AGREEMENT AND PLAN OF MERGER

Agreement and Plan of Merger

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HAMPTON ROADS BANKSHARES INC | GATEWAY FINANCIAL HOLDINGS, INC

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Title: AGREEMENT AND PLAN OF MERGER
Governing Law: Virginia Date: 9/24/2008
Industry: Regional Banks Law Firm: Williams Mullen Sector: Financial

Exhibit 2.1

AGREEMENT AND PLAN OF MERGER

BY AND BETWEEN

HAMPTON ROADS BANKSHARES, INC.

AND

GATEWAY FINANCIAL HOLDINGS, INC.

September 23, 2008

TABLE OF CONTENTS

ARTICLE 1	THE MERGER	1
Section 1.1	Consummation of Merger; Closing Date	1
Section 1.2	Effect of Merger	2
Section 1.3	Further Assurances	2
Section 1.4	Directors	2
Section 1.5	Delivery and Acceptance of Schedules	2
Section 1.6	Creation of HRB Preferred Shares	3
ARTICLE 2	BASIS AND MANNER OF CONVERSION; MANNER OF EXCHANGE	3
Section 2.1	Conversion of GFH Shares and GFH Preferred Shares	3
Section 2.2	Exchange Procedures	4
Section 2.3	No Fractional Securities	5
Section 2.4	Certain Adjustments	5
Section 2.5	Dissenter’s Rights	6
Section 2.6	GFH Stock Options	6
Section 2.7	Restricted Stock	7
Section 2.8	Laws of Escheat	7
ARTICLE 3	REPRESENTATIONS AND WARRANTIES OF GFH	7
Section 3.1	Corporate Organization	7
Section 3.2	Capitalization	10
Section 3.3	Financial Statements, Condition and Reports	10
Section 3.4	Loan Portfolio; Reserves; Mortgage Loan Buy-Backs	12
Section 3.5	Certain Loans and Related Matters	12
Section 3.6	Authority; No Violation	13
Section 3.7	Consents and Approvals	13
Section 3.8	Broker's Fees	14
Section 3.9	Absence of Certain Changes or Events	14
Section 3.10	Legal Proceedings; Etc.	14
Section 3.11	Taxes and Tax Returns	14
Section 3.12	Employee Benefit Plans	16
Section 3.13	Title and Related Matters	19
Section 3.14	Real Estate	20
Section 3.15	Environmental Matters	20
Section 3.16	Commitments and Contracts	21
Section 3.17	Regulatory and Tax Matters	22
Section 3.18	Registration Obligations	22
Section 3.19	Insurance	22
Section 3.20	Labor	22
Section 3.21	Compliance with Laws	23
Section 3.22	Transactions with Management	23
Section 3.23	Derivative Contracts	24
Section 3.24	Deposits	24
Section 3.25	Accounting Controls	24
Section 3.26	Proxy Materials	24

Section 3.27	Deposit Insurance	24
Section 3.28	Intellectual Property	25
Section 3.29	Antitakeover Provisions	26
Section 3.30	Communications with Shareholders	26
Section 3.31	Claims under Insurance Policies	26
Section 3.32	Fairness Opinion	26
Section 3.33	Untrue Statements and Omissions	26
ARTICLE 4	REPRESENTATIONS AND WARRANTIES OF HRB	27
Section 4.1	Corporate Organization	27
Section 4.2	Capitalization	30
Section 4.3	Financial Statements, Condition and Reports	30
Section 4.4	Loan Portfolio; Reserves; Mortgage Loan Buy-Backs	32
Section 4.5	Certain Loans and Related Matters	32
Section 4.6	Authority; No Violation	33
Section 4.7	Consents and Approvals	33
Section 4.8	Financial Advisors	34
Section 4.9	Absence of Certain Changes or Events	34
Section 4.10	Legal Proceedings, Etc.	34
Section 4.11	Taxes and Tax Returns	34
Section 4.12	Employee Benefit Plans	36
Section 4.13	Title and Related Matters	38
Section 4.14	Real Estate	39
Section 4.15	Environmental Matters	40
Section 4.16	Commitments and Contracts	41
Section 4.17	Regulatory and Tax Matters	41
Section 4.18	Registration Obligations	42
Section 4.19	Insurance	42
Section 4.20	Labor	42
Section 4.21	Compliance with Laws	43
Section 4.22	Transactions with Management	43
Section 4.23	Derivative Contracts	43
Section 4.24	Deposits	43
Section 4.25	Accounting Controls	44
Section 4.26	Proxy Materials	44
Section 4.27	Deposit Insurance	44
Section 4.28	Intellectual Property	44
Section 4.29	Antitakeover Provisions	46
Section 4.30	Communications with Shareholders	46
Section 4.31	Claims under Insurance Policies	46
Section 4.32	Fairness Opinion	46
Section 4.33	Untrue Statements and Omissions	46
ARTICLE 5	COVENANTS AND AGREEMENTS	46
Section 5.1	Conduct of the Business of GFH	46
Section 5.2	Current Information	48
Section 5.3	Access to Properties; Personnel and Records	49
Section 5.4	Approval of Shareholders of GFH and HRB	51

Section 5.5	No Other Bids	51
Section 5.6	Notice of Deadlines	52
Section 5.7	Affiliates	52
Section 5.8	Maintenance of Properties	52
Section 5.9	Consents to Assign and Use Leased Premises; Extensions	52
Section 5.10	Conforming Accounting and Reserve Policies	53
Section 5.11	Publicity	53
Section 5.12	Fixed Asset Inventory	53
Section 5.13	Environmental Audits	53
Section 5.14	Title Insurance	53
Section 5.15	Surveys; Appraisals	54
Section 5.16	Tax Matters	54
Section 5.17	Conduct of the Business of HRB	54
ARTICLE 6	ADDITIONAL COVENANTS AND AGREEMENTS	55
Section 6.1	Best Efforts; Cooperation	55
Section 6.2	Regulatory Matters	55
Section 6.3	Current Information	56
Section 6.4	Registration Statement	56
Section 6.5	Reservation of Shares	56
Section 6.6	Consideration	56
Section 6.7	Benefit Plans	56
Section 6.8	Indemnification	57
Section 6.9	NASDAQ Listing	57
Section 6.10	Support Agreements	57
Section 6.11	Loan to GFH; JP Morgan Loan; GFH Issuance of Additional Preferred	57
ARTICLE 7	MUTUAL CONDITIONS TO CLOSING	58
Section 7.1	Shareholder Approval	58
Section 7.2	Regulatory Approvals	58
Section 7.3	Litigation	58
Section 7.4	Proxy Statement and Registration Statement	59
Section 7.5	Listing	59
ARTICLE 8	CONDITIONS TO THE OBLIGATIONS OF HRB	59
Section 8.1	Representations and Warranties	59
Section 8.2	Performance of Obligations	59
Section 8.3	Certificate Representing Satisfaction of Conditions	59
Section 8.4	Opinion of Counsel	59
Section 8.5	Consents Under Agreements	59
Section 8.6	Outstanding Shares of GFH	60
Section 8.7	Tax Opinion	60
Section 8.8	Fairness Opinion	60
Section 8.9	Waiver of Officer and Director Indemnification	60
Section 8.10	Lenders’ Consent	60
Section 8.11	Stockholders’ Equity, Total Assets, Total Deposits, Net Loans; Net Income and Regulatory Capital	60
Section 8.12	Exercise of Dissenter’s Rights	60

iii

Section 8.13	Additional Capital .	61
ARTICLE 9	CONDITIONS TO OBLIGATIONS OF GFH	61
Section 9.1	Representations and Warranties	61
Section 9.2	Performance of Obligations	61
Section 9.3	Certificate Representing Satisfaction of Conditions	61
Section 9.4	HRB Shares	61
Section 9.5	Tax Opinion	61
Section 9.6	Fairness Opinion	62
Section 9.7	Opinion of Counsel	62
ARTICLE 10	TERMINATION, WAIVER AND AMENDMENT	62
Section 10.1	Termination	62
Section 10.2	Effect of Termination	64
Section 10.3	Amendments	64
Section 10.4	Waivers	64
Section 10.5	Non-Survival of Representations and Warranties	64
Section 10.6	Termination Fee; Expenses; Exclusive Remedy	65
ARTICLE 11	MISCELLANEOUS	66
Section 11.1	Alternative Structure	66
Section 11.2	Definitions; Rules of Construction	66
Section 11.3	Entire Agreement	72
Section 11.4	Notices	72
Section 11.5	Severability	73
Section 11.6	Costs and Expenses	73
Section 11.7	Captions	73
Section 11.8	Counterparts	73
Section 11.9	Persons Bound; No Assignment	74
Section 11.10	Exhibits and Schedules	74
Section 11.11	Waiver	74
Section 11.12	Construction of Terms	74
Section 11.13	Subsidiaries	74


LIST OF EXHIBITS

Exhibit 1.1(a)-1:	Articles of Merger (North Carolina)
Exhibit 1.1(a)-2:	Articles of Merger (Virginia)
Exhibit 5.7:	Form of Affiliate Letter
Exhibit 6.10(a)	Form of GFH Support Agreement
Exhibit 6.10(b)	Form of HRB Support Agreement
Exhibit 8.4:	Matters as to which Gaeta & Eveson, P.A. will opine
Exhibit 9.7:	Matters as to which Williams Mullen will opine

AGREEMENT AND PLAN OF MERGER

DISCLOSURE SCHEDULES

Disclosure Schedule 3.1(a)(iii)	- GFH Subsidiaries
Disclosure Schedule 3.1(a)(iv)	- GFH Other Direct or Indirect Ownership Interests
Disclosure Schedule 3.1(b)(iii)	- Gateway Bank Other Direct or Indirect Ownership Interests
Disclosure Schedule 3.1(c)(iii)	- GFH Subsidiaries Direct or Indirect Ownership Interests
Disclosure Schedule 3.2	- Capitalization
Disclosure Schedule 3.4	- Loan Portfolio Reserves
Disclosure Schedule 3.4.1	- GFH Residential Mortgage Loans Sold
Disclosure Schedule 3.5	- Certain Loans and Related Matters
Disclosure Schedule 3.6(b)	- Authority; No Violation
Disclosure Schedule 3.7	- Consents and Approvals
Disclosure Schedule 3.8	- GFH Broker’s Fees
Disclosure Schedule 3.10	- Legal Proceedings; Etc.
Disclosure Schedule 3.11	- Taxes and Tax Returns
Disclosure Schedule 3.12	- Employee Benefit Plans
Disclosure Schedule 3.12(a)	- Employee Benefit Plans
Disclosure Schedule 3.12(g)	- Employee Benefit Plans
Disclosure Schedule 3.12(k)	- Employee Benefit Plans
Disclosure Schedule 3.12(l)	- Employee Benefit Plans
Disclosure Schedule 3.12(m)	- Employee Benefit Plans
Disclosure Schedule 3.13(a)	- Employee Benefit Plans
Disclosure Schedule 3.13(b)	- Employee Benefit Plans
Disclosure Schedule 3.14(a)	- Real Estate
Disclosure Schedule 3.14(b)	- Real Estate
Disclosure Schedule 3.15	- Environmental Matters
Disclosure Schedule 3.16	- Commitments and Contracts
Disclosure Schedule 3.16(b)	- Violations of Commitments and Contracts
Disclosure Schedule 3.19	- Insurance
Disclosure Schedule 3.20(b)	- GFH Employees
Disclosure Schedule 3.20(d)	- Labor
Disclosure Schedule 3.21	- Compliance with Laws
Disclosure Schedule 3.22	- Transactions with Management
Disclosure Schedule 3.23	- Derivative Contracts
Disclosure Schedule 3.24	- Broker Deposits
Disclosure Schedule 3.28(a)	- GFH Intangibles
Disclosure Schedule 3.28(b)	- Third-Party Intellectual Property - Licenses
Disclosure Schedule 3.28(c)	- Third-Party Intellectual Property
Disclosure Schedule 3.30	- Communications with Shareholders
Disclosure Schedule 5.1(b)(iv)	- Conduct of the Business of GFH
Disclosure Schedule 5.1(b)(vi)	- Payments to Officers, Employees or Directors
Disclosure Schedule 5.6	- Notice of Deadlines

HRB SCHEDULES

HRB Schedule 4.1(a)(iii)	- HRB Subsidiaries
HRB Schedule 4.1(a)(iv)	- HRB Other Direct or Indirect Ownership Interests
HRB Schedule 4.1(b)(iii)	- Bank of Hampton Roads Other Direct or Indirect Ownership Interests

HRB Schedule 4.1(c)(iii)	- Shore Bank Other Direct or Indirect Ownership Interests
HRB Schedule 4.1(d)(iii)	- HRB Subsidiaries Direct or Indirect Ownership Interests
HRB Schedule 4.2	- Capitalization
HRB Schedule 4.4	- Loan Portfolio Reserves
HRB Schedule 4.4.1	- HRB Residential Mortgage Loans Sold
HRB Schedule 4.5	- Certain Loans and Related Matters
HRB Schedule 4.6(b)	- Authority; No Violation
HRB Schedule 4.7	- Consents and Approvals
HRB Schedule 4.8	- HRB Broker’s Fees
HRB Schedule 4.10	- Legal Proceedings; Etc.
HRB Schedule 4.11	- Taxes and Tax Returns
HRB Schedule 4.12	- Employee Benefit Plans
HRB Schedule 4.12(a)	- Employee Benefit Plans
HRB Schedule 4.12(g)	- Employee Benefit Plans
HRB Schedule 4.12(k)	- Employee Benefit Plans
HRB Schedule 4.12(l)	- Employee Benefit Plans
HRB Schedule 4.12(m)	- Employee Benefit Plans
HRB Schedule 4.13(a)	- Employee Benefit Plans
HRB Schedule 4.13(b)	- Employee Benefit Plans
HRB Schedule 4.14(a)	- Real Estate
HRB Schedule 4.14(b)	- Real Estate
HRB Schedule 4.15	- Environmental Matters
HRB Schedule 4.16	- Commitments and Contracts
HRB Schedule 4.16(b)	- Violations of Commitments and Contracts
HRB Schedule 4.19	- Insurance
HRB Schedule 4.20(b)	- HRB Employees
HRB Schedule 4.20(d)	- Labor
HRB Schedule 4.21	- Compliance with Laws
HRB Schedule 4.22	- Transactions with Management
HRB Schedule 4.23	- Derivative Contracts
HRB Schedule 4.24	- Broker Deposits
HRB Schedule 4.28(a)	- HRB Intangibles
HRB Schedule 4.28(b)	- HRB Third-Party Intellectual Property - Licenses
HRB Schedule 4.28(c)	- HRB Third-Party Intellectual Property
HRB Schedule 4.30	- Communications with Shareholders
HRB Schedule 5.17	- Conduct of the Business of HRB

AGREEMENT AND PLAN OF MERGER

BY AND BETWEEN

HAMPTON ROADS BANKSHARES, INC.

AND

GATEWAY FINANCIAL HOLDINGS, INC.

This AGREEMENT AND PLAN OF MERGER, dated as of the 23rd day of September, 2008 (this “Agreement”), by and between HAMPTON ROADS BANKSHARES, INC., a Virginia corporation (“HRB”), and GATEWAY FINANCIAL HOLDINGS, INC., a North Carolina corporation (“GFH”).

WITNESSETH THAT:

WHEREAS, the respective Boards of Directors of HRB and GFH deem it in the best interests of HRB and of GFH, respectively, and of their respective shareholders, that HRB and GFH merge pursuant to this Agreement in a transaction that qualifies as a reorganization pursuant to Section 368 of the Internal Revenue Code of 1986 (as amended, the “Code”); and

WHEREAS, the Boards of Directors of HRB and GFH have approved this Agreement and the Boards of Directors of HRB and GFH have directed that this Agreement be submitted to the HRB and GFH shareholders, respectively, for approval and adoption in accordance with the laws of the Commonwealth of Virginia and the State of North Carolina.

NOW, THEREFORE, in consideration of the premises and the mutual covenants, representations, warranties and agreements herein contained, the parties agree that GFH will be merged with and into HRB and that the terms and conditions of the Merger, the mode of carrying the Merger into effect, including the manner of converting the shares of common stock of GFH, no par value, into shares of common stock of HRB, par value of $0.625 per share, shall be as hereinafter set forth.

ARTICLE 1

THE MERGER

Section 1.1

Consummation of Merger; Closing Date .

(a) Subject to the provisions hereof, GFH shall be merged with and into HRB (which shall hereinafter be referred to as the “Merger”) pursuant to the laws of the Commonwealth of Virginia and the State of North Carolina, and HRB shall be the surviving corporation (sometimes hereinafter referred to as “Surviving Corporation” when reference is made to it after the Effective Time of the Merger). Subject to the provisions hereof, HRB and GFH shall file with the North Carolina Secretary of State Articles of Merger in substantially the form of Exhibit 1.1(a)-1 attached hereto and with the Virginia State Corporation Commission Articles of Merger in substantially the form of Exhibit 1.1(a)-2 attached hereto containing this Agreement and Plan of Merger (the “Plan of Merger”) as an attachment in accordance with all

applicable legal requirements. The Merger shall become effective on the date and at the time the parties specify in the Articles of Merger filed in North Carolina and the Articles of Merger filed in Virginia pursuant to the preceding sentence (such time is hereinafter referred to as the “Effective Time of the Merger” or the “Effective Time”). Unless otherwise agreed upon by HRB and GFH, the Effective Time of the Merger shall be specified as the fifteenth (15th) business day following the later to occur of (i) the effective date (including expiration of any applicable waiting period) of the last required Consent of any Regulatory Authority (as defined herein) having authority over the transactions contemplated under the Merger Agreement, (ii) the date on which the shareholders of HRB approve the transactions contemplated by this Agreement or (iii) the date on which the shareholders of GFH approve the transactions contemplated by this Agreement.

(b) The closing of the Merger (the “Closing”) shall take place at the Norfolk offices of Williams Mullen on a date and time as the parties may agree (the “Closing Date”). At the Closing there shall be delivered to each of the parties hereto the opinions, certificates and other documents and instruments required to be so delivered pursuant to this Agreement.

Section 1.2 Effect of Merger . At the Effective Time of the Merger, GFH shall be merged with and into HRB and the separate existence of GFH shall cease. The Articles of Incorporation and Bylaws of HRB, as in effect on the date hereof and as otherwise amended prior to the Effective Time of the Merger as contemplated herein, shall be the Articles of Incorporation and the Bylaws of the Surviving Corporation until further amended as provided therein and in accordance with applicable law. The Merger shall have the effects set forth in Section 13.1-721.A of the Code of Virginia, as amended and Section 55-11-06 of the North Carolina Business Corporation Act, as amended.

Section 1.3 Further Assurances . From and after the Effective Time of the Merger, as and when requested by the Surviving Corporation, the officers and directors of GFH last in office shall execute and deliver or cause to be executed and delivered in the name of GFH such deeds and other instruments and take or cause to be taken such further or other actions as shall be necessary in order to vest or perfect in or confirm of record or otherwise to the Surviving Corporation title to and possession of all of the property, interests, assets, rights, privileges, immunities, powers, franchises and authority of GFH.

Section 1.4 Directors . At or prior to the Effective Time, HRB shall cause the number HRB directors to be increased by seven. From and after the Effective Time of the Merger, the directors of the Surviving Corporation shall be those thirteen (13) persons serving as directors of HRB immediately prior to the Effective Time of the Merger, together with D. Ben Berry and six (6) additional directors of GFH to be designated by the by the Board of Directors of GFH (with such seven directors referred to herein as the “GFH Directors”).

Section 1.5

Delivery and Acceptance of Schedules .

(a) On or before the date that is thirty (30) days after the date of this Agreement, GFH shall have delivered to HRB schedules (the “Disclosure Schedules”) setting forth, among other things, items the disclosure of which is necessary or appropriate in response

to an express disclosure requirement contained in a provision hereof, or as an exception to one or more representations or warranties contained in Article 3 or the covenants and agreements in Section 5.1(b(iv), Section 5.1(b)(vi) or Section 5.6. Upon HRB’s acceptance of such Disclosure Schedules by delivery of a written acceptance signed by an authorized officer of HRB, such Disclosure Schedules shall be attached to this Agreement and shall qualify the representations, warranties, covenants and agreements to which they refer. HRB may reject the Disclosure Schedules if in the business judgment of HRB’s Board of Directors it would not have voted to cause HRB to enter into this Agreement had it been aware of the disclosures in the Disclosure Schedules.

(b) On or before the date that is thirty (30) days after the date of this Agreement, HRB shall have delivered to GFH schedules (the “HRB Schedules”) setting forth, among other things, items the disclosure of which is necessary or appropriate either in response to an express disclosure requirement contained in a provision hereof, or as an exception to one or more representations or warranties contained in Article 4 or the covenants and agreements in Section 5.17. GFH shall accept such HRB Schedules unless an item of disclosure would individually or in the aggregate represent a Material Adverse Effect with respect to HRB or materially or adversely affect the Merger or the other transactions contemplated in this Agreement. Unless within five (5) business days of their delivery, GFH rejects the HRB Schedules pursuant to the preceding sentence by delivering written notice signed by an authorized officer of GFH describing in detail the item of disclosure and the Material Adverse Effect it has on HRB, such HRB Schedules shall be attached to this Agreement and shall qualify the representations, warranties, covenants and agreements to which they refer.

Section 1.6 Creation of HRB Preferred Shares . At or before the Effective Time, HRB covenants and agrees to amend its articles of incorporation and take other necessary steps to authorize (i) a series of preferred stock of HRB that will have substantially identical rights to the Series A GFH Preferred Shares (the “Series A HRB Preferred Shares”), and (ii) a series of preferred stock of HRB that will have substantially identical rights to the Additional GFH Preferred Shares (the “Series B HRB Preferred Shares”).

ARTICLE 2

BASIS AND MANNER OF CONVERSION; MANNER OF EXCHANGE

Section 2.1

Conversion of GFH Shares and GFH Preferred Shares .

(a) At the Effective Time, by virtue of the Merger and without any action on the part of a holder of GFH Shares:

(i) Each HRB Share that is issued and outstanding at the Effective Time shall remain issued and outstanding and shall remain unchanged by the Merger.

(ii) Subject to Sections 2.2 and 2.4, each GFH Share issued and outstanding immediately before the Effective Time shall be converted into, and shall be

canceled in exchange for, the right to receive, 0.6700 (the “Exchange Ratio”) HRB Shares.

(b) Subject to Sections 2.2 at the Effective Time, by virtue of the Merger and without any action on the part of a holder of GFH Preferred Shares:

(i) Each Series A GFH Preferred Share issued and outstanding immediately before the Effective Time shall be converted into, and shall be canceled in exchange for, the right to receive one (the “Series A Preferred Exchange Ratio”) Series A HRB Preferred Share; and

(ii) Each Additional GFH Preferred Share issued and outstanding immediately before the Effective Time shall be converted into, and shall be canceled in exchange for, the right to receive one (the “Series B Preferred Exchange Ratio”) Series B HRB Preferred Share.

Section 2.2

Exchange Procedures .

(a) Upon the Effective Time, each holder of an outstanding certificate representing shares of GFH Shares prior to the Effective Date (a “GFH Certificate”) who has surrendered such GFH Certificate to the Exchange Agent will, upon acceptance thereof by the Exchange Agent, be entitled to a certificate or certificates representing the number of whole HRB Shares which the aggregate number of shares of GFH Shares previously represented by such GFH Certificate(s) surrendered shall have been converted pursuant to this Agreement and, if such holder’s shares of GFH Shares have been converted into HRB Shares, any other distribution on HRB Shares issuable in the Merger with a record date after the Effective Date, in each case without interest. The Exchange Agent shall accept such GFH Certificates upon compliance with such reasonable terms and conditions as the Exchange Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. Upon the Effective Time, each GFH Certificate that is not surrendered to the Exchange Agent in accordance with the procedures provided for herein shall, except as otherwise herein provided, until duly surrendered to the Exchange Agent be deemed to evidence ownership of the number of HRB Shares into which such GFH Shares shall have been converted. No dividends that have been declared by HRB will be remitted to any person entitled to receive HRB Shares hereunder until such person surrenders the GFH Certificate(s) representing GFH Shares, at which time such dividends shall be remitted to such person, without interest.

(b) Upon the Effective Time, each holder of an outstanding certificate representing shares of GFH Preferred Shares prior to the Effective Date (a “GFH Preferred Certificate”) who has surrendered such GFH Preferred Certificate to the Exchange Agent will, upon acceptance thereof by the Exchange Agent, be entitled to a certificate or certificates representing the number of whole HRB Preferred Shares which the aggregate number of shares of GFH Preferred Shares previously represented by such GFH Preferred Certificate(s) surrendered shall have been converted pursuant to this Agreement and, if such holder’s shares of GFH Preferred Shares have been converted into HRB Preferred Shares, any other distribution on HRB Preferred Shares issuable in the Merger with a record date after the Effective Date, in each

case without interest. The Exchange Agent shall accept such GFH Preferred Certificates upon compliance with such reasonable terms and conditions as the Exchange Agent may impose to effect an orderly exchange thereof in accordance with normal exchange practices. Upon the Effective Time, each GFH Preferred Certificate that is not surrendered to the Exchange Agent in accordance with the procedures provided for herein shall, except as otherwise herein provided, until duly surrendered to the Exchange Agent be deemed to evidence ownership of the number of HRB Preferred Shares into which such GFH Preferred Shares shall have been converted. No dividends that have been declared by HRB will be remitted to any person entitled to receive HRB Preferred Shares hereunder until such person surrenders the GFH Preferred Certificate(s) representing GFH Preferred Shares, at which time such dividends shall be remitted to such person, without interest.

(c) The Exchange Agent and HRB shall not (i) be obligated to deliver a certificate or certificates representing HRB Shares to which a holder of GFH Shares would otherwise be entitled as a result of the Merger, or (ii) be obligated to deliver a certificate or certificates representing HRB Preferred Shares to which a holder of GFH Preferred Shares would otherwise be entitled as a result of the Merger, until such holder surrenders the GFH Certificate(s) representing the GFH Shares or the GFH Preferred Certificate(s) representing GFH Preferred Shares, as applicable, for exchange as provided in this Section 2.2, or, in default thereof, an appropriate affidavit of loss and indemnity agreement and/or a bond in an amount as may be reasonably required in each case by HRB.

(d) Notwithstanding anything in this Agreement to the contrary, GFH Certificates or GFH Preferred Certificates surrendered for exchange by an GFH affiliate shall not be exchanged for certificates representing HRB Shares or HRB Preferred Shares, as applicable, to which such GFH affiliate may be entitled pursuant to the terms of this Agreement until HRB has received a written agreement from such person as specified in Section 5.7.

Section 2.3 No Fractional Securities . No certificates or scrip representing fractional HRB Shares shall be issued upon the surrender for exchange of GFH Certificates and such fractional shares shall not entitle the owner thereof to vote or to any other rights of a holder of HRB Shares. A holder of shares of GFH Shares converted in the Merger who would otherwise have been entitled to a fractional HRB Share shall be entitled to receive a cash payment (without interest) in lieu of such fractional share in an amount determined by multiplying (i) the fractional share interest to which such holder would otherwise be entitled by (ii) the product obtained by multiplying the HRB Average Price by the Exchange Ratio.

Section 2.4 Certain Adjustments . If, after the date hereof and on or prior to the Effective Time, the outstanding shares of HRB Shares shall be changed into a different number of shares by reason of any reclassification, recapitalization, split-up, combination or exchange of shares, or any dividend payable in stock or other securities is declared thereon with a record date within such period, or any similar event shall occur, the Merger Consideration, the Series A Preferred Exchange Ratio, or the Series B Exchange Ratio will be adjusted accordingly to provide to the holders of GFH Shares or GFH Preferred Shares, respectively, the same economic effect as contemplated by this Agreement prior to such reclassification, recapitalization, split-up, combination, exchange or dividend or similar event. In the event that the sum of (i) the number

of GFH Shares presented for exchange pursuant to Section 2.2 or otherwise issued and outstanding at the Effective Time, and (ii) the number of GFH Shares issuable upon the exercise of options (whether pursuant to GFH Stock Options or otherwise) as of the Effective Time, shall be greater than the sum of (x) the number of shares of GFH Shares represented in Section 3.2 as being outstanding as of the date hereof, and (y) the number of shares of GFH Shares issuable upon the exercise of GFH Stock Options represented in Section 3.2 as being outstanding as of the date hereof, then the per share Merger Consideration shall be appropriately and proportionately decreased to take into account such additional issued and outstanding, and issuable GFH Shares. In the event that the number of Series A GFH Preferred Shares presented for exchange pursuant to Section 2.2 as of the Effective Time shall be greater than the number of Series A GFH Preferred Shares represented in Section 3.2 as being outstanding as of the date hereof, then the Series A Exchange Ratio shall be appropriately and proportionately decreased to take into account such additional issued and outstanding, and issuable Series A GFH Preferred Shares.

Section 2.5 Dissenter’s Rights . Notwithstanding Section 2.1 hereof, any holder of GFH Preferred Shares who perfects such holder’s dissenter’s rights in accordance with and as contemplated by Sections 55-13-01 through 55-13-31 of the North Carolina Business Corporation Act shall be entitled to receive from the Surviving Corporation, in lieu of the HRB Preferred Shares, the value of such shares as to which appraisal rights have been perfected in cash as determined pursuant to Sections 55-13-01 through 55-13-31 of the North Carolina Business Corporation Act; provided, that no such payment shall be made to any dissenting holder of GFH Preferred Shares unless and until such dissenting holder of GFH Preferred Shares has complied with all applicable provisions of Sections 55-13-01 through 55-13-31 of the North Carolina Business Corporation Act, and surrendered to the Exchange Agent the certificate or certificates representing the shares for which payment is being made. In the event that after the Effective Time a dissenting holder of GFH Preferred Shares fails to perfect, or effectively withdraws or loses, such holder’s right to appraisal of and payment for such holder’s shares, the Surviving Corporation shall issue and deliver the consideration to which such holder of shares of GFH Preferred Shares is entitled under this Article 2 (without interest) upon surrender by such holder of the certificate or certificates representing such shares of GFH Preferred Shares held by such holder.

Section 2.6 GFH Stock Options . From and after the Effective Time, all options granted under the GFH Stock Option Plans to purchase GFH Shares (each, a “GFH Stock Option”), that are then outstanding and unexercised, shall be converted into and become options to purchase HRB Shares, and HRB shall assume each such GFH Stock Option in accordance with the terms of the plan and agreement by which it is evidenced; provided, however, that from and after the Effective Time (i) each such GFH Stock Option assumed by HRB may be exercised solely to purchase HRB Shares; (ii) the number of HRB Shares purchasable upon exercise of such GFH Stock Option shall be equal to the number of shares of GFH Shares that were purchasable under such GFH Stock Option immediately prior to the Effective Time multiplied by the Exchange Ratio, rounded down to the nearest whole share, and (iii) the per share exercise price under each such GFH Stock Option shall be adjusted by dividing the per share exercise price of each such GFH Stock Option by the Exchange Ratio, rounded up to the nearest cent. The terms of each GFH Stock Option shall, in accordance with its terms, be subject to further

adjustment as appropriate to reflect any stock split, stock dividend, recapitalization or other similar transaction with respect to HRB Shares on or subsequent to the Effective Time. The adjustment provided in this Section 2.6 with respect to any GFH Stock Options (whether or not “incentive stock options” (as defined in Section 422 of the Code)) shall be and is intended to be effected in a manner which is consistent with Section 424(a) of the Code and, to the extent it is not so consistent, the provisions of such Section 424(a) of the Code shall override anything to the contrary contained herein.

Section 2.7 Restricted Stock . To the extent that any restricted stock award agreement entered into between GFH and its officers, directors and employees or the officers, directors or employees of any GFH Subsidiary prior to the date of this Agreement or a restricted stock plan pursuant to which such restricted stock was awarded prior to the date hereof provides for acceleration of vesting in connection with the Merger, such restricted stock shall vest pursuant to the terms of such restricted stock award agreement or restricted stock plan and if vested as of the Effective Time pursuant to such restricted stock award agreement or restricted stock plan, shall be treated as GFH Shares for purposes of this Agreement.

Section 2.8 Laws of Escheat . If any of the consideration due or other payments to be paid or delivered to the holders of GFH Shares or GFH Preferred Shares is not paid or delivered within the time period specified by any applicable laws concerning abandoned property, escheat or similar laws, and if such failure to pay or deliver such consideration occurs or arises out of the fact that such property is not claimed by the proper owner thereof, HRB or the Exchange Agent shall be entitled to dispose of any such consideration or other payments in accordance with applicable laws concerning abandoned property, escheat or similar laws. Any other provision of this Agreement notwithstanding, none of GFH, HRB, the Exchange Agent, nor any other Person acting on their behalf shall be liable to a holder of GFH Shares or GFH Preferred Shares for any amount paid or property delivered in good faith to a public official pursuant to and in accordance with any applicable abandoned property, escheat or similar law.

ARTICLE 3

REPRESENTATIONS AND WARRANTIES OF GFH

Except for the exceptions listed in the sections of the Disclosure Schedules that correspond to the Sections in this Article 3, GFH hereby represents and warrants to HRB as of the date hereof and thereafter as of all times up to and including the Effective Time of the Merger (except as otherwise provided):

Section 3.1

Corporate Organization .

(a)

Organization and Related Matters of GFH .

(i) GFH is a corporation duly organized, validly existing and in good standing under the laws of North Carolina. GFH has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as now conducted, or as proposed to be conducted pursuant to this Agreement, and GFH is licensed or

qualified to do business in each jurisdiction in which the nature of the business conducted by GFH, or the character or location of the properties and assets owned or leased by GFH makes such licensing or qualification necessary. GFH is duly registered as a bank holding company under the Bank Holding Company Act of 1956, as amended. True and correct copies of the Articles of Incorporation of GFH and the Bylaws of GFH, each as amended to the date hereof, have been made available to HRB.

(ii) GFH has in effect all federal, state, local and foreign governmental, regulatory and other authorizations, permits and licenses necessary for it to own or lease its properties and assets and to carry on its business as now conducted, the absence of which, either individually or in the aggregate, would have a Material Adverse Effect on the Condition of GFH on a consolidated basis.

(iii) Disclosure Schedule 3.1(a)(iii) lists each Subsidiary together with the jurisdiction of organization of each such Subsidiary. Each Subsidiary is in compliance in all material respects with all rules and regulations promulgated by any relevant Regulatory Authority. (A) GFH owns, directly or indirectly, all the issued and outstanding equity securities of each of its Subsidiaries, (B) no equity securities of any of the Subsidiaries are or may become required to be issued (other than to it or its wholly-owned Subsidiaries) by reason of any right or otherwise, (C) there are no contracts, commitments, understandings or arrangements by which any of such Subsidiaries is or may be bound to sell or otherwise transfer any equity securities of any such Subsidiaries (other than to it or its wholly-owned Subsidiaries), (D) there are no contracts, commitments, understandings, or arrangements relating to its rights to vote or to dispose of such securities, (E) all the equity securities of each Subsidiary held by GFH or its Subsidiaries are fully paid and nonassessable (except, with respect to Gateway Bank, to the extent set forth in Section 53-42 of the North Carolina General Statutes) and are owned by GFH or its Subsidiaries free and clear of any liens, and (F) Gateway Bank has not received any notice from the North Carolina Commissioner of Banks notifying Gateway Bank that its capital has become impaired.

(iv) GFH does not own any capital stock of any Person, or have any direct or indirect interest in any partnership or joint venture except as set forth in Disclosure Schedule 3.1(a)(iv). Disclosure Schedule 3.1(a)(iv) lists the owner(s) and percentage ownership (direct or indirect) of each subsidiary, partnership or joint venture disclosed thereon.

(v) The minute books of GFH contain complete and accurate records in all material respects of all meetings and other corporate actions held or taken by their respective shareholders and Boards of Directors (including all committees thereof).

(b)

Organization and Related Matters of Gateway Bank .

(i) Gateway Bank is a banking corporation duly organized, validly existing and in good standing under the laws of North Carolina. Gateway Bank has the corporate power and authority to own or lease all of its properties and assets and to carry

on its business as now conducted, or as proposed to be conducted pursuant to this Agreement, and Gateway Bank is licensed or qualified to do business in each jurisdiction which the nature of the business conducted or to be conducted by Gateway Bank, or the character or location or the properties and assets owned or leased by Gateway Bank make such licensing or qualification necessary. True and correct copies of the Articles of Incorporation and Bylaws of Gateway Bank, as each may be amended to the date hereof, have been made available to HRB.

(ii) Gateway Bank has in effect all federal, state, local and foreign governmental, regulatory or other authorizations, permits and licenses necessary for it to own or lease its properties and assets and to carry on its business.

(iii) Gateway Bank does not own any capital stock of any Person, or have any interest in any partnership or joint venture except as set forth in Disclosure Schedule 3.1(b)(iii). Disclosure Schedule 3.1(b)(iii) lists the owner(s) and percentage ownership of each subsidiary, partnership or joint venture disclosed thereon.

(iv) Gateway Bank is an “insured bank” as defined in the Act and applicable regulations thereunder and its deposits are insured to the fullest extent allowed by law by the Deposit Insurance Fund of the FDIC.

(v)

Gateway Bank is a member of the Federal Reserve System.

(vi) The minute books of Gateway Bank contain complete and accurate records in all material respects of all meetings and other corporate actions held or taken by their respective shareholders and Boards of Directors (including all committees thereof).

(c)

Organization and Related Matters of GFH’s other Subsidiaries .

(i) Each of GFH’s Subsidiaries is a corporation, limited liability company, limited company or partnership, as the case may be, duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated or organized and has all requisite corporate or other power and authority necessary to own or lease all of its properties and assets and to carry on its business as it is now being conducted and as currently proposed by its management to be conducted. Each of GFH’s Subsidiaries is duly licensed or qualified to do business and is in good standing in each jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary.

(ii) Each of GFH’s Subsidiaries has in effect all federal, state, local and foreign governmental, regulatory or other authorizations, permits and licenses necessary for it to own or lease its properties and assets and to carry on its business.

(iii) None of GFH’s Subsidiaries own any capital stock of any Person, or have any interest in any partnership or joint venture except as set forth in Disclosure Schedule 3.1(c)(iii). Disclosure Schedule 3.1(c)(iii) lists the owner(s) and percentage ownership of each subsidiary, partnership or joint venture disclosed thereon.

(iv) The minute books of each of each of GFH’s Subsidiaries contain complete and accurate records in all material respects of all meetings and other corporate actions held or taken by their respective shareholders and Boards of Directors (including all committees thereof).

Section 3.2 Capitalization . The authorized capital stock of GFH consists of 30,000,000 GFH Shares, of which 12,717,190 GFH Shares were issued and outstanding as of August 31, 2008 and 1,000,000 shares of preferred stock, no par value, of which 23,266 Series A GFH Preferred Shares are outstanding as of the date hereof. No GFH Shares have been issued since August 31, 2008 except GFH Shares issued pursuant to the GFH Stock Option Plans and GFH’s dividend reinvestment plan. None of the Series A GFH Preferred Shares have any voting rights (except in connection with the approval of the Merger by the shareholders of GFH). When issued, none of the Series B GFH Preferred Shares shall have any voting rights (except in connection with the approval of the Merger by the shareholders of GFH). All of the issued and outstanding GFH Shares and Series A GFH Preferred Shares have been duly authorized and validly issued and all such shares are fully paid and nonassessable. As of the date hereof, there are no outstanding options, warrants, commitments, or other rights or instruments to purchase or acquire any GFH Shares or GFH Preferred Shares, or any securities or rights convertible into or exchangeable for GFH Shares or GFH Preferred Shares, except for options to purchase 1,790,390 GFH Shares (which are described in more detail in Disclosure Schedule 3.2). Except for holders of GFH Preferred Shares, shareholders of GFH are not entitled to dissenter’s rights under Sections 55-13-01 through 55-13-31 of the North Carolina Business Corporation Act or under any other applicable law in connection with the Merger.

Section 3.3

Financial Statements, Condition and Reports .

(a) GFH has made available to HRB copies of the consolidated financial statements of GFH as of and for the years ended December 31, 2005, 2006 and 2007, and for the period ended June 30, 2008, and GFH will make available to HRB, as soon as practicable following the preparation of additional consolidated financial statements for each subsequent calendar quarter or year of GFH, the consolidated financial statements of GFH as of and for such subsequent calendar quarter or year (such consolidated financial statements, unless otherwise indicated, being hereinafter referred to collectively as the “Financial Statements of GFH”).

(b) Each of the Financial Statements of GFH (including the related notes) have been or will be prepared in all material respects in accordance with generally accepted accounting principles, which principles have been or will be consistently applied during the periods involved, except as otherwise noted therein, and the books and records of GFH have been, are being, and will be maintained in all material respects in accordance with applicable legal and accounting requirements and reflect only actual transactions. Each of the Financial Statements of GFH (including the related notes) fairly presents or will fairly present the

consolidated financial position of GFH as of the respective dates thereof and fairly presents or will fairly present the results of operations of GFH for the respective periods therein set forth.

(c) Since June 30, 2008, neither GFH nor any of its Subsidiaries has incurred any obligation or liability (contingent or otherwise) that has or might reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Condition of GFH on a consolidated basis, except obligations and liabilities (i) which are accrued or reserved against in the Financial Statements of GFH or reflected in the notes thereto, or (ii) which were incurred after June 30, 2008 in the ordinary course of business consistent with past practices. Since June 30, 2008, and except for the matters described in (i) and (ii) above, neither GFH nor any of its Subsidiaries has incurred or paid any obligation or liability which would be material to the Condition of GFH on a consolidated basis.

(d) Each of the consolidated reports of condition and income for the years ending December 31, 2007, 2006 and 2005 and for the quarters ending March 31, 2008 and June 30, 2008, that GFH and each of its Subsidiaries has filed with the appropriate Regulatory Authority, fairly present the financial position, results of operation, changes in stockholder's equity and changes in cash flows, as the case may be for the periods to which they relate, in each case in accordance with the FFIEC instructions applicable to such reports.

(e) Since January 1, 2005, GFH and each of its Subsidiaries has filed all reports and statements, together with any amendments required to be made with respect thereto, if any, that was required to be filed with (i) the Federal Reserve, (ii) the FDIC and (iii) any other Regulatory Authority with jurisdiction over GFH and each of its Subsidiaries, and have paid all fees and assessments due and payable in connection therewith. As of their respective dates, each of such reports and documents, as amended, including any financial statements, exhibits and schedules thereto, complied with the relevant statutes, rules and regulations enforced or promulgated by the Regulatory Authorities with which they were filed, and did not contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

(f) GFH’s Annual Reports on Form 10-K for the fiscal years ended December 31, 2007, 2006 and 2005, and all other reports, registration statements, definitive proxy statements or information statements filed or to be filed by it or any of its Subsidiaries subsequent to December 31, 2007 under the Securities Act of 1933 (“Securities Act”), or under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 (“Exchange Act”), in the form filed or to be filed (collectively, the “GFH SEC Documents”) with the Securities and Exchange Commission, as of the date filed, (A) complied or will comply in all material respects as to form with the application requirements under the Securities Act or the Exchange Act, as the case may be, and (B) did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Copies of the GFH SEC Documents have been made available to HRB, to the extent not available on the SEC’s Electronic Data Gathering Analysis and Retrieval (“EDGAR”) system.

Section 3.4 Loan Portfolio; Reserves; Mortgage Loan Buy-Backs . Except as set forth in Disclosure Schedule 3.4 and except for any changes hereafter made to the hereinafter described allowances or reserves pursuant to this Agreement, (i) all evidences of indebtedness reflected as assets in the Financial Statements of GFH and the Call Reports of Gateway Bank as of June 30, 2008 were as of such dates in all material respects the binding obligations of the respective obligors named therein in accordance with their respective terms, and were not subject to any defenses, setoffs, or counterclaims, except as may be provided by bankruptcy, insolvency or similar laws or by general principles of equity; (ii) the allowances for possible loan losses shown on the Financial Statements of GFH and the Call Reports of Gateway Bank as of June 30, 2008 were, and the allowance for possible loan losses to be shown on the Financial Statements of GFH, and the Call Reports of Gateway Bank as of any date subsequent to the execution of this Agreement will be, as of such dates, adequate to provide for possible losses, net of recoveries relating to loans previously charged off, in respect of loans outstanding (including accrued interest receivable) of GFH or any of its Subsidiaries and other extensions of credit (including letters of credit or commitments to make loans or extend credit); (iii) the reserve for losses with respect to other real estate owned (“OREO Reserve”) shown on the Financial Statements of GFH, and the Call Reports of Gateway Bank as of June 30, 2008 were, and the OREO Reserve to be shown on the Financial Statements of GFH and the Call Reports of Gateway Bank as of any date subsequent to the execution of this Agreement will be, as of such dates, adequate to provide for losses relating to the other real estate owned portfolio of GFH and any of its Subsidiaries as of the dates thereof; (iv) the reserve for losses in respect of litigation (“Litigation Reserve”) shown on the Financial Statements of GFH, and the Call Reports of Gateway Bank as of June 30, 2008 was, and the Litigation Reserve to be shown on the Financial Statements of GFH and the Call Reports of Gateway Bank as of any date subsequent to the execution of this Agreement will be, as of such dates, adequate to provide for losses relating to or arising out of all pending or threatened litigation applicable to GFH or any of its Subsidiaries, as of the dates thereof, (v) each such allowance or reserve described above has been established in accordance with the accounting principles described in Section 3.3(b) and applicable regulatory requirements and guidelines. Disclosure Schedule 3.4.1 sets forth all one to four family residential mortgage loans originated on or after January 1, 2005 by GFH or any of its Subsidiaries (i) that were sold in the secondary mortgage market and have been re-purchased by GFH or any of its Subsidiaries or (ii) that the institutions to whom such loans were sold (or their successors or assigns) have asked GFH or any of its Subsidiaries to purchase back (but have not been purchased back).

Section 3.5 Certain Loans and Related Matters . Except as set forth in Disclosure Schedule 3.5, neither GFH nor any of its Subsidiaries is a party to any written or oral: (i) loan agreement, note or borrowing arrangement, under the terms of which the obligor is sixty (60) days delinquent in payment of principal or interest or in default of any other provision as of the date hereof; (ii) loan agreement, note or borrowing arrangement which has been classified or, in the exercise of reasonable diligence by GFH or any Regulatory Authority, should have been classified by any bank examiner (whether regulatory or internal) as “substandard,” “doubtful,” “loss,” “other loans especially mentioned”, “other assets especially mentioned”, “special mention”, “credit risk assets”, “classified”, “criticized”, “watch list”, “concerned loans” or any comparable classifications by such persons; (iii) loan agreement, note or borrowing arrangement, including any loan guaranty, with any director or executive officer of GFH, Gateway Bank or any five percent (5%) shareholder of GFH or any person, corporation or enterprise controlling,

controlled by or under common control with any of the foregoing; or (iv) loan agreement, note or borrowing arrangement in violation of any law, regulation or rule applicable to GFH or any of its Subsidiaries including, but not limited to, those promulgated, interpreted or enforced by any Regulatory Authority.

Section 3.6

Authority; No Violation .

(a) GFH has full corporate power and authority to execute and deliver this Agreement and, subject to the approval of the shareholders of GFH and to the receipt of the Consents of the Regulatory Authorities, to consummate the transactions contemplated hereby. By a unanimous vote, the Board of Directors of GFH has duly and validly approved this Agreement and the transactions contemplated hereby, has authorized the execution and delivery of this Agreement, has directed that this Agreement, the Plan of Merger and the transactions contemplated hereby be submitted to GFH’s shareholders for approval at a meeting of such shareholders and, except for the adoption of such Agreement by its shareholders, no other corporate proceeding on the part of GFH is necessary to consummate the transactions so contemplated. This Agreement, when duly and validly executed by GFH and delivered by GFH (and assuming due authorization, execution and delivery by HRB), will constitute a valid and binding obligation of GFH and will be enforceable against GFH in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting the enforcement of creditors’ rights generally and except that the availability of the equitable remedy of specific performance or injunctive relief is subject to the discretion of the court before which any proceeding may be brought.

(b) Except as set forth in Disclosure Schedule 3.6(b), neither the execution and delivery of this Agreement by GFH nor the consummation by GFH of the transactions contemplated hereby, nor compliance by GFH with any of the terms or provisions hereof, will (i) violate any provision of the Articles of Incorporation or Bylaws of GFH or any of its Subsidiaries, (ii) assuming that the Consents of the Regulatory Authorities and approvals referred to herein are duly obtained, violate any statute, code, ordinance, rule, regulation, judgment, order, writ, decree or injunction applicable to GFH or any of its Subsidiaries or (iii) violate, conflict with, result in a breach of any provisions of, constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, result in the termination of, accelerate the performance required by or result in the creation of any lien, security interest, charge or other encumbrance upon any of the respective properties or assets of GFH or any of its Subsidiaries under, any of the terms, conditions or provisions of any material note, bond, mortgage, indenture, deed of trust, license, permit, lease, agreement or other instrument or obligation to which GFH or any of its Subsidiaries is a party, or by which any of them or any of their respective properties or assets may be bound or affected.

Section 3.7 Consents and Approvals . Except for (i) the approval of the shareholders of GFH and the shareholders of HRB pursuant to the joint proxy statement of GFH and HRB relating to the Merger (the “Proxy Statement”); (ii) the Consents of the Regulatory Authorities; (iii) the filing of Articles of Merger in substantially in the form of Exhibit 1.1(a)-2 (with the Plan of Merger) with the Commonwealth of Virginia and the Articles of Merger in substantially the

form of Exhibit 1.1(a)-1 with the North Carolina Secretary of State; and (iv) as set forth in Disclosure Schedule 3.7, no Consents of any person are necessary in connection with the execution and delivery by GFH of this Agreement, and the consummation by GFH of the Merger and the other transactions contemplated hereby.

Section 3.8 Broker’s Fees . Except for Sandler O’Neill + Partners, L.P., whose engagement letter is attached as Disclosure Schedule 3.8, neither GFH, any of its Subsidiaries, nor any of its officers or directors, has employed any broker or finder or incurred any liability for any broker’s fees, commissions or finder’s fees in connection with any of the transactions contemplated by this Agreement.

Section 3.9 Absence of Certain Changes or Events . Since June 30, 2008, there has not been (i) any declaration, payment or setting aside of any dividend or distribution (whether in cash, stock or property) in respect of GFH Shares or GFH Preferred Shares (other than the cash dividends in an amount of $0.08 per share of GFH common stock paid on August 22, 2008); (ii) any change or any event involving a prospective change in the Condition of GFH or any of its Subsidiaries or a combination of any such change(s) and any such event(s) which has had, or is reasonably likely to have, a Material Adverse Effect on the Condition of GFH or any of its Subsidiaries taken as a whole; or (iii) any act or omission by GFH or its Subsidiaries prior to the date of this Agreement, which act or omission, if it occurred after the date of this Agreement, would represent or result in a material breach or violation of any of the covenants and agreements of GFH provided in this Agreement, including, without limitation, Section 5.1 hereof.

Section 3.10 Legal Proceedings; Etc . Except as set forth in Disclosure Schedule 3.10, neither GFH nor or any of its Subsidiaries is a party to any, and there are no pending or, to the Knowledge of GFH, threatened, judicial, administrative, arbitral or other proceedings, claims, actions, causes of action or governmental investigations against GFH or any of its Subsidiaries and, to the Knowledge of GFH, there is: no proceeding, claim, action or governmental investigation against GFH or any of its Subsidiaries; no judgment, decree, injunction, rule or order of any court, governmental department, commission, agency, instrumentality or arbitrator is outstanding against GFH or any of its Subsidiaries; no default by GFH or any of its Subsidiaries under any contract or agreement to which GFH or any of its Subsidiaries is a party; and neither GFH nor or any of its Subsidiaries is a party to any agreement, order or memorandum in writing by or with any Regulatory Authority restricting the operations of GFH or any of its Subsidiaries and neither GFH nor or any of its Subsidiaries has been advised by any Regulatory Authority that any such Regulatory Authority is contemplating issuing or requesting the issuance of any such order or memorandum in the future.

Section 3.11

Taxes and Tax Returns .

(a) GFH has made available to HRB copies of the federal, state and local income tax returns of GFH and its Subsidiaries for the years 2005, 2006 and 2007 and all schedules and exhibits thereto, and such returns have not been examined by the Internal Revenue Service or any other taxing authority. Except as reflected in Disclosure Schedule 3.11, GFH and each of its Subsidiaries has duly filed (or obtained extensions to file) in correct form in all

material respects all federal, state and local information returns and tax returns required to be filed on or prior to the date hereof, and GFH and each of its Subsidiaries has duly paid or made adequate provisions for the payment of all taxes and other governmental charges which are owed by it to any federal, state or local taxing authorities, whether or not reflected in such returns (including, without limitation, those owed in respect of the properties, income, business, capital stock, deposits, franchises, licenses, sales and payrolls of GFH and each of its Subsidiaries), other than taxes and other charges which (i) are not yet delinquent or are being contested in good faith or (ii) have not been finally determined. The amounts set forth as liabilities for taxes on the Financial Statements of GFH, and the Call Reports of Gateway Bank are sufficient, in the aggregate, for the payment of all unpaid federal, state and local taxes (including any interest or penalties thereon), whether or not disputed, accrued or applicable, for the periods then ended, and have been computed in accordance with generally accepted accounting principles. Neither GFH nor any of its Subsidiaries is responsible for the taxes of any other Person under Treasury Regulation 1.1502-6 or any similar provision of federal, state or foreign law. Neither GFH nor any of its Subsidiaries is a party to or bound by any tax allocation or tax sharing agreement.

(b) Except as disclosed in Disclosure Schedule 3.11, neither GFH nor any of its Subsidiaries has executed an extension or waiver of any statute of limitations on the assessment or collection of any federal, state or local taxes due that is currently in effect, and deferred taxes of GFH and its Subsidiaries have been adequately provided for in the Financial Statements of GFH.

(c) Except as disclosed in Disclosure Schedule 3.11, neither GFH nor any of its Subsidiaries has made any payment, is obligated to make any payment or is a party to any contract, agreement or other arrangement that could obligate it to make any payment that would be disallowed as a deduction under Section 280G or 162(m) of the Code.

(d) There has not been an ownership change, as defined in Section 382(g) of the Code, of GFH or any of its Subsidiaries that occurred during or after any taxable period in which GFH or any of its Subsidiaries incurred an operating loss that carries over to any taxable period ending after the fiscal year of GFH or any of its Subsidiaries immediately preceding the date of this Agreement.

(e) (i) Proper and accurate amounts have been withheld by GFH and each of its Subsidiaries from its employees and others for all prior periods in compliance in all material respects with the tax withholding provisions of all applicable federal, state and local laws and regulations, and proper due diligence steps have been taken in connection with back-up withholding, (ii) federal, state and local returns have been filed by GFH and each of its Subsidiaries for all periods for which returns were due with respect to withholding, Social Security and unemployment taxes or charges due to any federal, state or local taxing authority and (iii) the amounts shown on such returns to be due and payable have been paid in full or provision therefor has been included by GFH in the Financial Statements of GFH.

(f) In the past five years, neither GFH nor any of its Subsidiaries has distributed stock of another Person, or has had its stock distributed by another Person, in a

transaction that was purported or intended to be governed in whole or in part by Code §355 or Code §361.

(g) GFH has no Knowledge that any authority intends to assess any additional taxes for any period for which tax returns have been filed. No foreign, federal, state, or local tax audits or administrative or judicial tax proceedings are pending or being conducted with respect to GFH or any of its Subsidiaries. Neither GFH nor any of its Subsidiaries has received from any foreign, federal, state, or local taxing authority (including jurisdictions where GFH or its Subsidiaries have not filed tax returns) any (i) notice indicating an intent to open an audit or other review, or (ii) notice of deficiency or proposed adjustment for any amount of tax proposed, asserted, or assessed by any taxing authority against GFH or any of its Subsidiaries.

(h) Neither GFH nor any of its Subsidiaries will be required to include any item of income in, or exclude any item of deduction from, its computation of taxable income for any taxable period (or portion thereof) ending after the Closing Date as a result of any (A) change in method of accounting for a taxable period ending on or prior to the Closing Date; (B) “closing agreement” as described in Code §7121 (or any corresponding or similar provision of state, local or foreign income Tax law) executed on or prior to the Closing Date; (C) installment sale or open transaction disposition made on or prior to the Closing Date; or (D) prepaid amount received on or prior to the Closing Date, except to the extent any such item is taken into account in its Financial Statements.

(i) Neither GFH nor any of its Subsidiaries has engaged in a “reportable transaction” as defined in Section 1.6011-4(b) of the Treasury Regulations.

(j) Each of GFH and its Subsidiaries have disclosed on their federal income Tax Returns all positions taken therein that could give rise to a substantial understatement of federal income tax within the meaning of Code §6662.

Section 3.12

Employee Benefit Plans .

(a) Disclosure Schedule 3.12(a) sets forth a complete and correct list of all “employee benefit plans,” as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”), and all employment, compensation, commission, bonus, stock option, stock purchase, restricted stock, incentive, deferred compensation, retiree medical or life insurance, split dollar life insurance, supplemental retirement, severance, change of control, loans or other benefit plans, agreements, programs, arrangements, or fringe benefits, in each case, which are provided, maintained, contributed to or sponsored by GFH or any of its Subsidiaries on behalf of current or former directors, officers or employees of GFH or any of its Subsidiaries (collectively, the “Benefit Plans”). GFH has, with respect to each Benefit Plan, delivered to HRB true and complete copies of: (i) all current Benefit Plan texts and agreements and related trust agreements or annuity contracts and any amendments thereto; (ii) all summary plan descriptions and material communications to employees and Benefit Plan participants and beneficiaries; (iii) the Form 5500 filed in each of the most recent three plan years (including all schedules thereto and the opinions of independent accountants); (iv) the most recent actuarial valuation (if any); (v) the most recent annual and periodic accounting of plan assets; (vi) if the

plan is intended to qualify under Section 401(a) or 403(a) of the Code, the most recent determination letter received from the Internal Revenue Service and any application for a determination letter; (vii) a written summary of any unwritten Benefit Plans; and (viii) all material communications with any governmental entity or agency (including, without limitation, the Department of Labor, Internal Revenue Service and the Pension Benefit Guaranty Corporation (“PBGC”)) since January 1, 2005.

(b) Neither GFH nor any of its Subsidiaries (and any pension plan maintained by any of them) has incurred any liability to the PBGC or the Internal Revenue Service with respect to any pension plan qualified under Section 401 of the Code, except liabilities to the PBGC pursuant to Section 4007 of ERISA, all which have been fully paid. No reportable event under Section 4043(b) of ERISA (including events waived by PBGC regulation) has occurred with respect to any such pension plan.

(c) Neither GFH nor any of its Subsidiaries has incurred any material liability under Section 4201 of ERISA for a complete or partial withdrawal from, or agreed to participate in, any multi-employer plan as such term is defined in Section 3(37) of ERISA.

(d) All Benefit Plans comply, in all material respects, in operation, administration and form, with the applicable provisions of ERISA and the Code that are applicable, or intended to be applicable, including, but not limited to, COBRA, HIPAA and any applicable, similar state law, to such “employee benefit plans.” All contributions and all payments and premiums required to have been made to or under any Benefit Plan have been timely and properly made (or otherwise properly accrued, if not yet due), and nothing has occurred with respect to the operation of the Benefit Plans that would cause the imposition of any liability, penalty or tax under ERISA or the Code. Neither GFH nor any of its Subsidiaries have any material liability under any such plan that is not reflected in the Financial Statements of GFH.

For purposes of this Agreement, “COBRA” means the provision of Section 4980B of the Code and the regulations thereunder, and Part 6 of the Subtitle B of title I of ERISA and any regulations thereunder, and “HIPAA” means the provisions of the Code and ERISA as enacted by the Health Insurance Portability and Accountability Act of 1996 and the Standards for Privacy of Individually Identifiable Health Information and the Security Standards for the Protection of Electronic Protected Health Information set forth in 45 CFR Parts 160 and 164.

(e) No prohibited transaction (which shall mean any transaction prohibited by Section 406 of ERISA and/or Section 4975 of the Code and not exempt under Section 408 of ERISA) has occurred with respect to any employee benefit plan maintained by GFH or any of its Subsidiaries.

(f) No Benefit Plan which is a defined benefit “pension benefit plan” under ERISA has any “unfunded current liability,” as that term is defined in Section 302(d)(8)(A) of ERISA, and the present fair market value of the assets of any such plan exceeds the plan’s “benefit liabilities,” as that term is defined in Section 4001(a)(16) of ERISA, when determined

under actuarial factors that would apply if the plan terminated in accordance with all applicable legal requirements.

(g) Except as described in Disclosure Schedule 3.12(g), neither the execution and delivery of this Agreement nor the consummation of the transactions contemplated hereby will (i) result in any material payment (including, without limitation, severance, unemployment compensation, golden parachute or otherwise) becoming due to any director or any officer or employee of GFH or any of its Subsidiaries under any Benefit Plan or otherwise, (ii) materially increase any benefits otherwise payable under any Benefit Plan or (iii) result in any acceleration of the time of payment or vesting of any such benefits to any material extent.

(h) No Benefit Plan is subject to Title IV of ERISA or is a multiemployer plan as defined in Section 414(f) of the Code or Section 3(37) or 4001(a)(31) of ERISA. GFH has never been a party to or participant in a multiemployer plan.

(i) There are no actions, liens, suits or claims pending or threatened (other than routine claims for benefits) with respect to any Benefit Plan or against the assets of any Benefit Plan. No assets of GFH or any of its Subsidiaries are subject to any lien under Section 302(f) of ERISA or Section 412(n) of the Code.

(j) Each Benefit Plan which is intended to qualify under Section 401(a) or 403(a) of the Code so qualifies and its related trust is exempt from taxation under Section 501(a) of the Code. Each such Benefit Plan has received a favorable determination opinion from the Internal Revenue Service. No event has occurred or circumstance exists that will or could give rise to a disqualification or loss of tax-exempt status of any such plan or trust. Each Benefit Plan subject to Code section 409A complies with current requirements under Code section 409A and applicable guidance.

(k) Except as described in Disclosure Schedule 3.12(k), no Benefit Plan is a multiple employer plan within the meaning of Section 413(c) of the Code or Section 4063, 4064 or 4066 of ERISA, and no Benefit Plan is a multiple employer welfare arrangement as defined in Section 3(40) of ERISA.

(l) Each “employee pension benefit plan”, as defined in Section 3(2) of ERISA, that is not qualified under Section 401(a) or 403(a) of the Code is exempt from Part 2, 3 and 4 of Title I of ERISA as an unfunded plan that is maintained primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees, pursuant to Sections 201(2), 301(a)(3) and 401(a)(1) of ERISA (“Top Hat Plan”). Each Top Hat Plan is in compliance with the filing requirement of 29 CFR §2520.104-23. Except as set forth in Disclosure Schedule 3.12(l), no assets of GFH are allocated to or held in a “rabbi trust” or similar funding vehicle.

(m) Except as set forth on Disclosure Schedule 3.12(m), no Benefit Plan provides benefits to any current or former employee of GFH or any of its Subsidiaries beyond retirement or other termination of service (other than coverage mandated by COBRA, the cost of

which is fully paid by the current or former employee or his or her dependents). Any such plan may be amended or terminated at any time by unilateral action of GFH.

(n) GFH and its Subsidiaries have made all bonus and commission payments (on a pro rata basis) to which they are committed to make to any Employee under any Benefit Plan (or otherwise) for calendar year 2008.

Section 3.13

Title and Related Matters .

(a) Except as set forth in Disclosure Schedule 3.13(a), GFH and each of its Subsidiaries has good title, and as to owned real property, has good and marketable title in fee simple absolute, to all assets and properties, real or personal, tangible or intangible, reflected as owned by or leased or subleased by or carried under its name on the Financial Statements of GFH or acquired subsequent thereto (except to the extent that such assets and properties have been disposed of for fair value in the ordinary course of business since June 30, 2008), free and clear of all liens, encumbrances, mortgages, security interests, restrictions, pledges or claims, except for (i) those liens, encumbrances, mortgages, security interests, restrictions, pledges or claims reflected in the Financial Statements of GFH or incurred in the ordinary course of business after June 30, 2008 and (ii) statutory liens for amounts not yet delinquent or which are being contested in good faith.

(b) Except as set forth in Disclosure Schedule 3.13(b), all agreements pursuant to which GFH and each of its Subsidiaries leases, subleases or licenses material real or material personal properties from others are valid, binding and enforceable in accordance with their respective terms, and there is not, under any of such leases or licenses, any existing default or event of default, or any event which with notice or lapse of time, or both, would constitute a default or force majeure, or provide the basis for any other claim of excusable delay or nonperformance. Except as set forth in Disclosure Schedule 3.13(b), GFH and each of its Subsidiaries has all right, title and interest as a lessee under the terms of each lease or sublease, free and clear of all liens, claims or encumbrances (other than the rights of the lessor) as of the Effective Time of the Merger, and shall have the right to transfer each lease or sublease pursuant to this Agreement.

(c) Other than real estate that was acquired by foreclosure or voluntary deed in lieu of foreclosure (i) all of the buildings, structures and fixtures owned, leased or subleased by GFH and each of its Subsidiaries are in good operating condition and repair, subject only to ordinary wear and tear and/or minor defects which do not interfere with the continued use thereof in the conduct of normal operations, and (ii) all of the material personal properties owned, leased or subleased by GFH and each of its Subsidiaries are in good operating condition and repair, subject only to ordinary wear and tear and/or minor defects which do not interfere with the continued use thereof in the conduct of normal operations.

Section 3.14

Real Estate .

(a) Disclosure Schedule 3.14(a) identifies and sets forth the address for each parcel of real estate or interest therein owned, leased or subleased by GFH and each of its Subsidiaries or in which GFH or any of its Subsidiaries has any ownership or leasehold interest.

(b) Disclosure Schedule 3.14(b) lists or otherwise describes each and every written or oral lease or sublease, together with the current name, address and telephone number of the landlord or sub-landlord and the landlord’s property manager (if any), under which GFH and each of its Subsidiaries is the lessee of any real property and which relates in any manner to the operation of the businesses of GFH and its Subsidiaries.

(c) Neither GFH nor any of its Subsidiaries has violated, and is not currently in material violation of, any law, regulation or ordinance relating to the ownership or use of the real estate and real estate interests described in Disclosure Schedules 3.14(a) and 3.14(b) including, but not limited to any law, regulation or ordinance relating to zoning, building, occupancy, environmental or comparable matter.

(d) As to each parcel of real property owned or used by GFH or any of its Subsidiaries, neither GFH nor any of its Subsidiaries has received notice of any pending or, to the Knowledge of GFH, threatened condemnation proceedings, litigation proceedings or mechanic’s or materialmen’s liens.

Section 3.15

Environmental Matters .

(a) Each of GFH and its Subsidiaries, the Participation Facilities (as defined below) of GFH, and the Loan Properties of GFH (as defined below) are, and have been, in compliance, and there are no present circumstances that would prevent or interfere with the continuation of such compliance with all applicable federal, state and local laws, including common law, rules, regulations and ordinances, and with all applicable decrees, orders and contractual obligations relating to pollution or the protection of the environment or the discharge of, or exposure to, Hazardous Materials (as defined below) in the environment or workplace.

(b) There is no litigation or other proceeding pending or, to the Knowledge of GFH, threatened before any court, governmental agency or board or other forum in which GFH, its Subsidiaries or any Participation Facility of GFH has been or, with respect to any threatened litigation or other proceeding, may be, named as defendant (i) for alleged noncompliance (including by any predecessor), with respect to any Environmental Law (as defined below) or (ii) relating to the release into the environment of any Hazardous Material (as defined below), whether or not occurring at, on or involving a site owned, leased or operated by GFH, its Subsidiaries or any Participation Facility of GFH.

(c) There is no litigation or other proceeding pending or, to the Knowledge of GFH, threatened before any court, governmental agency or board or other forum in which any Loan Property (or GFH or any of its Subsidiaries in respect of such Loan Property of GFH) has been or, with respect to any threatened litigation or other proceeding, may be, named as a

defendant or potentially responsible party (i) for alleged noncompliance (including by any predecessor) with any Environmental Law or (ii) relating to the release into the environment of any Hazardous Material, whether or not occurring at, on or involving a Loan Property of GFH.

(d) To the Knowledge of GFH, there is no reasonable basis for any litigation or other proceeding of a type described in Sections 3.15(b) or 3.15(c) of this Agreement.

(e) During the period of (i) ownership or operation by GFH or any of its Subsidiaries of any of its current properties, (ii) participation by GFH or any of its Subsidiaries in the management of any Participation Facility of GFH, or (iii) holding by GFH or any of its Subsidiaries of a security interest in any Loan Property of GFH, there have been no releases of Hazardous Material in, on, under or affecting any such property, Participation Facility of GFH or Loan Property of GFH.

(f) To GFH’s Knowledge, prior to the period of (i) ownership or operation by GFH or any of its Subsidiaries, (ii) participation by GFH or any of its Subsidiaries in the management of any Participation Facility of GFH, or (iii) holding by GFH or any of its Subsidiaries of a security interest in any Loan Property of GFH there were no releases of Hazardous Material or oil in, on, under or affecting any such property, Participation Facility of GFH or Loan Property of GFH.

(g) Copies of any environmental reports in the possession of GFH or any of its Subsidiaries are described in Disclosure Schedule 3.15.

Section 3.16

Commitments and Contracts .

(a) Except as set forth in Disclosure Schedule 3.16, neither GFH nor any of its Subsidiaries is a party or subject to any of the following (whether written or oral, express or implied):

(i) Any employment contract or understanding (including any understandings or obligations with respect to severance or termination pay liabilities or fringe benefits) with any present or former officer, director, employee, including in any such person’s capacity as a consultant (other than those which either are terminable at will without any further amount being payable thereunder or as a result of such termination by GFH or any of its Subsidiaries);

(ii)

Any labor contract or agreement with any labor union;

(iii) Any contract covenants which limit the ability of GFH or any of its Subsidiaries to compete in any line of business or which involve any restriction of the geographical area in which GFH or any of its Subsidiaries may carry on their businesses (other than as may be required by law or applicable regulatory authorities);

(iv) Any lease (other than real estate leases described on Disclosure Schedule 3.14(b)) or other agreements or contracts with annual payments aggregating $50,000 or more; or

(v) Any other contract or agreement which would be required to be disclosed in reports filed by GFH or any of its Subsidiaries with the SEC, the FRB, the North Carolina Commissioner of Banks or the FDIC and which has not been so disclosed.

(b) Except as set forth in Disclosure Schedule 3.16(b), there is not, under any such agreement, lease or contract to which GFH or any of its Subsidiaries is a party, any existing default or event of default, or any event which with notice or lapse of time, or both, would constitute a default or force majeure, or provide the basis for any other claim of excusable delay or non-performance.

Section 3.17 Regulatory and Tax Matters . Neither GFH nor any of its Subsidiaries has taken or agreed to take any action or has any Knowledge of any fact or has agreed to any circumstance that would (i) materially impede or delay receipt of any Consents of any Regulatory Authorities referred to in this Agreement including, matters relating to the Community Reinvestment Act and protests thereunder, or (ii) prevent the transactions contemplated by this Agreement from qualifying as a reorganization within the meaning of Section 368(a) of the Code.

Section 3.18 Registration Obligations . Neither GFH nor any of its Subsidiaries is under any obligation, contingent or otherwise, which will survive the Merger to register any of its securities under the Securities Act or any state securities laws.

Section 3.19 Insurance . GFH and each of its Subsidiaries is presently insured, and during each of the past three calendar years has been insured, for reasonable amounts against such risks as companies or institutions engaged in a similar business would, in accordance with good business practice, customarily be insured. The policies of fire, theft, liability and other insurance maintained with respect to the assets or businesses of GFH and each of its Subsidiaries provide adequate coverage against loss, and the fidelity bonds in effect as to which GFH and each of its Subsidiaries is named an insured are sufficient for their purpose. Such policies of insurance are listed and described in Disclosure Schedule 3.19.

Section 3.20

Labor .

(a) No work stoppage involving GFH or any of its Subsidiaries is pending as of the date hereof or, to the Knowledge of GFH, threatened. Neither GFH nor any of its Subsidiaries is involved in, or, to the Knowledge of GFH, threatened with or affected by, any proceeding asserting that GFH or any of its Subsidiaries has committed an unfair labor practice or any labor dispute, arbitration, lawsuit or administrative proceeding. No union represents or claims to represent any employees of GFH or any of its Subsidiaries and, to the Knowledge of GFH, no labor union is attempting to organize employees of GFH or any of its Subsidiaries.

(b) Set forth on Disclosure Schedule 3.20(b) is a true and complete list of all employees of GFH and each of its Subsidiaries as of the date hereof, together with the employee position, title, salary and date of hire, and all information with respect to all benefit plans or policies, bonus arrangements, commissions, severance plans or policies, compensation arrangements or other benefits provided to such employees.

(c) GFH and each of its Subsidiaries is in compliance in all material respects with all applicable laws and regulations relating to employment or the workplace, including, without limitation, provisions relating to wages, hours, collective bargaining, safety and health, work authorization, equal employment opportunity, immigration and the withholding of income taxes, unemployment compensation, workers compensation, employee privacy and right to know and social security contributions.

(d) Except as set forth on Disclosure Schedule 3.20(d) hereto, there has not been, there is not presently pending or existing and, to the Knowledge of GFH, there is not threatened any proceeding against or affecting GFH or any of its Subsidiaries relating to the alleged violation of any legal requirement pertaining to labor relations or employment matters, including any charge or complaint filed by an employee or union with the National Labor Relations Board, the Equal Employment Opportunity Commission or any comparable governmental body, organizational activity, or other labor or employment dispute against or affecting GFH or any of its Subsidiaries.

Section 3.21 Compliance with Laws . GFH and each of its Subsidiaries has conducted its business in compliance with all applicable federal, foreign, state and local laws, regulations and orders, and is in compliance with such laws, regulations and orders. Except as disclosed in Disclosure Schedule 3.21, GFH and each of its Subsidiaries:

(a) is not in violation of any laws, orders or permits applicable to its business or the employees or agents or representatives conducting its business; and

(b) has not received a notification or communication from any agency or department of any federal, state or local governmental authority or any Regulatory Authority or the staff thereof (i) asserting that GFH or any of its Subsidiaries is not in compliance with any laws or orders which such governmental authority or Regulatory Authority enforces, (ii) threatening to revoke any permit, (iii) requiring GFH or any of its Subsidiaries to enter into any cease and desist order, formal agreement, commitment or memorandum of understanding, or to adopt any resolutions or similar undertakings, or (iv) directing, restricting or limiting, or purporting to direct, restrict or limit in any manner, the operations of GFH or any of its Subsidiaries, including, without limitation, any restrictions on the payment of dividends, or that in any manner relates to such entity’s capital adequacy, credit policies, management or business.

Section 3.22 Transactions with Management . Except for (a) deposits, all of which are on terms and conditions comparable to those made available to other customers of GFH and each of its Subsidiaries at the time such deposits were entered into, (b) the loans listed on Disclosure Schedule 3.5, (c) the agreements listed on Disclosure Schedule 3.16, (d) obligations under employee benefit plans of GFH and its Subsidiaries set forth in Disclosure Schedule 3.12 and (e)

the items described on Disclosure Schedule 3.22 and any loans or deposit agreements entered into in the ordinary course with customers of GFH and its Subsidiaries, there are no contracts with or commitments to present shareholders who own or owned more than one percent (1%) of GFH’s outstanding shares of common stock, directors, officers or employees involving the expenditure of more than $1,000 as to any one individual, including, with respect to any business directly or indirectly controlled by any such person, or $5,000 for all such contracts for commitments in the aggregate for all such individuals.

Section 3.23 Derivative Contracts . Neither GFH nor any of its Subsidiaries is a party to nor has any of them agreed to enter into an exchange-traded or over-the-counter swap, forward, future, option, cap, floor or collar financial contract or agreement, or any other contract or agreement which is a financial derivative contract (including various combinations thereof) (“Derivative Contracts”), except for those Derivative Contracts set forth in Disclosure Schedule 3.23.

Section 3.24 Deposits . Except as set forth on Disclosure Schedule 3.24, none of the deposits of GFH or any of its Subsidiaries are “brokered” deposits or are subject to any encumbrance, legal restraint or other legal process (other than garnishments, pledges, set off rights, escrow limitations and similar actions taken in the ordinary course of business), and no portion of such deposits represents a deposit of any affiliate of GFH or any of its Subsidiaries.

Section 3.25 Accounting Controls . GFH and each of its Subsidiaries has devised and maintained systems of internal accounting control that are sufficient to provide reasonable assurances that: (i) transactions are executed in accordance with general or specific authorization of the Board of Directors and the duly authorized executive officers of GFH and each of its Subsidiaries (as appropriate); (ii) transactions are recorded as necessary to permit the preparation of financial statements in conformity with generally accepted accounting principles consistently applied with respect to institutions such as GFH or any other criteria applicable to such financial statements, and to maintain proper accountability for items therein; (iii) access to the properties and assets of GFH and each of its Subsidiaries is permitted only in accordance with general or specific authorization of the Board of Directors and the duly authorized executive officers of GFH and each of its Subsidiaries (as appropriate); and (iv) the recorded accountability for items is compared with the actual levels at reasonable intervals and appropriate actions taken with respect to any differences.

Section 3.26 Proxy Materials . None of the information relating to GFH or any of its Subsidiaries to be included in the Proxy Statement which is to be mailed to the shareholders of GFH and HRB in connection with the solicitation of their approval of this Agreement will, at the time such Proxy Statement is mailed or at the time of the meetings of shareholders to which such Proxy Statement relates, be false or misleading with respect to any material fact, or omit to state any material fact necessary in order to make a statement therein not false or misleading.

Section 3.27 Deposit Insurance . The deposit accounts of Gateway Bank are insured by the FDIC in accordance with the provisions of the Act; Gateway Bank has paid all regular premiums and special assessments and filed all reports required under the Act.

Section 3.28

Intellectual Property .

(a)

GFH Intangibles.

(i) Disclosure Schedule 3.28(a) lists and identifies all Intellectual Property (as defined below) that is directly owned by GFH or its Subsidiaries and that is material to GFH’s, or any of its Subsidiaries’, business, including, without limitation, the rights to any names used by GFH or its Subsidiaries (the “GFH Intangibles”) and, with respect to the foregoing, specifically identifies the owner and each material license, agreement, or other permission that GFH or its Subsidiaries have granted to any third party with respect to any of the GFH Intangibles.

(ii) GFH has made available to HRB correct and complete copies of all patent, trademark, and copyright registrations, applications, and written licenses, agreements, and permissions (as any of the foregoing has been amended to date) and correct and complete copies of all other written documentation evidencing ownership and prosecution (if applicable) of each of GFH Intangibles.

(iii) With respect to the GFH Intangibles, and except as otherwise indicated in Disclosure Schedule 3.28(a):

(A)

GFH, or a Subsidiary of GFH, possesses all right, title, and interest in and to the GFH Intangibles free and clear of any security interest, lien, license, or other restriction and such GFH Intangibles are not subject to any outstanding injunction, judgment, order, decree, ruling, or charge; and

(B)

no action is pending and, to the Knowledge of GFH, no action is threatened that challenges the legality, validity, enforceability, use, or ownership of the GFH Intangibles.

(b) Third Party Intellectual Property. Disclosure Schedule 3.28(b) lists and identifies any Intellectual Property licensed to GFH or any of its Subsidiaries by a third party (other than Intellectual Property licensed pursuant to shrink-wrap and similar agreements) that is material to GFH’s, or any Subsidiary of GFH’s, business (“Third Party Intellectual Property”) pursuant to a written license, sublicense, agreement or permission (the “GFH License”) and identifies the owner or licensor of the Third Party Intellectual Property. GFH has made available to HRB correct and complete copies of each such GFH License. With respect to each item of Third Party Intellectual Property:

(i) each GFH License covering the item of Third Party Intellectual Property is an enforceable agreement of GFH or the Subsidiary who is a party thereto, and, to GFH’s Knowledge, is enforceable against the other parties thereto;

(ii) no party to a GFH License covering the item of Third Party Intellectual Property is in material breach or default, and no event has occurred that with

notice or lapse of time would constitute a material breach or default or permit termination, modification, or acceleration thereunder; and

(iii) no Action is pending or, to GFH’s Knowledge, is threatened that challenges the legality, validity, or enforceability of the underlying item of Third Party Intellectual Property.

(c) No Infringement. Except as set forth in Disclosure Schedule 3.28(c), the use or sale by GFH or any of its Subsidiaries of any products or services in GFH’s or one of its Subsidiaries’ businesses and use by GFH or any of its Subsidiaries of the Intellectual Property (including, without limitation, GFH Intangibles and Third Party Intellectual Property) does not materially interfere with, infringe on, misappropriate or otherwise come into conflict with any Intellectual Property rights of third parties and has not materially interfered with, infringed on, misappropriated or otherwise come into conflict with, any Intellectual Property rights of any third party and no activity of any third party materially infringes upon the rights of GFH or any Subsidiary of GFH with respect to any of the GFH Intangibles. Except as set forth in Disclosure Schedule 3.28(c), no action alleging or relating to any infringement of the rights of GFH or any Subsidiary of GFH or infringement of the rights of any third parties by GFH or any Subsidiary of GFH is currently pending or, to GFH’s Knowledge, threatened. To GFH’s Knowledge, no third party has materially interfered with, infringed upon or misappropriated any Intellectual Property rights of GFH or any of its Subsidiaries in the GFH Intangibles.

(d) Use of Third Party Intellectual Property. Each material item of Intellectual Property owned, licensed or used by GFH or any of its Subsidiaries immediately prior to the Effective Time hereunder will be owned or available for use by Surviving Corporation on identical terms and conditions immediately subsequent to the Closing hereunder.

Section 3.29 Antitakeover Provisions . GFH has taken all actions required to exempt GFH, this Agreement, the Merger from any provisions of an antitakeover nature contained in their organizational documents, and the provisions of any federal or state “antitakeover,” “fair price,” “moratorium,” “control share acquisition” or similar laws or regulations.

Section 3.30 Communications with Shareholders . Disclosure Schedule 3.30 identifies and sets forth all correspondence between GFH and its shareholders since September 1, 2008.

Section 3.31 Claims under Insurance Policies . GFH has no Knowledge of any pending or threatened claim under its directors and officers’ insurance policy or fidelity bond coverage.

Section 3.32 Fairness Opinion . The Board of Directors of GFH has received an opinion from Sandler O’Neill + Partners, L.P. dated as of the date that the GFH Board of Directors approved this Agreement stating that the Exchange Ratio is fair, from a financial point of view, to the shareholders of GFH.

Section 3.33 Untrue Statements and Omissions . No representation or warranty contained in Article 3 of this Agreement or in the Disclosure Schedules contains any untrue

statement of a material fact or omits to state a material fact necessary to make the statements therein, in light of the circumstances under which they were made, not misleading.

ARTICLE 4

REPRESENTATIONS AND WARRANTIES OF

HRB

Except for the exceptions listed in the sections of the HRB Schedule that correspond to the Sections in this Article 4, HRB hereby represents and warrants to GFH as follows as of the date hereof and thereafter as of all times up to and including the Effective Time of the Merger (except as otherwise provided):

Section 4.1

Corporate Organization .

(a)

Organization and Related Matters of HRB

(i) HRB is a corporation duly organized, validly existing and in good standing under the laws of Virginia. HRB has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as now conducted, or as proposed to be conducted pursuant to this Agreement, and HRB is licensed or qualified to do business in each jurisdiction in which the nature of the business conducted by HRB, or the character or location of the properties and assets owned or leased by HRB makes such licensing or qualification necessary. HRB is duly registered as a bank holding company under the Bank Holding Company Act of 1956, as amended. True and correct copies of the Articles of Incorporation of HRB and the Bylaws of HRB, each as amended to the date hereof, have been made available to GFH.

(ii) HRB has in effect all federal, state, local and foreign governmental, regulatory and other authorizations, permits and licenses necessary for it to own or lease its properties and assets and to carry on its business as now conducted, the absence of which, either individually or in the aggregate, would have a Material Adverse Effect on the Condition of HRB on a consolidated basis.

(iii) HRB Schedule 4.1(a)(iii) lists each Subsidiary of HRB together with the jurisdiction of organization of each such Subsidiary (“HRB Subsidiaries”). Each HRB Subsidiary is in compliance in all material respects with all rules and regulations promulgated by any relevant Regulatory Authority. (A) HRB owns, directly or indirectly, all the issued and outstanding equity securities of each of the HRB Subsidiaries, (B) no equity securities of any of the HRB Subsidiaries are or may become required to be issued (other than to it or its wholly-owned Subsidiaries) by reason of any right or otherwise, (C) there are no contracts, commitments, understandings or arrangements by which any of such HRB Subsidiaries is or may be bound to sell or otherwise transfer any equity securities of any such HRB Subsidiaries (other than to it or its wholly-owned Subsidiaries), (D) there are no contracts, commitments, understandings,

or arrangements relating to its rights to vote or to dispose of such securities, and (E) all the equity securities of each HRB Subsidiary held by HRB or the HRB Subsidiaries are fully paid and nonassessable and are owned by HRB or the HRB Subsidiaries free and clear of any liens.

(iv) HRB does not own any capital stock of any Person, or have any direct or indirect interest in any partnership or joint venture except as set forth in HRB Schedule 4.1(a)(iv). HRB Schedule 4.1(a)(iv) lists the owner(s) and percentage ownership (direct or indirect) of each subsidiary, partnership or joint venture disclosed thereon.

(v) The minute books of HRB contain complete and accurate records in all material respects of all meetings and other corporate actions held or taken by the shareholders and Boards of Directors (including all committees thereof).

(b)

Organization and Related Matters of Bank of Hampton Roads .

(i) Bank of Hampton Roads is a banking corporation duly organized, validly existing and in good standing under the laws of Virginia. Bank of Hampton Roads has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as now conducted and Bank of Hampton Roads is licensed or qualified to do business in each jurisdiction which the nature of the business conducted or to be conducted by Bank of Hampton Roads, or the character or location or the properties and assets owned or leased by Bank of Hampton Roads make such licensing or qualification necessary. True and correct copies of the Articles of Incorporation and Bylaws of Bank of Hampton Roads, as each may be amended to the date hereof, have been made available to GFH.

(ii) Bank of Hampton Roads has in effect all federal, state, local and foreign governmental, regulatory or other authorizations, permits and licenses necessary for it to own or lease its properties and assets and to carry on its business as proposed to be conducted.

(iii) Bank of Hampton Roads does not own any capital stock of any Person, or have any interest in any partnership or joint venture except as set forth in HRB Schedule 4.1(b)(iii). HRB Schedule 4.1(b)(iii) lists the owner(s) and percentage ownership of each subsidiary, partnership or joint venture disclosed thereon.

(iv) Bank of Hampton Roads is an “insured bank” as defined in the Act and applicable regulations thereunder and its deposits are insured to the fullest extent allowed by law by the Deposit Insurance Fund of the FDIC.

(v) Bank of Hampton Roads is a member of the Federal Reserve System.

(vi) The minute books of Bank of Hampton Roads contain complete and accurate records in all material respects of all meetings and other corporate actions held or taken by its shareholders and Boards of Directors (including all committees thereof).

(c)

Organization and Related Matters of Shore Bank .

(i) Shore Bank is a banking corporation duly organized, validly existing and in good standing under the laws of Virginia. Shore Bank has the corporate power and authority to own or lease all of its properties and assets and to carry on its business as now conducted and Shore Bank is licensed or qualified to do business in each jurisdiction which the nature of the business conducted or to be conducted by Bank of Hampton Roads, or the character or location or the properties and assets owned or leased by Bank of Hampton Roads make such licensing or qualification necessary. True and correct copies of the Articles of Incorporation and Bylaws of Bank of Hampton Roads, as each may be amended to the date hereof, have been made available to GFH.

(ii) Shore Bank has in effect all federal, state, local and foreign governmental, regulatory or other authorizations, permits and licenses necessary for it to own or lease its properties and assets and to carry on its business as proposed to be conducted.

(iii) Shore Bank does not own any capital stock of any Person, or have any interest in any partnership or joint venture except as set forth in HRB Schedule 4.1(c)(iii). HRB Schedule 4.1(c)(iii) lists the owner(s) and percentage ownership of each subsidiary, partnership or joint venture disclosed thereon.

(iv) Shore Bank is an “insured bank” as defined in the Act and applicable regulations thereunder and its deposits are insured to the fullest extent allowed by law by the Deposit Insurance Fund of the FDIC.

(v)

Shore Bank is a member of the Federal Reserve System.

(vi) The minute books of Shore Bank contain complete and accurate records in all material respects of all meetings and other corporate actions held or taken by its shareholders and Boards of Directors (including all committees thereof).

(d)

Organization and Related Matters of HRB’s other Subsidiaries .

(i) Each of HRB’s Subsidiaries is a corporation, limited liability company, limited company or partnership, as the case may be, duly organized, validly existing and in good standing under the laws of the jurisdiction in which it is incorporated or organized and has all requisite corporate or other power and authority necessary to own or lease all of its properties and assets and to carry on its business as it is now being conducted and as currently proposed by its management to be conducted. Each of HRB’s Subsidiaries is duly licensed or qualified to do business and is in good standing in each

jurisdiction in which the nature of the business conducted by it or the character or location of the properties and assets owned or leased by it makes such licensing or qualification necessary.

(ii) Each of HRB’s Subsidiaries has in effect all federal, state, local and foreign governmental, regulatory or other authorizations, permits and licenses necessary for it to own or lease its properties and assets and to carry on its business.

(iii) None of HRB’s Subsidiaries own any capital stock of any Person, or have any interest in any partnership or joint venture except as set forth in HRB Schedule 4.1(d)(iii). HRB Schedule 4.1(d)(iii) lists the owner(s) and percentage ownership of each subsidiary, partnership or joint venture disclosed thereon.

(iv) The minute books of each of each of HRB’s Subsidiaries contain complete and accurate records in all material respects of all meetings and other corporate actions held or taken by their respective shareholders and Boards of Directors (including all committees thereof).

Section 4.2 Capitalization . The authorized capital stock of HRB consists of 40,000,000 HRB shares, 13,220,955.4492 shares of which are issued and outstanding, and 1,000,000 shares of preferred stock, no par value, none of which is issued and outstanding as of the date hereof. All issued and outstanding HRB Shares have been duly authorized and validly issued, and all such shares are fully paid and nonassessable. As of the date hereof, other than options to purchase 985,467 HRB Shares (which are described in more detail in HRB Schedule 4.2), there are no outstanding options, warrants, commitments, or other rights or instruments to purchase or acquire any HRB Shares, or any securities or rights convertible into or exchangeable for HRB Shares.

Section 4.3

Financial Statements, Condition and Reports .

(a) HRB has made available to GFH copies of the consolidated financial statements of HRB as of and for the years ended December 31, 2005, 2006 and 2007, and for the period ended June 30, 2008, and HRB will make available to GFH, as soon as practicable following the preparation of additional consolidated financial statements for each subsequent calendar quarter or year of HRB, the consolidated financial statements of HRB as of and for such subsequent calendar quarter or year (such consolidated financial statements, unless otherwise indicated, being hereinafter referred to collectively as the “Financial Statements of HRB”).

(b) Each of the Financial Statements of HRB (including the related notes) have been or will be prepared in all material respects in accordance with generally accepted accounting principles, which principles have been or will be consistently applied during the periods involved, except as otherwise noted therein, and the books and records of HRB have been, are being, and will be maintained in all material respects in accordance with applicable legal and accounting requirements and reflect only actual transactions. Each of the Financial Statements of HRB (including the related notes) fairly presents or will fairly present the

consolidated financial position of HRB as of the respective dates thereof and fairly presents or will fairly present the results of operations of HRB for the respective periods therein set forth.

(c) Since June 30, 2008, neither HRB nor any of the HRB Subsidiaries has incurred any obligation or liability (contingent or otherwise) that has or might reasonably be expected to have, individually or in the aggregate, a Material Adverse Effect on the Condition of HRB on a consolidated basis, except obligations and liabilities (i) which are accrued or reserved against in the Financial Statements of HRB or reflected in the notes thereto, and (ii) which were incurred after June 30, 2008 in the ordinary course of business consistent with past practices. Since June 30, 2008, and except for the matters described in (i) and (ii) above, neither HRB nor any of the HRB Subsidiaries has incurred or paid any obligation or liability which would be material to the Condition of HRB on a consolidated basis.

(d) Each of the consolidated reports of condition and income for the years ending December 31, 2007, 2006 and 2005 and for the quarters ending March 31, 2008 and June 30, 2008, that HRB and each of the HRB Subsidiaries has filed with the appropriate Regulatory Authority, fairly present the financial position, results of operation, changes in stockholder’s equity and changes in cash flows, as the case may be of each such bank for the periods to which they relate, in each case in accordance with the FFIEC instructions applicable to such reports.

(e) Since January 1, 2005, HRB and each of the HRB Subsidiaries has filed all reports and statements, together with any amendments required to be made with respect thereto, if any, that was required to be filed with (i) the Federal Reserve, (ii) the FDIC and (iii) any other Regulatory Authority with jurisdiction over HRB and each of the HRB Subsidiaries, and have paid all fees and assessments due and payable in connection therewith. As of their respective dates, each of such reports and documents, as amended, including any financial statements, exhibits and schedules thereto, complied with the relevant statutes, rules and regulations enforced or promulgated by the Regulatory Authorities with which they were filed, and did not contain any untrue statement of material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.

(f) HRB’s Annual Reports on Form 10-K for the fiscal years ended December 31, 2007, 2006 and 2005, and all other reports, registration statements, definitive proxy statements or information statements filed or to be filed by it or any of the HRB Subsidiaries subsequent to December 31, 2005 under the Securities Act, or under Section 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act, in the form filed or to be filed (collectively, the “HRB SEC Documents”) with the Securities and Exchange Commission, as of the date filed, (A) complied or will comply in all material respects as to form with the application requirements under the Securities Act or the Exchange Act, as the case may be, and (B) did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. Copies of the HRB SEC Documents have been made available to GFH, to the extent not available on the SEC’s EDGAR system.

Section 4.4 Loan Portfolio; Reserves; Mortgage Loan Buy-Backs . Except as set forth in HRB Schedule 4.4 and except for any changes hereafter made to the hereinafter described allowances or reserves pursuant to this Agreement, (i) all evidences of indebtedness reflected as assets in the Financial Statements of HRB and the Call Reports of Bank of Hampton Roads and Shore Bank as of June 30, 2008 were as of such dates in all material respects the binding obligations of the respective obligors named therein in accordance with their respective terms, and were not subject to any defenses, setoffs, or counterclaims, except as may be provided by bankruptcy, insolvency or similar laws or by general principles of equity; (ii) the allowances for possible loan losses shown on the Financial Statements of HRB and the Call Reports of Bank of Hampton Roads and Shore Bank as of June 30, 2008 were, and the allowance for possible loan losses to be shown on the Financial Statements of HRB and the Call Reports of Bank of Hampton Roads and Shore Bank as of any date subsequent to the execution of this Agreement will be, as of such dates, adequate to provide for possible losses, net of recoveries relating to loans previously charged off, in respect of loans outstanding (including accrued interest receivable) of HRB or any of the HRB Subsidiaries and other extensions of credit (including letters of credit or commitments to make loans or extend credit); (iii) the OREO Reserve shown on the Financial Statements of HRB and the Call Reports of Bank of Hampton Roads and Shore Bank as of June 30, 2008 were, and the OREO Reserve to be shown on the Financial Statements of HRB and the Call Reports of Bank of Hampton Roads and Shore Bank as of any date subsequent to the execution of this Agreement will be, as of such dates, adequate to provide for losses relating to the other real estate owned portfolio of HRB and any of the HRB Subsidiaries as of the dates thereof; (iv) the Litigation Reserve shown on the Financial Statements of HRB and the Call Reports of Bank of Hampton Roads and Shore Bank as of June 30, 2008 was, and the Litigation Reserve to be shown on the Financial Statements of HRB and the Call Reports of Bank of Hampton Roads and Shore Bank as of any date subsequent to the execution of this Agreement will be, as of such dates, adequate to provide for losses relating to or arising out of all pending or threatened litigation applicable to HRB or any of the HRB Subsidiaries, as of the dates thereof, (v) each such allowance or reserve described above has been established in accordance with the accounting principles described in Section 4.3(b) and applicable regulatory requirements and guidelines. HRB Schedule 4.4.1 sets forth all one to four family residential mortgage loans originated on or after January 1, 2005 by HRB or any of the HRB Subsidiaries (i) that were sold in the secondary mortgage market and have been re-purchased by HRB or any of the HRB Subsidiaries or (ii) that the

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