Exhibit 10.4

            NOTICE: THIS AGREEMENT IS SUBJECT TO ARBITRATION PURSUANT
                  TO THE SOUTH CAROLINA UNIFORM ARBITRATION ACT



               NONCOMPETITION, SEVERANCE AND EMPLOYMENT AGREEMENT

     THIS NONCOMPETITION,  SEVERANCE AND EMPLOYMENT AGREEMENT (this "Agreement")
is made and  entered  into as of this 18th day of  January,  2006,  by and among
Ronald K. Earnest, an individual (the "Executive"), GrandSouth Bancorporation, a
South  Carolina  corporation  (the  "Company"),  and the Company's  wholly-owned
subsidiary, GrandSouth Bank, a South Carolina corporation (the "Bank").

     WHEREAS,  the  Bank  and  the  Executive  entered  into  a  Noncompetition,
Severance  and  Employment  Agreement  dated as of January  18,  2006 (the "Bank
Agreement");

     WHEREAS,  the Bank  Agreement was entered into prior to  acquisition of the
Bank by the Company;

     WHEREAS, the Executive,  the Bank and the Company now desire to replace the
Bank Agreement with this Agreement;

     WHEREAS,  the Boards of Directors  of the Company and the Bank  continue to
believe that the Executive has been  instrumental  in the success of the Company
and the Bank since his employment in 1998;

     WHEREAS,  the  Company  desires  to  continue  to employ the  Executive  as
President and Chief  Executive  Officer of the Company,  and the Bank desires to
continue to employ the Executive as President and Chief Executive Officer of the
Bank;

     WHEREAS,  the  Executive  is willing to continue  to accept the  employment
contemplated herein under the terms and conditions set forth herein.

     NOW,  THEREFORE,  in consideration of the premises and the mutual covenants
and agreements contained herein and other good and valuable  consideration,  the
receipt of which is hereby acknowledged, the parties hereto agree as follows:

     1.  Employment.  Subject to the terms and  conditions  hereof,  the Company
hereby employs the Executive and the Executive hereby accepts such employment as
the President and Chief  Executive  Officer of the Company,  and the Bank hereby
employs the Executive and the Executive  hereby  accepts such  employment as the
President  and Chief  Executive  Officer  of the Bank,  having  such  duties and
responsibilities as are set forth in Section 3 below.


                                    1 of 13
<PAGE>


     2. Definitions.  For purposes of this Agreement,  the following terms shall
have the meanings specified below.

     "Change of Control" shall mean the occurrence during the Term of any of the
following events:

          (a) An  acquisition  (other  than  directly  from the  Company) of any
     voting securities of the Company (the "Voting  Securities") by any "Person"
     (as the term person is used for  purposes of Section  13(d) or 14(d) of the
     Securities  Exchange Act of 1934 (the "1934 Act"))  immediately after which
     such Person has  "beneficial  ownership"  (within the meaning of Rule 13d-3
     promulgated under the 1934 Act) of 50% or more of the combined voting power
     of the Company's then outstanding  Voting  Securities;  provided,  however,
     that in  determining  whether  a Change of  Control  has  occurred,  Voting
     Securities   which  are  acquired  in  a  "Non-Control   Acquisition"   (as
     hereinafter  defined) shall not constitute an acquisition which would cause
     a Change of Control. A "Non-Control  Acquisition" shall mean an acquisition
     by (i) an  employee  benefit  plan  (or a  trust  forming  a part  thereof)
     maintained  by (x) the Company or (y) any  corporation  or other  Person of
     which a majority  of its voting  power or its equity  securities  or equity
     interest is owned  directly or indirectly by the Company (a  "Subsidiary"),
     (ii) the Company or any Subsidiary,  or (iii) any Person in connection with
     a "Non-Control Transaction" (as hereinafter defined); or

          (b) The individuals who, as of the date of this Agreement, are members
     of the Board of Directors of the Company (the "Incumbent  Board") cease for
     any reason to constitute  at least  two-thirds of the Board of the Company;
     provided,  however, that if the election, or nomination for election by the
     Company's  stockholders,  of any new  director was approved by a vote of at
     least  two-thirds  of the Incumbent  Board,  such new director  shall,  for
     purposes of this  Agreement,  be  considered  as a member of the  Incumbent
     Board; or

          (c) Approval by stockholders of the Company of:

               (1) A  merger,  consolidation  or  reorganization  involving  the
          Company, unless

                    i) the stockholders of the Company,  immediately before such
               merger,   consolidation  or  reorganization,   own,  directly  or
               indirectly,  immediately following such merger,  consolidation or
               reorganization,  at least two-thirds of the combined voting power
               of the outstanding voting securities of the corporation resulting
               from  such  merger  or  consolidation  or   reorganization   (the
               "Surviving  Corporation") in substantially the same proportion as
               their ownership of


                                    2 of 13
<PAGE>

               the   Voting   Securities   immediately   before   such   merger,
               consolidation or reorganization, and

                    ii) the  individuals who were members of the Incumbent Board
               immediately prior to the execution of the agreement providing for
               such merger,  consolidation or reorganization constitute at least
               two-thirds  of the  members  of the  board  of  directors  of the
               Surviving Corporation.

               (A  transaction  described  in clauses  (c)(1)(i)  and (ii) shall
               herein be referred to as a "Non-Control Transaction").

     (2) A complete liquidation or dissolution of the Company; or

     (3) An agreement for the sale or other  disposition of all or substantially
all of the  assets of the  Company  to any Person  (other  than a transfer  to a
Subsidiary).

          (d)  Notwithstanding  anything  contained  in  this  Agreement  to the
     contrary, if the Executive's  employment is terminated prior to a Change of
     Control and the Executive reasonably demonstrates that such termination (1)
     was at the request of a third party who has indicated an intention or taken
     steps  reasonably  calculated  to  effect  a  Change  of  Control  and  who
     effectuates a Change of Control (a "Third Party") or (2) otherwise occurred
     in  connection  with,  or in  anticipation  of, a Change of  Control  which
     actually  occurs,  then for all purposes of this  Agreement,  the date of a
     Change  of  Control  with  respect  to the  Executive  shall  mean the date
     immediately  prior  to the  date of  such  termination  of the  Executive's
     employment.

     "Cause" shall mean:

          (a) any act that (i) constitutes, on the part of the Executive, fraud,
     dishonesty,  willful  failure to follow the  directives  or  implement  the
     policies  of the Board of  Directors  of the  Company or the Bank,  willful
     violation  of any state or  federal  law or  regulation  applicable  to the
     Company  or  the  Bank,   gross   malfeasance  of  duty,   conduct  grossly
     inappropriate to the Executive's office, or a material willful violation of
     this Agreement,  and (ii) is demonstrably likely to lead to material injury
     to the Company or the Bank or resulted or was  intended to result in direct
     or indirect gain to or personal enrichment of the Executive at the expense,
     direct or indirect, of the Company or the Bank; or

          (b) the conviction (from which no appeal may be or is timely taken) of
     the Executive of a felony; or

                                    3 of 13
<PAGE>

          (c) the  suspension  or removal of the  Executive  by federal or state
     banking  regulatory  authorities  acting under lawful authority pursuant to
     provisions  of  federal or state law or  regulation  which may be in effect
     from time to time;

     provided, however, that in the case of clause (a) above, such conduct shall
     not constitute Cause:

          (x) unless (i) there  shall have been  delivered  to the  Executive  a
     written  notice setting forth with  specificity  the reasons that the Board
     believes  the  Executive's  conduct  meets the criteria set forth in clause
     (a), (ii) the  Executive  shall have been  provided the  opportunity  to be
     heard in person by the Board (with assistance of the Executive's counsel if
     the Executive so desires), and (iii) after such hearing, the termination is
     evidenced  by a  resolution  adopted  in good  faith by  two-thirds  of the
     members of the Board (other than the Executive); or

          (y) if such conduct (i) was believed by the Executive in good faith to
     have been in, or not opposed to, the interests of the Company, and (ii) was
     not intended to, and did not,  result in the direct or indirect  gain to or
     personal enrichment of the Executive.

     "Confidential  Information"  shall mean all business and other  information
relating to the business of the Company, including without limitation, technical
or non-technical data, programs, methods, techniques, processes, financial data,
financial  plans,  product  plans,  and lists of actual or potential  customers,
which (i) derives economic value, actual or potential,  from not being generally
known to, and not being readily ascertainable by proper means by, other Persons,
and (ii) is the subject of efforts that are reasonable  under the  circumstances
to maintain its secrecy or confidentiality. Such information and compilations of
information  shall be  contractually  subject to protection under this Agreement
whether or not such  information  constitutes  a trade secret and is  separately
protectable at law or in equity as a trade secret.

     "Disability" or "Disabled" shall mean the Executive's inability as a result
of physical or mental  incapacity  to  substantially  perform his duties for the
Company  or the Bank on a  full-time  basis  for a period  of six (6)  months as
determined by an  independent  physician  selected with the approval of both the
Executive and the Company.

     "Involuntary  Termination"  shall mean the  termination of the  Executive's
employment by the Executive following a Change of Control which is due to: (i) a
material change of the Executive's responsibilities,  position (including status
as President/Chief  Executive Officer of the Company,  its successor or ultimate
parent entity, and the Bank), office, title, reporting  relationships or working
conditions, authority or duties (including changes resulting from the assignment
to the  Executive  of any  duties  inconsistent  with his  positions,  duties or
responsibilities  as in effect  immediately prior to the Change of Control);  or
(ii) a  change  in the  terms  or  status  (including  the  rolling  three  year
termination  date) of this  Agreement;  or (iii) a reduction in the  Executive's
compensation or benefits;  or (iv) a forced  relocation of the Executive outside


                                    4 of 13
<PAGE>

the  Greenville  metropolitan  area;  or  (v)  a  significant  increase  in  the
Executive's  travel  requirements;  or (vi) any attempted  termination for Cause
that does not comply with the substantive and procedural provisions set forth in
the  definition  of Cause;  or (vii) the  Company's  insolvency;  or (viii)  the
Company's  breach of this Agreement;  and such  circumstance  has not been cured
within 15 business days after written notice of such circumstance has been given
to the Company and the Bank by the Executive.

     "Person" shall mean any individual,  corporation,  bank, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
other entity.

     "Voluntary   Termination"  shall  mean  the  termination  by  Executive  of
Executive's  employment following a Change of Control which is not the result of
any of clauses (i) through  (viii) set forth in the  definition  of  Involuntary
Termination above.

     3. Duties. During the Term hereof, the Executive shall have such duties and
authority as are typical of a President and Chief Executive Officer of companies
such as the Company and the Bank, including, without limitation, those specified
in the Company's and the Bank's  Bylaws.  Executive  agrees that during the Term
hereof,  he will devote his full time,  attention  and  energies to the diligent
performance of his duties. Executive shall not, without prior written consent of
the  Company  and the  Bank,  at any time  during  the Term  hereof  (i)  accept
employment  with, or render  services of a business,  professional or commercial
nature to, any Person  other than the Company  and the Bank,  (ii) engage in any
venture or activity  which the Company or the Bank may in good faith consider to
be  competitive  with or adverse to the business of the Company,  the Bank or of
any other  affiliate  of the  Company,  whether  alone,  as a partner,  or as an
officer,  director,  employee  or  shareholder  or  otherwise,  except  that the
ownership  of not more  than 5% of the  stock or other  equity  interest  of any
publicly  traded  corporation or other entity shall not be deemed a violation of
this  Section,  or (iii)  engage in any venture or  activity  which the Board of
Directors  of the Company or the Bank may in good faith  consider  to  interfere
with Executive's performance of his duties hereunder.

     4. Term.  Unless earlier  terminated as provided  herein,  the  Executive's
employment  hereunder  shall be for a rolling  term of three years (the  "Term")
commencing on the date hereof,  with compensation to be effective as of the date
of this  Agreement.  This  Agreement  shall be deemed to extend  each day for an
additional  day  automatically  and  without  any  action on behalf of any party
hereto;  provided,  however,  that any party may, by notice to the others, cause
this  Agreement to cease to extend  automatically  and,  upon such  notice,  the
"Term" of this  Agreement  shall be the three years  following  the date of such
notice,  and this Agreement shall terminate upon the expiration of such Term. If
no such notice is given and this  Agreement is terminated  pursuant to Section 5
hereof,  for the purposes of calculating any amounts payable to the Executive as
a result of such  termination,  the remaining  Term of this  Agreement  shall be
deemed to be three years from the date of such termination.


                                    5 of 13
<PAGE>

     5. Termination. This Agreement may be terminated as follows:

          5.1 By the Company or the Bank. The Company or the Bank shall have the
     right to terminate the Executive's  employment hereunder at any time during
     the Term hereof (i) for Cause, (ii) if the Executive  becomes Disabled,  or
     (iii) upon the Executive's death.

               5.1.1  If  the  Company  or  the  Bank   terminates   Executive's
          employment under this Agreement  pursuant to clauses (i) through (iii)
          of Section 5.1, the  Company's  and the Bank's  obligations  hereunder
          shall cease as of the date of  termination  without  prejudice  to any
          vested rights to benefits provided  hereunder;  provided,  however, if
          Executive is terminated for Cause after a Change of Control, then such
          termination   shall  be  treated  as  a   Voluntary   Termination   as
          contemplated in Section 5.2 below.

               5.1.2 If the Company or the Bank terminates  Executive other than
          pursuant  to clauses  (i)  through  (iii) of Section 5.1 and there has
          been a Change of Control,  Executive shall be entitled to receive,  as
          severance,  immediately  upon such  termination,  the compensation and
          benefits  provided in Section 6 hereof that would otherwise be payable
          over the three years subsequent to such termination.

               5.1.3 If the Company or the Bank terminates  Executive other than
          pursuant  to  clauses  (i)  through  (iii) of  Section  5.1 and in the
          absence  of a  Change  of  Control,  Executive  shall be  entitled  to
          receive,  as  severance,   immediately  upon  such  termination,   the
          compensation  and  benefits  provided  in  Section  6  hereof  for the
          remaining Term of this Agreement.

               5.1.4 If the Company or the Bank terminates  Executive other than
          pursuant to clauses (i) through  (iii) of Section  5.1, (A) all rights
          of Executive  pursuant to awards of share grants or options granted by
          the  Company or the Bank  shall be deemed to have  vested and shall be
          released from all conditions and restrictions, except for restrictions
          on transfer  pursuant to the Securities  Act of 1933, as amended,  and
          (B) the Executive shall be deemed to be credited with service with the
          Company and the Bank for such  remaining  Term for the purposes of the
          Company's and the Bank's benefit plans, including, without limitation,
          any restricted stock agreements hereafter entered into with Executive.

               5.1.5 For purposes of determining  severance payments pursuant to
          Sections  5.1.2,  5.1.3,  5.2.2 and  5.2.3,  (i) the  amount of annual
          salary  shall  be  deemed  to be  the  annualized  salary  being  paid
          immediately  prior to the  termination,  (ii)  the  annual  amount  of
          unfixed  compensation (such as a bonus) shall be deemed to be equal to
          the  average  of  such   compensation   over  the  three  year  period
          immediately  prior to the termination,  and (iii) the annual amount of
          benefits shall be deemed to be the sum of the costs to the Company and
          the Bank of  providing  the benefits to the  Executive  for the twelve
          month period ending immediately prior to the termination.

                                    6 of 13
<PAGE>

          5.2 By  Executive.  Executive  shall have the right to  terminate  his
     employment  hereunder  if (i) the Company or the Bank  materially  breaches
     this  Agreement  and such breach is not cured within 30 days after  written
     notice of such  breach is given by  Executive  to the Company and the Bank;
     (ii) there is a Voluntary  Termination;  or (iii)  there is an  Involuntary
     Termination.

               5.2.1 If Executive  terminates his employment other than pursuant
          to clauses (i) through  (iii) of Section  5.2, the  Company's  and the
          Bank's  obligations under this Agreement shall cease as of the date of
          such termination and Executive shall be subject to the non-competition
          provisions set forth in section 10 hereof.

               5.2.2 If Executive  terminates his employment  hereunder pursuant
          to either  clause  (i) or (iii) of  Section  5.2,  Executive  shall be
          entitled to receive  immediately  as severance  the  compensation  and
          benefits  provided in Section 6 hereof that would otherwise be payable
          over the three years subsequent to such termination.

               5.2.3 If Executive  terminates his employment  pursuant to clause
          (ii)  of  Section  5.2,   Executive   shall  be  entitled  to  receive
          immediately  as severance the  compensation  and benefits  provided in
          Section  6 hereof  for one year  following  the date of his  Voluntary
          Termination.

               5.2.4 In addition,  in the event of such termination  pursuant to
          any of clauses (i) through  (iii) of this  Section 5.2, (A) all rights
          of Executive  pursuant to awards of share grants or options granted by
          the  Company or the Bank  shall be deemed to have  vested and shall be
          released from all conditions and restrictions, except for restrictions
          on transfer  pursuant to the Securities  Act of 1933, as amended,  and
          (B) the Executive shall be deemed to be credited with service with the
          Company and the Bank for the  remaining  Term for the  purposes of the
          Company's and the Bank's benefit plans.

          5.3 Limitation on  Availability of Severance  Benefits.  Any severance
     benefits to Executive  conditioned  on a Change of Control  which shall not
     have been claimed by Executive in writing within three (3) years  following
     a Change of Control shall be null,  void, and deemed to have been waived by
     Executive.

     6.  Compensation.  In consideration  of Executive's  services and covenants
hereunder,  the Company or the Bank shall pay to Executive the  compensation and
benefits  described below (which  compensation  shall be paid in accordance with
the  normal  compensation  practices  of the  Company  or the Bank and  shall be
subject to such  deductions and  withholdings as are required by law or policies
of the  Company  and the Bank in  effect  from time to time,  provided  that his
salary  pursuant  to  section  6.1 shall be  payable  not less  frequently  than
monthly):

          6.1 Annual  Salary.  During the Term  hereof,  the Company or the Bank
     shall  pay to  Executive  a salary  at a rate of  $___________  per  annum.
     Executive's  salary  will be  reviewed  by the  Board of  Directors  of the


                                    7 of 13
<PAGE>

     Company or the Bank at the  beginning  of each of its fiscal  years and, in
     the sole  discretion  of the Board of Directors of the Company or the Bank,
     may be increased for such year.

          6.2 Annual Incentive Bonus. During the Term hereof, the Company or the
     Bank shall pay to Executive an annual  incentive  cash bonus in  accordance
     with the terms of any incentive  plans adopted by the Board of Directors of
     the Company or the Bank.

          6.3 Stock Options.  During the Term hereof,  the Board of Directors of
     the Company may grant Executive options to purchase Company common stock in
     accordance with the terms of the Company's stock option plan.

          6.4 Other Benefits.  Executive shall be entitled to share in any other
     employee benefits  generally  provided by the Company and the Bank to their
     most  highly  ranking  executives  for so long as the  Company  or the Bank
     provides  such  benefits.  The  Company  or the  Bank  shall  also  provide
     Executive with a Company-paid  automobile and reasonable  club dues for one
     country club.  Executive shall also be entitled to participate in all other
     benefits accorded generally to Company and Bank employees.

          6.5 Executive's Right To Benefits Absolute. The right of the Executive
     to receive the benefits set forth in this  Agreement  shall be absolute and
     not subject to any right of set-off or counterclaim the Company or the Bank
     may have against Executive.

          6.6 Discharge of Payment Obligation.  The Company's obligation to make
     any payments owed to the Executive under this Agreement shall be discharged
     to the extent such payments are made by the Bank, and the Bank's obligation
     to make any payments owed to the Executive  under this  Agreement  shall be
     discharged to the extent such payments are made by the Company.

     7.  Accelerated  Vesting of Executive's  Stock Options . Anything set forth
herein to the contrary  notwithstanding,  Executive's  stock  options shall vest
immediately  upon the  occurrence of a Change of Control,  even if the Executive
remains  employed  with the  Company  or the Bank  after a  Change  of  Control.
However,  to the extent that this Agreement is  inconsistent  with the Company's
Stock Option Plan, the terms of the Stock Option Plan shall  control.  Moreover,
anything set forth herein to the contrary notwithstanding,  Executive shall have
a minimum of one (1) year from the date of vesting to exercise such stock option
rights.

     8.  Parachute  Payments.   Notwithstanding  any  other  provision  of  this
Agreement,  if any  payment  provided  for in this  Agreement  would,  if  paid,
constitute a "golden parachute  payment" as defined in 12 C.F.R. ss. 359.1(f) as
in effect on the date of this  Agreement,  the  obligation of the Company or the
Bank to make such payment shall be subject to an additional  condition  that the
circumstances  which cause the payment to be a "golden parachute  payment" shall
have ceased to exist but such payment  will become  payable in full at such time


                                    8 of 13
<PAGE>

as the  condition is met together  with  interest at the prime rate,  compounded
annually,  from the date  such  payment  would  have  been due had it not been a
"golden parachute payment" until paid.

     9. Confidentiality.

          9.1 Company and Bank Confidential Information.  Executive acknowledges
     that,  prior to and during the term of this Agreement,  the Company and the
     Bank have  furnished and will furnish to Executive,  and the Executive will
     develop  for  the  benefit  of  the  Company  and  the  Bank,  Confidential
     Information  which could be used by Executive on behalf of a competitor  of
     the  Company  or the  Bank  to the  Company's  or  the  Bank's  substantial
     detriment. Executive acknowledges that Confidential Information is the sole
     property of the Company and the Bank. In view of the  foregoing,  Executive
     acknowledges  and agrees that the restrictive  covenants  contained in this
     Agreement are reasonably  necessary to protect the Company's and the Bank's
     legitimate business interests and goodwill.  Executive agrees that he shall
     protect the Company's and the Bank's Confidential Information and shall not
     disclose to any Person,  or otherwise  use,  except in connection  with his
     duties  performed  in  accordance  with this  Agreement,  any  Confidential
     Information;   provided,  however,  that  Executive  may  make  disclosures
     required by a valid order or subpoena  issued by a court or  administrative
     agency  of  competent  jurisdiction,  in which  event  Executive  will,  if
     permitted to do so under  applicable  law,  promptly notify the Company and
     the Bank of such order or  subpoena  to provide the Company and the Bank an
     opportunity to protect its interests. Upon the termination or expiration of
     his employment  hereunder,  the Executive agrees to deliver promptly to the
     Company  and the  Bank  all of  their  respective  files,  customer  lists,
     management reports, memoranda,  research, forms, financial data and reports
     and other  documents  supplied to or created by him in connection  with his
     employment  hereunder  (including  all  copies  of  the  foregoing)  in his
     possession  or control and all of the  Company's  and Bank's  equipment and
     other materials in his possession or control.  This provision shall survive
     for 24 months after the later of  termination  of  employment  of Executive
     with the Bank or the Company.

          9.2 Third Party Confidential Information. Executive shall also hold in
     the strictest  confidence all confidential or proprietary  information that
     the  Company or the Bank has  received  from any third party to which it is
     the Company's or the Bank's obligation to maintain the  confidentiality  of
     such  information  and to use it only for  certain  limited  purposes,  and
     Executive  shall not  disclose  such  information  to any  person,  firm or
     corporation or use it except as necessary in carrying out Executive's  work
     for the Company or the Bank  consistent  with the  Company's  or the Bank's
     agreement with such third party.

     10.  Noncompetition.  In the event  that  Executive's  employment  with the
Company or the Bank is terminated before a Change of Control  voluntarily by the
Executive or by the Board of Directors for Cause,  then Executive shall not, for
a period of one (1) year following such termination of employment:

                                    9 of 13
<PAGE>

     (i)  become  employed  by  any  insured  depository  institution  that  has
          customers or does business as follows:

          (a)  has an office situated in or an agent or agents regularly working
               in any city in which  the Bank has an office in which an agent or
               agents of the Bank regularly work, or

          (b)  has a significant  number of offices situated in or a significant
               number of agents regularly  working in any city in which the Bank
               has a  significant  number of offices  or in which a  significant
               number of agents of the Bank regularly work, or

          (c)  has a  significant  number of customers  located in any county of
               South  Carolina  where  the  Bank  has a  significant  number  of
               customers, or

          (d)  shares a significant number of customers with the Bank.

     (ii) interfere or attempt to interfere  with any business  relationship  of
          the Company or the Bank, including,  without limitation,  employee and
          customer relationships, whether by lawful competition or otherwise; or

     (iii)engage,  directly or  indirectly,  in any  business or activity  which
          requires Executive,  or any person or party employed by him or whom he
          represents, to provide Confidential Information or other data obtained
          by  Executive  as a result of his  employment  with the Company or the
          Bank to any other  person or party who is then  engaged  in  providing
          similar  services  to  those  of the  Company  or the  Bank for use in
          competing with the Company or the Bank; or

     (iv) solicit from any customer of the Bank any business  that such customer
          has customarily done or contemplates doing with the Bank; or

     (v)  solicit  any  business  that could be done by the  Company or the Bank
          from any  customer  of the Bank with whom the  Executive  had  contact
          while employed by the Bank; or

     (vi) solicit any business on the basis of, or  advertise,  the  Executive's
          former affiliation with the Company or the Bank; or



                                    10 of 13
<PAGE>

       (vii)  solicit,  encourage  or assist  any other  person  to  solicit  or
              encourage  any  employee of the  Company or the Bank to  terminate
              such employment; or

       (viii) otherwise  compete  against the  Company or the Bank,  directly or
              indirectly, whether as principal, agent, employee, or owner of any
              entity (if the percentage or ownership exceeds 10% of the entity).

The parties hereto intend the geographic  areas and all other  restrictions  set
forth  herein  to be  completely  severable  and  independent;  if  any  of  the
restrictions  set forth  above are  determined  to be either  unenforceable,  or
unenforceable in any of the geographic areas set forth above, the parties intend
that the  restrictions  set forth above shall continue to apply to the remaining
geographic areas set forth above and that the other restrictions set forth above
shall continue to apply.

     In the event  that  Executive's  employment  is  terminated  for any reason
following a Change of Control (whether by the Company or the Bank or Executive),
it  is  expressly  acknowledged  that  there  shall  be  no  limitation  on  any
competitive activity of Executive, including direct competition with the Company
or the Bank or their  successors,  and neither the Company nor the Bank shall be
entitled to injunctive relief with respect to any such competitive activities of
Executive.

     11. Trust.  The Company shall  establish an  irrevocable  trust to fund the
obligations  hereunder  (which  may  be a  "rabbi  trust"  if  so  requested  by
Executive),  which trust (i) shall have as trustee an  individual  acceptable to
Executive,  (ii) shall be funded  upon the earlier of a Change of Control or the
approval of any  regulatory  application  filed by a  potential  acquiror of the
Company seeking to acquire control of the Company,  and (iii) shall contain such
other  terms  and  conditions  as  are   reasonably   necessary  in  Executive's
determination  to  ensure  the  Company's  and the  Bank's  compliance  with its
obligations hereunder.

     12.  Assignment.  The  parties  acknowledge  that this  Agreement  has been
entered into due to, among other things,  the special  skills of Executive,  and
agree that this Agreement may not be assigned or  transferred  by Executive,  in
whole or in part, without the prior written consent of the Company and the Bank.

     13.  Notices.  All notices,  requests,  demands,  and other  communications
required or permitted  hereunder shall be in writing and shall be deemed to have
been duly given if delivered or seven days after mailing if mailed, first class,
certified mail postage prepaid:


                                    11 of 13
<PAGE>

To the Bank:               GrandSouth Bank
                           P.O. Box 6548
                           Greenville, S.C. 29606
                           Attn: Chairman of the Board

To the Company:            GrandSouth Bancorporation
                           P.O. Box 6548
                           Greenville, S.C. 29606
                           Attn: Chairman of the Board

To Executive:              Ronald K. Earnest
                           802 South Almond Drive
                           Simpsonville, S.C. 29681

Any party may change the address to which notices, requests,  demands, and other
communications  shall be  delivered  or mailed by giving  notice  thereof to the
other party in the same manner provided herein.

     14.  Provisions  Severable.  If any  provision  or  covenant,  or any  part
thereof, of this Agreement should be held by any court to be invalid, illegal or
unenforceable,  either  in whole  or in part,  such  invalidity,  illegality  or
unenforceability  shall not affect the validity,  legality or  enforceability of
the remaining  provisions or covenants,  or any part thereof, of this Agreement,
all of which shall remain in full force and effect.

     15.  Remedies.  (a)  The  Executive  acknowledges  that if he  breaches  or
threatens to breach his  covenants  and  agreements in Sections 9 and 10 of this
Agreement,  such actions may cause irreparable harm and damage to the Company or
the Bank which could not be compensated by monetary damages alone.  Accordingly,
if Executive  breaches or  threatens  to breach  Section 9 or Section 10 of this
Agreement,  the Company and the Bank shall be entitled to injunctive  relief, in
addition to any other rights or remedies of the Company or the Bank.

     (b) In the event that  Executive  is  reasonably  required to engage  legal
counsel to defend or enforce  his rights  hereunder  against  the Company or the
Bank,  Executive  shall be entitled to receive  from the Company his  reasonable
attorney's fees and costs.

     16.  Arbitration.  Any  dispute  or  controversy,  other  than a claim  for
injunctive  relief  pursuant  to  Section  15(a)  hereof,  arising  under  or in
connection  with this Agreement  shall be settled  exclusively by arbitration in
Greenville, South Carolina, by three arbitrators in accordance with the rules of
the American Arbitration  Association then in effect. Judgment may be entered on
the arbitrators' award in any court having jurisdiction; provided, however, that
Executive shall be entitled to seek specific performance of the right to be paid
until the Date of Termination  during the pendency of any dispute or controversy
arising under or in connection with this  Agreement.  The Company shall bear all
costs  and  expenses  arising  in  connection  with any  arbitration  proceeding
pursuant to this Section.

     17.  Waiver.  Except as provided  in Section 5.3 hereof,  failure of either
party to insist, in one or more instances, on performance by the other in strict
accordance with the terms and conditions of this Agreement shall not be deemed a
waiver or relinquishment of any right granted in this Agreement or of the future


                                    12 of 13
<PAGE>

performance  of any such term or  condition or of any other term or condition of
this Agreement, unless such waiver is contained in a writing signed by the party
making the waiver.

     18. Amendments and Modifications. This Agreement may be amended or modified
only by a writing signed by the parties hereto.

     19.  Governing  Law.  The validity  and effect of this  Agreement  shall be
governed  by and  construed  in  accordance  with the laws of the State of South
Carolina.

     20.  Integration.  This  Agreement  represents  the  entire  agreement  and
understanding between the parties as to the subject matter herein and supersedes
all prior or contemporaneous  agreements whether written or oral. This Agreement
also specifically replaces and supercedes the Bank Agreement.

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


                              [SIGNATURES OMITTED]



                                    13 of 13