**Exhibit 10.40**

**HAMPTON ROADS BANKSHARES, INC.**

**2008 DIRECTOR DEFERRED COMPENSATION PLAN**

1. PLAN ADMINISTRATION AND ELIGIBILITY. 

1.1. PURPOSE. Thepurpose of the Hampton Roads Bankshares, Inc. (the “Company”) 2008 Director Deferred Compensation Plan (the “Plan”) is to advance the interests of the Company and its shareholders by attracting and retaining the highest qualityof experienced persons as directors and to further align the interests of the directors with the interests of the Company’s shareholders. 

1.2. ELIGIBILITY. Each member of the Board of Directors of Hampton Roads Bankshares, Inc. is eligible to participate in the Plan. Additionally, the Board of Directors of the Company, in its sole discretion, may extend participation in thisPlan to the Boards of its wholly owned subsidiaries. The members of the Board of Directors of the Company and the Boards of Directors of subsidiaries selected for participation are “Eligible Directors.” 

1.3. ADMINISTRATION. The Plan shall be administered, construed and interpreted by the Board of Directors of the Company (“HRB Board”). Pursuantto such authorization, the HRB Board shall have the responsibility for carrying out the terms of the Plan, including but not limited to the determination of the amount and form of payment or any annual or monthly retainer and any additional feespayable by the Company or a subsidiary to an Eligible Director for his or her services as a director (the “Fees,” which shall not include reimbursements or other payments not for services rendered). To the extent permitted under thesecurities laws applicable to compensation plans including, without limitation, the requirements of Section 16(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or under the Internal Revenue Code of 1986, asamended (the “Code”), a committee of the HRB Board, or a subcommittee of any committee, may exercise the discretion granted to the HRB Board under the Plan, provided that the composition of such committee or subcommittee shall satisfy therequirements of Rule 16b-3 under the Exchange Act (i.e. comprised of independent and/or non-executive directors), or any successor rule or regulation. The HRB Board of Directors may also designate a plan administrator to manage the record keepingand other routine administrative duties under the Plan. 

2. STOCK SUBJECT TO THE PLAN. 

2.1. SHARE PURCHASE. To satisfy the requirements of Section 3, the Company shall direct the trustees (“Trustee”) of the Hampton RoadsBankshares, Inc. Executive Savings Plan Trust (the “ESP Trust”) to purchase shares of the Company’s common stock (“Shares”) on the open market or from the Company. The purchase, holding and distribution of Shares by theTrustee hereunder shall in all cases be conducted pursuant to applicable law (including the rules and regulations of the U.S. Securities and Exchange Commission) and any Company policies and procedures then in effect. 

 

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2.2. GENERAL RESTRICTIONS. Delivery of Shares under Section 3 of the Plan shall be subject to thefollowing: 

(a) Notwithstanding any other provision of the Plan, the Company shall have no liability to deliver any Shares under the Plan ormake any other distribution of benefits under the Plan unless such delivery or distribution would comply with all applicable laws (including, without limitation, the requirements of the Securities Act of 1933), and the applicable requirements of anysecurities exchange or similar entity. 

(b) To the extent that the Plan provides for delivery of stock certificates, the delivery may beeffected on a non-certificated basis, to the extent not prohibited by applicable law or the applicable rules of any stock exchange. 

2.3.TAX WITHHOLDING. The HRB Board may condition the delivery of any shares or other benefits under the Plan on satisfaction of any applicable withholding obligations. The HRB Board, in its discretion, and subject to such requirements as the HRB Boardmay impose prior to the occurrence of such withholding, may permit such withholding obligations to be satisfied through cash payment by the participating Eligible Director (“Participant”), through the surrender of Shares which theParticipant already owns, or through the surrender of Shares to which the participant is otherwise entitled under the Plan. 

3. DEFERRED COMPENSATION.

3.1. DEFERRAL OF FEES. 

(a)Any Eligible Director may elect to defer in either cash or Shares all or a portion of the Fees earned during any calendar year by delivering a deferral election to the Company not later than (i) December 31 of the year immediatelypreceding the year to which the deferral election relates, or (ii) with respect to an Eligible Director’s first year or partial year of service as a director, thirty days following the date on which such director first became a director,but only for Fees earned after such election is made. The election form shall specify the amount or portion of the Fees to be deferred; whether and to what extent such Fees are to be deferred in cash or in Shares; the manner of payment with respectto such deferred amounts; and the date on which the deferred amounts shall be paid and whether paid in a lump sum or in installment. Such election shall remain in force for such calendar year and for each year thereafter until changed or revoked bythe director by written notice to the Company not later than December 31 immediately preceding the year to which such change or revocation relates. A deferral election may not be changed or revoked after the beginning of the calendar year towhich it relates. 

(b) For Fees to be earned in 2008, an Eligible Director’s deferral election pursuant to the Hampton RoadsBankshares, Inc. Directors’ Deferred Compensation Plan which was frozen as of December 31, 2007 and delivered to the Company before December 31, 2007 shall be a valid deferral election for purposes of this Plan. 

 

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3.2. ACCOUNTS; INTEREST AND DIVIDEND CREDITS. On the first day of each calendar quarter (the “CreditDate”), an Eligible Director who elects to defer his or her Fees shall receive a credit to his or her deferred compensation accounts (the “Deferred Compensation Accounts”) under the Plan as hereinafter provided. Any portion of aParticipant’s Fees which are deferred in cash shall be credited to the Participant’s Cash Deferral Account. The amount of the credit shall equal the amount of Fees deferred in cash by the Participant during the immediately precedingquarter. Any portion of a Participant’s Fees which are deferred in Shares shall be credited to the Participant’s Deferred Stock Account and such Fees shall be contributed to the ESP Trust. The Trustee shall use the contributed Fees topurchase Shares in the open market or from the Company and the Deferred Stock Account shall be credited with the number of shares purchased by the Trustee. Only whole shares shall be purchased and any residual Fees which remain shall be held untilthe next Credit Date and aggregated with Fees deferred during such quarter. 

On the first day of each calendar quarter, an amount shall becredited to each Participant’s Cash Deferral Account equal to the Interest Rate (as hereinafter defined) on the balance credited to the Cash Deferral Account during the immediately preceding quarter. Interest shall accrue on the balance of eachParticipant’s Cash Deferral Account commencing with the date the first payment is credited thereto and ending with the final payment therefrom. For this purpose, “Interest Rate” shall mean the highest interest rate paid on anyoutstanding certificate of deposit held by customers at any of the Company’s subsidiary banks on the first day of the calendar year. 

Each time any dividend is paid on the Stock, the funds from such dividend will be reinvested by the Trustee on behalf of the Participant in additional Shares in accordance with the terms of the Company’s dividend reinvestment plan thenin effect. 

3.3 INVESTMENT CHANGE 

Subject to the prior approval of the Company and in its sole discretion, as of the first business day of a calendar quarter, a Participant may direct the Company to liquidate his Cash Deferral Account and invest such amount into a DeferredStock Account. The Trustee shall use the contributed Fees to purchase Shares in the open market or from the Company and the Deferred Stock Account shall be credited with the number of shares purchased by the Trustee. Only whole shares shall bepurchased and any residual Fees which remain shall be held until the next Credit Date and aggregated with Fees deferred during such quarter. A Participant may not direct the Company to liquidate his Deferred Stock Account. 

3.4 DEEMED INVESTMENT. 

Notwithstanding anyprovision of this Plan that may be interpreted to the contrary, the Cash Deferral and Deferred Stock Accounts are to be used for bookkeeping purposes only, and a Participant’s election with respect to his Deferred Compensation Accounts shallnot be considered or construed in any manner as an actual investment of his Deferred Compensation Accounts. In the event that the Company or the Trustee of the ESP Trust, in its own discretion, decides to invest funds in Shares, no Participant shallhave any rights to such Shares themselves. 

 

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3.5. PAYMENT. 

(a) An Eligible Director’s Deferred Compensation Accounts shall be paid to the director as follows: at the director’s option, either (i) in a single lump sum as soon as practicable following the earlierof (x) the date on which the director ceases to serve as a director of the Company or subsidiary of the Company or (y) the date specified by the director as the distribution date (such earlier date shall be referred to as the“Distribution Date”), or (ii) in annual installments over a period, to be specified by the director, not to exceed five years, commencing as soon as practicable after the Distribution Date. If an Eligible Director’s Cash DeferralAccount is paid in installments, the amount of each installment shall be (l) the balance of the Cash Deferral Account on the Distribution Date divided by the number of installments plus (2) interest credits. If an Eligible Director’sStock Deferral Account is paid in installments, the number of Shares in each installment shall be the number of Shares in the Stock Deferral Account on the Distribution Date divided by the number of installments, rounded to the nearest whole share.A cash payment will be made with the final installment for any fraction of a share of Common Stock credited to the Eligible Director’s Deferred Stock Account. 

(b) Upon the death of an Eligible Director, the Company shall pay or distribute any remaining benefits as a single lump sum within 90 days following the date of death. 

(c) A lump sum payment shall be paid no later than the end of the calendar year in which theDistribution Date occurs. The first payment in a series of installment payments shall be paid no later than the 15th day of the third monthfollowing the Distribution Date. Subsequent installment payments shall be paid on the anniversary date of the first payment. 

(d) AnEligible Director’s continued service as an employee of the Company is not taken into account in determining whether such director is entitled to a payment under this Plan upon his resignation from the Board. 

(e) Except as provided in Treasury Regulation section 1.409A-3(j), no acceleration in the time or schedule of any payment or amount scheduled to be paidfrom an Eligible Director’s Account is permitted. 

3.6. DESIGNATION OF BENEFICIARY. Each Eligible Director may designate in writing abeneficiary to receive such portion, if any, of the director’s Deferred Compensation Accounts as remains unpaid at the director’s death. In the absence of a valid beneficiary designation, that portion, if any, of an Account remainingunpaid at the director’s death shall be paid to his or her estate. 

3.7. NATURE OF PROMISE. The Company shall not be required tosegregate or earmark any funds or Shares in respect of its obligations under Section 3 of the Plan. No Eligible Director nor any other person shall have any rights to any assets of the Company by reason of amounts deferred or benefits accruedunder this Plan, other than as a general unsecured creditor of the Company. The Plan constitutes a mere promise by the Company to make payments in the future and is unfunded for purposes of Title I of ERISA and for tax purposes. The Company shallmake available as and when required a sufficient number of Shares to meet the requirements arising under the Plan. 

 

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3.8. NO ASSIGNMENT. Rights to benefits under this Section 3 of the Plan may not be assigned, sold,transferred, encumbered, pledged or otherwise alienated, attached, garnished, or anticipated, other than in accordance with the beneficiary designation provisions of Section 3.4 above. 

4. GENERAL PROVISIONS. 

4.1. EFFECTIVE DATE OF THIS PLAN.This Plan shall be effective January 1, 2008 and remain in effect until terminated or superceded. 

4.2. AMENDMENT OF THIS PLAN. ThePlan may be terminated or amended at any time by the HRB Board, or its authorized delegate, effective as of any date specified. Any such action taken by the HRB Board, or its authorized delegate, shall be evidenced by a resolution. No amendment ortermination shall decrease an Eligible Director’s Deferred Compensation Account. The Plan shall not be terminated unless such termination is permitted and administered in accordance with Treasury Regulation section 1.409A-3(j)(4)(ix).

4.3. CHANGE OF CONTROL. Upon a Change of Control (as defined below), any outstanding balance in an Eligible Director’s Cash DeferralAccount shall be paid in a lump sum and any outstanding balance in an Eligible Director’s Deferred Stock Account shall be distributed in Shares if the Eligible Director ceases to serve as a director of the Company or a surviving company afterthe date of the Change of Control. For purposes of the Plan, the term “Change of Control” includes: (i) a change in the ownership of the Company, (ii) a change in effective control of the Company, or (iii) a change in theownership of a substantial portion of the assets of the Company. A “change in the ownership of the Company” occurs on the date that any one person, or more than one person, acting as a group, acquires ownership of stock of the Companythat, 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 Company. A “change in the effective control of the Company” occurs only on(i) the date any on person or group acquires ownership of stock of the Company possessing 40% or more of the total voting power of the stock, or (ii) the date a majority of the members of the Company’s Board is replaced during any 12month period by directors whose appointment or election is not endorsed by a majority of the members of the Company’s Board before the date of the appointment or election. A “change in the ownership of a substantial portion of the assetsof the Company” occurs on the date that any one person or group acquires assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all the assets of the Companyimmediately before such acquisition. This definition of Change in Control shall be interpreted in a manner that is consistent with Treasury Regulation section 1.409A-3(i)(5). 

 

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4.4. LIMITATION OF RIGHTS. 

(a) NO RIGHT TO CONTINUE AS A DIRECTOR. Neither this Plan, nor any other action taken pursuant to this Plan shall constitute or be evidence of any agreement or understanding, express or implied, that the Company willretain a director for any period of time, or at any particular rate of compensation. 

(b) NO SHAREHOLDERS’ RIGHTS. Except asspecifically provided by the Plan, a participant in the Plan shall have no rights as a shareholder with respect to the Deferred Stock Account until the date of the issuance to him or her of a stock certificate therefore. 

4.5. NOTICE. Any written notice to the Company required by any of the provisions of this Plan shall be addressed to the secretary of the Company andshall become effective when it is received. 

4.6. GOVERNING LAW. This Plan and all determinations made and actions taken pursuant heretoshall be governed by and construed in accordance with the laws of the Commonwealth of Virginia. 

4.7. SEVERABILITY. If any term orprovision of this Plan or the application thereof to any person or circumstances shall, to any extent, be invalid or unenforceable, then the remainder of the Plan, or the application of such term or provision to persons or circumstances other thanthose as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision hereof shall be valid and be enforced to the fullest extent permitted by applicable law. 

4.8. SECTION 409A OF THE CODE. 

(a) Anybenefit, payment or other right provided by the Plan shall be provided or made in a manner, and at such time, in such form and subject to such election procedures (if any), as complies with the applicable requirements of Code section 409A to avoid aplan failure described in Code section 409A(a)(1), including without limitation, deferring payment until the occurrence of a specified payment event described in Code section 409A(a)(2). Notwithstanding any other provision hereof or documentpertaining hereto, the Plan shall be so construed and interpreted to meet the applicable requirements of Code section 409A to avoid a plan failure described in Code section 409A(a)(1). 

(b) It is specifically intended that all elections, consents and modifications thereto under the Plan will comply with the requirements of Code section409A (including any transition or grandfather rules thereunder). The Company is authorized to adopt rules or regulations deemed necessary or appropriate in connection therewith to anticipate and/or comply the requirements of Code section 409A(including any transition or grandfather rules thereunder and to declare any election, consent or modification thereto void if non-compliant with Code section 409A. 

 

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(c) Pursuant to Section 3.01(B)(1).02 of Internal Revenue Notice 2007-86 (“TransitionRelief”), the Company may permit Participants to modify their existing deferral elections previously made pursuant to the Plan to reflect new deferral elections regarding the time and form of payment of benefits under the Plan to the fullextent permitted by, and in accordance with, the Transition Relief. 

 

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