8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): June 10, 2008

Hampton Roads Bankshares, Inc.

(Exact name of registrant as specified in its charter)

Virginia (State or other jurisdiction of incorporation)	001-32968 (Commission File Number)		54-2053718 (I.R.S. Employer Identification No.)
999 Waterside Drive, Suite 200 Norfolk, Virginia (Address of principal executive offices)		23510 (Zip Code)

Registrant’s telephone number, including area code: (757) 217-1000

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item5.02.          Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers; Compensatory Arrangements of Certain Officers.

Election of Directors

In connection with the acquisition of Shore Financial Corporation (“SFC”) by Hampton Roads Bankshares, Inc. (the “Company”), on June 10, 2008 the Company’s Board of Directors increased its size from 10 members to 13 members and, as provided for in the merger agreement, elected Henry P. Custis, Jr., Scott C. Harvard and Richard F. Hall, III (collectively, the “New Directors”), formerly members of the SFC board of directors, to the Board of Directors of the Company. Each of the New Directors was appointed to the class of directors whose term expires in 2009.

Election of Officer

On June 10, 2008 the Company’s Board of Directors elected Scott C. Harvard Executive Vice President for Delmarva Operations.

Employment Agreements

Upon the closing of the acquisition of SFC, the Company and Shore Bank, the Company’s wholly owned subsidiary, entered into an employment agreement with Scott C. Harvard. The agreement has a term of sixty (60) months with an initial base salary of $250,000. Mr. Harvard received a retention bonus of $644,000 in cash and deferred compensation. The agreement provides for certain payments under specified circumstances including a change in control of the Company. The agreement restricts Mr. Harvard from employment that competes with Shore Bank for one year following termination of employment. In addition he is restricted from the solicitation of business of Shore Bank’s customers and solicitation of employment of Shore Bank’s employees for a period of one year following termination of employment. The agreement further prohibits the disclosure of proprietary information. In addition, the Company entered into a restrictive covenant agreement with Mr. Harvard that restricts Mr. Harvard from employment that competes with the Company and any of its affiliates for a period of time specified in the covenant. Mr. Harvard received $175,000 in compensation for entering into the covenant.

The above summaries of Mr. Harvard’s employment agreement and restrictive covenant agreement are qualified in their entirety by the full text of such documents, which are attached hereto as Exhibits 10.1 and 10.2 respectively and incorporated by reference herein.

Shore Bank entered into a deferred compensation agreement with Mr. Harvard. Under the terms of the arrangement $400,000 of Mr. Harvard’s retention bonus was deferred. Future deferral amounts will be calculated based upon the performance, as defined in the agreement, of Shore Bank. Payments under the deferred compensation agreement will begin at the earlier of ten years from the date of the agreement or the date on which Mr. Harvard’s employment with Shore Bank and its affiliates ceases.

The above summary of Mr. Harvard’s deferred compensation agreement is qualified in its entirety by the full text of such document, which is attached hereto as Exhibit 10.3 and incorporated by reference herein.

Item 9.01. Financial Statements and Exhibits.

(a)         Financial Statements of Businesses Acquired. The Company intends to file by amendment to this Form 8-K the required audited historical financial statements with respect to the acquisition of SFC within the time period as calculated in accordance with Item 9.01(a)(4).

(b)         Pro Forma Financial Information. The Company intends to file by amendment to this Form 8-K the pro forma financial information with respect to the acquisition of SFC within the time period as calculated in accordance with Item 9.01(b)(2).

(d) Exhibits.

Exhibit No. Description

10.1 Employment Agreement by and between Shore Bank, Scott C. Harvard and the Company.

10.2 Restrictive Covenant Agreement by and between Scott C. Harvard and the Company.

10.3 Deferred Compensation Agreement by and between Shore Bank and Scott C. Harvard.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Hampton Roads Bankshares, Inc.
Date: June 16, 2008	By:	/s/ Jack W. Gibson
		Jack W. Gibson
		Vice Chairman, President and Chief Executive Officer

EXHIBIT INDEX

Exhibit No.	Description
10.1	Employment Agreement by and between Shore Bank, Scott C. Harvard and the Company.
10.2	Restrictive Covenant Agreement by and between Scott C. Harvard and the Company.
10.3	Deferred Compensation Agreement by and between Shore Bank and Scott C. Harvard.

EX-10

Exhibit 10.1

EMPLOYMENT AGREEMENT

This Employment Agreement, (the "Agreement"), made this the 1^st day of June, 2008, by and between Shore Bank, a banking corporation organized under the laws of the Commonwealth of Virginia (the "Bank" or "Employer"), with a principal address of 25020 Shore Parkway, Onley, Virginia (23418), and Scott C. Harvard (the "Officer"), with an address of ____________, ____, Virginia (____), and to which Hampton Roads Bankshares, Inc., a Virginia corporation and the proposed parent company of the Employer (“HRB”), is made a party.

WITNESSETH:

WHEREAS, this Agreement is entered into by the Bank as a condition of the closing of that certain Agreement and Plan of Merger (the “Merger Agreement”) dated January 8, 2008, by and between HRB and Shore Financial Corporation, a Virginia corporation, (“SFC”), pursuant to which Merger Agreement the Bank will become a wholly owned subsidiary of HRB and, further, Officer is being directly and materially benefited as an equity holder and executive of SFC and through this Agreement with the Bank;

WHEREAS, the Officer currently is rendering or desires to render valuable services to the Employer and and HRB and it is the desire of the Employer and HRB to have the benefit of the Officer's continued and future loyalty, service and counsel;

WHEREAS, Employer is engaged in the business of banking and Officer has particular and peculiar knowledge and background in the operation of a business of this nature; and

WHEREAS, the Officer wishes to continue 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 employ the Officer, and the Officer agrees to continue to or serve the Employer, as the Bank’s President and Chief Executive Officer, upon the terms and conditions herein provided. As of the Commencement Date (as defined below) or as soon thereafter as HRB’s Board of Directors shall meet, the Officer will also be elected as the Executive Vice President for DelMarVa Operations for HRB and serve as an executive officer of HRB in that position as HRB is currently structured. For purposes of this Agreement, “DelMarVa” shall be defined as the geographic area encompassing parts of Delaware, Maryland and Virginia generally known as the DelMarVa Peninsula. The Officer agrees to perform such managerial duties and responsibilities as shall be assigned to him by Employer’s Board of Directors (the “Board”) and/or the President and/or Chief Executive Officer of HRB; provided, however, as HRB is currently structured, the Officer will report to HRB’s Chief Executive Officer. The Officer shall devote his time and attention on a full-time basis to the discharge of the duties undertaken by him hereunder; provided, however, that the Officer may (i) continue to serve on the Board of the Federal Home Loan Bank of Atlanta for so long as Officer is elected or re-elected to such position and (ii) serve on the boards of directors of other companies with the prior consent of the Board.

2. Terms and Compensation.

(a)Term of Agreement. The term (the “Term”) of this Agreement shall commence on the date (the “Commencement Date”) of the closing of the Merger Agreement. On the Commencement Date, the Officer’s certain Amended and Restated Employment Agreement dated December 14, 1999, with SFC and certain Management Continuity Agreement dated December 14, 1999, with SFC shall both terminate and be superseded and replaced with this Agreement. 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 (60^th) consecutive full 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 forty-eighth (48th) consecutive full 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.

(b)Compensation. Officer shall be paid an annual base salary of not less than $250,000 (“Base Salary”), payable in accordance with the Bank’s normal payroll practices. Any increases or adjustments in Officer’s annual Base Salary shall be in the sole discretion of the Board.

(c)Benefits. The Officer shall be eligible for participation in any additional plans, programs or forms of compensation or benefits that the Bank might provide from time to time to the class of employees that includes the Officer, or, as allowed, for the Officer solely, which benefit plans currently or may include: (i) the Bank’s 401K Retirement Program subject to normal Internal Revenue Service guidelines with respect to the maximum amount of participation; (ii) a non contributory profit sharing plan where a discretionary contribution made by the Bank on behalf of its personnel is allocated based upon IRS allocations for profit sharing plans necessary to insure that it remains a qualified retirement account in accordance with ERISA guidelines; and (iii) a deferred compensation arrangement described in subsection 2(d) below. In addition, it is the intent of HRB to have Shore Bank, subject to the approval of the Shore Bank’s Board of Directors, establish an executive savings plan for Shore Bank employees, including the Officer, on, or as soon as practicable after, the Commencement Date, that provides benefits similar to the executive savings plan currently maintained by Bank of Hampton Roads. The benefits, rights and obligations of the Officer under the various plans or arrangements set forth above or in this Agreement shall be exclusively governed by the respective plans or governing documents as they may be amended or established from time to time in the event of any conflict with this Agreement.

(d)Retention Bonus; Deferred Compensation Arrangement. On the Commencement Date, $244,000 shall be paid to Officer as a retention bonus. In addition, on the earlier of ten years from the Commencement Date or the date on which Officer's employment by the Bank and its affiliates ceases for whatever reason, the Officer shall be paid $400,000 pursuant to a deferred compensation arrangement that will offer investment options that will be as substantially similar as possible to the investment options to be made available under the Bank’s proposed executive savings plan, plus any additional amounts described in the next sentence. While the Officer is employed by the Bank or its affiliates, the Bank will accrue the

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following additional amounts for the benefit of Officer as of last day of each calendar year beginning December 31, 2009 and ending December 31, 2018: (i) if the Bank’s year-over-year net income under GAAP for such calendar year increases by 10% or more, $100,000, or (ii) if Bank’s year-over-year net income under GAAP for such calendar year increases, but such increase is less than 10%, $25,000, including, in either case, earnings on such amounts beginning on or about December 31^st of each year that an award is made based on the investment options that will be as substantially similar as possible to the investment options to be made available under the Bank’s proposed executive savings plan. For purposes of clarity, calculations for 2008 shall be inclusive of expenses related to the merger of HRB and SFC.

(e)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 may be entitled to receive disability benefits, if any, available to the Officer under the Employer’s plans in effect at that time.

(f)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.

(g)Automobile.    During the Term, the Bank will provide Officer with the use of a vehicle which Officer may choose and select within a reasonable budget established by the Board. All fuel, insurance and maintenance shall be paid for by the Bank pursuant to the Bank’s Automobile Policy as adopted by the Board.

(h)Vacation.    The Officer will be entitled to paid vacation days in accordance with the Bank’s vacation policy for senior executive officers as adopted by the Board but in no event less than 20 days.

(i)Insurance and other Expenses.    The Bank will provide Officer with health insurance, dental insurance and life insurance coverage as are provided to the class of employees that includes the Officer, as well as the necessary tools to perform Officer’s duties as an executive officer of the Bank, including, but not limited to, reimbursement (aa) for the Officer’s current cellular phone plan or participation in the Bank’s cell phone plan, (bb) current and customary dues and related expenses at the Eastern Shore Yacht & Country Club, and (cc) dues for necessary civic organizations which Officer may join and are used or designed to further enhance Officer’s opportunity to conduct the business of the Bank, subject to approval by the Board.

(j)Stock Options. Officer shall be eligible to participate in HRB’s current stock option program (including the Bank’s current stock option program as may be assumed by HRB as of the Commencement Date) and any future stock option program as may be adopted from time to time by HRB, subject at all times to a determination by the HRB Board of Directors to include the Officer in any stock option program. In addition to stock options that will arise or as are granted during Officer’s employment period, on the Commencement Date, HRB will issue to the Officer (i) incentive

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stock options for 8,000 shares of HRB common stock and (ii) non-statutory stock options for 10,000 shares of HRB common stock, with the exercise price of each option being equal to the fair market value of HRB common stock on the date of grant. Such options shall vest over five (5) years and be subject to the stock incentive plan as adopted by HRB’s Board of Directors and shareholders in effect at the time of issuance.

(k)Incentive for Future Bank Acquisitions. During the course of Officer’s employment by the Bank, if, through the substantial efforts of and participation by Officer, either HRB or the Bank acquires another bank or related financial institution, then, within thirty (30) days subsequent to the closing of any such transaction, HRB will issue to the Officer incentive stock options for 5,000 shares of HRB common stock, with the exercise price of each option being equal to the fair market value of HRB common stock on the date of grant. Such options shall vest over five (5) years and be subject to the stock incentive plan as adopted by HRB’s Board of Directors and shareholders in effect at the time of issuance.

(l)Termination of Compensation and Benefits. The foregoing compensation, benefits, and other arrangements described in this Section 2 shall cease when Officer is no longer employed by Employer for any reason or upon termination of this Agreement.

3. Termination of Employment.

(a)Termination by the Employer.    Officer’s employment with the Bank may be terminated by the Bank in accordance with the following provisions:

(i)The Bank may, at any time, terminate Officer’s employment for “good cause” (as defined below). If such termination is for good cause, then the Officer shall be entitled only to receive his base salary in respect of services performed through the Date of Termination and the compensation and benefits of the Officer will cease as of the Date of Termination as defined in Paragraph 3(d). For purposes of this Agreement, “good cause” means a dismissal of the Officer by Employer because of (i) the material failure of the Officer, 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, in good faith, under this Agreement or by Employer; (iii) imprudent financial management of Employer by the Officer not otherwise authorized which causes Employer an extraordinary or material loss; (iv) conviction of or guilty plea to a felony or a crime involving moral turpitude; (v) illegal use of drugs or alcohol; (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 causes a material adverse impact on the Bank’s standing in the community or with its customers, staff or shareholders, including, but not limited to, if Officer is suspended and/or temporarily prohibited from participating in the conduct of the Employer’s business by any regulatory authority governing Employer’s business.

(ii)The Bank may, at any time, terminate Officer’s employment without “good cause” (as defined above). If such termination is without good cause then Employer shall pay the Officer a termination allowance in not more than twelve (12) equal

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monthly payments commencing on the last day of the month in which the date of actual termination occurs, the total amount of which will equal the Officer’s Base Salary, but not including any bonuses, exclusive of any payments made pursuant to Section 2(e), paid to the Officer by Employer in the twelve (12) months preceding the Notice of Termination. Except as provided in this paragraph, upon the termination herein described, the compensation and benefits of the Officer will cease as of the Date of Termination as defined in Paragraph 3(d).

(iii)If Officer’s employment is terminated by the Bank without good cause and such termination occurs within one (1) year after a “Change in Control” of Employer’s Parent Company (as such terms are defined below) then the provisions of Paragraph 4 shall govern the compensation or benefits owed to the Officer upon the Officer’s termination.

(b)Termination by the Officer.  Officer’s employment with the Bank may be terminated by the Officer in accordance with the following provisions: 

(i)The Officer shall be entitled to terminate his employment pursuant to this Agreement voluntarily at any time, provided, however, that in the event the Officer terminates his employment pursuant to this Agreement without “good reason” (as defined below) or other than in connection with a “Change in Control” as described below, then the Officer shall be entitled to no termination allowance and/or no severance allowance and no further compensation or benefits after the "Date of Termination" as defined in part (d) of this Paragraph 3.

(ii)The Officer may terminate his employment for good reason and will be entitled in such event to the payments and other benefits provided in Paragraph 3(a)(ii) in the event of a termination of the Officer’s employment without good cause. For purposes of this Agreement, “good reason” shall mean: (aa) the continued assignment to the Officer of duties inconsistent with the Officer’s position, duty and responsibilities with Employer as of the Commencement Date to which the Officer objects, in writing; (bb) the relocation of the Officer to a primary place of employment which might require the Officer to move his residence which, for this purpose, includes any reassignment to a place or employment located more than thirty-five (35) miles from Onley, Virginia, without Officer’s express written consent to such relocation; or (cc) any failure by Employer or HRB, or any successor entity following a “Change of Control” (as defined below), to comply with the provisions of Section 2 or other material term of this Agreement. Notwithstanding the foregoing, “good reason” shall not include any resignation by the Officer where good cause exists for the Officer’s termination by the Employer or an isolated, insubstantial, immaterial and/or inadvertent action not taken in bad faith by the Employer or HRB and which is remedied within a reasonable time after receipt of notice thereof given by the Officer.

(iii)The Officer shall be entitled to terminate his employment pursuant to this Agreement within six (6) months after the occurrence of a “Change in Control” with respect to HRB, its successor’s or assigns, (Employer’s “Parent Company”), in which case Employer shall be obligated to pay the Officer and furnish him the benefits provided in Section 4 hereof. For purposes of this Agreement, a Change in Control shall be defined as (a) the date that any one person, or more than one person, acting as a group, acquires ownership of stock of the Parent Company that, together with stock held by such person or group constitutes more than 50% of the total fair market value or total voting power of the stock of the Parent Company, (b) the date any one person, or more than one person, acting as a group, acquires (or has acquired

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ownership during the 12 month period ending on the date of the most recent acquisition by such person) ownership of stock of the Parent Company possessing 30% or more of the total voting power of the stock, or (c) the date a majority of the members of the Parent Company’s Board is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the Parent Company’s Board before the date of the appointment or election.

(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 for a Change in Control Event. If the Officer’s employment is terminated by the Bank in accordance with Section 3(a)(iii) or the Officer terminates his employment pursuant to Section 3(b)(iii) 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.

(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 2.99 times (2.99x) the base amount.

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 Employer, 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 the Change of Control occurs.

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

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(c)Incentive Plans.   The Employer shall pay such other amounts to which the Officer is entitled according to the terms of the incentive plans, equity plans, supplemental retirement plans, etc., in which the Officer participates.

(d)Employee Benefits.    The Employer shall maintain in full force and effect, for the Officer's continued benefit until the earlier of the first (1st) 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 at no cost and with no apportionment of prepaid premiums, any assignable insurance policy owned by the Employer and relating specifically to the Officer.

(e)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 Property. When the Officer's employment with the Bank ends, the Officer shall immediately deliver to the Bank all of its property, including, but not limited to (i) all documents and copies of such documents whether in hard copy or electronic format, 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 other items or records in the Officer's possession, or subsequently coming into the Officer's possession pertaining to the business of Employer, including without limitation, confidential and proprietary information which the Officer would not possess but for his or her employment relationship with Employer and (ii) any tangible personal property of Employer or provided by Employer to Officer, including, but not limited to, computer(s) and related peripherals, laptops, automobiles, cellular telephones, access cards and credit cards.

6. Prohibition of Certain Activities.

(a)During the Officer's employment with the Bank and for a period of one (1) year following the date Officer's employment with the Bank ends, the Officer will not, directly or indirectly, either as a principal, agent, employee, employer, stockholder, partner or in any other individual or representative capacity whatsoever, engage in a position where Officer is engaged in the process of providing services or products that compete with the services or products the Bank provided at any time during the last year of Officer’s employment with the Bank. This restriction shall only apply within a twenty-five (25) mile radius of any office or branch operated by the Bank on the date Officer’s employment with the Bank ends.

(b)During the Officer's employment with the Bank and for a period of one (1) year following the later of (i) the date Officer's employment with the Bank ends or (ii) the date Officer ceases to receive any payment from the Bank pursuant to this Agreement (except as provided below), Officer will

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not solicit, or assist any person or entity to solicit, any person or entity who, during the six (6) month period prior to the date Officer’s employment with the Bank ends, paid or engaged the Bank for products or services, for the purpose of providing services or selling products where those services or products compete with the services or products offered by the Bank as of the date Officer’s employment with the Bank ends. If Officer’s employment with the Bank is terminated pursuant to sections 3(a)(iii) or 3(b)(iii) of this Agreement, the duration of the restriction set forth in this section 6(b) shall be one (1) year from the date Officer’s employment with the Bank ends.

(c)During the Officer's employment with the Bank and for a period of one (1) year following the later of (i) the date Officer’s employment with the Bank ends or (ii) the date Officer ceases to receive any payment from the Bank pursuant to this Agreement (except as provided below), the Officer agrees that he will not on his 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 Employer, an employee or officer with Employer, Employer’s subsidiaries or Employer’s Parent Company. If Officer’s employment with the Bank is terminated pursuant to sections 3(a)(iii) or 3(b)(iii) of this Agreement, the duration of the restriction set forth in this section 6(c) shall be one (1) year from the date Officer’s employment with the Bank ends.

(d)During the Officer's employment with the Bank, and at all times thereafter, Officer agrees not to disclose, communicate or divulge to any third party, or use, or permit others to use, any confidential information of the Bank. For purposes of this Agreement, “confidential information” shall mean all information disclosed to Officer, or known to Officer as a consequence of or through Officer’s employment with the Bank, where such information is not generally known by the public or was regarded or treated as proprietary by the Bank.

Subsections (a), (b), (c), and (d) 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), (c), and (d) 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 which is the later of one (1) year (i) after the Officer's employment with Employer ends or (ii) the date Officer ceases to receive any payment from the Bank pursuant to this Agreement (except as provided below), the Officer agrees to notify Employer of the name and address of the Officer's employer and the Officer hereby authorizes Employer 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. If Officer’s employment with the Bank is terminated pursuant to sections 3(a)(iii) or 3(b)(iii) of this Agreement, the duration of the restriction set forth in this section 7 shall be one (1) year from the date Officer’s employment with the Bank ends.

8.Remedies. The Officer acknowledges that if Officer breaches or threatens to breach this Agreement, in addition to any and all other rights and remedies it may have, Employer shall be entitled to injunctive relief, both pendente lite and permanent, against the Officer, as the Officer recognizes that a remedy at law would be inadequate and insufficient.

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Employer 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 Employer 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 Employer 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 Employer’s external accounting firm or such other independent certified accounting firm (the "Accounting Firm") selected by mutual consent of Employer and the Officer, which shall provide detailed supporting calculations both to Employer 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 Employer. 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 Employer. Any determination by the Accounting Firm shall be binding upon Employer and the Officer. Any Gross-Up Payment, as determined pursuant to this Agreement shall be paid by Employer to the Officer within five (5) days of the receipt of determination by the Accounting Firm that such payment is due; provided, however, that all gross-up payments must be paid no later than the end of the calendar year in which the Officer remits the related taxes. 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 Employer. The Officer shall notify Employer in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by Employer 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 Employer 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 Employer (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If Employer notifies the Officer in writing prior to the expiration of such period that it desires to contest such claim, the Officer shall:

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(i) give Employer any information reasonably requested relating to such claim,

(ii) take such action in connection with contesting such claim as Employer 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 Employer,

(iii) cooperate with Employer in good faith in order to effectively contest such claim; and

(iv) permit Employer to participate in any proceedings relating to such claim;

provided, however, that Employer 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 Employer 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, Employer 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 Employer shall determine; provided, however, that if Employer directs the Officer to pay such claim and sue for a refund, Employer 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, Employer'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 Employment 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 Employer pursuant to this Agreement, the Officer becomes entitled to receive any refund with respect to such claim, the Officer shall subject to Employer's complying

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with the requirements of Subsection (b) above, promptly pay to Employer 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 Employer pursuant to Subsection (b) above, a determination is made that the Officer shall not be entitled to any refund with respect to such claim and Employer 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.Specified Employee.If Officer is a Specified Employee on his separation from service, payments under Sections 3 and 4 of this Agreement shall be delayed until the six-month anniversary of the Officer's separation from service date. For purposes of this Agreement, Specified Employee means an Officer who on the date of his separation from service is a Key Employee of the Employer provided that the Employer is publicly traded on an established securities market. Key Employee means an Officer who meets the requirements of Code section 416(i)(1)(A)(i), (ii), or (iii) applied in accordance with the regulations thereunder and disregarding Code section 416(i)(5). Compensation for purposes of identifying the Key Employee is defined according to Treasury Regulation section 1.415(c)-2(a) applied without regard to the safe harbor provided in Treasury Regulation section 1.415(c)-2(d), the special timing rules provided in Treasury Regulation section 1.415(c)-2(e), and the special rules provided in Treasury Regulation section 1.415(c)-2(g).

11.Litigation Expenses. Employer 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) brought by Employer, the Officer or others concerning the validity or enforceability of, or liability under, the Change in Control of Employer’s Parent Company (as defined above) provision of this 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 Change in Control provision 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 a court of competent jurisdiction.

12. 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)Severabilitv.    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.

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(d)Nonassignabilitv 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.

(e)Binding Effect.    This Agreement shall be binding upon and inure to the benefit of the Officer (and his personal representative), Employer and any successor organization or organizations which shall succeed to substantially all of the business and property of Employer, whether by means of merger, consolidation, acquisition of all or substantially all of the assets of Employer 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, or where Employer’s Parent Company is headquartered.

(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)Excise Tax.    Notwithstanding anything in this Agreement to the contrary, for any taxable year(s) in which the Officer shall be liable for the payment of an Excise Tax with respect to any payment or benefit in the nature of compensation made or provided pursuant to section 2(d) of this Agreement or as a result of the compensation paid the Officer by HRB for a certain Restrictive Covenant executed by the Officer in favor of HRB as of the Commencement Date, HRB shall pay to the Officer a Gross-Up Payment in an amount such that after payment of 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 on the Gross-Up Payment, the Officer retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the payments. The determination of the Gross-Up Payment and other matters related thereto shall be subject to the applicable provisions of Section 9 of this Agreement. It is intended by the parties to this Agreement that this Section 12(j) shall survive the expiration of the Term.

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

Scott C. Harvard	Shore Bank,
	a Virginia banking corporation
/s/ Scott C. Harvard	By: /s/ Henry P. Custis, Jr.
Date: June 1, 2008	Print Name: Henry P. Custis, Jr.
	Title: Chairman
	Date: June 1, 2008
	Hampton Roads Bankshares, Inc.,
	a Virginia corporation
	By: /s/ Jack W. Gibson
	Print Name: Jack W. Gibson
	Title: Vice Chairman, President and
	Chief Executive Officer
	Date: June 1, 2008

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EX-10

Exhibit 10.2

RESTRICTIVE COVENANT AGREEMENT

This Restrictive Covenant Agreement (“Agreement”) effective as of this 1st day of June, 2008, is entered into by and between Scott C. Harvard (“Officer”) and Hampton Roads Bankshares, a Virginia corporation (“HRB”).

RECITALS

WHEREAS, this Agreement is entered into by HRB as a condition of the closing of that certain Agreement and Plan of Merger (the “Merger Agreement”) dated January 8, 2008, by and between HRB and Shore Financial Corporation, a Virginia corporation, (“SFC”), pursuant to which Merger Agreement SFC will become a wholly owned subsidiary of HRB;

WHEREAS, Officer is being directly and materially benefited as an equity holder or executive of SFC and through this Agreement with HRB;

WHEREAS, the Officer currently is rendering or desires to render valuable services to HRB and it is the desire of HRB to have the benefit of the Officer's continued and future loyalty, service and counsel;

WHEREAS, HRB is engaged in the business of banking and Officer has particular and peculiar knowledge and background in the operation of a business of this nature;

WHEREAS, Officer is currently employed as the President and Chief Executive Officer of Shore Bank, a wholly owned subsidiary of SFC, and shall continue to be employed in such capacity after the closing of the Merger Agreement;

WHEREAS, upon closing of the Merger Agreement between HRB and SFC, Shore Bank, shall become a wholly owned subsidiary of HRB;

WHEREAS, upon closing of the Merger Agreement between HRB and SFC, Officer shall become an executive officer of HRB as HRB is currently structured and a member of the Board of Directors of HRB and Bank of Hampton Roads with integral knowledge of the confidential and trade secret information of both entities; and

WHEREAS, HRB desires to protect its investment in SFC, Shore Bank and Bank of Hampton Road and any of its subsidiaries from unfair competition and its confidential information from unauthorized disclosure or misappropriation.

NOW, THEREFORE, in consideration of the mutual covenants and agreements herein set forth, the parties covenant and agree as follows:

1. Effective Date; Payment to Officer upon Closing of Merger.

The effective date of this Agreement shall be the closing date of the Merger Agreement. In consideration for his covenants and obligations as set forth herein, HRB will pay to Officer

One Hundred Seventy-Five Thousand Dollars and no cents ($175,000.00) upon the closing of the Merger Agreement.

2. Restrictive Covenants.

(a)            During the Officer's employment with Shore Bank and for a period of one (1) year following the date Officer's employment with Shore Bank ends, the Officer will not, directly or indirectly, either as a principal, agent, employee, employer, stockholder, partner or in any other individual or representative capacity whatsoever, serve in a position where Officer is engaged in the process of providing services or products that compete with the services or products provided by HRB or any direct or indirect wholly owned subsidiary of HRB, including, but not limited to, Bank of Hampton Roads and Shore Bank, at any time during the last year of Officer’s employment with Shore Bank. This restriction shall only apply within a twenty-five (25) mile radius of any office or branch operated by Shore Bank, Bank of Hampton Roads, HRB or any direct or indirect wholly owned subsidiary of HRB on the date Officer’s employment with Shore Bank ends.

(b)            During the Officer's employment with Shore Bank and for a period of one (1) year following the later of (i) the date Officer's employment with Shore Bank ends or (ii) the date Officer ceases to receive any payment from Shore Bank pursuant to any agreement (except as provided below), Officer will not solicit, or assist any person or entity to solicit, any person or entity who, during the six (6) month period prior to the date Officer’s employment with Shore Bank ends, paid or engaged Shore Bank, Bank of Hampton Roads, HRB or any direct or indirect wholly owned subsidiary of HRB, for products or services, for the purpose of providing services or selling products where those services or products compete with the services or products offered by Shore Bank, Bank of Hampton Roads, HRB or any direct or indirect wholly owned subsidiary of HRB, as of the date Officer’s employment with Shore Bank ends. If Officer’s employment with Shore Bank is terminated by either Shore Bank or the Officer as a result of a “Change in Control” of HRB, then the duration of the restriction set forth in this section 2(b) shall be one (1) year from the date Officer’s employment with Shore Bank ends. For purposes of this Agreement, a “Change in Control” shall be defined as (a) the date that any one person, or more than one person, acting as a group, acquires ownership of stock of HRB that, together with stock held by such person or group constitutes more than 50% of the total fair market value or total voting power of the stock of HRB , (b) the date any one person, or more than one person, acting as a group, acquires (or has acquired ownership during the twelve (12) month period ending on the date of the most recent acquisition by such person) ownership of stock of HRB possessing 30% or more of the total voting power of the stock, or (c) the date a majority of the members of HRB’s Board of Directors are replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of HRB’s Board of Directors before the date of the appointment or election.

(c)              During the Officer's employment with Shore Bank and for a period of one (1) year following the later of (i) the date Officer’s employment with Shore Bank ends or (ii) the date Officer ceases to receive any payment from Shore Bank pursuant to any agreement, Officer agrees that he will not on his 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, during the twelve (12) months preceding the termination of the Officer's employment with Shore Bank, was an employee or officer with Shore Bank, Bank of Hampton Roads, HRB or any direct or indirect wholly owned subsidiary of HRB. If Officer’s employment with Shore Bank is terminated by either Shore Bank or the Officer as a result of a “Change in Control” (as defined

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above) of HRB, then the duration of the restriction set forth in this section 2(c) shall be one (1) year from the date Officer’s employment with Shore Bank ends.

(d)              During the Officer's employment with Shore Bank, and at all times thereafter, Officer agrees not to disclose, communicate or divulge to any third party, or use, or permit others to use, any confidential information of Shore Bank, Bank of Hampton Roads, HRB or any direct or indirect wholly owned subsidiary of HRB. For purposes of this Agreement, “confidential information” shall mean all information disclosed to Officer, or known to Officer as a consequence of or through Officer’s employment with Shore Bank, where such information is not generally known by the public or was regarded or treated as proprietary by Shore Bank, Bank of Hampton Roads, HRB or any direct or indirect wholly owned subsidiary of HRB.

Subsections (a), (b), (c), and (d) of this Section 2 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), (c), and (d) 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.

3.            Notice of Subsequent Employment. For a period which is the later of one (1) year (i) after the Officer's employment with Shore Bank ends or (ii) the date Officer ceases to receive any payment from Shore Bank pursuant to any agreement, the Officer agrees to notify HRB of the name and address of the Officer's employer and the Officer hereby authorizes HRB 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. If Officer’s employment with Shore Bank is terminated by either Shore Bank or the Officer as a result of a “Change in Control” (as defined above) of HRB, then the obligations required of the Officer set forth in this section 3 shall be one (1) year from the date Officer’s employment with Shore Bank ends.

4.            Remedies. The Officer acknowledges that if Officer breaches or threatens to breach this Agreement, in addition to any and all other rights and remedies it may have, HRB shall be entitled to injunctive relief, both temporary and permanent, against the Officer, as the Officer recognizes that a remedy at law would be inadequate and insufficient. HRB 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 HRB 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 HRB may have under this Agreement or any other agreement, at law or in equity.

5. 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.

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(b)              Severabilitv.   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)              Nonassignabilitv 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.

(e)              Binding Effect.   This Agreement shall be binding upon and inure to the benefit of the Officer (and his personal representative), HRB and any successor organization or organizations which shall succeed to substantially all of the business and property of HRB, whether by means of merger, consolidation, acquisition of all or substantially all of the assets of HRB 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, or where HRB is headquartered.

(g)              Assignment. Officer shall not have the right to transfer or assign any or all of his or her rights or interest hereunder. This Agreement may be assigned by HRB.

(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.

[Signatures Follow Next Page]

Initials: HRB _____ Scott C. Harvard: _____

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

Officer:	Hampton Roads Bankshares,
	a Virginia banking corporation
/s/ Scott C. Harvard	By: /s/ Jack W. Gibson
Scott C. Harvard
	Print Name: Jack W. Gibson
	Title: Vice Chairman, President and
	Chief Executive Officer
Date: June 1, 2008	Date: June 1, 2008

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EX-10

Exhibit 10.3

DEFERRED COMPENSATION AGREEMENT

This Deferred Compensation Agreement is made and entered into by and between Shore Bank, a Virginia banking corporation, (the “Bank”), and Scott C. Harvard (the “Executive”).

1. Purpose and Effective Date.

(a)Purpose. The purpose of this Agreement is to provide the Executive, whose judgment, abilities and experience will contribute to the financial success of the Bank, with an incentive to continue in the employ of the Bank. The Agreement is intended to be an unfunded deferred compensation arrangement for purposes of the Employee Retirement Income Security Act of 1974, as amended. The Bank has determined that the benefits to be paid to the Executive under this Agreement constitute reasonable compensation for the services rendered and to be rendered by the Executive.

(b) Effective Date. The effective date of this Agreement is June 1, 2008.

2. Definitions.

(a)Beneficiary. The person, persons, or entity designated by the Executive to receive his benefits under the Agreement in a writing filed with the Bank. If the Executive fails to make a designation or if the person designated does not survive the Executive (or, if an entity, is not in existence at the time of the Executive’s death), the Beneficiary shall be the Executive’s estate.

(b)         Code. The Internal Revenue Code of 1986, as amended.

(c)Committee. The Compensation Committee of Hampton Roads Bankshares, Inc.

(d)Deferred Compensation Account. The bookkeeping record established for purposes of measuring the Executive’s benefit under this Agreement.

(e)Deferred Compensation Benefit. The total amount payable to the Executive pursuant to Sections 4 and 5 of this Agreement.

(f)Disability. The Executive is either unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months; or by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than 3 months under an accident and health plan covering employees of the Bank.

(g)Employment Agreement. The employment agreement dated January 8, 2008 between the Executive, the Bank and Hampton Roads Bankshares, Inc. and effective June 1, 2008 (“Employment Agreement”).

(h)Rabbi Trust. A grantor trust within the meaning of Code Sections 671 through 679 that shall be established by the Bank in accordance with Section 8 of this Agreement to provide for the payment of all the Deferred Compensation Benefit payable to the Executive under this Agreement.

(i) Unforeseeable Emergency. A severe financial hardship to the Executive resulting from a sudden and unexpected illness or accident of the Executive, his spouse, or his dependent (as defined in Code Section 152(a)); loss of the Executive’s property due to casualty; or other similar extraordinary and unforeseeable circumstance arising as a result of events beyond the control of the Executive.

3.Administration and Claims Procedure. This Agreement is administered by the Committee. Subject to the Agreement’s provisions, the Committee may adopt rules and regulations necessary to carry out the Agreement’s purposes. The Committee shall have complete discretion to terminate the Executive’s participation and to take all other actions permitted or required by the Agreement. If for any reason a benefit due under this Agreement is not paid when due, the individual entitled to such benefit may file a written claim with the Committee. If the claim is denied or no response is received within 90 days (in which case the claim will be deemed to have been denied), the individual may appeal the denial to the Committee within 60 days of the denial. In pursuing an appeal, an individual may request that a responsible officer of the Bank review the denial, may review pertinent documents, and may submit issues and comments in writing. A decision on appeal will be made within 60 days after the appeal is made, unless special circumstances require the Bank to extend the period for another 60 days.

4. Amount of the Deferred Compensation Benefit.

(a)Initial Deferred Compensation Benefit. The Bank shall credit $400,000 to the Executive’s Deferred Compensation Account. The amount credited to the Executive’s Deferred Compensation Account shall be subject to earnings and losses until the time it is paid to the Executive pursuant to Section 5. The Bank shall permit the Executive to direct the investment of his Deferred Compensation Account pursuant to the investment options under the Hampton Roads Bankshares, Inc. Executive Savings Plan; however, the amounts credited to the Executive’s Account shall be retained by the Bank until the entire amount has been distributed to the Executive or his Beneficiary.

(b)         Additional Compensation Deferrals.

(1)In general, additional compensation for services performed by the Executive pursuant to Section 2(d) of the Employment Agreement may be deferred at the Executive’s election, provided the election to defer such compensation is made and

 

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becomes irrevocable not later than the close of the Executive’s taxable year next preceding the Executive’s subsequent taxable year.

(2)The timing and form of payment of such additional deferrals shall be the same as identified in Section 5.

(3)The election will not be considered to be made until such election becomes irrevocable. An election to defer may be changed at any time prior to the last permissible date for making such election. Once made, the Executive’s election to defer a set percentage shall remain in effect until changed or revoked, but as of each December 31, the election shall become irrevocable with respect to compensation payable for services to be performed in the immediately following taxable year.

5. Payment of Deferred Compensation Benefit.

(a)Payment After Ten Years or Termination of Employment. Payment of the Deferred Compensation Benefit shall be payable in a single lump sum payment on the first day of the month following the earlier of the tenth (10^th) anniversary of this Agreement or the Executive’s last day of full-time employment.

(b)Payment Upon Executive’s Death or Disability. If the Executive dies or is deemed to have a Disability before any of his Deferred Compensation Benefit under this Agreement has been distributed, payment of the Deferred Compensation Benefit shall be made to the Executive or to the Executive’s Beneficiary. Payment shall be made on the first day of the month following the Executive’s death or Disability. If benefit payments have already begun, the remaining payments will be made for the remainder of the payment period.

(c)Payment Upon Unforeseeable Emergency. A full or partial distribution of the Deferred Compensation Benefit may be made prior to the Executive’s termination of employment if requested by the Executive due to an Unforeseeable Emergency. Whether an Unforeseeable Emergency has occurred will be determined by the Committee, in its sole and exclusive discretion. Any distribution under this provision shall not exceed the remaining amount required by the Participant to resolve the hardship after (i) reimbursement or compensation through insurance or otherwise, (ii) obtaining liquidation of the Participant's assets, to the extent such liquidation would not itself cause a severe financial hardship, or (iii) suspension of deferrals under the Plan. The Executive shall be required to submit to the Committee documentation of the hardship and proof that the loss is not covered by other means. Distributions in the event of an Unforeseeable Emergency will be paid within 90 days of such approval by the Committee.

6.Change in Timing of Distribution. Notwithstanding Section 5 above, the Executive shall be permitted to make a subsequent election to delay his distribution of benefits, subject to the following requirements:

(a)such election to delay distribution of benefits shall not take effect until at least 12 months after the date on which the election is made; and

 

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(b)in the case of an election relating to a payment which does not arise on account of death, Disability or an Unforeseeable Emergency, the first payment with respect to which the election is made shall be deferred for a period of not less than 5 years from the date on which the first payment was scheduled to be paid in the absence of such election.

7.Specified Employee. If the Executive is a “specified employee” (as defined under Code Section 409A and underlying Treasury Regulations) of the Bank and if amounts payable under this Agreement are subject to Code Section 409A(a)(2)(B)(i), amounts that would otherwise have been paid during the six-month period immediately following the termination date shall be paid on the first regular payroll date immediately following the six-month anniversary of the termination date.

8.Establishment of a Rabbi Trust. The Bank shall establish a Rabbi Trust and contribute assets to the Rabbi Trust sufficient to pay the Executive’s Deferred Compensation Account. The assets held in the Rabbi Trust shall be subject to the claims of the Bank’s creditors only in the event of the Bank’s insolvency or bankruptcy. The Executive shall not have any right, title or interest in and to the assets of the Rabbi Trust, except for rights to benefit payments in accordance with the terms of this Agreement.

9.Amendment or Termination. This Agreement may be amended or terminated only by a written instrument executed by both the Executive and the Bank.

10.  General Provisions.

(a)Funding. The Agreement is unfunded. Any benefit under this Agreement is a mere contractual obligation of the Bank. The Executive and his Beneficiary have no right, title, or interest in the Deferred Compensation Account or any claim against it.

(b)Restrictions on Transfer. Any benefits to which the Executive or Beneficiary may become entitled under this Agreement are not subject in any manner to anticipation, alienation, sale, transfer, assignment, pledge, encumbrance, or charge, and any attempt to do so is void. Benefits are not subject to attachment or legal process for the debts, contracts, liabilities, engagements, or torts of the Executive or Beneficiary. This Agreement does not give the Executive or Beneficiary any interest, lien, or claim against any specific asset of the Bank. The Executive and his Beneficiary have only the rights of general creditors of the Bank.

(c)Assignments. The Executive’s interest in a benefit under this Agreement is not assignable by the Executive or his Beneficiary. The Bank may assign its responsibilities and obligations under the Agreement to a successor or other entity with or without notice to the Executive or Beneficiary.

(d)Governing Law. This Agreement is construed in accordance with the laws of the Commonwealth of Virginia, other than its choice of law rules.

 

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(e)Validity. If any provision of this Agreement is not valid or enforceable, that invalidity or enforceability shall not affect the remaining provisions.

(f)Employment Rights. This Agreement shall not be construed as a contract of employment and does not confer upon Executive the right to continue in the employ of the Bank for any length of time or in any manner alter the terms of the Executive’s employment set forth in any employment agreement to which the Bank and the Executive are or may in the future be parties.

(g)Tax Matters. The Bank does not represent or guarantee that any particular federal, state or local income or payroll tax consequence will result to Executive under this Agreement. The Bank shall have the right to withhold from any benefit payments to the Executive under this Agreement or take other actions necessary to satisfy the Bank’s obligation to withhold federal, state and local income and payroll taxes.

11.409A Compliance. To the extent applicable, this Agreement is intended to comply with Code Section 409A, and it shall be interpreted and administered in accordance therewith. In addition, any provision, including, without limitation, any definition, in this Agreement that is determined to violate the requirements of Code Section 409A shall be void and without effect and any provision, including, without limitation, any definition, that is required to appear in this Agreement under Code Section 409A that is not expressly set forth shall be deemed to be set forth herein, and the Agreement shall be administered in all respects as if such provisions were expressly set forth. In addition, the timing of payment of the benefits provided for under this Agreement shall be revised as necessary for compliance with Code Section 409A.

IN WITNESS WHEREOF, the Bank and the Executive have duly executed this Agreement as of the Effective Date.

SHORE BANK

By: /s/ Henry P. Custis, Jr.

Henry P. Custis, Jr., Chairman

Date: June 1, 2008

EXECUTIVE

/s/ Scott C. Harvard

Scott C. Harvard

Date: June 1, 2008

 

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