, no payouts are made other than those which would have been paid without regard
to the Plan termination; and 
 (5) all payouts are made within 24 months of the Plan termination. 

 

	 	(c)	 The Bank may also authorize payouts after Plan termination in any other situation authorized by the Guidance.

  

	Section 9	 Administration and claims 

 

	9.1	 Action by the Bank 

Whenever this Plan requires action by the Bank, it means action of its Board of Directors or its designated Committee acting in accordance with
bylaws, charter and applicable banking regulations. 
  

	9.2	 Committee authority 

The Committee is empowered: 
 (1)
to interpret the Plan and to make decisions with respect to any benefit requests by a Participant or surviving spouse, 
 (2) to implement
actions on behalf of the Board, and 
 (3) to approve amendments to the Plan which do not add material liabilities to the Bank and which are
intended for the purpose of government compliance or to facilitate Plan administration. 
  

	9.3	 Arbitration 

(a) If a Participant or surviving spouse disagrees with the Bank’s decision on benefits, he or she may submit the matter to final and
binding arbitration within 90 days of receipt of a written decision of the Bank which contains an explanation for the decision with reference to pertinent facts and Plan provisions. Failure to initiate arbitration within said 90 days will cause the
complaining party to be permanently bound by the Bank’s decision. 
 (b) Arbitration shall be conducted in Boston, Massachusetts in
accordance with Commercial Rules of the American Arbitration Association (“AAA”) and shall be conducted by one arbitrator. If the parties are not able to agree upon the selection of an arbitrator within 30 days of commencement of an
arbitration proceeding by service of a demand for arbitration, the arbitrator shall be selected by AAA. 
 (c) Judgment may be entered on
the arbitrator’s award in any court of competent jurisdiction. 
 (d) The arbitrator shall have no authority to award punitive,
consequential, or special damages and may award only the amount of Plan benefit which the arbitrator deems to have been wrongfully denied by the Bank’s decision, together with interest at a rate equal to the lesser of 6% per annum or the
applicable statutory rate in Massachusetts for judgments. 

  
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 (e) Each party shall be responsible for their own attorney’s fees, regardless of
outcome. The costs of the arbitration proceeding and any proceeding in court to confirm or vacate any arbitration award, as applicable, shall be borne by the unsuccessful party. 

 

	Section 10	 Miscellaneous 

 

	10.1	 No guarantee of continued Board membership. 

This Plan does not guarantee any Outside Director the right to continue to serve on the Board or to be nominated for reelection or to be
retained by any other member of the Bank Group. 
  

	10.2	 Nonassignment 

Outside Directors shall have no right to assign, alienate, pledge, hypothecate, encumber or dispose of the right to receive payments under this
Plan, nor shall such payments be subject to pledge, attachment or claims of creditors. Such payments and the rights thereto are expressly declared to be nonassignable and nontransferable. In the event of any attempted assignment or transfer, the
Bank shall not be bound thereby and the Bank shall be relieved of its liability hereunder by making payments in accordance with this Plan to the parties designed to receive payments under this Plan. 

 

	10.3	 Governing law; severability. 

This Plan shall be governed by and construed in accordance with the laws of the Commonwealth of Massachusetts. Any provision of this Agreement
which is prohibited or unenforceable shall be ineffective only to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof. This Plan does not cover “employees” of the Bank Group and is not an
employee benefit plan under ERISA. 
  

	10.4	 Section 409A compliance. 

The Plan shall be administered and interpreted so that it complies with Section 409A, including specifically its prohibition of:
(i) distributions prior to events described in Section 409A(a)(2), (ii) acceleration of benefits except as permitted in Section 409A(a)(3), and elections which do not meet the requirements of Section 409A(a)(4). The Plan is an
unfunded Plan and no amounts shall be set aside in off shore vehicles prohibited by Code Section 409A(b)(1) or restricted from creditors due to changes in the Bank’s financial condition as described in Code Section 409A(b)(l). Any
provision in this Plan which would trigger a plan failure under Code Section 409A(a)(l) or income inclusion under Code Section 409A(c) is of no effect and void. 

As approved at a meeting of the Board on December 15, 2016. 

Attest: 

	
	 

  

	Nancy Huntington Stager
	Committee Agent and
	Executive Vice President, Human Resources and Charitable Giving

  
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 AMENDMENT 

EASTERN BANK OUTSIDE DIRECTORS’ RETAINER CONTINUANCE PLAN 

 
  

Preamble 
 Eastern Bank (the
“Bank”) sponsors the Eastern Bank Outside Directors’ Retainer Continuance Plan (the “Plan”). The Plan may be amended, and is subject to applicable provisions of Internal Revenue Code Section 409A (“Section
409A”). 
 The Bank intends, pursuant to section 8.1(c) of the Plan: 

 

	 	—	 to freeze benefit accruals under the Plan as of December 31, 2020, and 

 

	 	—	 to freeze the period over which benefits will be paid to the Plan “benefit period” established as of
December 31, 2020. 

  

	 	—	 to confirm that the timing of payments is not to be altered due to this amendment. 

The Bank further intends, pursuant to sections 8.1(a) and (b) of the Plan: 

 

	 	—	 to provide that the five year waiting period to join the Plan, after which benefit credit is retroactive to
date of appointment, be modified in order that directors with less than five years of service not be deprived of a Plan benefit for the first five years of service due to this benefit freeze. 

Amendment 
 Section 1 shall include the
following amended definitions: 
 Benefit Period is a consecutive period of calendar years following the calendar year of the
Participant’s Retirement or Death. The number of consecutive years is the lesser of 10 or the total Years of Service credited to the Participant. Years of Service with an Acquired Company will not be credited for this purpose. Years of
Service after December 31, 2020 will not be credited for this purpose. 
 Total Retainers means the gross
total of annual Board retainers for Outside Directors during each calendar year of the Outside Director’s service as an Outside Director. For any calendar year during which two levels of Board retainer are in effect, the higher level will be
used unless the Outside Director retired prior to the implementation of that higher level. Meeting fees and other retainers and payments in addition to the Board retainer are not included. Retainers after December 31, 2020 will not be credited
for this purpose. 

Table of Contents

 Section 2.1 is amended to read as follows: 

2.1    Immediate participation 

(a)    Effective as of January 1, 2020, the requirement that an Outside Director complete 5 Years of Service to participate is
repealed. Outside Directors as of January 1, 2020, with less than 5 Years of Service qualify for immediate participation. As is the case with other Participants, “Total Retainers” and “Benefit Period” shall be calculated
retroactively to the date service commenced. 
 (b)    No director who first commenced service after January 1, 2020 will be
eligible for this Plan. 
 Section 6.2, providing for additional credit after a Change in Control is deleted in its entirety. 

As approved at a meeting of the Board on September 3, 2020. 
  

			
	Eastern Bank
		
	By:	 	

		 	Nancy Huntington Stager, (as authorized)
		 	Executive Vice President and Chief Human Resources Officer

  
 2

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