GRANDSOUTH BANCORPORATION


STOCK OPTION
AGREEMENT PURSUANT TO THE


GRANDSOUTH BANK
2009 STOCK OPTION PLAN (THE “PLAN”)





 


APPENDIX A


 


	1.	HOLDER:	 
	 	 	      (Name)
	 	 	 
	 	 	      (Street Address or PO Box Number)
	 	 	 
	 	 	      (City, State, ZIP)
	 	 	 
	 	 	      (Social Security Number)






	2.	TYPE OF OPTION: 	Incentive Stock Option
	 	(Inventive pursuant to Section 422A of the Internal Revenue Code or non-qualified)




		3.	NUMBER OF SHARES SUBJECT TO OPTION:	 





		4.	EXERCISE PRICE PER SHARE:	 




		5.	DATE OF GRANT:	 





		6.	EXERCISE
                                         TERMS:



 


		(a)	DATE FIRST EXERCISABLE	NUMBER OF SHARES
	 	 	 	 
	 	XXX


XXX


XXX


XXX


XXX


	 






		(b)	CASHLESS EXERCISE PERMITTED (May only be permitted for non-qualified stock options):
                                                                                                                                 YES ___ NO X



 


		(c)	 RIGHT OF REPURCHASE PERMITTED PURSUANT TO SECTION 12 OF THE
                                                                                                                      PLAN:            YES ___NO ___






 


	 	 	IF RIGHT OF REPURCHASE IS PERMITTED,
                                         THE TERMS ARE AS FOLLOWS:
	 	 	 
		(d)	OTHER
                                         TERMS:



 


	7.	TERMINATION DATE: 	    XXX, XXX
	 	(Ten years from date of grant, unless otherwise specified here)














	 	 	 	 	 	 
	HOLDER	 	 	GRANDSOUTH BANCORPORATION
	 	 	 	 
		                     	 	By: 	                                    	 
	XXX	 	 	Title: 	President	 












    	 



    	 



    




GRANDSOUTH BANCORPORATION


STOCK OPTION
AGREEMENT


 


THIS AGREEMENT
is made and entered into between GrandSouth Bancorporation, a South Carolina bank holding corporation (the “Bank”),
and the person named in Appendix A hereto as the Holder (the “Holder”), as of the date set forth in Appendix A hereto
as the Date of Grant, in connection with the grant of options pursuant to the GrandSouth Bancorporation 2009 Stock Option Plan
(the “Plan”). Appendix A hereto is incorporated by reference herein (“Appendix A”).


 


W I T N E S S
E T H:


 


WHEREAS,
the Holder is employed by the Bank or one of its subsidiaries in a key position or is an officer or director of the Bank and the
Bank desires to retain the Holder in it services, to encourage the Holder to own Common Stock (as defined in the Plan) of the
Bank and to give the Holder added incentive to advance the interests of the Bank through the Plan and, therefore, desires to grant
the Holder an option to purchase shares of Common Stock or the Bank under terms and conditions established by the Board of Directors
or a committee thereof (as set forth in the Plan).


 


NOW, THEREFORE,
in consideration of these premises, the parties agree that the following shall constitute the Agreement between the Bank and the
Holder:


 


1.              Grant
of Option. Subject to the terms and conditions set forth herein, the Bank grants to the Holder incentive stock options
qualified under Section 422 of the Internal Revenue Code (the “Code”) (“Incentive Stock Options”) and
/or non-qualified stock options (“Non-qualified Stock Options”) to purchase from the Bank the number of shares
specified in Appendix A hereto, at the price, for the period, and on the terms set forth in Appendix A.


 


2.             
Additional Terms of Option and Terms of Exercise. The term of the options granted hereby
may be reduced only on account of termination of employment, disability or death of the Holder as provided in Paragraphs 4 and
5 hereof, or in the event of certain extraordinary corporate actions as set forth in the Plan. At any time and from time to time
when any option or portion thereof is exercisable, the same may be exercised in whole or in part. Except as provided in Paragraphs
4 and 5 hereof, no option shall be exercisable unless, at the time of the exercise, the Holder is then, and has been continuously
since such option was granted, an employee of the Bank. Leave of absence from employment by the Bank when granted by the Bank
because of sick leave, military leave or any other reason approved by the Bank, to the extent permitted under the Code and applicable
regulations, shall not be considered as interruption or termination of employment for any purpose under the Plan.


 


The
Holder shall also be subject to the following:


 


(a)             With
respect to an Incentive Stock Option granted under the Plan, the aggregate fair market value of shares of Common Stock subject
to such Incentive Stock Option and the aggregate fair market value of shares of Common Stock or stock of any affiliate (or a predecessor
of the Bank or an affiliate) subject to any other incentive stock option (within the meaning of Section 422 of the Code) of the
Bank and its affiliates (or a predecessor corporation of any such corporation), to the extent such options become first exercisable
in any calendar year, may not (with respect to any holder) exceed $100,000, determined as of the date the Incentive Stock Option
is granted.


 


(b)            Any
options granted hereby which are in excess of the fair market value limitations set forth in Paragraph (a) of this subsection
shall be deemed “non-statutory” or “non-qualified” and shall not be Incentive Stock Options granted hereunder.


 


(c)             The right to exercise any option granted hereunder shall be forfeited in the event the Holder shall be dismissed or resign
as the consequence of the commission of a crime involving moral turpitude.


 


3.              Exercise
of Options


 


The
options granted hereunder shall be exercisable only upon delivery to the Bank at its main office of a written notice: (a) stating
the Holder’s election to exercise, (b) specifying the number of shares to be purchased, and (c) enclosing payment for the
shares purchased in full. Payment shall be made in cash unless Appendix A specifies that cashless exercise is permitted. Any cashless
exercise shall comply with Section 9(e) of the Plan. As promptly as practicable thereafter, a certificate or certificates for
the number of shares to which the notice refers shall be issued, provided, however, that the time of such delivery may be postponed
by the Bank for such period as may be required by the Bank with reasonable diligence to comply with applicable listing requirements
of any securities exchange or to comply with applicable state or federal law. In no case may a fraction of a share be purchased
or issued under the Plan.


 


The
Holder shall not, by reason of the Plan and the granting to him of any option hereunder, have or thereby acquire any rights of
a shareholder of the Bank with respect to the shares covered by the option unless and until his ownership shall have been recorded
on the stock record books of the Bank and a certificate for such shares shall have been issued and delivered to him.



    	 



    	 



    




4.              Effect
of Termination of Employment, Disability or Death on Incentive Stock Options.


 


(a)             Termination of Employment. If the Holder’s employment by the Bank or any of its subsidiaries is terminated because of the
Holder’s retirement, or for disability with the approval of the Bank or any of its subsidiaries, or for any other reason
except death or termination pursuant to paragraph 2(c) hereof, the Holder shall have the right at any time within three months
thereafter (but in any event no later than the date of the expiration of the option period) to exercise the Holder’s Incentive
Stock Options with respect to the number of shares which were immediately purchasable by the Holder at the time of termination
of employment, and the Holder’s right to purchase any remaining shares shall terminate forthwith. Notwithstanding the foregoing,
in the event employment is terminated due to disability as defined under Section 22 (e)(3) of the Code, the Holder shall have
the right at any time within one year thereafter (but in any event no later than the date of the expiration of the option period)
to exercise such Incentive Stock Option.


 


This
Agreement shall not in any event confer on the Holder any right to continue in the employment of the Bank or any of its subsidiaries,
or affect their right to terminate the Holder’s service at any time, and nothing contained herein shall be deemed a waiver
or modification of any provision contained in any agreement between the Holder and the Bank or any parent or subsidiary thereof.


 


(b)            Death
of Holder of Option. In the event of the death of the Holder while the Holder is in the employ of the Bank or any of it subsidiaries,
any Incentive Stock Option or unexercised portion thereof granted to the Holder shall be exercisable at any time prior to the
expiration of one year after the date of such death (but in any event no later than the date of the expiration of the option period),
but only by the estate of the Holder or by the person or persons to whom the Holder’s rights under the Incentive Stock Option
shall pass by the Holder’s will or by the laws of descent and distribution of the state of the Holder’s domicile at
the time of the Holder’s death, and then only if and to the extent that the Holder was entitled to exercise the Incentive
Stock Option at the date of his death. The estate of the Holder or the person or persons so exercising such Incentive Stock Option
after the Holder’s death shall, simultaneously with the delivery of notice to exercise and the payment for the shares purchased,
deliver to the Bank such proof of the right to such estate or such person or persons to exercise the Incentive Stock Option as
may reasonably be required by the Board of Directors and counsel.


 


5.              Effect
of Termination of Employment, Disability or Death on Non-qualified Stock Options.


 


The
terms and conditions of Non-qualified Stock Options relating to the effect of the termination of the Holder’s employment,
or the Holder’s death or disability shall be such terms and conditions as the Board or the Committee shall, in its sole
discretion, determine at the time of termination, unless otherwise specifically provided for in Appendix A hereto.


 


6.              Options
not Transferable


 


Options
granted hereby shall not be transferable otherwise than by will or by the laws of descent and distribution, and shall be exercisable
during the Holder’s lifetime only by the Holder.


 


7.              Adjustment
of Shares


 


In
the event of stock dividends, stocks splits, recapitalization, combination or exchange of shares, merger, consolidation, reorganization,
or any other increase or decrease in the number of Shares of Common Stock effected without the receipt of consideration by the
Bank (other than Shares held by dissenting stockholders), the number of shares subject to he Plan, and the number of shares, the
option price, and the exercise date thereof subject to this Agreement, shall be appropriately adjusted by the Board of Directors,
whose determination shall be conclusive with respect to such adjustment. Certain other adjustments may (or shall) also be made
with respect to the options in connection with the foregoing events or a change in control or imminent change in control as provided
in the Plan.


 


8.              Investment
Letter.


 


The
Holder agrees, and any other party that purchases any shares of the Common Stock pursuant to any options granted hereby must as
a condition precedent to such purchase likewise agree, that the shares of Common Stock acquired upon exercise of any options shall
be acquired for his own account for investment only and not with a view to, or for resale in connection with, any distribution
or public offering thereof within the meaning of the Securities Act of 1933, as amended (the “Act”), or other applicable
securities laws. If the Board of Directors so determines, any Common Stock certificates issued upon exercise of any option shall
bear a legend to the effect that the shares have been so acquired. The Bank may, but in no event shall be required to, bear any
expense of complying with the Act, other applicable securities laws or the rules and regulation s of any national securities exchange
or other regulatory authority in connection with the registration, qualification, or transfer, as the case may be, of any option
or any shares of Common Stock acquired upon the exercise hereof. The foregoing restrictions on the transfer of the shares of Common
Stock shall be inoperative if (a) the Bank previously shall have been furnished with an opinion of counsel, satisfactory to it,
to the effect that such transfer will not involve any violation of the Act or other applicable securities laws, or (b) the shares
of Common Stock shall have been duly registered in compliance with the Act and other applicable securities laws. If any option,
or the shares of Common Stock subject to any option, are so registered under the Act and listed on any securities exchange, the
Holder agrees, and any other party that purchases any shares of Common Stock pursuant to any option must as a condition precedent
to such purchase likewise agree, that he will not make a public offering of the said shares except on a national securities exchange
on which the Common Stock of the Bank is then registered and listed.


 


9.              No
Effect on Capital Structure


 


This
grant of options shall not affect the right of the Bank or any affiliate thereof to reclassify, recapitalize or otherwise change
its capital or debt structure or to merge, consolidate, convey any or all of its assets, dissolve, liquidate, windup, or otherwise
reorganize.



    	 



    	 



    

10.            Amendment,
Suspension and Termination


 


The
Board may at any time alter, suspend or discontinue the Plan, provided, however, that the Board shall not, without the approval
of the shareholders of the Bank, amend the Plan to: (a) increase the maximum number of shares as to which options may be granted
(other than as provided in Paragraph 13 of the Plan), (b) materially increase the benefits accruing to participants under the
Plan, or (c) materially modify the requirements for eligibility for participation in the Plan.


 


The
options granted hereby will terminate automatically at the close of business on the date which is ten years from the date of grant
as set forth in Appendix A unless terminated prior thereto as hereinabove provided or unless otherwise provided in Appendix A.


 


11.            Board
Authority


 


Any
question concerning the interpretation of this Agreement, any adjustments required to be made under Paragraph 7 of this Agreement,
and any controversy which may arise under this Agreement shall be determined by the Board of Directors of the Bank in its sole
discretion.


 


12.            Plan
Governs


 


The
terms of this Agreement are governed by the terms of the Plan, a copy of which is attached hereto as Appendix B and made a part
hereof as if fully set forth herein, and in the case of any inconsistency between the terms of this Agreement and the terms of
the Plan, the terms of the Plan shall govern. Initially capitalized terms used in this agreement shall have the same meaning as
provided in the Plan, unless otherwise specifically provided herein.


 


13.            Notice


 


Whenever
any notice is required or permitted hereunder, such notice must be in writing and personally delivered, or sent by mail. Any notice
required or permitted to be delivered hereunder shall be deemed to be delivered, whether actually received or not, on the third
business day after it is deposited in the United States mail, certified or registered, postage prepaid, addressed to the person
who is to receive it at the address which such person has theretofore specified by written notice delivered in accordance herewith.
The Bank or Holder may change, at any time and from time to time, by written notice to the other, the address previously specified
for receiving notices. Until changed in accordance herewith, the Bank specifies its address as set forth below:


 


                 GrandSouth
Bancorporation


                 P.O.
Box 6548


                 381
Halton Road


                 Greenville,
S.C. 29606


 


Until changed
in accordance herewith, the Holder specifies his address is as set forth on Appendix A hereto.


 


14.            Unenforceability
of Portion of Agreement.


 


In
the event any provision of this Agreement shall be held to be illegal, invalid, or unenforceable for any reason, the illegality,
invalidity, or unenforceability of such provision shall not affect the remaining provisions of this Agreement, but shall be fully
severable and this Agreement shall be construed and enforced as if the illegal, invalid, or unenforceable provision had never
been included herein.


 


15.            Effect
of Emergency Economic Stabilization Act of 2008.


 


Notwithstanding
any provision hereof, or the Plan, to the contrary, if any obligation of the Company to the Federal government arising from financial
assistance provided under the Troubled Asset Relief Program established pursuant to the Emergency Economic Stabilization Act of
2008, as amended, remains outstanding at a time when the terms of this Agreement or the Plan would cause the vesting of the Holder’s
rights to exercise options to be accelerated (i) as a result of the termination of the Holder’s employment by the Company,
or its subsidiary, or (ii) due to a change in control, then such acceleration shall not occur.


 


IN
WITHNESS HEREOF, the Bank has caused this Agreement to be executed and the Holder has hereunder set his hand on this day and year
set forth on Appendix A as the Date of Grant.





	 	 	 	 	 	 
	HOLDER	 	 	GRANDSOUTH BANCORPORATION
	 	 	 	 
		                     	 	By: 	                                    	 
	 	 	 	 
		 	 	Title: President