Document:

exv10w17

Exhibit 10.17

FLOWERS FOODS, INC.

2001 EQUITY AND PERFORMANCE INCENTIVE PLAN

2011 Nonqualified Stock Option Agreement

          WHEREAS, _________________________ (the “Optionee”) is an employee of Flowers Foods, Inc. (the
“Company”) or a Subsidiary (as defined below);

          WHEREAS, the grant of a stock option to the Optionee has been duly authorized by a resolution
of the Committee (as defined below) duly adopted on __________, (the “Date of Grant”); and

          WHEREAS, the option granted hereunder is intended to be a nonqualified stock option and will
not be treated as an “incentive stock option” within the meaning of that term under Section 422 of
the Internal Revenue Code of 1986, as amended (the “Code”).

          NOW, THEREFORE, pursuant to the Flowers Foods, Inc. 2001 Equity and Performance Incentive Plan
(the “Plan”), the Company hereby grants to the Optionee an option (the “Option”) pursuant to this
2011 Nonqualified Stock Option Agreement (this “Agreement”) to purchase __________ shares of the
Company’s common stock, par value $.01 per share (“Common Stock”), at the price of $_____ per share
(the “Option Price”), and agrees to cause shares of Common Stock purchased hereunder to be
delivered to the Optionee upon full payment of the Option Price, subject to the applicable terms
and conditions of the Plan and this Agreement.

     1. Exercise of Option; Vesting.

          (a) Unless and until terminated as hereinafter provided, the Option will become exercisable in
full on the third anniversary of the Date of Grant so long as the Optionee remains in the
continuous employ of the Company or a Subsidiary until said date. For the purposes of this
Agreement, the continuous employment of the Optionee with the Company or a Subsidiary will not be
deemed to have been interrupted, and the Optionee will not be deemed to have ceased to be an
employee of the Company or a Subsidiary, by reason of (i) the termination of his employment by the
Company or a Subsidiary and immediate rehire by the Company (if the Company was not the original
employer) or by another Subsidiary or (ii) an approved leave of absence. To the extent that the
Option will have so become exercisable, it may be exercised in whole or in part from time to time
by notice in writing and payment of the Option Price; provided, however, that any such exercise may
occur only once during each calendar year during the term of the Option as set forth herein.

          (b) In the event, however, that prior to the Option becoming exercisable in full the Optionee
shall be demoted from the position of employment held by the Optionee on the Date of Grant to a
position which would not have been eligible for a Grant pursuant to the Committee’s guidelines as
of the Date of Grant, then the Optionee shall forfeit a fraction of the Common Stock, but shall be
entitled to retain the remaining fraction of the Common Stock covered by the Option, subject to the
provisions of this agreement, which is equal to the number of the Company’s fiscal quarters in
which the Optionee is employed in the position held by the Optionee on the Date of Grant (beginning
with the Date of Grant and terminating with the

 

 

quarter in which or with which demotion occurs) divided by twelve. Notwithstanding the
foregoing, solely for purposes of this Agreement, an apparent demotion from the position of
employment held by the Optionee on the Date of Grant shall nonetheless not be deemed to constitute
a demotion if the Committee so determines.

          (c) Notwithstanding the provisions of Subsection (a) of this Section, the Option will become
immediately exercisable in full upon the occurrence of a Change in Control (as defined below) of
the Company, or death, Disability (as defined below) or Retirement (as defined below) of the
Optionee prior to the time the Option would otherwise vest hereunder. The Committee may provide
for accelerated vesting of the Option in other circumstances, in its discretion.

     2. Payment of Option Price. The Option Price is payable in cash or by certified or
cashier’s check or other cash equivalent acceptable to the Company payable to the order of the
Company. The requirement of payment in cash will be deemed satisfied if the Optionee has made
arrangements satisfactory to the Company with a bank or broker that is a member of the National
Association of Securities Dealers, Inc. to sell a sufficient number of shares of Common Stock being
purchased so that the net proceeds of the sale transaction will at least equal the aggregate Option
Price and pursuant to which the bank or broker undertakes to deliver the aggregate Option Price to
the Company not later than the date on which the sale transaction will settle in the ordinary
course of business.

     3. Term of Option. An Option which is not, or does not become, exercisable upon the
date of termination of employment with the Company will terminate as of said date. An Option which
is exercisable will terminate on the earliest of the following dates:

          (a) Three (3) months after the Optionee ceases to be an employee of the Company or a
Subsidiary for any reason other than Retirement, death, Disability, voluntary termination without
the written consent of the Company, or termination for Cause (as defined below);

          (b) Two (2) years from the date of termination of employment because of Disability, death, or
from the date of Retirement, if the Optionee becomes disabled, dies or retires while an employee of
the Company or a Subsidiary;

          (c) Seven (7) years from the Date of Grant; or

          (d) The effective date of the Optionee’s termination of employment for Cause, or voluntary
termination without the Company’s written consent.

          (e) Notwithstanding the provisions of Section 3(a) and 3(b), if the Optionee dies within the
applicable period for exercise, the Option will expire two (2) years from the date of death.

          The Optionee shall nonetheless forfeit the entire Option if, during the applicable period for
exercise Optionee enters into competition with the Company through employment with, rendering of
services for compensation to, or ownership of more than five percent (5%)

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interest in any entity which is engaged in a business field in which the Company or any
Subsidiary, is also engaged. The Committee may waive this noncompetition requirement.

     4. Restrictions on Transfer of Option.

          (a) Except as otherwise permitted by the Plan, the Option may not be transferred except by
will or the laws of descent and distribution and may not be exercised during the lifetime of the
Optionee except by the Optionee or the Optionee’s guardian or legal representative acting on behalf
of the Optionee in a fiduciary capacity under state law and court supervision.

          (b) To the extent the Option or a portion thereof remains unvested due to a restriction of
future performance of services or any other restriction, the Optionee shall not have the right to
sell, transfer, assign, convey, pledge, hypothecate, grant any security interest in or mortgage on,
or otherwise dispose of or encumber any unvested portion of the Option or any interest therein. As
a result of the retention of rights in the Option by the Company, except as required by any law,
neither any unvested portion of the Option nor any interest therein shall be subject in any manner
to any forced or involuntary sale, transfer, conveyance, pledge, hypothecation, encumbrance, or
other disposition or to any charge, liability, debt, or any other obligation of the Optionee,
whether as a direct or indirect result of any action of the Optionee or any action taken in any
proceeding, including but not limited to any proceeding under any divorce, bankruptcy or other
creditors’ rights law. Any action attempting to effect a transaction of such type shall be void.

     5. Compliance with Law. The Company will make reasonable efforts to comply with all
applicable federal and state securities laws; provided, however, notwithstanding any other
provision of this Agreement, the Company will not be obligated to issue any Common Stock pursuant
to this Agreement if the issuance thereof would result in a violation of any such law.

     6. Adjustments. The Committee may make any adjustments in the Option Price and in the
number and kind of shares of stock or other securities covered by this Agreement that the Committee
may determine to be equitably required to prevent dilution or enlargement of the Optionee’s rights
under this Agreement that would otherwise result from any (a) stock dividend, stock split,
combination of shares, recapitalization or other change in the capital structure of the Company,
(b) merger, consolidation, spin-off, spin-out, split-off, split-up, reorganization, partial or
complete liquidation or other distribution of assets, issuance of rights or warrants to purchase
securities or (c) other corporate transaction or event having an effect similar to any of the
foregoing. Furthermore, in the event of any transaction or event described or referred to in the
immediately preceding sentence, the Committee may provide in substitution for any or all of the
Optionee’s rights under this Agreement such alternative consideration as it may in good faith
determine to be equitable under the circumstances and may require in connection therewith the
surrender of all grants so replaced.

     7. Taxes and Withholding. To the extent that the Company is required to withhold
federal, state, local or foreign taxes in connection with any payment made or benefit realized by
the Optionee or other person under this Agreement, and the amounts available to the Company

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for such withholding are insufficient, it shall be a condition to the receipt of such payment
or the realization of such benefit that the Optionee or such other person make arrangements
satisfactory to the Company for payment of the balance of such taxes required to be withheld, which
arrangements may include additional payment in cash by the Optionee to the Company to meet the
withholding requirement.

     8. No Employment Rights. The Plan and this Agreement will not confer upon the
Optionee any right with respect to the continuance of employment or other service with the Company
or any Subsidiary and will not interfere in any way with any right that the Company or any
Subsidiary would otherwise have to terminate any employment or other service of the Optionee at any
time.

     9. Relation to Other Benefits. Any economic or other benefit to the Optionee under
this Agreement will not be taken into account in determining any benefits to which the Optionee may
be entitled under any profit-sharing, retirement or other benefit or compensation plan maintained
by the Company or a Subsidiary and will not affect the amount of any life insurance coverage
available to any beneficiary under any life insurance plan covering employees of the Company or any
Subsidiary, unless provided otherwise in any such plan.

     10. Agreement Subject to the Plan. The Option granted under this Agreement and all of
the terms and conditions hereof are subject to all of the terms and conditions of the Plan. In the
event of any inconsistency between this Agreement and the Plan, the terms of the Plan will govern.
The Committee acting pursuant to the Plan, as constituted from time to time, shall, except as
expressly provided otherwise herein, have the right to determine any questions which arise in
connection with this Option or its exercise.

     11. Recoupment. In the event the Committee invokes the recoupment remedy set forth in
Section 26 of the Plan, Optionee will either (i) forfeit the Option or (ii) return to the Company
the Common Stock received by the Optionee as a result of exercising all or a portion of the Option,
or any proceeds received by the Optionee as a result of the sale of the Common Stock received by
the Optionee as a result of exercising all or a portion of the Option, less the amount of
consideration paid by the Optionee therefore.

     12. No Stockholder Rights. The holder of the Option shall have no stockholder rights
with respect to the shares of Common Stock subject to the Option until such person shall have
exercised the Option.

     13. Amendments. Any amendment to the Plan will be deemed to be an amendment to this
Agreement to the extent that the amendment is applicable hereto; provided, however, that no
amendment will adversely affect the rights of the Optionee under this Agreement without the
Optionee’s consent.

     14. Severability. In the event that one or more of the provisions of this Agreement
is invalidated for any reason by a court of competent jurisdiction, any provision so invalidated
will be deemed to be separable from the other provisions hereof, and the remaining provisions
hereof will continue to be valid and fully enforceable.

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     15. Successors and Assigns. Without limiting Section 4 hereof, the provisions of this
Agreement shall inure to the benefit of, and be binding upon, the successors, administrators,
heirs, legal representatives and assigns of the Optionee, and the successors and assigns of the
Company.

     16. Governing Law. This Agreement will be construed and governed in accordance with
the laws of the State of Georgia.

     17. Notices.  Any notice to the Company provided for herein shall be in writing to the
Company at the principal executive office of the Company, marked Attention: Corporate Secretary,
and any notice to the Optionee shall be addressed to said Optionee at his or her address currently
on file with the Company. Except as otherwise provided herein, any written notice shall be deemed
to be duly given if and when delivered personally or deposited in the United States mail, first
class registered mail, postage and fees prepaid, and addressed as aforesaid. Any party may change
the address to which notices are to be given hereunder by written notice to the other party as
herein specified (provided that for this purpose any mailed notice shall be deemed given on the
third business day following deposit of the same in the United States mail).

     18. Certain Defined Terms. In addition to the following defined terms and terms
defined elsewhere herein, when used in the Agreement, terms with initial capital letters have the
meaning given such term under the Plan, as in effect from time to time.

          (a) “Board” means the Board of Directors of the Company and, to the extent of any delegation
by the Board to a committee (or subcommittee thereof) pursuant to the Plan, such committee or
subcommittee.

          (b) “Cause” means that, prior to any termination of employment, the Optionee shall have
committed an act or acts of dishonesty, moral turpitude or willful misconduct, which act or acts
were intended to result in substantial personal enrichment at the expense of the Company or any
Subsidiary or which have a material adverse effect on the business or reputation of the Corporation
or any Subsidiary

          For the avoidance of doubt and for the purpose of determining Cause, the exercise of business
judgment by the Optionee shall not be determined to be Cause, even if such business judgment
materially injures the financial condition or business reputation of, or is otherwise materially
injurious to the Company or any Subsidiary, unless such business judgment by the Optionee was not
made in good faith, constitutes willful or wanton misconduct, or was an intentional violation of
state or federal law.

          (c) “Change in Control” shall mean the occurrence during the term of any of the following
events, subject to the provisions of Section 18(c)(vi) hereof:

               (i) the Company merges into itself, or is merged or consolidated with, another entity and as a
result of such merger or consolidation less than 51% of the voting power of the then-outstanding
voting securities of the surviving or resulting entity immediately after such transaction are
directly or indirectly beneficially owned in the aggregate by the former shareholders of the
Company immediately prior to such transaction; or

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               (ii) all or substantially all the assets accounted for on the consolidated balance sheet
of the Company are sold or transferred to one or more entities or persons, and as a result of such
sale or transfer less than 51% of the voting power of the then-outstanding voting securities of
such entity or person immediately after such sale or transfer is directly or indirectly
beneficially held in the aggregate by the former shareholders of the Company immediately prior to
such transaction or series of transactions; or

               (iii) a person, within the meaning of Section 3(a)(9) or 13(d)(3) (as in effect on the
Effective Date of the Plan) of the Exchange Act becomes the beneficial owner (as defined in Rule
13d-3 of the Securities and Exchange Commission pursuant to the Exchange Act) of (i) 15% or more
but less than 35% of the voting power of the then-outstanding voting securities of the Company
without prior approval of the Board, or (ii) 35% or more of the voting power of the
then-outstanding voting securities of the Company; provided, however, that the foregoing does not
apply to any such acquisition that is made by (w) any Subsidiary; (x) any employee benefit plan of
the Company or any Subsidiary; or (y) any person or group of which employees of the Company or of
any Subsidiary control a greater than 25% interest unless the Board determines that such person or
group is making a “hostile acquisition;” or (z) any person or group of which the Company is an
affiliate; or

               (iv) a majority of the members of the Board are not Continuing Directors, where a “Continuing
Director” is any member of the Board who (x) was a member of the Board on the Effective Date of the
Plan or (y) was nominated for election or elected to such Board with the affirmative vote of a
majority of the Continuing Directors who were members of such Board at the time of such nomination
or election; or

               (v) the Board determines that (A) any particular actual or proposed merger, consolidation,
reorganization, sale or transfer of assets, accumulation of shares of the Company or other
transaction or event or series of transactions or events will, or is likely to, if carried out,
result in a Change in Control falling within Subsections (i), (ii), (iii) or (iv) and (B) it is in
the best interests of the Company and its shareholders, and will serve the intended purposes of
this Section 18(c), if the provisions of awards which provide for earlier exercise or earlier lapse
of restrictions or conditions upon a Change in Control shall thereupon become immediately
operative.

               (vi) Notwithstanding the foregoing provisions of this Section 18(c):

          (1) If any such merger, consolidation, reorganization, sale or transfer of
assets, or tender offer or other transaction or event or series of transactions or
events mentioned in Section 18(c)(v) shall be abandoned, or any such accumulations
of shares shall be dispersed or otherwise resolved, the Board may, by notice to the
Participant, nullify the effect thereof and reinstate the award as previously in
effect, but without prejudice to any action that may have been taken prior to such
nullification.

          (2) Unless otherwise determined in a specific case by the Board, a “Change in
Control” shall not be deemed to have occurred for purposes of Section (18)(c) solely
because (X) the Company, (Y) a Subsidiary, or (Z) any

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Company-sponsored employee
stock ownership plan or any other employee benefit plan of the Company or any
Subsidiary either files or becomes obligated to file a report or a proxy statement
under or in response to Schedule 13D, Schedule 14D-1, Form 8-K or Schedule 14A (or
any successor schedule, form or report or item therein) under the Exchange Act
disclosing beneficial ownership by it of shares of the then-outstanding voting
securities of the Company, whether in excess of 20% or otherwise, or because the
Company reports that a change in control of the Company has occurred or will occur
in the future by reason of such beneficial ownership.

          (d) “Committee” means the Compensation Committee of the Board, which shall consist of a
committee of two (2) or more Nonemployee Directors appointed by the Board to exercise one or more
administrative functions under the Plan.

          (e) “Director” means a member of the Board of Directors of the Company.

          (f) “Disability” means disability as determined under procedures established by the Committee
for purposes of the Plan.

          (g) “Exchange Act” means the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder, as such law, rules and regulations may be amended from time to time.

          (h) “Nonemployee Director” means a Director who is not an employee of the Company or any
Subsidiary.

          (i) “Retirement” means termination of employment (i) on or after attainment of age 65.

          (j) “Subsidiary” means a corporation, company or other entity (i) more than fifty percent
(50%) of whose outstanding shares or securities (representing the right to vote for the election of
directors or other managing authority) are, or (ii) which does not have outstanding shares or
securities (as may be the case in a partnership, joint venture or unincorporated association), but
more than fifty percent (50%) of whose ownership interest representing the right generally to make
decisions for such other entity is, now or hereafter, owned or controlled, directly or indirectly,
by the Company.

     19. Compliance with Section 409A of the Code. To the extent applicable, it is intended
that this Agreement and the Plan comply with the provisions of Section 409A of the Code, so that
the income inclusion provisions of Section 409A(a)(1) do not apply to the Optionee. This Agreement
and the Plan shall be administered in a manner consistent with this intent.

     20. Data Protection. By signing below, the Optionee consents that the Company may
process the Optionee’s personal data, including name, Social Security number, address and number of
shares of Common Stock purchased hereunder (“Data”) exclusively for the purpose of performing this
Agreement, in particular in connection with the Option awarded to the

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Optionee. For this purpose
the Data may also be disclosed to and processed by companies outside the Company, e.g.,
banks involved.

[Signatures appear on following pages]

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          In witness whereof, the Company has caused this agreement to be executed as of the Date
of Grant.

	 	 	 	 	 
	 	FLOWERS FOODS, INC.

 	 
	 	By:  	 	 
	 	 	  	 	 
	 	 	Title:  	 	 

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          The undersigned Optionee hereby acknowledges receipt of an executed original of this
2009 Nonqualified Stock Option Agreement and accepts the Option subject to the applicable terms and
conditions of the Plan and the terms and conditions hereinabove set forth.

	 	 	 	 	 
	 	 	 
	 	  	
 	 
	 	 	Signature of Optionee 	 
	 	 	 	 
	 

10Exhibit 10.1

Exhibit 10.1

SUPERVISORY AGREEMENT

This Supervisory Agreement (Agreement) is made this 17th day of February, 2011 by
and through the Board of Directors (Board) of Wilmington Trust FSB, Baltimore, Maryland, OTS Docket
No. 12090 (Association) and the Office of Thrift Supervision (OTS), acting by and through its
Regional Director for the Southeast Region (Regional Director);

WHEREAS, the OTS, pursuant to 12 U.S.C. § 1818, has the statutory authority to enter into and
enforce supervisory agreements to ensure the establishment and maintenance of appropriate
safeguards in the operation of the entities it regulates; and

WHEREAS, the Association is subject to examination, regulation and supervision by the OTS; and

WHEREAS, based on its July 6, 2010 examination of the Association (2010 Examination), the OTS
finds that the Association has engaged in unsafe or unsound practices and/or violations of law or
regulation; and

WHEREAS, in furtherance of their common goal to ensure that the Association addresses the
unsafe or unsound practices and/or violations of law or regulation identified by the OTS in the
2010 Examination, the Association and the OTS have mutually agreed to enter into this Agreement;
and

WHEREAS, on February 16, 2011, the Association’s Board, at a duly constituted meeting, adopted
a resolution (Board Resolution) that authorizes the Association to enter into this Agreement and
directs compliance by the Association and its directors, officers, employees, and other
institution-affiliated parties with each and every provision of this Agreement.

Wilmington Trust FSB

Supervisory Agreement

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NOW THEREFORE, in consideration of the above premises, it is agreed as follows:

Laws and Regulations.

1. The Association, its institution-affiliated parties, and its successors and assigns, shall
cease and desist from any action (alone or with others) for or toward causing, bringing about,
participating in, counseling, or the aiding and abetting violations of the following laws and
regulations:

(a)
12 C.F.R. § 560.160 (regarding accurate and timely classification of assets); and

(b) 12 C.F.R. § 563.161 (regarding safe and sound management and financial policies).
 

Capital.

2. By June 30, 2011, the Association shall have and maintain a Tier 1 (Core) Capital Ratio equal to
or greater than nine percent (9%) and a Total Risk-Based Capital Ratio equal to or greater than
fourteen percent (14%).1

3. By April 30, 2011, the Association shall submit a written plan to achieve and maintain the
Association’s capital at the levels prescribed in Paragraph 3 (Capital Plan) that is acceptable to
the Regional Director. At a minimum, the Capital Plan shall:

(a) identify the specific sources of additional capital and the timeframes and methods by
which additional capital will be raised, including specific target dates and corresponding
capital levels;

(b) detail the Association’s capital preservation and enhancement strategies with specific
narrative goals;

 

	 	 	 
	1	 	The requirement in Paragraph 1 to have and maintain a
specific capital level means that the Association may not be deemed to be
“well-capitalized” for purposes of 12 U.S.C. §1831o and 12 C.F.R. Part 565,
pursuant to 12 C.F.R. §565.4(b)(1)(iv).

Wilmington Trust FSB

Supervisory Agreement

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(c) address the requirements and restrictions imposed by this Agreement relating to capital
under different forward-looking scenarios involving progressively stressed economic
environments;

(d) address all corrective actions set forth in the 2010 Examination relating to capital;

(e) include detailed quarterly financial projections, including Tier 1 (Core) and Total
Risk-Based Capital Ratios;

(f) address the Association’s level of classified assets, allowance for loan and lease
losses (ALLL), earnings, asset concentrations, liquidity needs, and trends in the foregoing
areas; and

(g) address current and projected trends in real estate market conditions.

4. Upon receipt of written notification from the Regional Director that the Capital Plan is
acceptable, the Association shall implement and adhere to the Capital Plan. A copy of the Capital
Plan and the Board meeting minutes reflecting the Board’s adoption thereof shall be provided to the
Regional Director within twenty-one (21) days after the Board meeting.

5. On a quarterly basis, beginning with the quarter ending June 30, 2011, the Board shall review
the Association’s compliance with the Capital Plan. At a minimum, the Board’s review shall
include:

(a) a comparison of actual operating results to projected results;

(b) detailed explanations of any material deviations;2 and

(c) a discussion of specific corrective actions or measures that have been or will be
implemented to address each material deviation.

 

	 	 	 
	2	 	A deviation shall be considered material under this
Paragraph of the Order when the Association: determines that it needs to adjust
its identified sources of additional capital, timeframes, methods, or target
dates by which it will raise capital.

Wilmington Trust FSB

Supervisory Agreement

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6. Within fifteen (15) days after: (a) the Association fails to meet the capital requirements
prescribed in Paragraph 3; (b) the Association fails to comply with the Capital Plan prescribed in
Paragraph 4; or (c) any written request from the Regional Director, the Association shall submit a
written Contingency Plan that is acceptable to the Regional Director.

7. The Contingency Plan shall detail the actions to be taken, with specific time frames, to achieve
one of the following results by the later of the date of receipt of all required regulatory
approvals or sixty (60) days after the implementation of the Contingency Plan: (a) merger with, or
acquisition by, another federally insured depository institution or holding company thereof; or (b)
voluntary dissolution by filing an appropriate application with the OTS in conformity with
applicable laws, regulations and regulatory guidance.

8. Upon receipt of written notification from the Regional Director, the Association shall implement
and adhere to the Contingency Plan immediately. The Association shall provide the Regional
Director with written status reports detailing the Association’s progress in implementing the
Contingency Plan by no later than the first (1st) and fifteenth (15th) of
each month following implementation of the Contingency Plan.

Operating Plan.

9. By April 30, 2011, the Association shall submit a plan to the Regional Director with specific
strategies and timeframes by which the Association will achieve and maintain separate and
independent management and operations from any affiliated federally insured depository institution
(Operating Plan).

10. Upon receipt of written notification from the Regional Director, the Association shall
immediately implement and adhere to the Operating Plan. The Association shall provide the Regional
Director with written status reports detailing the Association’s progress in
implementing the Operating Plan no later than the first (1st) of each month following
implementation of the Operating Plan.

Wilmington Trust FSB

Supervisory Agreement

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Growth.

11. Effective immediately, the Association shall not increase its total assets during any quarter
in excess of an amount equal to net interest credited on deposit liabilities during the prior
quarter without the prior written notice of non-objection of the Regional Director.

Problem Assets.

12. Within sixty (60) days, the Association shall submit a detailed, written plan with specific
strategies, targets and timeframes to reduce3 the Association’s level of problem
assets4 (Problem Asset Reduction Plan) to the Regional Director for review and
non-objection. Upon notice of non-objection, the Association shall implement and adhere to the
Problem Asset Reduction Plan. The Problem Asset Reduction Plan, at a minimum, shall include:

(a) quarterly targets for the level of problem assets as a percentage of Tier 1 (Core)
capital plus ALLL;

(b) a description of the methods for reducing the Association’s level of problem assets to
the established targets; and

(c) all relevant assumptions and projections.

13. Effective immediately, the Association shall revise as necessary (but at least quarterly)
existing or develop new individual written specific workout plans for each problem asset or group
of loans to any one borrower or loan relationship of One Million Dollars ($1,000,000) or greater
(Asset Workout Plans).

 

	 	 	 
	3	 	For purposes of this Paragraph, “reduce” means to
collect, sell, charge off, or improve the quality of an asset sufficient to
warrant its removal from adverse criticism or classification.
	 
	4	 	The term “problem assets” shall include all classified
assets, and assets designated special mention, and all nonperforming assets,
and all delinquent loans.

Wilmington Trust FSB

Supervisory Agreement

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14. Within thirty (30) days after the end of each quarter, beginning with the quarter ending
June 30, 2011, the Association shall submit a quarterly written asset status report (Quarterly
Asset Report) to the Board. The Board’s review of the Quarterly Asset Report shall be documented
in the Board meeting minutes. The Quarterly Asset Report shall include, at a minimum:

(a) the current status of all Asset Workout Plans;

(b) a comparison of problem assets to Tier 1 (Core) capital plus ALLL and Total Risk-Based
capital;

(c) a comparison of problem assets at the current quarter end with the preceding quarter;

(d) a breakdown of problem assets by type (residential, acquisition and development,
construction, land loans;

(e) an assessment of the Association’s compliance with the Problem Asset Reduction Plan;

(f) a discussion of the actions taken during the preceding quarter to reduce the
Association’s level of problem assets; and

(g) any recommended revisions or updates to the Problem Asset Reduction Plan.

15. A copy of the Quarterly Asset Report shall be provided to the Regional Director within
twenty-one (21) days after the Board meeting.

Wilmington Trust FSB

Supervisory Agreement

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Credit Administration.

16. Within ninety (90) days after the Effective Date of this Agreement, the Association shall
revise its credit administration policies, procedures, practices, and controls (Credit
Administration Policy) to ensure that it addresses all corrective actions in the 2010 Examination
relating to credit and lending administration. The Credit Administration Policy shall comply with
all applicable laws, regulations and regulatory guidance, and include, at a minimum:

(a) within ninety (90) days of the Effective Date of this Agreement, implementation of the
actions called for by the recently-completed assessment of the adequacy of staff and
management resources in credit and lending to properly implement, control, and enforce
credit administration policies and procedures, and corrective actions to remedy any
deficiencies;

(b) the establishment of policies and procedures to correct underwriting deficiencies and
weaknesses; and

(c) the separation of sales and production activities from underwriting, credit analysis and
monitoring to ensure independence.

17. Within thirty (30) days after the end of each quarter, beginning with the quarter ending June
30, 2011, the Association shall conduct a review of its compliance with the Credit Administration
Policy. A copy of the Board meeting minutes detailing the Board’s review shall be provided to the
Regional Director within twenty-one (21) days after the Board meeting.

Wilmington Trust FSB

Supervisory Agreement

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Concentrations of Credit. 

18. Within sixty (60) days, the Association shall revise its written program for identifying,
monitoring, and controlling risks associated with concentrations of credit (Concentration Program)
to ensure that it addresses all corrective actions set forth in the 2010 Examination relating to
concentrations of credit. The Concentration Program shall comply with all applicable laws,
regulations and regulatory guidance and shall:

(a) establish prudent concentration limits expressed as a percentage of Tier 1 (Core)
Capital plus ALLL, and document the appropriateness of such limits based on the
Association’s risk profile;

(b) establish stratification categories of the Association’s concentrations of credit such
as (e.g., land loans, construction loans, income property loans, nonresidential real estate
loans, commercial loans) and establish enhanced risk analysis, monitoring, and management
for each stratification category;

(c) contain specific review procedures and reporting requirements, including written reports
to the Board, designed to identify, monitor, and control the risks associated with
concentrations of credit and periodic market analysis for the various property types and
geographic markets represented in its portfolio; and

(d) contain a written action plan, including specific time frames, for bringing the
Association into compliance with its concentration of credit limits.

19. Within thirty (30) days after the end of each quarter, beginning with the quarter ending June
30, 2011, the Board shall review the appropriateness of the Association’s concentration limits
given current conditions and the Association’s compliance with its Credit Concentration Program.
The Board’s review of the Association’s Concentration Program shall be documented in the Board
meeting minutes. A copy of the Board meeting minutes shall be provided to the Regional Director
within twenty-one (21) days after the Board meeting.

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Allowance for Loan and Lease Losses.

20. Within sixty (60) days, the Association shall revise its policies, procedures, and methodology
relating to the timely establishment and maintenance of an adequate allowance for loan and lease
losses level (ALLL Policy) to ensure that it addresses any corrective actions set
forth in the 2010 Examination relating to ALLL. The ALLL Policy shall comply with applicable laws,
regulations, and regulatory guidance and shall:

(a) incorporate the results of all internal loan reviews and classifications;

(b) address the level and impact of the Association’s current concentrations of credit;

(c) include appropriate review for impairment testing and ensure that impairment testing is
supported by an independent new appraisal; and

(d) provide for the continued inclusion of the additional $18 million qualitative component
until notified otherwise in writing by the OTS.

21. Within thirty (30) days after the end of each quarter, beginning with the quarter ending June
30, 2011, the Association shall analyze the adequacy of the ALLL consistent with its ALLL Policy
(Quarterly ALLL Report). The Board’s review of the Quarterly ALLL Report, including, but not
limited to, all qualitative factors considered in determining the adequacy of the Association’s
ALLL, shall be fully documented in the Board meeting minutes. Any deficiency in the ALLL shall be
remedied by the Association in the quarter in which it is discovered and before the Association
files its Thrift Financial Report (TFR) with the OTS. A copy of the Quarterly ALLL Report and the
Board meeting minutes detailing the Board’s review shall be provided to the Regional Director
within twenty-one (21) days after the Board meeting.

Liquidity Management.

22. Within sixty (60) days, the Association shall revise its liquidity and funds management policy
(Liquidity Management Plan). The Liquidity Management Plan shall comply with all applicable laws,
regulations and regulatory guidance.

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23. The Liquidity Management Plan shall, at a minimum, include:

(a) periodic monitoring of liquidity;

(b) minimum liquidity ratios which are to be established and monitored by the Board;

(c) identification of alternative funding sources for meeting extraordinary demands or to
provide liquidity in the event the sources identified are insufficient. Such alternative
funding sources must consider, at a minimum, the selling of assets, obtaining secured lines
of credit, recovering charged-off assets, injecting additional equity capital, and the
priority of their implementation; and

(d) periodic stress-testing to ensure that adequate liquidity is maintained.

24. Within thirty (30) days after the end of each quarter, beginning with the quarter ending March
31, 2011, the Board shall review the Association’s compliance with its Liquidity Management Plan.
The Board’s quarterly review of the Liquidity Management Plan shall be documented in the Board
meeting minutes. A copy of the Board meeting minutes shall be provided to the Regional Director
within twenty-one (21) days after the Board meeting.

Brokered Deposits.

25. Effective immediately, the Association shall comply with the requirements of 12 C.F.R. §
337.6(b).

Directorate and Management Changes. 

26. Effective immediately, the Association shall comply with the prior notification requirements
for changes in directors and Senior Executive Officers5 set forth in 12 C.F.R. Part 563,
Subpart H.

 

	 	 	 
	5	 	The term “Senior Executive Officer” is defined at 12
C.F.R. § 563.555.

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Dividends and Other Capital Distributions.

27. Effective immediately, the Association shall not declare or pay dividends or make any other
capital distributions, as that term is defined in 12 C.F.R. § 563.141, without receiving the
prior written approval of the Regional Director in accordance with applicable regulations and
regulatory guidance. The Association’s written request for approval shall be submitted to the
Regional Director at least thirty (30) days prior to the anticipated date of the proposed
declaration, dividend payment or distribution of capital.

Employment Contracts and Compensation Arrangements. 

28. Effective immediately, the Association shall not enter into, renew, extend or revise any
contractual arrangement relating to compensation or benefits for any Senior Executive
Officer6 or director of the Association, unless it first provides the Regional Director
with not less than thirty (30) days prior written notice of the proposed transaction. The notice
to the Regional Director shall include a copy of the proposed employment contract or compensation
arrangement or a detailed, written description of the compensation arrangement to be offered to
such Senior Executive Officer or director, including all benefits and perquisites. The Board shall
ensure that any contract, agreement or arrangement submitted to the Regional Director fully
complies with the requirements of 12 C.F.R. Part 359, 12 C.F.R. §§ 563.39 and 563.161(b), and 12
C.F.R. Part 570 — Appendix A.

Golden Parachute and Indemnification Payments.

29. Effective immediately, the Association shall not make any golden parachute payment7
or prohibited indemnification payment8 unless, with respect to such payment, the
Association has complied with the requirements of 12 C.F.R. Part 359 and, as to indemnification
payments, 12 C.F.R. § 545.121.

 

	 	 	 
	6	 	The term “Senior Executive Officer” is defined at 12
C.F.R. § 563.555.
	 
	7	 	The term “golden parachute payment” is defined at 12
C.F.R. § 359.1(f).
	 
	8	 	The term “prohibited indemnification payment” is
defined at 12 C.F.R. § 359.1(l).

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Third Party Contracts.

30. Effective immediately, the Association shall not enter into any new arrangement or
contract with a third party service provider that is significant to the overall operation or
financial condition of the Association9 or outside the Association’s normal course of
business unless, with respect to each such contract, the Association has: (a) provided the Regional
Director with a minimum of thirty (30) days prior written notice of such arrangement or contract
and a written determination that the arrangement or contract complies with the standards and
guidelines set forth in Thrift Bulletin 82a (TB 82a); and (b) received written notice of
non-objection from the Regional Director.

Transactions with Affiliates.

31. Effective immediately, the Association shall not engage in any new transaction with an
affiliate unless, with respect to each such transaction, the Association has complied with the
notice requirements set forth in 12 C.F.R. § 563.41(c)(4), which shall include the information set
forth in 12 C.F.R. § 563.41(c)(3). The Board shall ensure that any transaction with an affiliate
for which notice is submitted pursuant to this Paragraph, complies with the requirements of 12
C.F.R. § 563.41 and Regulation W, 12 C.F.R. Part 223.

32. Effective immediately, the Association must limit the level of fed funds sold to any affiliated
federally insured depository institution (Affiliate Transaction Limitation) to a level not to
exceed 100 percent of Tier 1 capital. The Association must also submit, no later than June 30,
2011, a plan that is acceptable to the Regional Director to reduce the total exposure to any
affiliated federally insured depository institution, including federal funds sold, checking
accounts, “due from” accounts, and other deposit accounts, to a level not to exceed 100 percent of
Tier 1 capital.

 

	 	 	 
	9	 	A contract will be considered significant to the
overall operation or financial condition of the Association where the annual
contract amount equals or exceeds two percent (2%) of the Association’s total
capital, where there is a foreign service provider, or where it involves
information technology that is critical to the Association’s daily operations
without regard to the contract amount.

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New Board and Senior Management Members.

33. By June 30, 2011, the Association shall, consistent with 12 C.F.R. § 563.550, appoint a new
qualified member for the Board who is independent with respect to the Association.

34. By June 30, 2011, the Association shall, consistent with 12 C.F.R. § 563.550, appoint a new
qualified senior executive officer to serve as one of the top two officers at the Association who
is independent with respect to the Association.

Board Oversight of Compliance with Agreement.

35. Within thirty (30) days, the Board shall designate a committee to monitor and coordinate the
Association’s compliance with the provisions of this Agreement and the completion of all corrective
actions required in the 2010 Examination (Oversight Committee). The Oversight Committee shall be
comprised of three (3) or more directors, including at least one independent director, and the
majority of whom, by June 30, 2011, shall be independent10 directors.

 

	 	 	 
	10	 	For purposes of this Order, an individual who is
“independent” with respect to the Association shall be any individual who:
	 
	(a) 	 	is not employed in any capacity by the Association, its subsidiaries, or its
affiliates, other than as a director;

	 
	(b)	 	does not own or control more than ten percent (10%) of the outstanding
 shares of the Association or any of its affiliates;

	 
	(c)	 	is not related by blood or marriage to any officer or director of the
Association or any of its affiliates, or to any shareholder owning more
than ten percent (10%) of the outstanding shares of the Association or any
of its affiliates, and who does not otherwise share a common financial
interest with any such officer, director or shareholder;

	 
	(d)	 	is not indebted, directly or indirectly, to the Association or any of its
affiliates, including the indebtedness of any entity in which the
individual has a substantial financial interest, in an amount exceeding 10
percent (10%) of the Association’s total Tier 1 (Core) capital; and

	 
	(e)	 	has not served as a consultant, advisor, underwriter, or legal counsel to
the Association or any of its affiliates.

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36. Within forty-five (45) days after the end of each quarter, beginning with the quarter ending
March 31, 2011, the Oversight Committee shall submit a written compliance progress report to the
Board (Compliance Tracking Report). The Compliance Tracking Report shall, at a minimum:

(a) separately list each corrective action required by this and the 2010 Examination;

(b) identify the required or anticipated completion date for each corrective action; and

(c) discuss the current status of each corrective action, including the action(s) taken
during the previous quarter or to be taken to comply with each corrective action.

37. Within forty-five (45) days after the end of each quarter, beginning with the quarter ending
March 31, 2011, the Board shall review the Compliance Tracking Report and all reports required to
be prepared by this Agreement. Following its review, the Board shall adopt a resolution: (a)
certifying that each director has reviewed the Compliance Tracking Report and all required reports;
and (b) documenting any corrective actions adopted by the Board. A copy of the Compliance Tracking
Report and the Board resolution shall be provided to the Regional Director within twenty-one (21)
days after the Board meeting.

38. Nothing contained herein shall diminish the responsibility of the entire Board to ensure the
Association’s compliance with the provisions of this Agreement. The Board shall review and adopt
all policies and procedures required by this Agreement prior to submission to the OTS.

Effective Date.

39. This Agreement is effective on the Effective Date as shown on the first page.

Duration.

40. This Agreement shall remain in effect until terminated, modified or suspended, by written
notice of such action by the OTS, acting by and through its authorized representatives.

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Time Calculations.

41. Calculation of time limitations for compliance with the terms of this Agreement run from the
Effective Date and shall be based on calendar days, unless otherwise noted.

Submissions and Notices.

42. All submissions to the OTS that are required by or contemplated by the Agreement shall be
submitted within the specified timeframes.

43. Except as otherwise provided herein, all submissions, requests, communications, consents or
other documents relating to this Agreement shall be in writing and sent by first class U.S. mail
(or by reputable overnight carrier, electronic facsimile transmission or hand delivery by
messenger) addressed as follows:

	 	(a)	 	To the OTS:

Regional Director

Office of Thrift Supervision

1475 Peachtree St., NE

Atlanta, Georgia 30309

404.897.1861 (Fax)
	 
	 	(b)	 	To the Association:

Board of Directors

Wilmington Trust FSB

1100 North Market Street

Wilmington, Delaware 19890

302.651.8010 (Fax)

No Violations Authorized.

44. Nothing in this Agreement shall be construed as allowing the Association, its Board, officers
or employees to violate any law, rule, or regulation.

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OTS Authority Not Affected.

45. Nothing in this Agreement shall inhibit, estop, bar or otherwise prevent the OTS from taking
any other action affecting the Association if at any time the OTS deems it appropriate to do so to
fulfill the responsibilities placed upon the OTS by law.

Other Governmental Actions Not Affected.

46. The Association acknowledges and agrees that its execution of the Agreement is solely for the
purpose of resolving the matters addressed herein, consistent with Paragraph 41 above, and does not
otherwise release, discharge, compromise, settle, dismiss, resolve, or in any way affect any
actions, charges against, or liability of the Association that arise pursuant to this action or
otherwise, and that may be or have been brought by any governmental entity other than the OTS.

Miscellaneous.

47. The laws of the United States of America shall govern the construction and validity of this
Agreement.

48. If any provision of this Agreement is ruled to be invalid, illegal, or unenforceable by the
decision of any Court of competent jurisdiction, the validity, legality, and enforceability of the
remaining provisions hereof shall not in any way be affected or impaired thereby, unless the
Regional Director in his or her sole discretion determines otherwise.

49. All references to the OTS in this Agreement shall also mean any of the OTS’s predecessors,
successors, and assigns.

50. The section and paragraph headings in this Agreement are for convenience only and shall not
affect the interpretation of this Agreement.

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51. The terms of this Agreement represent the final agreement of the parties with respect to the
subject matters thereof, and constitute the sole agreement of the parties with respect to such
subject matters.

Enforceability of Agreement.

52. This Agreement is a “written agreement” entered into with an agency within the meaning and for
the purposes of 12 U.S.C. § 1818.

Signature of Directors/Board Resolution.

53. Each Director signing this Agreement attests that he or she voted in favor of a Board
Resolution authorizing the consent of the Association to the issuance and execution of the
Agreement. This Agreement may be executed in counterparts by the directors after approval of
execution of the Agreement at a duly called board meeting. A copy of the Board Resolution
authorizing execution of this Agreement shall be delivered to the OTS, along with the executed
original(s) of this Agreement.

[This Space Intentionally Left Blank]

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WHEREFORE, the OTS, acting by and through its Regional Director, and the Board of the
Association, hereby execute this Agreement.

	 	 	 	 	 	 	 	 	 	 	 
	WILMINGTON TRUST FSB	 	OFFICE OF THRIFT SUPERVISION
	Baltimore, Maryland	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Donald E. Foley
	 	 	 	By:
	 	/s/ James G. Price	 	 
	 

	 	 
	 	 	 	 	 	 	 	 
	 

	 	Donald E. Foley
	 	 	 	 	 	James G. Price	 	 
	 

	 	Chairman
	 	 	 	 	 	Regional Director, Southeast Region	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	 

	 	 	 	 	 	Date: See Effective Date on page 1	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	/s/ Mark A. Graham
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Mark A. Graham, Director	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	/s/ Robert V.A. Harra, Jr.
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Robert V.A. Harra, Jr., Director	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	/s/ Rebecca A. DePorte
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Rebecca A. DePorte, Director	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	/s/ Peter E. Guernsey, Jr.
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Peter E. Guernsey, Jr., Director	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	/s/ Stephen H. McKnight
	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Stephen H. McKnight, Director	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 	 	 
	/s/ Jay M. Wilson
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 
	Jay M. Wilson, Director	 	 	 	 	 	 	 	 

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