Document:

Amendment No. 5 dated as of March 30, 2009

 Exhibit 10.40 
  
 EXECUTION COPY 
  
 AMENDMENT NO. 5 
 TO 

SUBORDINATED CREDIT AGREEMENT 
  
 AMENDMENT NO. 5 TO SUBORDINATED CREDIT AGREEMENT, dated as of March 30, 2009 (this “Amendment”), among TIMBERLANDS II,
LLC, a Delaware limited liability company (“Wells Timberland”), WELLS TIMBERLAND OPERATING PARTNERSHIP L.P., a Delaware limited partnership (“Wells Partnership”; Wells Partnership and Wells Timberland,
each a “Borrower” and, collectively, the “Borrowers”), the various other Loan Parties that are parties hereto, the various financial institutions that are parties hereto (collectively, the
“Lenders”), and WACHOVIA BANK, NATIONAL ASSOCIATION, as administrative agent (in such capacity, the “Administrative Agent”) for the Lenders. 
  
 W I T N E S S E T H: 
  
 WHEREAS, the Borrowers, the Lenders and the Administrative Agent are parties to that certain Subordinated Credit Agreement (the
“Subordinated Credit Agreement”), dated as of October 9, 2007, as amended by that certain Amendment No. 1 to Subordinated Credit Agreement dated as of November 26, 2007, as further amended by that certain Amendment
No. 2 to Subordinated Credit Agreement dated as of February 29, 2008, as further amended by that certain Amendment No. 3 to Subordinated Credit Agreement dated as of October 15, 2008, and as further amended by that certain
Amendment No. 4 to Subordinated Credit Agreement (“Amendment No. 4”) dated as of December 18, 2008 (collectively, the “Existing Credit Agreement”) and, along with the other Loan Parties, as
applicable, the other Loan Documents; 
  
 WHEREAS, the
Borrowers have requested that, as of the Effective Date (as defined below), the Existing Credit Agreement be amended as herein provided, including the clarification of a scrivener’s error contained in Amendment No. 4; and 
  
 WHEREAS, the Lenders are willing, subject to the terms and conditions
hereinafter set forth, to make such amendments. 
  
 NOW,
THEREFORE, in consideration of the agreements herein contained, the parties hereto hereby agree as follows: 
  
 ARTICLE I 
  
 DEFINITIONS 
  
 SECTION 1.1.
Certain Definitions. The following terms (whether or not underscored) when used in this Amendment shall have the following meanings: 
  
 “Administrative Agent” is defined in the preamble. 
  

 “Amended Credit Agreement” means the Existing Credit Agreement as amended by this Amendment as of the Effective Date.

  
 “Amendment” is defined in the
preamble. 
  
 “Effective Date” is defined
in Section 5.1. 

 “Existing Credit Agreement” is defined in the first recital. 
  
 “Lenders” is defined in the preamble. 
  
 “Wells Partnership” is defined in the preamble.

  
 “Wells Timberland” is defined in the
preamble. 
  
 SECTION 1.2. Other
Definitions. Unless otherwise defined or the context otherwise requires, terms used herein (including in the preamble and recitals hereto) have the meanings provided for in the Amended Credit Agreement. 
  
 ARTICLE II 
  
 AMENDMENTS 
  
 Effective on (and subject to the occurrence of) the Effective Date, the
Existing Credit Agreement is amended as follows: 
  
 SECTION
2.1. Additions to Section 1.1. The following new definitions are added to Section 1.1 of the Existing Credit Agreement in the appropriate alphabetical order: 
  
 “Amendment No. 5 to Subordinated Credit
Agreement” shall mean Amendment No. 5 to Subordinated Credit Agreement, dated as of March 30, 2009, among the parties to this Amendment. 
  

“Permitted Sub-S Corporation Tax Distribution” shall mean a distribution payable to shareholders of WREF during any period in
which WREF is and remains an “electing small business corporation” for the purposes of Subchapter S of the Code in an amount not to exceed the lesser of (i) taxes payable by such shareholders on account of their allocable shares of
WREF’s taxable income or (ii) an aggregate of $15,000,000, with such aggregate amount increasing to $20,000,000 from and after January 1, 2010; provided that at the time such distribution is made (A) no Default or Event of
Default has occurred and is continuing, (B) WREF is Solvent and (C) such distribution is permitted under applicable law. 
  
 “Sixth Principal Reduction Date” shall mean December 31, 2009. 
  
 “Term Loan Agreement” shall mean that certain Amended and Restated Loan Agreement, dated as of
October 9, 2007, by and between WREF, the various Subsidiaries of WREF identified on the signature pages thereto and Wachovia, as amended, supplemented or otherwise modified from time to time. 
  
 “Term Loan Indebtedness” shall mean the Indebtedness
incurred by WREF pursuant to the Term Loan Agreement. 
  
 “Wells 1031 Exchange Program” shall mean the program developed by Wells Capital and WREF to facilitate the completion of transactions complying with Section 1031 of the Code whereby Wells Capital and WREF formed
a series of single-member limited liability companies for the purpose of acquiring income-producing commercial properties and facilitating the re-sale of co-tenancy interests in such real estate properties to be owned in co-tenancy arrangements with
persons who are seeking to invest the proceeds from a sale of real estate held for investment in another real estate investment for purposes of qualifying for like-kind exchange treatment under the Code; provided that each of the properties acquired
by such limited liability companies is financed by a combination of long-term financing and bridge financing obtained from institutional lenders. 
  

 -2- 

 SECTION 2.2. Amendments to Section 1.1. Section 1.1 of the Existing
Credit Agreement is amended as follows: 
  
 (a) The definition of
“Agreement” is amended and restated in its entirety to read as follows: 
  
 ““Agreement” means this Subordinated Credit Agreement, as amended by Amendment No. 1 to Subordinated
Credit Agreement, Amendment No. 2 to Subordinated Credit Agreement, Amendment No. 3 to Subordinated Credit Agreement, Amendment No. 4 to Subordinated Credit Agreement and Amendment No. 5 to Subordinated Credit Agreement.”

  
 (b) The definition of “Fifth Principal Reduction
Date” is amended and restated in its entirety to read as follows: 
  
 ““Fifth Principal Reduction Date” means September 30, 2009.” 
  
 (c) The definition of “Fourth Principal Reduction
Date” is amended and restated in its entirety to read as follows: 
  
 ““Fourth Principal Reduction Date” means June 30, 2009.” 
  
 (d) The definition of “Stated Maturity Date” is
amended and restated in its entirety to read as follows: 
  
 ““Stated Maturity Date” means April 30, 2010.” 
  
 SECTION 2.3. Amendments to Section 3.1.2. Section 3.1.2 of the Existing Credit Agreement is amended as follows:

  
 (a) Section 3.1.2(c4) is amended by deleting the phrase
“twenty-five million dollars ($25,000,000)” and inserting “thirty million dollars ($30,000,000)” in lieu thereof. 
  
 (b) The following is added as new subsection 3.1.2(c5) immediately between Section 3.1.2 subsections (c4) and (d): 
  
 “(c5) A principal payment shall be made on the Sixth
Principal Reduction Date in an amount which, when added to all previously made principal payments, reduces the aggregate outstanding principal balance of the Loans to an amount not greater than fifteen million dollars ($15,000,000);”

  
 SECTION 2.4. Amendments to
Section 7.2.2. Section 7.2.2 of the Existing Credit Agreement is amended as follows: 
  
 (a) Subsection 7.2.2(c) is amended by deleting the word “and” at the end of the subsection. 
  
 (b) Subsection 7.2.2(d) is amended by replacing the period at the end of the
subsection with a semicolon and inserting the word “and” immediately after such semicolon. 
  
 (c) The following is added as new subsection 7.2.2(e) immediately after subsection 7.2.2(d): 
  
 “(e) with respect to WREF only, (i) purchase money
Indebtedness not exceeding $500,000 in aggregate principal amount at any time outstanding incurred to purchase tangible fixed assets, provided that the amount of such Indebtedness shall not at any time exceed the purchase price of such assets,
(ii) Indebtedness incurred in the Wells 1031 Exchange Program that is not recourse to WREF and (iii) the Term Loan Indebtedness.”. 
  
 SECTION 2.5. Amendments to Section 7.2.3. Section 7.2.3 of the Existing Credit Agreement is amended as follows:

  
 (a) Subsection 7.2.3(e) is amended by deleting the word
“and” at the end of the subsection. 
  

 -3- 

 (b) Subsection 7.2.3(f) is amended by replacing the period at the end of the subsection with a semicolon
and inserting the word “and” immediately after such semicolon. 
  
 (c) The following is added as new subsection 7.2.3(g) immediately after subsection 7.2.3(f): 
  
 “(g) with respect to WREF only, (i) Liens securing the payment of purchase money Indebtedness not exceeding $500,000 in
aggregate principal amount at any time outstanding incurred to purchase tangible fixed assets, provided that any such Lien does not secure more than the purchase price of such assets and does not encumber property other than the purchased assets,
(ii) Liens arising out of operation of law and securing the claims of materialmen, mechanics, carriers, warehousemen, processors or landlords, provided that the obligations secured by such Liens are not past due or are being diligently
contested in good faith by appropriate proceedings that suspend enforcement of such, (iii) Liens consisting of deposits or pledges made in the ordinary course of business in connection with workers’ compensation, unemployment insurance,
social security or similar laws, (iv) Liens granted in the Wells 1031 Exchange Program and (v) Liens not otherwise permitted by this Section 7.2.3 and described on Schedule 6.2 to the Term Loan Agreement.”. 
  
 SECTION 2.6. Amendments to Section 7.2.5.
Section 7.2.5 of the Existing Credit Agreement is amended as follows: 
  
 (a) Subsection 7.2.5(a) is amended by replacing the word “and” immediately before clause (vii) of the subsection with a comma. 
  
 (b) Subsection 7.2.5(a) is amended by replacing the period at the end of the clause (vii) of the subsection the
following: 
  
 “and (viii) Investments
of WREF in any Subsidiary of WREF existing as of the date hereof.”. 
  
 (c) The following is added as new subsection 7.2.5(c) immediately after subsection 7.2.5(b): 
  
 “(c) Notwithstanding anything in this Section 7.2.5 to the contrary, WREF may (i) purchase direct obligations of the
United States government, (ii) make deposits in commercial banking institutions, (iii) purchase commercial paper of any United States corporation having the highest rating then given by Moody’s Investors Services, Inc. or
Standard & Poor’s Corporation, (iv) make advances to employees for business travel and other expenses incurred in the ordinary course of business that do not at any time exceed $250,000 in the aggregate, (v) make Investments
in Subsidiaries of WREF formed as part of the Wells 1031 Exchange Program, (vi) make the $42,828,000 Investment in Wells REIT referred to in that certain Pledge Agreement dated as of October 9, 2007 by and between WREF, Wells Advisory and
Wachovia, and (vii) other (A) Investments that do not at any time in the aggregate exceed $2,000,000, increasing to $2,500,000 from and after January 1, 2010 and (B) purchases of preferred stock of Wells REIT, provided that Wells
REIT uses the total purchase price of such preferred stock to satisfy the Obligations with respect to Wells REIT.”. 
  
 SECTION 2.7. Amendment to Section 7.2.6. Section 7.2.6 of the Existing Credit Agreement is amended by inserting the
phrase “(w) WREF may make Permitted Sub-S Corporation Distributions,” immediately before clause (x) of the section. 
  
 SECTION 2.8. Amendment to Section 7.2.8. Section 7.2.8 of the Existing Credit Agreement is amended and restated in
its entirety as follows: 
  
 “Mergers,
Asset Acquisitions, etc. No Borrower will or will permit any other Loan Party to (or agree to), liquidate or dissolve, consolidate or amalgamate with, or merge into or with, any other Person, or establish, purchase, lease or otherwise
acquire (in each case in one transaction or a series of transactions) all or any part of the assets or Equity Interests of any Person (or of any division thereof), other than (a) the consummation of the Transaction, (b) Investments by the
Borrowers and the other Loan Parties permitted by 

  

 -4- 

 
Section 6.8 comprising the Equity Interests of Persons referred to therein, (c) transactions permitted by Section 7.2.5,
(d) the acquisition of assets that (i) are to be utilized in the ordinary course of the business of the Borrowers in accordance with Section 7.2.1 and (ii) are from the amounts paid to the Borrowers pursuant to clause
(a)(viii) of Section 9.3 of the Senior Credit Agreement, (e) subject to the other terms of this Agreement the purchase or lease of real property pursuant to an Unrestricted Timber Transaction and (f) with regard to WREF
only, (i) the sale of inventory in the ordinary course of WREF’s business, (ii) the sale or transfer of assets by WREF as part of the Wells 1031 Exchange Program and (iii) the sale or transfer of assets or the discontinuance of a
business line (in a single transaction or a series of transactions) by WREF so long as at the time of such sale or other transfer, and after giving effect thereto, each of the following conditions is met: (A) no Default or Event of Default
Exists and (B) the aggregate assets to be so transferred or utilized in the division or line of business to be so discontinued, when combined with all other assets transferred pursuant to this clause (f)(3) and all other assets utilized
in a division or line of business to be discontinued pursuant to this clause (f)(3), do not exceed $2,500,000 in book value in the aggregate.”. 
  
 SECTION 2.9. Amendment to Section 7.2.19. Section 7.2.19 of the Existing Credit Agreement is amended by replacing the
period immediately after the last word of clause (c) of the first sentence of the section with the following: 
  
 “, provided, however, that this clause (c) shall not apply to the amendment of Wells Installment Note
Issuer’s organizational documents by that certain First Amendment to the Limited Liability Company Agreement of MWV SPE, LLC (the “First Amendment to LLC Agreement”), dated as of December 18, 2008, by and among Wells
Acquisition, Wells Manager, Special Member (as defined in the First Amendment to LLC Agreement), MW and Wachovia.” 
  
 ARTICLE III 
  
 REPRESENTATIONS AND WARRANTIES 
  
 SECTION 3.1. Representations and Warranties. In order to induce the Lenders to make the amendments provided for in Article II,
the Borrowers hereby jointly and severally represent and warrant that: 
  
 (a) each of the representations and warranties of the Loan Parties contained in the Existing Credit Agreement and in the other Loan Documents is true and correct in all material respects as of the date hereof as if made on the date hereof
(except, if any such representation and warranty relates to an earlier date, such representation and warranty shall be true and correct in all material respects as of such earlier date); 
  
 (b) no Default or Event of Default has occurred and is continuing; and 
  
 (c) the execution, delivery and performance by each Loan Party of this
Amendment and the consummation of the transactions contemplated hereby and the fulfillment of the terms hereof do not (i) conflict with, result in any breach of any of the terms and provisions of, or constitute (with or without notice or lapse
of time) a default under (A) the formation documents of the Loan Parties, or (B) any material indenture, agreement, mortgage, deed of trust, or other instrument to which any Loan Party is a party or by which it is bound or any of its
properties are subject; (ii) result in the creation or imposition of any Lien upon any of its properties pursuant to the terms of any such indenture, agreement, mortgage, deed of trust, or other instrument; or (iii) violate any law, order,
rule, or regulation applicable to any Loan Party of any court or of any Federal or State regulatory body, administrative agency, or other governmental instrumentality having jurisdiction over any Loan Party or its properties. 
  
 SECTION 3.2. Further Agreement. The Borrowers hereby
jointly and severally agree that (a) the incorrectness in any material respect of any representation and warranty contained in the preceding Section 3.1 shall constitute an immediate Event of Default, (b) each Loan Document to
which each Loan Party is a party is in full force and effect with respect to it, and (c) no event that would reasonably be expected to have a Material Adverse Effect has occurred since the execution of Amendment No. 4 to Subordinated
Credit Agreement. 
  

 -5- 

 ARTICLE IV 
  

ACKNOWLEDGMENT OF OTHER LOAN PARTIES 
  
 By executing this Amendment, each of the Loan Parties hereby confirms and agrees that each Loan Document to which it is a party is, and shall continue to
be, in full force and effect and is hereby ratified and confirmed in all respects, except that on and after the Effective Date each reference therein to the Subordinated Credit Agreement shall refer to the Amended Credit Agreement. 
  
 ARTICLE V 
  
 CONDITIONS TO EFFECTIVENESS; EXPIRATION 
  
 SECTION 5.1. Effective Date. This Amendment shall become effective on such date (herein called the
“Effective Date”) when the conditions set forth in this Article V have been satisfied. 
  
 SECTION 5.2. Execution of Amendment. The Administrative Agent shall have received original counterparts of this Amendment duly
executed and delivered on behalf of the Borrowers, each of the other Loan Parties, the Administrative Agent and all the Lenders. 
  
 SECTION 5.3. Legal Opinions. The Administrative Agent shall have received from counsel to the Loan Parties legal opinions regarding
due organization, existence and good standing, due authorization, due execution and delivery, enforceability and usury for the Loan Parties and the Amended Credit Agreement substantially in the forms received by the Administrative Agent at the
closing of the Subordinated Credit Agreement. 
  
 SECTION
5.4. Representations and Warranties. The representations, warranties and agreements made by the Borrowers pursuant to Article III hereof shall be true and correct as of the Effective Date. 
  
 SECTION 5.5. Expiration. If the Effective Date has not
occurred on or prior to March 31, 2008, the agreements of the parties contained in this Amendment shall, unless otherwise agreed by all the Lenders, terminate immediately on such date and without further action. 
  
 ARTICLE VI 
  
 MISCELLANEOUS 
  
 SECTION 6.1. Cross-References. References in this
Amendment to any Article or Section are, unless otherwise specified, to such Article or Section of this Amendment. 
  
 SECTION 6.2. Loan Document Pursuant to Amended Credit Agreement. This Amendment is a Loan Document executed pursuant to the Amended
Credit Agreement. Except as expressly amended hereby, all of the representations, warranties, terms, covenants and conditions contained in the Existing Credit Agreement shall remain unamended or otherwise unmodified and in full force and effect.

  
 SECTION 6.3. Limitation of Amendments.
The amendments set forth in Article II hereof shall be limited precisely as provided for herein and shall not be deemed to be a waiver of, amendment of, consent to or modification of any other term or provision of the Existing Credit
Agreement or of any term or provision of any other Loan Document or of any transaction or further or future action on the part of the Borrowers or any other Loan Party which would require the consent of any of the Lenders under the Existing Credit
Agreement or any other Loan Document. The Lender Parties hereby expressly, fully and completely reserve all of their rights and remedies under the Amended Credit Agreement and the other Loan Documents. 
  
  

 -6- 

 SECTION 6.4. Counterparts. This Amendment may be executed by the parties hereto in
several counterparts, each of which shall be deemed to be an original and all of which shall constitute together but one and the same agreement. 
  
 SECTION 6.5. Successors and Assigns. This Amendment shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns. 
  
 SECTION 6.6.
Further Assurances. The Borrowers shall execute and deliver, and shall cause each other Loan Party to execute and deliver, from time to time in favor of the Administrative Agent and the Lenders, such documents, agreements, certificates
and other instruments as shall be necessary or advisable to effect the purposes of this Amendment. 
  
 SECTION 6.7. Costs and Expenses. The Borrowers agree to pay all reasonable costs and expenses of the Administrative Agent (including
the reasonable fees and out-of-pocket expenses of legal counsel of the Administrative Agent) that are incurred in connection with the execution and delivery of this Amendment and the other agreements and documents entered into in connection
herewith. 
  
 SECTION 6.8. Release. Each
of the Loan Parties hereby releases the Administrative Agent, the Lenders and their respective officers, directors, equity owners, agents and employees (collectively, the “Specified Parties”) of, from and against any and all claims,
liability, losses, costs and expenses directly or indirectly relating to or arising out of the Loan Documents and the execution and delivery thereof or any act or omission of the Specified Parties thereunder or relating thereto which has occurred up
through and including the time of the execution and delivery of this Amendment and which is known by, or should have been known by, any of the Loan Parties. 
  
 SECTION 6.9. GOVERNING LAW; WAIVER OF JURY TRIAL; ENTIRE AGREEMENT. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
LAWS OF THE STATE OF NEW YORK. EACH PERSON A PARTY HERETO KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHT TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION ARISING UNDER OR IN CONNECTION WITH THIS AMENDMENT OR ANY AGREEMENT OR DOCUMENT
ENTERED INTO IN CONNECTION HEREWITH. THIS AMENDMENT CONSTITUTES THE ENTIRE UNDERSTANDING AMONG THE PARTIES HERETO WITH RESPECT TO THE SUBJECT MATTER HEREOF AND SUPERSEDES ANY PRIOR AGREEMENT, WRITTEN OR ORAL, WITH RESPECT HERETO. 
  
 SECTION 6.10. Reservation of Rights. Nothing in this
Amendment shall extend to or affect in any way any of the Obligations or any of the rights or remedies of the Administrative Agent or the Lenders arising under the Loan Documents, and neither the Administrative Agent nor the Lenders shall be deemed
to have waived, and hereby expressly reserve, any or all such rights or remedies with respect to any default or Event of Default or event or condition which, with notice or the lapse of time, or both, would become a default or Event of Default under
the Loan Documents and which might otherwise exist or which might hereafter occur. 
  
 SECTION 6.11. Course of Dealing. The Administrative Agent and the Loan Parties hereby acknowledge and agree that at no time shall any prior or subsequent course of conduct by any Loan Party or the
Administrative Agent directly or indirectly limit, impair or otherwise adversely affect any of the Administrative Agent’s or the Lenders’ rights, interests or remedies in connection with the Loan and the Loan Documents or obligate the
Administrative Agent to agree to, or to negotiate or consider an agreement to, any waiver of any obligation or any default or any Event of Default by any Loan Party under any Loan Document or any amendment to any term or condition of any Loan
Document.  
  
 [Signature pages follow] 
  

 -7- 

 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective
officers hereunto duly authorized as of the day and year first above written. 
  

			
	 BORROWERS:
  
 TIMBERLANDS II, LLC, 
 a Delaware limited liability
company

		
	 By:
	 	Wells Timberland Management Organization, LLC, a Georgia limited liability company, its Manager
		
	 By:
	 	/s/ Brian Davis
	Name:	 	Brian Davis
	Title:	 	Vice President, Finance
	
	WELLS TIMBERLAND OPERATING PARTNERSHIP, L.P., a Delaware limited partnership
		
	 By:
	 	Wells Timberland REIT, INC., a Maryland corporation, its General Partner
		
	 By:
	 	/s/ Randall D. Fretz
	Name:	 	Randall D. Fretz
	Title:	 	Senior Vice President

			
	 OTHER LOAN PARTIES:
  
 WELLS TRS HARVESTING OPERATIONS, LLC, a Delaware limited liability company

		
	 By:
	 	Forest Resource Consultants, Inc., a Georgia corporation, its Manager
		
	 By:
	 	/s/ David Foil
	Name:	 	David Foil
	Title:	 	President
	
	WELLS TIMBERLAND REIT, INC., a Maryland corporation
		
	 By:
	 	/s/ Randall D. Fretz
	Name:	 	Randall D. Fretz
	Title:	 	Senior Vice President
	
	WELLS TIMBERLAND TRS, INC., a Delaware corporation
		
	 By:
	 	/s/ Randall D. Fretz
	Name:	 	Randall D. Fretz
	Title:	 	Senior Vice President
	
	WELLS REAL ESTATE FUNDS, INC., a Georgia corporation
		
	 By:
	 	/s/ Randall D. Fretz
	Name:	 	Randall D. Fretz
	Title:	 	Senior Vice President
	
	WELLS ADVISORY SERVICES I, LLC, a Georgia limited liability company
		
	 By:
	 	Wells Management Company, Inc., a Georgia corporation, its Managing Member
		
	 By:
	 	/s/ Randall D. Fretz
	Name:	 	Randall D. Fretz
	Title:	 	Vice President

			
	 ADMINISTRATIVE AGENT:
  
 WACHOVIA BANK, NATIONAL ASSOCIATION, as Administrative Agent

		
	 By:
	 	/s/ Brian Rubins
	Name:	 	Brian Rubins
	Title:	 	Director
	
	 LENDERS:
  
 WACHOVIA BANK, NATIONAL ASSOCIATION

		
	 By:
	 	/s/ Brian Rubins
	Name:	 	Brian Rubins
	Title:	 	DirectorEmployment Agreement, dated as of August 28, 2006

 Exhibit 10.35 
 EMPLOYMENT AGREEMENT 
 This Employment Agreement, (the “Agreement”)
made this the          day of                     , 2006, by and between The Bank Of Hampton Roads, a
banking corporation organized under the laws of the Commonwealth of Virginia (the “Bank” or “Employer”), with a principal address of 999 Waterside Drive, Suite 200, Norfolk, Virginia (23510), and Lorelle Fritsch
(the “Officer”), with an address of 1026 Copperstone Circle in the City/County of Chesapeake, in the State of Virginia (23320)(Zip Code). 
 W I T N E S S E T H: 
 WHEREAS, the Officer currently is rendering or desires to render
valuable services to the Employer and it is the desire of the Employer to have the benefit of the Officer’s continued and future loyalty, service and counsel; and 
 WHEREAS, the Officer wishes to continue or become in the employ of the Employer. 
 NOW,
THEREFORE, in consideration of the mutual covenants and agreements herein set forth, the parties covenant and agree as follows; 
 1.
Employment: The Employer agrees to continue to or employ the Officer to perform services for the Employer and the Officer agrees to continue to or serve the Employer upon the terms and conditions herein provided. The Officer agrees to
perform such managerial duties and responsibilities as shall be assigned to him or her by the Chief Executive Officer of the Employer, which duties and responsibilities, if Officer is presently employed by Employer, shall be substantially those
functions of the Officer on the date of this Agreement and the commencement date hereof. The Officer shall devote his or her time and attention on a full-time basis to the discharge of the duties undertaken by him or her hereunder. 
 2. Terms And Compensation: 
 (a) Term of Agreement. The term (the “Term”) of this Agreement shall
commence on that date (the “Commencement Date”) upon which the Compensation Committee of the Bank’s Board of Directors approves the Agreement or, if previously authorized by the Bank’s Board of Directors, the date upon
which Employer’s Chief Executive Officer acknowledges and accepts this Agreement for the Bank. Thereafter, the Agreement shall continue until the first to occur of (i) except as otherwise provided in Section 3 hereof, the end of the
sixtieth (60th) consecutive month following the Commencement Date, (ii) the Officer’s death, or (iii) except as provided in
Paragraph (d) of this Section 2, the Officer’s disability. Notwithstanding the foregoing, however, in the event the Officer is not informed by the Bank, in writing, prior to the last day of the sixtieth (60th) consecutive month following the Commencement Date of employment, or any subsequent renewal term, that this Agreement will not be renewed, this Agreement
will automatically renew itself for additional periods of sixty (60) months (each a “Renewal Term”) from the original anniversary date or, as the case may be, any Renewal Term. For purposes of this Agreement, the
“Term” shall include and refer to, as appropriate by the context, any Renewal Term. 
  

 1 

 (b) Compensation. During the term of employment hereunder, the Officer shall receive for
his or her services a base salary and incentive or bonus compensation in amounts determined by the (i) Bank’s Board of Directors, (ii) an appropriate committee of the Employer or (iii) the Bank’s Chief Executive Officer, in
accordance with the salary administration program of the Employer as the same may from time to time be in effect. 
 (c)
Benefits. The Officer shall be eligible for participation in any additional plans, programs or forms of compensation or benefits that the Employer’s Board of Directors might hereinafter provide to the class of employees that
includes the Officer. 
 (d) Disability. In the event of the physical or mental disability of the Officer by reason of which
the Officer is unable to perform the duties of his employment hereunder, the Employer shall continue to pay or provide to the Officer the compensation and benefits provided under Paragraphs (b) and (c) of this Section 2 for the first
six (6) months of such disability. If, however, the disability continues beyond such six-month period, the Employer may, at its election, terminate the Officer’s employment under this Agreement, in which case the Officer shall receive any
disability benefits payable the Employer’s plans in effect at that time. 
 (e) Death. In the event that the
Officer’s death should occur during the Term of this Agreement, this Agreement shall terminate and the Officer or his estate or beneficiaries, as the case may be, shall be entitled only to income earned but not yet paid as of the date of death
and any and all retirement or death benefits payable under the Employer’s plans in effect at that time and no further compensation will be paid under this Agreement. 
 3. Termination: 
 (a) Termination by the Employer. Nothing herein contained shall
prevent the Employer from terminating the services of the Officer at any time prior to the expiration of this Agreement “for good cause”. For purposes of this Agreement, “for good cause” means a dismissal of the Officer by
Employer because of (i) the material failure of the Officer, after written notice, for reasons other than disability, to render services to the Employer as provided herein; (ii) the Officer’s gross or willful neglect of duty, neglect
or refusal to perform all duties assigned to him or her, in good faith, under this Agreement or by Employer; (iii) imprudent financial management of Employer by the Officer which causes Employer an extraordinary or material loss not otherwise
authorized; (iv) conviction of or guilty plea to a felony or a crime involving moral turpitude; (v) habitual use of drugs or alcohol; (vi) conduct that adversely affects the Employer’s business reputation; (vi) the material
breach of this Agreement; (vii) material waste or misuse of assets of Employer; (viii) embezzlement, dishonesty, fraud or other similar acts reflecting adversely upon Officer’s honesty and integrity, (ix) illegal or intentional
acts by the Officer demonstrating bad faith toward the Employer, including, but not limited to, any conduct by Officer so as to permit, condone or acquiesce in any act or conduct of other persons, which could cause Employer, its parent or any of its
subsidiaries, to be in material violation of any law, statute or regulation, or (x) commission by Officer of any other act which the Bank, in its sole discretion, determines to have an adverse impact on its standing in the community or with its
customers, staff or shareholders. If the Employer shall terminate the Officer’s employment “for good cause”, the Officer shall be entitled only to receive his or her base salary in respect of services performed through the Date of
Termination. 
  

 2 

 (b) Termination by the Officer. 
 (i) The Officer shall be entitled to terminate his or her employment pursuant to this Agreement voluntarily at any time, provided,
however, that in the event the Officer terminates his or her employment pursuant to this Agreement for any reason other than “a change of control” as described below, then the Officer shall be entitled to no termination allowance and/or no
severance allowance and no further compensation after the “Date of Termination” as defined in part (d) of this Paragraph 3. 
 (ii) The Officer shall be entitled to terminate his or her employment pursuant to this Agreement if “a change of control” occurs with respect to the Bank, in which event the Employer shall be obligated to
pay the Officer and furnish him or her the benefits provided in Section 4 hereof. For purposes of this Agreement, the term “a change in control” shall mean (a) any “person” (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934) who is, or who has entered into a definite agreement with the Bank to become, the beneficial owner, directly or indirectly, of securities of the Bank representing more than 50% of the combined voting
power of the then outstanding securities of the Bank; or (b) a change in the composition of a majority of the Board of Directors of the Bank within twelve (12) months after any person (as defined above) is or becomes the beneficial owner,
directly or indirectly, of securities of the Bank representing 25% of the combined voting power of the then outstanding securities of the Bank. The right herein conferred upon the Officer to terminate his employment “for good reason” may
be exercised by the Officer at any time during the Term of this Agreement at his or her sole discretion, and any failure by the Officer to exercise this right after he or she has “good reason” to do so shall not be deemed a waiver of the
right. 
 (c) Notice of Termination. Any termination of the Officer’s employment by the Employer or by the Officer shall
be communicated by a written Notice of Termination to the other party hereto. For purposes of this Agreement, a “Notice of Termination” shall mean a written notice which shall indicate the specific termination provision(s) in this
Agreement relied upon and shall set forth in reasonable detail the facts and circumstances providing the basis for termination. 
 (d)
Date of Termination. The “Date of Termination” shall mean (i) if the Agreement is terminated by the Officer, the date on which the Notice of Termination is delivered to Employer, (ii) if the Agreement is terminated
by the Employer because of the Officer’s disability, thirty (30) days after the Notice of Termination is given, or (iii) if the Officer’s employment is terminated by the Employer for any other reason, the date on which a Notice
of Termination is given. 
 4. Compensation Upon Termination By Officer For A Change of Control Event. If the Officer
terminates his or her employment pursuant to Section 3(b)(ii) hereof then: 
 (a) Accrued But Unpaid Compensation. The
Employer shall pay the Officer’s full base salary through the Date of Termination at the rate then in effect and the amount, if any, of awards theretofore made which have not yet been paid. 
  

 3 

 (b) Severance Allowance. The Employer shall pay the Officer a severance allowance in sixty
(60) equal monthly payments commencing on the last day of the month in which the Date of Termination occurs, the total amount of which will equal and will not exceed the present value of three times (3x) the base amount minus $1.00 plus
the present value of any other payments in the nature of compensation within the meaning of Section 280G(b)(2)(A)(ii) of the Internal Revenue Code of 1954, as amended (the “Code”). 
 For purposes of this Paragraph 4(b), the following definitions shall apply: 
 (i) Base Amount - The term “base amount” means the Officer’s average annualized includible compensation for the base
period. 
 (ii) Annualized Includible Compensation for the Base Period - The term “annualized includible compensation for
the base period” means the average annual compensation paid by the Bank, which was includible in the gross income of the officer for federal income tax purposes for taxable years in the base period. 
 (iii) Base Period - The term “base period” means the period consisting of the most recent three (3) taxable years ending
before the date on which termination occurs, except for termination as a result of the operation of Paragraph 3(b) above in which case the date of termination shall be deemed to be the date a change in control occurs with respect to the Bank.

 (iv) Present Value - Present value shall be determined in accordance with Section 1274(b)(2) of the Code. 

(c) Employee Benefits. The Employer shall maintain in full force and effect, for the Officer’s continued benefit until the earlier
of the third (3rd) anniversary of the Date of Termination or the date the Officer becomes a participant in similar plans, programs or arrangements provided by a subsequent employer, all life, accident, medical and dental insurance benefit plans
and programs or arrangements in which the Officer was entitled to participate immediately prior to the Date of Termination, provided that the Officer’s continued participation is possible under the general terms and provisions of such plans and
programs. In the event that the Officer’s participation in any such plan or program is barred, the Employer shall arrange to provide the Officer with benefits substantially similar to those which the Officer is entitled to receive under such
plans and programs. At the end of the period of coverage, the Officer shall have the option to have assigned to him or her at no cost and with no apportionment of prepaid premiums, any assignable insurance policy owned by the Employer and relating
specifically to the Officer. 
 (d) No Duty to Mitigate. The Officer shall not be required to mitigate the amount of any
payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment provided for in this Section 4 be reduced by any compensation earned by the Officer as the result of employment by another
employer after the Date of Termination, or otherwise. 
 5. Return of Bank’s Property. When the Officer’s employment
with the Bank ends, the Officer agrees to immediately deliver to the Bank (i) all documents, including, but not limited to, address and telephone records of customers, listings of customer names and/or account numbers, and any telephone records
of customers, listings of customer names and/or account numbers, and any 

  

 4 

 
other items or records in the Officer’s possession, or subsequently coming into the Officer’s possession pertaining to the business of the Bank,
including without limitation, confidential and proprietary information which the Officer would not possess but for his employment relationship with the Bank and (ii) any tangible personal property of the Bank or provided by the Bank to Officer,
including, but not limited to, computer(s) and related peripherals, laptops, automobiles, cellular telephones, access cards and credit cards. 
 6. Prohibition of Competitive Activities. Except upon the termination of this Agreement by the Officer pursuant to Section 3(b)(ii) hereof, then: 
 (a) During the Officer’s employment with the Bank and for a period of two (2) years following the Officer’s termination or the expiration
of this Agreement, the Officer agrees that he/she will not on his/her own behalf, or on behalf of any other person or entity, solicit, divert, take away, or attempt to solicit, divert, or take away the business or patronage of any client or customer
of the Bank or from the Bank to any other individual, entity or institution providing banking, lending or similar financial services as those provided by the Bank as of the Date of Termination. 
 (b) During the Officer’s employment with the Bank and following termination of employment with the Bank pursuant to this Agreement, the Officer will
preserve the confidentiality of, and will not reveal for any reason, or use to the detriment of the Bank, trade secrets, or other confidential, business, or proprietary information which the Officer has received in the course of the Officer’s
employment with the Bank. 
 (c) During the period of the Officer’s employment and for a period of two (2) years after employment
ends, the Officer agrees that he/she will not on his/her own behalf or on behalf of any person or entity, in any capacity, solicit, recruit or hire or assist others in soliciting, recruiting or hiring any person who is currently or was during the
preceding twelve (12) months prior to the Officer’s termination of employment with the Bank, an employee or officer with the Bank. 
 Subsections (a), (b) and (c) of this Section 6 are intended by the parties hereto as separate and divisible provisions, and if for any reason either one is held to be invalid or unenforceable, neither the validity nor the
enforceability of the other shall thereby be affected. If any court holds that the whole or any part of Subsections (a), (b) and (c) is unenforceable by reason of the extent, duration or geographic scope thereof, or otherwise, then the
court making such determination shall have the right to reduce such extent, duration, geographic scope, or other provisions hereof and in its reduced form such Section shall be enforceable in the manner contemplated hereby. 
 7. Notice of Subsequent Employment. For a period of two (2) years after the Officer’s employment with the Bank ends, the Officer
agrees to notify the Bank of the name and address of the Officer’s employer and the Officer hereby authorizes the Bank to contact any such employer during that period for the limited purpose of making the employer aware of this Agreement and
protection against any disclosure of confidential and proprietary information, or unfair competition. 
 8. Remedies. The
Officer acknowledges that if he/she breaches or threatens to breach this Agreement, in addition to any and all other rights and remedies it may have, the Bank shall be entitled to injunctive relief, both pendente lite and permanent, against the
Officer, as the Officer recognizes 

  

 5 

 
that a remedy at law would be inadequate and insufficient. The Bank shall be entitled to recover from the Officer all costs and expenses, including but not
limited to reasonable attorney’s fees and court costs, incurred by the Bank as a result of or arising out of any breach of threatened breach under or pursuant to this Agreement in addition to such other rights and remedies as the Bank may have
under this Agreement or any other agreement, at law or in equity. 
 9. Section 4999 Gross-Up Payment. In the event it
shall be determined that any payments and benefits called for under the Agreement and any Amendments thereto, together with any other payments and benefits (whether paid or payable or distributed or distributable pursuant to the terms of this
Agreement or otherwise, but determined without regard to any additional payments required under this Agreement (a “Payment”) would be subject to the excise tax imposed under Section 4999 of the Code, or any successor statute,
or any interest or penalties are incurred by the Officer with respect to such excise tax (collectively, the “Excise Tax”), then the Officer shall be entitled to receive an additional payment (a “Gross-Up Payment”)
in an amount such that after payment by the Officer of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Gross-Up Payment, the Officer retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the payments. 
 (a) Gross-Up Determination. Subject to the provision of Subsection (b) herein, all determinations required to be made under this Agreement, including whether and when a Gross-Up Payment is required
and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by KPMG LLP or such other independent certified accounting firm (the “Accounting Firm”) selected by mutual
consent of the Bank and the Officer, which shall provide detailed supporting calculations both to the Bank and the Officer within fifteen (15) business days of the receipt of notice from the Officer that there has been a Payment, or such
earlier time as is requested by the Bank. The calculations under this Agreement will be made in a manner consistent with the requirements of Code Sections 280G and 4999 and any applicable related regulations and any related Internal Revenue Service
rulings. All fees and expenses of the Accounting Firm for such determination shall be borne solely by the Bank. Any determination by the Accounting Firm shall be binding upon the Bank and the Officer. Any Gross-Up Payment, as determined pursuant to
this Agreement shall be paid by the Bank to the Officer within five (5) days of the receipt of determination by the Accounting Firm that such payment is due. If it is determined that no Excise Tax is payable to the Officer, it shall so indicate
to the Officer in writing. 
 (b) Notification to Bank. The Officer shall notify the Bank in writing of any claim by the
Internal Revenue Service that, if successful, would require the payment by the Bank of the Gross-Up Payment. Such notice shall be given as soon as practicable but no later than ten (10) business days after the Officer is informed in writing of
such claim and said notice shall advise the Bank of the nature of such claim and the date on which such claim is requested to be paid. The Officer shall not pay such claim prior to the expiration of the 30-day period following the date on which it
gives such notice to the Bank (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Bank notifies the Officer in writing prior to the expiration of such period that it desires to contest such
claim, the Officer shall: 
 (i) give the Bank any information reasonably requested by the Bank relating to such claim,

  

 6 

 (ii) take such action in connection with contesting such claim as the Bank shall
reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonable selected by the Bank, 
 (iii) cooperate with the Bank in good faith in order to effectively contest such claim; and 
 (iv) permit the Bank to participate in any proceedings relating to such claim; 
 provided, however, that the Bank shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection
with any contest of a claim for payment of the Excise Taxes and the Bank shall indemnify and hold the Officer harmless, on an after tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a
result of such representation and payment of costs and expenses. 
 Without limitation on the foregoing provisions of this Agreement, the Bank shall control
all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole
option, either direct the Officer to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Officer agrees to prosecute such contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Bank shall determine; provided, however, that if the Bank directs the Officer to pay such claim and sue for a refund, the Bank shall advance the amount of such payment to the Officer,
on an interest-free basis and shall indemnify and hold the Officer harmless, on an after-tax-basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any
imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Officer with respect to which such contested amount is claimed to be due is
limited solely to such contested amount. Furthermore, the Bank’s control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Officer shall be entitled to settle or contest, as
the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. 
 (c) Underpayment of Gross-Up
Payment. In the event there is an underpayment of the Gross-Up Payment due to the uncertainty in the application of Section 4999 of the Code at the time of the initial determination the Accounting Firm, and the Officer thereafter is
required to make a payment of any Excise Tax, the Accounting Firm will determine the amount of any such underpayment that has occurred and such amount will be promptly paid by the Bank to or for the benefit of the Officer. 
 (d) Refund of Gross-Up Payment. If, after the receipt by the Officer of an amount advanced by the Bank pursuant to this Agreement, the
Officer becomes entitled to receive any refund with respect to such claim, the Officer shall [subject to the Bank’s complying with the requirements of Subsection (b) above], promptly pay to the Bank the amount of such refund (together with
any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Officer of an amount advanced by the Bank pursuant to Subsection (b) above, a determination is made that the Officer shall not be entitled to
any refund with respect to such 

  

 7 

 
claim and the Bank does not notify the Officer in writing of its intent to contest such denial of refund prior to the expiration of thirty (30) days
after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 
 10. Litigation Expenses 
 (a)
The Bank agrees to pay promptly as incurred, to the full extent permitted by law, all the legal fees and expenses which the Officer may reasonably incur as a result of any contest (regardless of the outcome thereof unless a court of competent
jurisdiction determines that the Officer acted in bad faith in initiating the contest) by the Bank, the Officer or others of the validity or enforceability of, or liability under, any provision of the Employment Agreement or Amendments thereto, or
any guarantee of performance thereof (including as a result of any contest by the Officer about the amount of any payment pursuant to the Agreement or its Amendments), plus in each case interest on any delayed payment at the applicable Federal rate
provided for in Code Section 7872(f)(2)(A); provided however, that the reasonableness of the fees and expenses must be determined by an independent arbitrator, using standard legal principles, mutually agreed upon by the Bank and the Officer in
accordance with rules set forth by the American Arbitration Association. 
 (b) If there is any dispute between the Bank and the Officer in
the event of any termination of the Officer’s employment by the Bank or by the Officer, then unless and until there is a final, nonappealable judgment by a court of competent jurisdiction declaring that the Officer is not entitled to benefits
under the Agreement and Amendments thereto, the Bank will pay all amounts, and provide all benefits to the Officer and/or the Officer’s family or other beneficiaries, as the case may be, that the Bank would be required to pay or provide
pursuant to the Agreement and its Amendments. The Bank will not be required to pay any disputed amounts pursuant to this paragraph except upon receipt of an undertaking (which may be unsecured) by or on behalf of the Officer to repay all such
amounts to which the Officer is ultimately adjudged by such court not to be entitled. 
 11. Miscellaneous: 
 (a) Waiver. A waiver by any party of any of the terms and conditions of this Agreement in any instance shall not be deemed or construed to
be a waiver of such terms and conditions for the future, or of any subsequent breach thereof. 
 (b) Severability. If any
provision of this Agreement, as applied to any circumstances, shall be adjudged by a court to be void and unenforceable, the same shall in no way affect any other provision of this Agreement or the applicability of such provision to any other
circumstances. 
 (c) Amendment. This Agreement may not be varied, altered, modified, changed, or in any way amended except by
an instrument in writing, executed by the parties hereto or their legal representatives. 
 (d) Nonassignability of Payments.
Neither the Officer nor his estate shall have any right to commute, sell, assign, transfer or otherwise convey the right to receive any payments hereunder, which payments and the right thereto are expressly declared to be nonassignable and
nontransferable. 
  

 8 

 (e) Binding Effect. This Agreement shall be binding upon and inure to the benefit of the
Officer (and his personal representative), the Bank and any successor organization or organizations which shall succeed to substantially all of the business and property of the Bank, whether by means of merger, consolidation, acquisition of all or
substantially all of the assets of the Bank or otherwise, including by operation of law. 
 (f) Governing Law. This Agreement
shall be governed by and construed in accordance with the Laws of the Commonwealth of Virginia, whether statutory or decisional, applicable to agreements made and entirely to be performed within such state and such provisions of federal law as may
be applicable. Venue for any dispute arising hereunder shall lie exclusively in the state or federal courts located in or having jurisdiction over the City of Norfolk, Virginia. 
 (g) Assignment. Officer shall not have the right to transfer or assign any or all of his or her rights or interest hereunder. Pursuant to
the provisions of Section 3(b) hereof, Officer agrees that should Employer convey all or substantially all of Employer’s assets to a third-party, which assets include this Agreement, that Employer may assign this Agreement to such
third-party without the prior consent of Officer, and, further, that such assignment shall be deemed to be undertaken with Officer’s consent with regard to the third-party. 
 (h) Background, Enumerations and Headings. The Background, enumerations and headings contained in this Agreement are for convenience of
reference only and are not intended to have any substantive significance in interpreting this Agreement. 
 (i) Gender and
Number. Unless the context otherwise requires, whenever used in this Agreement the singular shall include the plural, the plural shall include the singular, and the masculine gender shall include neuter or feminine gender and vice versa.

 (j) Dispute Resolution. If a dispute arises out of or relates to this Agreement or the breach thereof, such dispute shall
first be submitted to the Personnel Committee for the Bank’s Board of Directors for resolution whose decision shall be final. 
 [Signatures Follow Next Page] 
  

 9 

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

  

					
	The Bank of Hampton Roads,	 	
	a Virginia banking corporation	 	
			
	By	 	 /s/ Jack W. Gibson
	 	(SEAL)

					
			
	Print Name:	 	 Jack W. Gibson
	 	

					
			
	Title:	 	 President & CEO
	 	
			
	Date:	 	  
	 	

					
	
	Officer:
		
	 /s/ Lorelle Fritsch
	 	(SEAL)
			
	Print Name:	 	 Lorelle Fritsch
	 	

  

 10

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