Exhibit 4-1(b)



                             STATE OF SOUTH CAROLINA
                               SECRETARY OF STATE

                              ARTICLES OF AMENDMENT



TYPE OR PRINT CLEARLY IN BLACK INK

Pursuant Section  33-10-106 of the 1976 South Carolina Code of Laws, as amended,
the undersigned  corporation  adopts the following  Articles of Amendment to its
Articles of Incorporation:

1.   The name of the corporation is GrandSouth Bancorporation

2.   Date of Incorporation  June 7, 2000

3.   Agent's Name and Address Ronald K. Earnest, 381 Halton Road, Greenville, SC
     29606

4.   On January 5, 2009, the corporation  adopted the following  Amendment(s) of
     its Articles of  Incorporation:  (Type or attach the complete  text of each
     Amendment)

     See Anex A and Annex B attached hereto.






5.   The  manner,  if not set forth in the  Amendment,  in which  any  exchange,
reclassification, or cancellation of issued shares provided for in the Amendment
shall be effected, is as follows: (if not applicable, insert "not applicable" or
"NA").


      NA





6.   Complete either "a" or "b," whichever is applicable.

     a.   [ ]  Amendment(s) adopted by shareholder action.

               At the  date of  adoption  of the  Amendment(s),  the  number  of
               outstanding   shares  of  each  voting  group  entitled  to  vote
               separately on the Amendment(s), and vote of such shares was:

<TABLE>
<CAPTION>
                                Number of              Number of            Number of Votes         Number of Undisputed
         Voting                Outstanding           Votes Entitled         Represented at                 Shares
         Group                   Shares                to be Cast             the Meeting              For or Against
         -----                   ------                ----------             -----------              --------------
<S>     <C>                      <C>                   <C>                   <C>                     <C>        <C>





</TABLE>

<PAGE>
                                               GrandSouth Bancorporation
                                               ---------------------------------
                                                  Name of Corporation


Note:  Pursuant to Section  33-10-106(6)(i),  of the 1976 South Carolina Code of
Laws, as amended,  the corporation can  alternatively  state the total number of
disputed  shares cast for the  amendment  by each voting group  together  with a
statement  that the  number  cast for the  amendment  by each  voting  group was
sufficient for approval by that voting group.


     b.  [x]   The Amendment(s)  was duly adopted by the  incorporators or board
               of directors  without  shareholder  approval pursuant to Sections
               33-6-102(d),  33-10-102 and 33-10-105 of the 1976 South  Carolina
               Code  of  Laws,  as  amended,  and  shareholder  action  was  not
               required.

7.   Unless a delayed dated is specified,  the effective  date of these Articles
of  Amendment  shall be the date of  acceptance  for filing by the  Secretary of
State (See  Section  33-1-230(b)  of the 1976 South  Carolina  Code of Laws,  as
amended) _______________________________________________________________________


Date January 5, 2009
     ----------------------             GrandSouth Bancorporation
                                        ----------------------------------------
                                        Name of Corporation

                                        s/Ronald K. Earnest
                                        ----------------------------------------
                                        Signature

                                        Ronald K. Earnest, President
                                        ----------------------------------------
                                        Type or Print Name and Office



                               FILING INSTRUCTIONS

1. Two copies of this form, one of which can be either a duplicate original or a
conformed copy, must be filed.


2. If the space in this form is insufficient,  please attach  additional  sheets
containing a reference to the appropriate paragraph in this form.

3. Filing  fees and taxes  payable to the  Secretary  of State at time of filing
application.

         Filing Fee                                      $  10.00
         Filing Tax                                        100.00
                                                           ------
         Total                                           $ 110.00

         Return to:        Secretary of State
                           PO Box 11350
                           Columbia, SC 29211




DOM-ARTICLES OF AMENDMENT                       FORM REVISED BY SOUTH CAROLINA
                                                SECRETARY OF STATE, JANUARY 2000



<PAGE>


                                     ANNEX A

            FIXED RATE CUMULATIVE PERPETUAL PREFERRED STOCK, SERIES T
                                       OF
                            GRANDSOUTH BANCORPORATION

         Pursuant to the  provisions  of Sections  33-6-102 and 33-10-106 of the
South Carolina Business Corporation Act of 1988, as amended, and the Articles of
Incorporation of GrandSouth Bancorporation (the "Issuer"), a series of Preferred
Stock,  no par value  per  share,  of the  Issuer  is  hereby  created,  and the
designation  and  number of  shares of such  series,  and the  voting  and other
powers, preferences and relative,  participating,  optional or other rights, and
the qualifications,  limitations and restrictions thereof, of the shares of such
series, are as follows:

Part 1.  Designation  and Number of Shares.  There is hereby  created out of the
authorized  and  unissued  shares of  preferred  stock of the Issuer a series of
preferred  stock  designated as the "Fixed Rate Cumulative  Perpetual  Preferred
Stock,  Series T" (the "Designated  Preferred Stock").  The authorized number of
shares of Designated Preferred Stock shall be 9,000.

Part. 2.  Definitions.  The following  terms are used in this Annex A (including
the Standard Provisions hereto) as defined below:

         (a) "Common Stock" means the common stock,  no par value per share,  of
the Issuer.

         (b) "Dividend  Payment  Date" means  February 15, May 15, August 15 and
November 15 of each year.

         (c)  "Junior  Stock"  means the Common  Stock,  and any other  class or
series of stock of the Issuer the terms of which expressly provide that it ranks
junior to Designated  Preferred  Stock as to dividend rights and/or as to rights
on liquidation, dissolution or winding up of the Issuer.

         (d) "Liquidation Amount" means $1,000 per share of Designated Preferred
Stock.

         (e) "Minimum Amount" means $2,250,000.

         (f)  "Parity  Stock"  means any class or series of stock of the  Issuer
(other  than  Designated  Preferred  Stock) the terms of which do not  expressly
provide  that such  class or series  will  rank  senior or junior to  Designated
Preferred  Stock as to  dividend  rights  and/or as to  rights  on  liquidation,
dissolution  or winding up of the Issuer (in each case without regard to whether
dividends  accrue  cumulatively  or  non-cumulatively).   Without  limiting  the
foregoing,  Parity  Stock  shall  include  the  Issuer's  Fixed Rate  Cumulative
Perpetual Preferred Stock, Series W.

         (g) "Signing Date" means January 9, 2009.

Part. 3. Certain Voting Matters. Holders of shares of Designated Preferred Stock
will be entitled to one vote for each such share on any matter on which  holders
of  Designated  Preferred  Stock are entitled to vote,  including  any action by
written consent.

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                                       1
<PAGE>


Part 4. Standard Provisions. The Standard Provisions of the Designated Preferred
Stock are as follow:

         Section 1. General  Matters.  Each share of Designated  Preferred Stock
shall be identical in all respects to every other share of Designated  Preferred
Stock.  The  Designated  Preferred  Stock  shall be  perpetual,  subject  to the
provisions  of Section 5 of these  Standard  Provisions  that form a part of the
Certificate of Designations.  The Designated  Preferred Stock shall rank equally
with  Parity  Stock and shall rank  senior to Junior  Stock with  respect to the
payment  of  dividends  and the  distribution  of  assets  in the  event  of any
dissolution, liquidation or winding up of the Issuer.

         Section  2. S tandard  Definitions.  As used  herein  with  respect  to
Designated Preferred Stock:

         (a)  "Applicable  Dividend  Rate"  means (i) during the period from the
Original  Issue  Date to,  but  excluding,  the first day of the first  Dividend
Period  commencing on or after the fifth anniversary of the Original Issue Date,
5% per annum and (ii) from and after the first day of the first Dividend  Period
commencing on or after the fifth  anniversary of the Original Issue Date, 9% per
annum.

         (b) "Appropriate Federal Banking Agency" means the "appropriate Federal
banking  agency"  with  respect to the Issuer as defined in Section  3(q) of the
Federal  Deposit  Insurance Act (12 U.S.C.  Section  1813(q)),  or any successor
provision.

         (c) "Business  Combination"  means a merger,  consolidation,  statutory
share exchange or similar transaction that requires the approval of the Issuer's
stockholders.

         (d) "Business Day" means any day except Saturday, Sunday and any day on
which banking  institutions in the State of New York generally are authorized or
required by law or other governmental actions to close.

         (e)  "Bylaws"  means the bylaws of the  Issuer,  as they may be amended
from time to time.

         (f) "Certificate of Designations" means the Certificate of Designations
or comparable  instrument  relating to the Designated  Preferred Stock, of which
these Standard Provisions form a part, as it may be amended from time to time.

         (g)   "Charter"   means  the  Issuer's   certificate   or  articles  of
incorporation, articles of association, or similar organizational document.

         (h) "Dividend Period" has the meaning set forth in Section 3(a).

         (i) "Dividend Record Date" has the meaning set forth in Section 3(a).

         (j) "Liquidation Preference" has the meaning set forth in Section 4(a).


                                                                UST Seq. No. 327

                                       2
<PAGE>

         (k) "Original  Issue Date" means the date on which shares of Designated
Preferred Stock are first issued.

         (I) "Preferred Director" has the meaning set forth in Section 7(b).

         (m)  "Preferred  Stock" means any and all series of preferred  stock of
the Issuer, including the Designated Preferred Stock.

         (n) "Qualified Equity Offering" means the sale and issuance for cash by
the Issuer to persons other than the Issuer or any of its subsidiaries after the
Original Issue Date of shares of perpetual  Preferred Stock, Common Stock or any
combination of such stock, that, in each case, qualify as and may be included in
Tier 1 capital  of the  Issuer  at the time of  issuance  under  the  applicable
risk-based capital guidelines of the Issuer's Appropriate Federal Banking Agency
(other  than any such  sales  and  issuances  made  pursuant  to  agreements  or
arrangements  entered into,  or pursuant to financing  plans which were publicly
announced, on or prior to November 17, 2008).

         (o) "Standard  Provisions"  mean these Standard  Provisions that form a
part of the  Certificate of  Designations  relating to the Designated  Preferred
Stock.

         (p)  "Successor  Preferred  Stock" has the meaning set forth in Section
5(a).

         (q) "Voting Parity Stock" means,  with regard to any matter as to which
the holders of Designated  Preferred  Stock are entitled to vote as specified in
Sections  7(a) and 7(b) of these  Standard  Provisions  that  form a part of the
Certificate of Designations,  any and all series of Parity Stock upon which like
voting  rights have been  conferred  and are  exercisable  with  respect to such
matter.

         Section 3. Dividends.

         (a) Rate.  Holders of Designated  Preferred  Stock shall be entitled to
receive, on each share of Designated Preferred Stock if, as and when declared by
the  Board  of  Directors  or any  duly  authorized  committee  of the  Board of
Directors,  but only out of assets legally available  therefor,  cumulative cash
dividends with respect to each Dividend  Period (as defined below) at a rate per
annum equal to the Applicable  Dividend Rate on (i) the  Liquidation  Amount per
share of  Designated  Preferred  Stock and (ii) the amount of accrued and unpaid
dividends for any prior  Dividend  Period on such share of Designated  Preferred
Stock,  if any. Such dividends  shall begin to accrue and be cumulative from the
Original Issue Date,  shall compound on each  subsequent  Dividend  Payment Date
(i.e., no dividends  shall accrue on other dividends  unless and until the first
Dividend  Payment Date for such other  dividends  has passed  without such other
dividends  having  been paid on such  date) and shall be  payable  quarterly  in
arrears on each Dividend  Payment Date,  commencing with the first such Dividend
Payment Date to occur at least 20 calendar  days after the Original  Issue Date.
In the event that any Dividend  Payment Date would  otherwise fall on a day that
is not a Business  Day, the dividend  payment due on that date will be postponed
to the next day that is a Business Day and no additional  dividends  will accrue
as a result of that  postponement.  The period from and  including  any Dividend
Payment Date to, but  excluding,  the next Dividend  Payment Date is a "Dividend

                                                                UST Seq. No. 327

                                       3
<PAGE>

Period",  provided that the initial Dividend Period shall be the period from and
including the Original Issue Date to, but excluding,  the next Dividend  Payment
Date.

         Dividends that are payable on Designated  Preferred Stock in respect of
any Dividend  Period shall be computed on the basis of a 360-day year consisting
of twelve 30-day months. The amount of dividends payable on Designated Preferred
Stock on any date prior to the end of a  Dividend  Period,  and for the  initial
Dividend Period,  shall be computed on the basis of a 360-day year consisting of
twelve 30-day months, and actual days elapsed over a 30-day month.

         Dividends  that  are  payable  on  Designated  Preferred  Stock  on any
Dividend  Payment  Date will be  payable  to  holders  of  record of  Designated
Preferred  Stock as they  appear  on the  stock  register  of the  Issuer on the
applicable  record  date,  which  shall be the  15th  calendar  day  immediately
preceding  such  Dividend  Payment  Date or such other  record date fixed by the
Board of  Directors or any duly  authorized  committee of the Board of Directors
that is not more than 60 nor less than 10 days  prior to such  Dividend  Payment
Date (each, a "Dividend  Record Date").  Any such day that is a Dividend  Record
Date shall be a Dividend Record Date whether or not such day is a Business Day.

         Holders of  Designated  Preferred  Stock  shall not be  entitled to any
dividends,  whether payable in cash,  securities or other  property,  other than
dividends  (if any)  declared  and  payable  on  Designated  Preferred  Stock as
specified in this Section 3 (subject to the other  provisions of the Certificate
of Designations).

         (b) Priority of Dividends. So long as any share of Designated Preferred
Stock remains outstanding, no dividend or distribution shall be declared or paid
on the Common Stock or any other  shares of Junior  Stock (other than  dividends
payable  solely  in shares of Common  Stock)  or Parity  Stock,  subject  to the
immediately following paragraph in the case of Parity Stock and no Common Stock,
Junior  Stock or Parity  Stock  shall be,  directly  or  indirectly,  purchased.
redeemed or  otherwise  acquired for  consideration  by the Issuer or any of its
subsidiaries  unless all  accrued  and unpaid  dividends  for all past  Dividend
Periods,   including  the  latest  completed  Dividend  Period  (including,   if
applicable as provided in Section 3(a) above,  dividends on such amount), on all
outstanding   shares   of   Designated   Preferred   Stock   have  been  or  are
contemporaneously  declared  and paid in full (or have been  declared  and a sum
sufficient  for the  payment  thereof  has been set aside for the benefit of the
holders of shares of Designated  Preferred Stock on the applicable record date).
The foregoing limitation shall not apply to (i) redemptions,  purchases or other
acquisitions  of shares of Common Stock or other Junior Stock in connection with
the  administration  of any  employee  benefit  plan in the  ordinary  course of
business and consistent  with past practice;  (ii) the acquisition by the Issuer
or any of its  subsidiaries of record  ownership in Junior Stock or Parity Stock
for the beneficial  ownership of any other persons (other than the Issuer or any
of its  subsidiaries),  including  as  trustees  or  custodians;  and  (iii) the
exchange or  conversion  of Junior  Stock for or into other  Junior  Stock or of
Parity Stock for or into other  Parity Stock (with the same or lesser  aggregate
liquidation amount) or Junior Stock, in each case. solely to the extent required
pursuant to binding  contractual  agreements  entered  into prior to the Signing
Date or any subsequent  agreement for the  accelerated  exercise,  settlement or
exchange thereof for Common Stock.


                                                                UST Seq. No. 327

                                       4
<PAGE>

         When  dividends  are not paid (or  declared  and a sum  sufficient  for
payment  thereof  set  aside  for the  benefit  of the  holders  thereof  on the
applicable  record date) on any Dividend Payment Date (or, in the case of Parity
Stock having dividend  payment dates different from the Dividend  Payment Dates,
on a dividend  payment date  falling  within a Dividend  Period  related to such
Dividend Payment Date) in full upon Designated Preferred Stock and any shares of
Parity Stock, all dividends declared on Designated  Preferred Stock and all such
Parity  Stock and  payable on such  Dividend  Payment  Date (or,  in the case of
Parity Stock having dividend  payment dates different from the Dividend  Payment
Dates, on a dividend  payment date falling within the Dividend Period related to
such Dividend  Payment  Date) shall be declared pro rata so that the  respective
amounts of such  dividends  declared  shall bear the same ratio to each other as
all accrued and unpaid dividends per share on the shares of Designated Preferred
Stock (including,  if applicable as provided in Section 3(a) above, dividends on
such amount) and all Parity Stock payable on such Dividend  Payment Date (or, in
the case of Parity  Stock  having  dividend  payment  dates  different  from the
Dividend  Payment Dates, on a dividend  payment date falling within the Dividend
Period  related to such  Dividend  Payment  Date)  (subject to their having been
declared by the Board of Directors or a duly  authorized  committee of the Board
of Directors out of legally available funds and including, in the case of Parity
Stock that bears cumulative dividends, all accrued but unpaid dividends) bear to
each other.  If the Board of  Directors  or a duly  authorized  committee of the
Board of Directors  determines  not to pay any dividend or a full  dividend on a
Dividend  Payment Date, the Issuer will provide written notice to the holders of
Designated Preferred Stock prior to such Dividend Payment Date.

         Subject to the foregoing, and not otherwise, such dividends (payable in
cash,  securities  or  other  property)  as may be  determined  by the  Board of
Directors or any duly  authorized  committee  of the Board of  Directors  may be
declared  and paid on any  securities,  including  Common Stock and other Junior
Stock,  from time to time out of any funds  legally  available for such payment,
and holders of Designated  Preferred  Stock shall not be entitled to participate
in any such dividends.

         Section 4. Liquidation Rights.

         (a)  Voluntary  or  Involuntary  Liquidation.   In  the  event  of  any
liquidation,  dissolution  or winding up of the affairs of the  Issuer,  whether
voluntary  or  involuntary,  holders  of  Designated  Preferred  Stock  shall be
entitled to receive for each share of  Designated  Preferred  Stock,  out of the
assets of the Issuer or proceeds thereof (whether capital or surplus)  available
for  distribution to  stockholders  of the Issuer,  subject to the rights of any
creditors of the Issuer,  before any  distribution of such assets or proceeds is
made to or set aside for the holders of Common  Stock and any other stock of the
Issuer ranking  junior to Designated  Preferred  Stock as to such  distribution,
payment in full in an amount equal to the sum of (i) the Liquidation  Amount per
share and (ii) the amount of any accrued  and unpaid  dividends  (including,  if
applicable as provided in Section 3(a) above, dividends on such amount), whether
or not  declared,  to the  date  of  payment  (such  amounts  collectively,  the
"Liquidation Preference").

         (b) Partial Payment.  If in any distribution  described in Section 4(a)
above the assets of the Issuer or proceeds  thereof are not sufficient to pay in
full the amounts  payable with respect to all  outstanding  shares of Designated
Preferred Stock and the corresponding  amounts payable with respect of any other
stock of the Issuer ranking equally with  Designated  Preferred Stock as to such

                                                                UST Seq. No. 327

                                       5
<PAGE>

distribution,  holders of  Designated  Preferred  Stock and the  holders of such
other stock shall share  ratably in any such  distribution  in proportion to the
full respective distributions to which they are entitled.

         (c) Residual Distributions. If the Liquidation Preference has been paid
in full to all  holders  of  Designated  Preferred  Stock and the  corresponding
amounts  payable with respect of any other stock of the Issuer  ranking  equally
with Designated  Preferred Stock as to such  distribution has been paid in full,
the  holders  of other  stock of the Issuer  shall be  entitled  to receive  all
remaining  assets  of the  Issuer  (or  proceeds  thereof)  according  to  their
respective rights and preferences.

         (d)  Merger,  Consolidation  and Sale of Assets  Not  Liquidation.  For
purposes of this Section 4, the merger or  consolidation  of the Issuer with any
other corporation or other entity,  including a merger or consolidation in which
the holders of Designated  Preferred  Stock  receive  cash,  securities or other
property for their shares, or the sale, lease or exchange (for cash,  securities
or other  property)  of all or  substantially  all of the assets of the  Issuer,
shall not constitute a liquidation, dissolution or winding up of the Issuer.

         Section 5. Redemption.

         (a)  Optional  Redemption.  Except as provided  below,  the  Designated
Preferred  Stock may not be redeemed  prior to the first  Dividend  Payment Date
falling on or after the third  anniversary  of the  Original  Issue Date.  On or
after the first Dividend Payment Date falling on or after the third  anniversary
of the Original Issue Date, the Issuer,  at its option,  subject to the approval
of the Appropriate  Federal Banking Agency,  may redeem, in whole or in part, at
any time and from time to time,  out of funds legally  available  therefor,  the
shares of Designated Preferred Stock at the time outstanding,  upon notice given
as provided in Section 5(c) below, at a redemption price equal to the sum of (i)
the  Liquidation  Amount per share and (ii) except as otherwise  provided below,
any  accrued  and unpaid  dividends  (including,  if  applicable  as provided in
Section  3(a)  above,  dividends  on such  amount)  (regardless  of whether  any
dividends  are  actually  declared)  to,  but  excluding,  the  date  fixed  for
redemption.

         Notwithstanding the foregoing, prior to the first Dividend Payment Date
falling  on or after the third  anniversary  of the  Original  Issue  Date,  the
Issuer,  at its  option,  subject to the  approval  of the  Appropriate  Federal
Banking  Agency,  may redeem,  in whole or in part, at any time and from time to
time, the shares of Designated  Preferred  Stock at the time  outstanding,  upon
notice given as provided in Section 5(c) below,  at a redemption  price equal to
the sum of (i) the  Liquidation  Amount per share and (ii)  except as  otherwise
provided below,  any accrued and unpaid dividends  (including,  if applicable as
provided in Section 3(a) above, dividends on such amount) (regardless of whether
any  dividends  are actually  declared)  to, but  excluding,  the date fixed for
redemption;  provided  that  (x)  the  Issuer  (or  any  successor  by  Business
Combination) has received  aggregate gross proceeds of not less than the Minimum
Amount (plus the  "Minimum  Amount" as defined in the  relevant  certificate  of
designations  for each  other  outstanding  series  of  preferred  stock of such
successor  that was  originally  issued to the United  States  Department of the
Treasury (the "Successor Preferred Stock") in connection with the Troubled Asset
Relief  Program  Capital  Purchase  Program) from one or more  Qualified  Equity
Offerings (including Qualified Equity Offerings of such successor),  and (y) the

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<PAGE>

aggregate  redemption price of the Designated Preferred Stock (and any Successor
Preferred  Stock)  redeemed  pursuant  to  this  paragraph  may not  exceed  the
aggregate net cash proceeds received by the Issuer (or any successor by Business
Combination)  from such Qualified Equity Offerings  (including  Qualified Equity
Offerings of such successor).

         The redemption price for any shares of Designated Preferred Stock shall
be payable on the redemption date to the holder of such shares against surrender
of the  certificate(s)  evidencing  such shares to the Issuer or its agent.  Any
declared  but  unpaid  dividends  payable  on  a  redemption  date  that  occurs
subsequent to the Dividend  Record Date for a Dividend  Period shall not be paid
to the holder entitled to receive the redemption  price on the redemption  date,
but rather shall be paid to the holder of record of the redeemed  shares on such
Dividend  Record  Date  relating  to the  Dividend  Payment  Date as provided in
Section 3 above.

         (b) No Sinking Fund. The Designated Preferred Stock will not be subject
to any mandatory redemption,  sinking fund or other similar provisions.  Holders
of  Designated  Preferred  Stock  will have no right to  require  redemption  or
repurchase of any shares of Designated Preferred Stock.

         (c)  Notice  of  Redemption.  Notice of every  redemption  of shares of
Designated  Preferred Stock shall be given by first class mail, postage prepaid,
addressed  to the  holders  of record  of the  shares  to be  redeemed  at their
respective  last  addresses  appearing on the books of the Issuer.  Such mailing
shall be at least 30 days and not more than 60 days  before  the date  fixed for
redemption.   Any  notice  mailed  as  provided  in  this  Subsection  shall  be
conclusively  presumed  to have  been  duly  given,  whether  or not the  holder
receives  such  notice,  but failure  duly to give such  notice by mail,  or any
defect in such  notice or in the  mailing  thereof,  to any  holder of shares of
Designated  Preferred  Stock  designated  for  redemption  shall not  affect the
validity of the proceedings for the redemption of any other shares of Designated
Preferred  Stock.   Notwithstanding  the  foregoing,  if  shares  of  Designated
Preferred  Stock are issued in  book-entry  form  through The  Depository  Trust
Company or any other similar facility,  notice of redemption may be given to the
holders of Designated  Preferred Stock at such time and in any manner  permitted
by such facility.  Each notice of redemption  given to a holder shall state: (1)
the redemption  date; (2) the number of shares of Designated  Preferred Stock to
be  redeemed  and,  if less than all the  shares  held by such  holder are to be
redeemed,  the number of such shares to be redeemed  from such  holder;  (3) the
redemption price; and (4) the place or places where certificates for such shares
are to be surrendered for payment of the redemption price.

         (d) Partial Redemption. In case of any redemption of part of the shares
of Designated Preferred Stock at the time outstanding, the shares to be redeemed
shall be  selected  either  pro rata or in such  other  manner  as the  Board of
Directors or a duly  authorized  committee  thereof may determine to be fair and
equitable.  Subject to the provisions  hereof,  the Board of Directors or a duly
authorized  committee  thereof  shall have full power and authority to prescribe
the terms and conditions  upon which shares of Designated  Preferred Stock shall
be redeemed from time to time. If fewer than all the shares  represented  by any
certificate are redeemed,  a new certificate  shall be issued  representing  the
unredeemed shares without charge to the holder thereof.

         (e) Effectiveness of Redemption.  If notice of redemption has been duly
given and if on or before the redemption  date specified in the notice all funds
necessary for the redemption have been deposited by the Issuer, in trust for the

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<PAGE>

pro rata benefit of the holders of the shares called for redemption, with a bank
or trust  company doing  business in the Borough of  Manhattan,  The City of New
York,  and having a capital and surplus of at least $500 million and selected by
the  Board  of  Directors,  so as to be  and  continue  to be  available  solely
therefor, then, notwithstanding that any certificate for any share so called for
redemption  has  not  been  surrendered  for  cancellation,  on  and  after  the
redemption  date  dividends  shall  cease to accrue on all  shares so called for
redemption,  all  shares  so  called  for  redemption  shall no longer be deemed
outstanding  and all rights with respect to such shares shall  forthwith on such
redemption  date  cease and  terminate,  except  only the  right of the  holders
thereof to receive the amount payable on such redemption from such bank or trust
company,  without  interest.  Any funds unclaimed at the end of three years from
the redemption  date shall,  to the extent  permitted by law, be released to the
Issuer,  after  which time the  holders  of the shares so called for  redemption
shall  look only to the  Issuer  for  payment  of the  redemption  price of such
shares.

         (f) Status of Redeemed  Shares.  Shares of Designated  Preferred  Stock
that are redeemed,  repurchased or otherwise acquired by the Issuer shall revert
to authorized  but unissued  shares of Preferred  Stock  (provided that any such
cancelled shares of Designated Preferred Stock may be reissued only as shares of
any series of Preferred Stock other than Designated Preferred Stock).

         Section 6.  Conversion.  Holders of Designated  Preferred  Stock shares
shall  have no  right  to  exchange  or  convert  such  shares  into  any  other
securities.

         Section 7. Voting Rights.

         (a) General.  The holders of Designated  Preferred Stock shall not have
any voting  rights  except as set forth below or as otherwise  from time to time
required by law.

         (b)  Preferred  Stock  Directors.  Whenever,  at  any  time  or  times,
dividends payable on the shares of Designated Preferred Stock have not been paid
for an  aggregate  of six  quarterly  Dividend  Periods or more,  whether or not
consecutive,   the   authorized   number  of   directors  of  the  Issuer  shall
automatically  be increased by two and the holders of the  Designated  Preferred
Stock  shall  have the  right,  with  holders of shares of any one or more other
classes  or  series of  Voting  Parity  Stock  outstanding  at the time,  voting
together  as a  class,  to  elect  two  directors  (hereinafter  the  "Preferred
Directors"  and  each  a  "Preferred  Director")  to  fill  such  newly  created
directorships  at the  Issuer's  next annual  meeting of  stockholders  (or at a
special  meeting called for that purpose prior to such next annual  meeting) and
at each subsequent  annual meeting of stockholders  until all accrued and unpaid
dividends for all past Dividend Periods, including the latest completed Dividend
Period (including, if applicable as provided in Section 3(a) above, dividends on
such amount), on all outstanding shares of Designated  Preferred Stock have been
declared and paid in full at which time such right shall  terminate with respect
to the  Designated  Preferred  Stock,  except  as  herein  or by  law  expressly
provided, subject to revesting in the event of each and every subsequent default
of the character above mentioned;  provided that it shall be a qualification for

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election for any Preferred Director that the election of such Preferred Director
shall not cause the Issuer to violate any corporate  governance  requirements of
any  securities  exchange or other trading  facility on which  securities of the
Issuer may then be listed or traded that listed or traded  companies must have a
majority of  independent  directors.  Upon any  termination  of the right of the
holders of shares of  Designated  Preferred  Stock and Voting  Parity Stock as a
class to vote for directors as provided  above,  the Preferred  Directors  shall
cease  to be  qualified  as  directors,  the  term of  office  of all  Preferred
Directors then in office shall terminate  immediately and the authorized  number
of  directors  shall be  reduced by the number of  Preferred  Directors  elected
pursuant  hereto.  Any  Preferred  Director may be removed at any time,  with or
without  cause,  and any  vacancy  created  thereby  may be filled,  only by the
affirmative vote of the holders a majority of the shares of Designated Preferred
Stock at the time  outstanding  voting  separately as a class  together with the
holders of shares of Voting  Parity  Stock,  to the extent the voting  rights of
such  holders  described  above  are  then  exercisable.  If the  office  of any
Preferred  Director becomes vacant for any reason other than removal from office
as aforesaid,  the remaining Preferred Director may choose a successor who shall
hold office for the unexpired term in respect of which such vacancy occurred.

         (c) Class Voting Rights as to Particular Matters. So long as any shares
of Designated Preferred Stock are outstanding,  in addition to any other vote or
consent of stockholders  required by law or by the Charter,  the vote or consent
of the holders of at least 66 2/3% of the shares of Designated  Preferred  Stock
at the time  outstanding,  voting  as a  separate  class,  given in person or by
proxy,  either in writing without a meeting or by vote at any meeting called for
the purpose, shall be necessary for effecting or validating:

                  (i) Authorization of Senior Stock. Any amendment or alteration
         of the Certificate of Designations  for the Designated  Preferred Stock
         or the Charter to authorize or create or increase the authorized amount
         of, or any  issuance of, any shares of, or any  securities  convertible
         into or  exchangeable or exercisable for shares of, any class or series
         of capital stock of the Issuer ranking  senior to Designated  Preferred
         Stock with  respect to either or both the payment of  dividends  and/or
         the distribution of assets on any  liquidation,  dissolution or winding
         up of the Issuer;

                  (ii) Amendment of Designated  Preferred  Stock. Any amendment,
         alteration   or  repeal  of  any  provision  of  the   Certificate   of
         Designations  for  the  Designated   Preferred  Stock  or  the  Charter
         (including,  unless no vote on such merger or consolidation is required
         by Section  7(c)(iii)  below,  any  amendment,  alteration or repeal by
         means of a  merger,  consolidation  or  otherwise)  so as to  adversely
         affect the  rights,  preferences,  privileges  or voting  powers of the
         Designated Preferred Stock; or

                  (iii)   Share   Exchanges,   Reclassifications.   Mergers  and
         Consolidations.  Any  consummation  of  a  binding  share  exchange  or
         reclassification  involving the  Designated  Preferred  Stock,  or of a
         merger or consolidation of the Issuer with another corporation or other
         entity,  unless in each case (x) the  shares  of  Designated  Preferred
         Stock  remain  outstanding  or,  in the  case  of any  such  merger  or
         consolidation  with respect to which the Issuer is not the surviving or
         resulting  entity,  are  converted  into or  exchanged  for  preference
         securities of the surviving or resulting entity or its ultimate parent,
         and  (y)  such  shares   remaining   outstanding  or  such   preference
         securities,  as  the  case  may  be,  have  such  rights,  preferences,
         privileges and voting powers, and limitations and restrictions thereof,
         taken as a whole,  as are not materially  less favorable to the holders
         thereof than the rights, preferences, privileges and voting powers, and
         limitations and  restrictions  thereof,  of Designated  Preferred Stock
         immediately prior to such consummation, taken as a whole;

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<PAGE>

provided,  however,  that for all purposes of this Section 7(c), any increase in
the amount of the  authorized  Preferred  Stock,  including  any increase in the
authorized amount of Designated  Preferred Stock necessary to satisfy preemptive
or similar  rights  granted by the Issuer to other  persons prior to the Signing
Date, or the creation and issuance,  or an increase in the  authorized or issued
amount,  whether  pursuant to preemptive or similar rights or otherwise,  of any
other  series  of  Preferred  Stock,  or  any  securities  convertible  into  or
exchangeable  or exercisable  for any other series of Preferred  Stock,  ranking
equally with and/or  junior to  Designated  Preferred  Stock with respect to the
payment of dividends  (whether such dividends are cumulative or  non-cumulative)
and the  distribution of assets upon  liquidation,  dissolution or winding up of
the  Issuer  will not be deemed to  adversely  affect the  rights,  preferences,
privileges  or voting  powers,  and shall not  require the  affirmative  vote or
consent of, the holders of outstanding shares of the Designated Preferred Stock.

         (d) Changes after Provision for  Redemption.  No vote or consent of the
holders of Designated Preferred Stock shall be required pursuant to Section 7(c)
above if, at or prior to the time when any such vote or consent would  otherwise
be required pursuant to such Section,  all outstanding  shares of the Designated
Preferred  Stock  shall  have  been  redeemed,  or shall  have been  called  for
redemption upon proper notice and sufficient  funds shall have been deposited in
trust for such redemption, in each case pursuant to Section 5 above.

         (e)  Procedures  for Voting and Consents.  The rules and procedures for
calling and conducting any meeting of the holders of Designated  Preferred Stock
(including,  without  limitation,  the  fixing  of a record  date in  connection
therewith), the solicitation and use of proxies at such a meeting, the obtaining
of written consents and any other aspect or matter with regard to such a meeting
or such consents shall be governed by any rules of the Board of Directors or any
duly  authorized  committee of the Board of Directors,  in its  discretion,  may
adopt  from  time to time,  which  rules and  procedures  shall  conform  to the
requirements of the Charter, the Bylaws, and applicable law and the rules of any
national  securities  exchange or other  trading  facility  on which  Designated
Preferred Stock is listed or traded at the time.

         Section  8.  Record  Holders.   To  the  fullest  extent  permitted  by
applicable law, the Issuer and the transfer agent for Designated Preferred Stock
may deem and treat the record holder of any share of Designated  Preferred Stock
as the true and lawful owner  thereof for all  purposes,  and neither the Issuer
nor such transfer agent shall be affected by any notice to the contrary.

         Section  9.  Notices.  All  notices  or  communications  in  respect of
Designated  Preferred Stock shall be sufficiently  given if given in writing and
delivered in person or by first class mail, postage prepaid, or if given in such
other manner as may be permitted in this  Certificate  of  Designations,  in the
Charter or Bylaws or by applicable law. Notwithstanding the foregoing, if shares
of  Designated  Preferred  Stock  are  issued in  book-entry  form  through  The
Depository Trust Company or any similar  facility,  such notices may be given to
the  holders  of  Designated  Preferred  Stock in any manner  permitted  by such
facility.

         Section 10. No  Preemptive  Rights.  No share of  Designated  Preferred
Stock shall have any rights of preemption whatsoever as to any securities of the
Issuer,  or any  warrants,  rights or  options  issued or granted  with  respect
thereto, regardless of how such securities, or such warrants, rights or options,
may be designated, issued or granted.


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<PAGE>

         Section 11.  Replacement  Certificates.  The Issuer  shall  replace any
mutilated certificate at the holder's expense upon surrender of that certificate
to the Issuer.  The Issuer shall  replace  certificates  that become  destroyed,
stolen or lost at the holder's expense upon delivery to the Issuer of reasonably
satisfactory  evidence that the certificate has been destroyed,  stolen or lost,
together with any indemnity that may be reasonably required by the Issuer.

         Section 12. Other  Rights.  The shares of  Designated  Preferred  Stock
shall not have any rights, preferences, privileges or voting powers or relative,
participating, optional or other special rights, or qualifications,  limitations
or restrictions thereof,  other than as set forth herein or in the Charter or as
provided by applicable law.

                                * * * * * * * * *

























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                                     ANNEX B

            FIXED RATE CUMULATIVE PERPETUAL PREFERRED STOCK, SERIES W
                                       OF
                            GRANDSOUTH BANCORPORATION

         Pursuant to the  provisions  of Sections  33-6-102 and 33-10-106 of the
South Carolina Business Corporation Act of 1988, as amended, and the Articles of
Incorporation of GrandSouth Bancorporation (the "Issuer"), a series of Preferred
Stock,  no par value  per  share,  of the  Issuer  is  hereby  created,  and the
designation  and  number of  shares of such  series,  and the  voting  and other
powers, preferences and relative,  participating,  optional or other rights, and
the qualifications,  limitations and restrictions thereof, of the shares of such
series, are as follows:

Part 1.  Designation  and Number of Shares.  There is hereby  created out of the
authorized  and  unissued  shares of  preferred  stock of the Issuer a series of
preferred  stock  designated as the "Fixed Rate Cumulative  Perpetual  Preferred
Stock,  Series W" (the "Designated  Preferred Stock").  The authorized number of
shares of Designated Preferred Stock shall be 451.

Part. 2.  Definitions.  The following  terms are used in this Annex B (including
the Standard Provisions hereto) as defined below:

         (a) "Common Stock" means the common stock,  no par value per share,  of
the Issuer.

         (b) "Dividend  Payment  Date" means  February 15, May 15, August 15 and
November 15 of each year.

         (c)  "Junior  Stock"  means the Common  Stock,  and any other  class or
series of stock of the Issuer the terms of which expressly provide that it ranks
junior to Designated  Preferred  Stock as to dividend rights and/or as to rights
on liquidation, dissolution or winding up of the Issuer.

         (d) "Liquidation Amount" means $1,000 per share of Designated Preferred
Stock.

         (e) "Minimum Amount" means $112,500.

         (f)  "Parity  Stock"  means any class or series of stock of the  Issuer
(other  than  Designated  Preferred  Stock) the terms of which do not  expressly
provide  that such  class or series  will  rank  senior or junior to  Designated
Preferred  Stock as to  dividend  rights  and/or as to  rights  on  liquidation,
dissolution  or winding up of the Issuer (in each case without regard to whether
dividends  accrue  cumulatively  or  non-cumulatively).   Without  limiting  the
foregoing, Parity Stock shall include the Issuer's UST Preferred Stock.

         (g) "Signing Date" means January 9, 2009.

         (h) "UST  Preferred  Stock"  means the Issuer's  Fixed Rate  Cumulative
Perpetual Preferred Stock, Series T.


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<PAGE>

Part. 3. Certain Voting Matters. Holders of shares of Designated Preferred Stock
will be entitled to one vote for each such share on any matter on which  holders
of  Designated  Preferred  Stock are entitled to vote,  including  any action by
written consent.

Part 4. Standard Provisions. The Standard Provisions of the Designated Preferred
Stock are as follow:


         Section 1. General  Matters.  Each share of Designated  Preferred Stock
shall be identical in all respects to every other share of Designated  Preferred
Stock.  The  Designated  Preferred  Stock  shall be  perpetual,  subject  to the
provisions  of Section 5 of these  Standard  Provisions  that form a part of the
Certificate of Designations.  The Designated  Preferred Stock shall rank equally
with  Parity  Stock and shall rank  senior to Junior  Stock with  respect to the
payment  of  dividends  and the  distribution  of  assets  in the  event  of any
dissolution, liquidation or winding up of the Issuer.

         Section  2.  Standard  Definitions.  As used  herein  with  respect  to
Designated Preferred Stock:

         (a) "Appropriate Federal Banking Agency" means the "appropriate Federal
banking  agency"  with  respect to the Issuer as defined in Section  3(q) of the
Federal  Deposit  Insurance Act (12 U.S.C.  Section  1813(q)),  or any successor
provision.

         (b) "Business  Combination"  means a merger,  consolidation,  statutory
share exchange or similar transaction that requires the approval of the Issuer's
stockholders.

         (c) "Business Day" means any day except Saturday, Sunday and any day on
which banking  institutions in the State of New York generally are authorized or
required by law or other governmental actions to close.

         (d)  "Bylaws"  means the bylaws of the  Issuer,  as they may be amended
from time to time.

         (e) "Certificate of Designations" means the Certificate of Designations
or comparable  instrument  relating to the Designated  Preferred Stock, of which
these Standard Provisions form a part, as it may be amended from time to time.

         (f)   "Charter"   means  the  Issuer's   certificate   or  articles  of
incorporation, articles of association, or similar organizational document.

         (g) "Dividend Period" has the meaning set forth in Section 3(a).

         (h) "Dividend Record Date" has the meaning set forth in Section 3(a).

         (i) "Liquidation Preference" has the meaning set forth in Section 4(a).


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<PAGE>

         (j) "Original  Issue Date" means the date on which shares of Designated
Preferred Stock are first issued.

         (k) "Preferred Director" has the meaning set forth in Section 7(b).

         (l)  "Preferred  Stock" means any and all series of preferred  stock of
the Issuer, including the Designated Preferred Stock.

         (m) "Qualified Equity Offering" means the sale and issuance for cash by
the Issuer to persons other than the Issuer or any of its subsidiaries after the
Original Issue Date of shares of perpetual  Preferred Stock, Common Stock or any
combination of such stock, that, in each case, qualify as and may be included in
Tier 1 capital  of the  Issuer  at the time of  issuance  under  the  applicable
risk-based capital guidelines of the Issuer's Appropriate Federal Banking Agency
(other  than any such  sales  and  issuances  made  pursuant  to  agreements  or
arrangements  entered into,  or pursuant to financing  plans which were publicly
announced, on or prior to November 17, 2008).

         (n) "Standard  Provisions"  mean these Standard  Provisions that form a
part of the  Certificate of  Designations  relating to the Designated  Preferred
Stock.

         (o)  "Successor  Preferred  Stock" has the meaning set forth in Section
5(a).

         (p) "Voting Parity Stock" means,  with regard to any matter as to which
the holders of Designated  Preferred  Stock are entitled to vote as specified in
Sections  7(a) and 7(b) of these  Standard  Provisions  that  form a part of the
Certificate of Designations,  any and all series of Parity Stock upon which like
voting  rights have been  conferred  and are  exercisable  with  respect to such
matter.

         Section 3. Dividends.

         (a) Rate.  Holders of Designated  Preferred  Stock shall be entitled to
receive, on each share of Designated Preferred Stock if, as and when declared by
the  Board  of  Directors  or any  duly  authorized  committee  of the  Board of
Directors,  but only out of assets legally available  therefor,  cumulative cash
dividends with respect to each Dividend Period (as defined below) at a per annum
rate of 9.0% on (i) the  Liquidation  Amount per share of  Designated  Preferred
Stock and (ii) the amount of accrued and unpaid dividends for any prior Dividend
Period on such share of Designated Preferred Stock, if any. Such dividends shall
begin to accrue and be cumulative  from the Original Issue Date,  shall compound
on each  subsequent  Dividend  Payment Date (i.e.,  no dividends shall accrue on
other dividends  unless and until the first Dividend Payment Date for such other
dividends has passed without such other dividends having been paid on such date)
and shall be  payable  quarterly  in  arrears  on each  Dividend  Payment  Date,
commencing  with  the  first  such  Dividend  Payment  Date to occur at least 20
calendar  days after the  Original  Issue Date.  In the event that any  Dividend
Payment  Date  would  otherwise  fall on a day that is not a Business  Day,  the
dividend  payment due on that date will be  postponed  to the next day that is a
Business  Day and no  additional  dividends  will  accrue  as a  result  of that
postponement.  The period from and including  any Dividend  Payment Date to, but

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<PAGE>

excluding, the next Dividend Payment Date is a "Dividend Period",  provided that
the initial  Dividend Period shall be the period from and including the Original
Issue Date to, but excluding, the next Dividend Payment Date.

         Dividends that are payable on Designated  Preferred Stock in respect of
any Dividend  Period shall be computed on the basis of a 360-day year consisting
of twelve 30-day months. The amount of dividends payable on Designated Preferred
Stock on any date prior to the end of a  Dividend  Period,  and for the  initial
Dividend Period,  shall be computed on the basis of a 360-day year consisting of
twelve 30-day months, and actual days elapsed over a 30-day month.

         Dividends  that  are  payable  on  Designated  Preferred  Stock  on any
Dividend  Payment  Date will be  payable  to  holders  of  record of  Designated
Preferred  Stock as they  appear  on the  stock  register  of the  Issuer on the
applicable  record  date,  which  shall be the  15th  calendar  day  immediately
preceding  such  Dividend  Payment  Date or such other  record date fixed by the
Board of  Directors or any duly  authorized  committee of the Board of Directors
that is not more than 60 nor less than 10 days  prior to such  Dividend  Payment
Date (each, a "Dividend  Record Date").  Any such day that is a Dividend  Record
Date shall be a Dividend Record Date whether or not such day is a Business Day.

         Holders of  Designated  Preferred  Stock  shall not be  entitled to any
dividends,  whether payable in cash,  securities or other  property,  other than
dividends  (if any)  declared  and  payable  on  Designated  Preferred  Stock as
specified in this Section 3 (subject to the other  provisions of the Certificate
of Designations).

         (b) Priority of Dividends. So long as any share of Designated Preferred
Stock remains outstanding, no dividend or distribution shall be declared or paid
on the Common Stock or any other  shares of Junior  Stock (other than  dividends
payable  solely  in shares of Common  Stock)  or Parity  Stock,  subject  to the
immediately following paragraph in the case of Parity Stock and no Common Stock,
Junior  Stock or Parity  Stock  shall be,  directly  or  indirectly,  purchased.
redeemed or  otherwise  acquired for  consideration  by the Issuer or any of its
subsidiaries  unless all  accrued  and unpaid  dividends  for all past  Dividend
Periods,   including  the  latest  completed  Dividend  Period  (including,   if
applicable as provided in Section 3(a) above,  dividends on such amount), on all
outstanding   shares   of   Designated   Preferred   Stock   have  been  or  are
contemporaneously  declared  and paid in full (or have been  declared  and a sum
sufficient  for the  payment  thereof  has been set aside for the benefit of the
holders of shares of Designated  Preferred Stock on the applicable record date).
The foregoing limitation shall not apply to (i) redemptions,  purchases or other
acquisitions  of shares of Common Stock or other Junior Stock in connection with
the  administration  of any  employee  benefit  plan in the  ordinary  course of
business and consistent  with past practice;  (ii) the acquisition by the Issuer
or any of its  subsidiaries of record  ownership in Junior Stock or Parity Stock
for the beneficial  ownership of any other persons (other than the Issuer or any
of its  subsidiaries),  including  as  trustees  or  custodians;  and  (iii) the
exchange or  conversion  of Junior  Stock for or into other  Junior  Stock or of
Parity Stock for or into other  Parity Stock (with the same or lesser  aggregate
liquidation amount) or Junior Stock, in each case. solely to the extent required
pursuant to binding  contractual  agreements  entered  into prior to the Signing
Date or any subsequent  agreement for the  accelerated  exercise,  settlement or
exchange thereof for Common Stock.


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<PAGE>

         When  dividends  are not paid (or  declared  and a sum  sufficient  for
payment  thereof  set  aside  for the  benefit  of the  holders  thereof  on the
applicable  record date) on any Dividend Payment Date (or, in the case of Parity
Stock having dividend  payment dates different from the Dividend  Payment Dates,
on a dividend  payment date  falling  within a Dividend  Period  related to such
Dividend Payment Date) in full upon Designated Preferred Stock and any shares of
Parity Stock, all dividends declared on Designated  Preferred Stock and all such
Parity  Stock and  payable on such  Dividend  Payment  Date (or,  in the case of
Parity Stock having dividend  payment dates different from the Dividend  Payment
Dates, on a dividend  payment date falling within the Dividend Period related to
such Dividend  Payment  Date) shall be declared pro rata so that the  respective
amounts of such  dividends  declared  shall bear the same ratio to each other as
all accrued and unpaid dividends per share on the shares of Designated Preferred
Stock (including,  if applicable as provided in Section 3(a) above, dividends on
such amount) and all Parity Stock payable on such Dividend  Payment Date (or, in
the case of Parity  Stock  having  dividend  payment  dates  different  from the
Dividend  Payment Dates, on a dividend  payment date falling within the Dividend
Period  related to such  Dividend  Payment  Date)  (subject to their having been
declared by the Board of Directors or a duly  authorized  committee of the Board
of Directors out of legally available funds and including, in the case of Parity
Stock that bears cumulative dividends, all accrued but unpaid dividends) bear to
each other.  If the Board of  Directors  or a duly  authorized  committee of the
Board of Directors  determines  not to pay any dividend or a full  dividend on a
Dividend  Payment Date, the Issuer will provide written notice to the holders of
Designated Preferred Stock prior to such Dividend Payment Date.

         Subject to the foregoing, and not otherwise, such dividends (payable in
cash,  securities  or  other  property)  as may be  determined  by the  Board of
Directors or any duly  authorized  committee  of the Board of  Directors  may be
declared  and paid on any  securities,  including  Common Stock and other Junior
Stock,  from time to time out of any funds  legally  available for such payment,
and holders of Designated  Preferred  Stock shall not be entitled to participate
in any such dividends.

         Section 4. Liquidation Rights.

         (a)  Voluntary  or  Involuntary  Liquidation.   In  the  event  of  any
liquidation,  dissolution  or winding up of the affairs of the  Issuer,  whether
voluntary  or  involuntary,  holders  of  Designated  Preferred  Stock  shall be
entitled to receive for each share of  Designated  Preferred  Stock,  out of the
assets of the Issuer or proceeds thereof (whether capital or surplus)  available
for  distribution to  stockholders  of the Issuer,  subject to the rights of any
creditors of the Issuer,  before any  distribution of such assets or proceeds is
made to or set aside for the holders of Common  Stock and any other stock of the
Issuer ranking  junior to Designated  Preferred  Stock as to such  distribution,
payment in full in an amount equal to the sum of (i) the Liquidation  Amount per
share and (ii) the amount of any accrued  and unpaid  dividends  (including,  if
applicable as provided in Section 3(a) above, dividends on such amount), whether
or not  declared,  to the  date  of  payment  (such  amounts  collectively,  the
"Liquidation Preference").

         (b) Partial Payment.  If in any distribution  described in Section 4(a)
above the assets of the Issuer or proceeds  thereof are not sufficient to pay in
full the amounts  payable with respect to all  outstanding  shares of Designated
Preferred Stock and the corresponding  amounts payable with respect of any other

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stock of the Issuer ranking equally with  Designated  Preferred Stock as to such
distribution,  holders of  Designated  Preferred  Stock and the  holders of such
other stock shall share  ratably in any such  distribution  in proportion to the
full respective distributions to which they are entitled.

         (c) Residual Distributions. If the Liquidation Preference has been paid
in full to all  holders  of  Designated  Preferred  Stock and the  corresponding
amounts  payable with respect of any other stock of the Issuer  ranking  equally
with Designated  Preferred Stock as to such  distribution has been paid in full,
the  holders  of other  stock of the Issuer  shall be  entitled  to receive  all
remaining  assets  of the  Issuer  (or  proceeds  thereof)  according  to  their
respective rights and preferences.

         (d)  Merger,  Consolidation  and Sale of Assets  Not  Liquidation.  For
purposes of this Section 4, the merger or  consolidation  of the Issuer with any
other corporation or other entity,  including a merger or consolidation in which
the holders of Designated  Preferred  Stock  receive  cash,  securities or other
property for their shares, or the sale, lease or exchange (for cash,  securities
or other  property)  of all or  substantially  all of the assets of the  Issuer,
shall not constitute a liquidation, dissolution or winding up of the Issuer.

         Section 5. Redemption.

         (a)  Optional  Redemption.  Except as provided  below,  the  Designated
Preferred Stock may not be redeemed prior to the later of (i) the first Dividend
Payment Date  falling on or after the third  anniversary  of the Original  Issue
Date; and (ii) the date on which all  outstanding  shares of UST Preferred Stock
have been redeemed,  purchased or otherwise  acquired by the Issuer. On or after
the first Dividend Payment Date falling on or after the third anniversary of the
Original Issue Date, the Issuer,  at its option,  subject to the approval of the
Appropriate Federal Banking Agency, may redeem, in whole or in part, at any time
and from time to time, out of funds legally  available  therefor,  the shares of
Designated  Preferred  Stock  at the  time  outstanding,  upon  notice  given as
provided in Section 5(c) below,  at a  redemption  price equal to the sum of (i)
the  Liquidation  Amount per share and (ii) except as otherwise  provided below,
any  accrued  and unpaid  dividends  (including,  if  applicable  as provided in
Section  3(a)  above,  dividends  on such  amount)  (regardless  of whether  any
dividends  are  actually  declared)  to,  but  excluding,  the  date  fixed  for
redemption.

         Notwithstanding the foregoing, prior to the first Dividend Payment Date
falling  on or after the third  anniversary  of the  Original  Issue  Date,  the
Issuer,  at its  option,  subject to the  approval  of the  Appropriate  Federal
Banking Agency and subject to the requirement that all outstanding  shares of of
UST  Preferred  Stock  shall  previously  have  been  redeemed,  repurchased  or
otherwise  acquired by the Issuer,  may redeem, in whole or in part, at any time
and from time to time,  the  shares of  Designated  Preferred  Stock at the time
outstanding,  upon  notice  given  as  provided  in  Section  5(c)  below,  at a
redemption  price equal to the sum of (i) the  Liquidation  Amount per share and
(ii) except as  otherwise  provided  below,  any  accrued  and unpaid  dividends
(including,  if applicable as provided in Section 3(a) above,  dividends on such
amount)  (regardless  of whether any  dividends  are actually  declared) to, but
excluding,  the date fixed for redemption;  provided that (x) the Issuer (or any
successor by Business  Combination) has received aggregate gross proceeds of not
less than the  Minimum  Amount  (plus the  "Minimum  Amount"  as  defined in the

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relevant  certificate  of  designations  for each  other  outstanding  series of
preferred  stock of such  successor  that was  originally  issued to the  United
States  Department  of  the  Treasury  (the  "Successor   Preferred  Stock")  in
connection with the Troubled Asset Relief Program Capital Purchase Program) from
one or more Qualified Equity Offerings  (including Qualified Equity Offerings of
such  successor),  and (y) the  aggregate  redemption  price  of the  Designated
Preferred Stock (and any Successor  Preferred  Stock) redeemed  pursuant to this
paragraph may not exceed the aggregate net cash proceeds  received by the Issuer
(or any successor by Business  Combination) from such Qualified Equity Offerings
(including Qualified Equity Offerings of such successor).

         The redemption price for any shares of Designated Preferred Stock shall
be payable on the redemption date to the holder of such shares against surrender
of the  certificate(s)  evidencing  such shares to the Issuer or its agent.  Any
declared  but  unpaid  dividends  payable  on  a  redemption  date  that  occurs
subsequent to the Dividend  Record Date for a Dividend  Period shall not be paid
to the holder entitled to receive the redemption  price on the redemption  date,
but rather shall be paid to the holder of record of the redeemed  shares on such
Dividend  Record  Date  relating  to the  Dividend  Payment  Date as provided in
Section 3 above.

         (b) No Sinking Fund. The Designated Preferred Stock will not be subject
to any mandatory redemption,  sinking fund or other similar provisions.  Holders
of  Designated  Preferred  Stock  will have no right to  require  redemption  or
repurchase of any shares of Designated Preferred Stock.

         (c)  Notice  of  Redemption.  Notice of every  redemption  of shares of
Designated  Preferred Stock shall be given by first class mail, postage prepaid,
addressed  to the  holders  of record  of the  shares  to be  redeemed  at their
respective  last  addresses  appearing on the books of the Issuer.  Such mailing
shall be at least 30 days and not more than 60 days  before  the date  fixed for
redemption.   Any  notice  mailed  as  provided  in  this  Subsection  shall  be
conclusively  presumed  to have  been  duly  given,  whether  or not the  holder
receives  such  notice,  but failure  duly to give such  notice by mail,  or any
defect in such  notice or in the  mailing  thereof,  to any  holder of shares of
Designated  Preferred  Stock  designated  for  redemption  shall not  affect the
validity of the proceedings for the redemption of any other shares of Designated
Preferred  Stock.   Notwithstanding  the  foregoing,  if  shares  of  Designated
Preferred  Stock are issued in  book-entry  form  through The  Depository  Trust
Company or any other similar facility,  notice of redemption may be given to the
holders of Designated  Preferred Stock at such time and in any manner  permitted
by such facility.  Each notice of redemption  given to a holder shall state: (1)
the redemption  date; (2) the number of shares of Designated  Preferred Stock to
be  redeemed  and,  if less than all the  shares  held by such  holder are to be
redeemed,  the number of such shares to be redeemed  from such  holder;  (3) the
redemption price; and (4) the place or places where certificates for such shares
are to be surrendered for payment of the redemption price.

         (d) Partial Redemption. In case of any redemption of part of the shares
of Designated Preferred Stock at the time outstanding, the shares to be redeemed
shall be  selected  either  pro rata or in such  other  manner  as the  Board of
Directors or a duly  authorized  committee  thereof may determine to be fair and
equitable.  Subject to the provisions  hereof,  the Board of Directors or a duly
authorized  committee  thereof  shall have full power and authority to prescribe
the terms and conditions  upon which shares of Designated  Preferred Stock shall
be redeemed from time to time. If fewer than all the shares  represented  by any

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<PAGE>

certificate are redeemed,  a new certificate  shall be issued  representing  the
unredeemed shares without charge to the holder thereof.

         (e) Effectiveness of Redemption.  If notice of redemption has been duly
given and if on or before the redemption  date specified in the notice all funds
necessary for the redemption have been deposited by the Issuer, in trust for the
pro rata benefit of the holders of the shares called for redemption, with a bank
or trust  company doing  business in the Borough of  Manhattan,  The City of New
York,  and having a capital and surplus of at least $500 million and selected by
the  Board  of  Directors,  so as to be  and  continue  to be  available  solely
therefor, then, notwithstanding that any certificate for any share so called for
redemption  has  not  been  surrendered  for  cancellation,  on  and  after  the
redemption  date  dividends  shall  cease to accrue on all  shares so called for
redemption,  all  shares  so  called  for  redemption  shall no longer be deemed
outstanding  and all rights with respect to such shares shall  forthwith on such
redemption  date  cease and  terminate,  except  only the  right of the  holders
thereof to receive the amount payable on such redemption from such bank or trust
company,  without  interest.  Any funds unclaimed at the end of three years from
the redemption  date shall,  to the extent  permitted by law, be released to the
Issuer,  after  which time the  holders  of the shares so called for  redemption
shall  look only to the  Issuer  for  payment  of the  redemption  price of such
shares.

         (f) Status of Redeemed  Shares.  Shares of Designated  Preferred  Stock
that are redeemed,  repurchased or otherwise acquired by the Issuer shall revert
to authorized  but unissued  shares of Preferred  Stock  (provided that any such
cancelled shares of Designated Preferred Stock may be reissued only as shares of
any series of Preferred Stock other than Designated Preferred Stock).

         Section 6.  Conversion.  Holders of Designated  Preferred  Stock shares
shall  have no  right  to  exchange  or  convert  such  shares  into  any  other
securities.

         Section 7. Voting Rights.

         (a) General.  The holders of Designated  Preferred Stock shall not have
any voting  rights  except as set forth below or as otherwise  from time to time
required by law.

         (b)  Preferred  Stock  Directors.  Whenever,  at  any  time  or  times,
dividends payable on the shares of Designated Preferred Stock have not been paid
for an  aggregate  of six  quarterly  Dividend  Periods or more,  whether or not
consecutive,   the   authorized   number  of   directors  of  the  Issuer  shall
automatically  be increased by two and the holders of the  Designated  Preferred
Stock  shall  have the  right,  with  holders of shares of any one or more other
classes  or  series of  Voting  Parity  Stock  outstanding  at the time,  voting
together  as a  class,  to  elect  two  directors  (hereinafter  the  "Preferred
Directors"  and  each  a  "Preferred  Director")  to  fill  such  newly  created
directorships  at the  Issuer's  next annual  meeting of  stockholders  (or at a
special  meeting called for that purpose prior to such next annual  meeting) and
at each subsequent  annual meeting of stockholders  until all accrued and unpaid
dividends for all past Dividend Periods, including the latest completed Dividend
Period (including, if applicable as provided in Section 3(a) above, dividends on
such amount), on all outstanding shares of Designated  Preferred Stock have been
declared and paid in full at which time such right shall  terminate with respect

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<PAGE>

to the  Designated  Preferred  Stock,  except  as  herein  or by  law  expressly
provided, subject to revesting in the event of each and every subsequent default
of the character above mentioned;  provided that it shall be a qualification for
election for any Preferred Director that the election of such Preferred Director
shall not cause the Issuer to violate any corporate  governance  requirements of
any  securities  exchange or other trading  facility on which  securities of the
Issuer may then be listed or traded that listed or traded  companies must have a
majority of  independent  directors.  Upon any  termination  of the right of the
holders of shares of  Designated  Preferred  Stock and Voting  Parity Stock as a
class to vote for directors as provided  above,  the Preferred  Directors  shall
cease  to be  qualified  as  directors,  the  term of  office  of all  Preferred
Directors then in office shall terminate  immediately and the authorized  number
of  directors  shall be  reduced by the number of  Preferred  Directors  elected
pursuant  hereto.  Any  Preferred  Director may be removed at any time,  with or
without  cause,  and any  vacancy  created  thereby  may be filled,  only by the
affirmative vote of the holders a majority of the shares of Designated Preferred
Stock at the time  outstanding  voting  separately as a class  together with the
holders of shares of Voting  Parity  Stock,  to the extent the voting  rights of
such  holders  described  above  are  then  exercisable.  If the  office  of any
Preferred  Director becomes vacant for any reason other than removal from office
as aforesaid,  the remaining Preferred Director may choose a successor who shall
hold office for the unexpired term in respect of which such vacancy occurred.

         (c) Class Voting Rights as to Particular Matters. So long as any shares
of Designated Preferred Stock are outstanding,  in addition to any other vote or
consent of stockholders  required by law or by the Charter,  the vote or consent
of the holders of at least 66 2/3% of the shares of Designated  Preferred  Stock
at the time  outstanding,  voting  as a  separate  class,  given in person or by
proxy,  either in writing without a meeting or by vote at any meeting called for
the purpose, shall be necessary for effecting or validating:

                  (i) Authorization of Senior Stock. Any amendment or alteration
         of the Certificate of Designations  for the Designated  Preferred Stock
         or the Charter to authorize or create or increase the authorized amount
         of, or any  issuance of, any shares of, or any  securities  convertible
         into or  exchangeable or exercisable for shares of, any class or series
         of capital stock of the Issuer ranking  senior to Designated  Preferred
         Stock with  respect to either or both the payment of  dividends  and/or
         the distribution of assets on any  liquidation,  dissolution or winding
         up of the Issuer;

                  (ii) Amendment of Designated  Preferred  Stock. Any amendment,
         alteration   or  repeal  of  any  provision  of  the   Certificate   of
         Designations  for  the  Designated   Preferred  Stock  or  the  Charter
         (including,  unless no vote on such merger or consolidation is required
         by Section  7(c)(iii)  below,  any  amendment,  alteration or repeal by
         means of a  merger,  consolidation  or  otherwise)  so as to  adversely
         affect the  rights,  preferences,  privileges  or voting  powers of the
         Designated Preferred Stock; or

                  (iii)   Share   Exchanges,   Reclassifications.   Mergers  and
         Consolidations.  Any  consummation  of  a  binding  share  exchange  or
         reclassification  involving the  Designated  Preferred  Stock,  or of a
         merger or consolidation of the Issuer with another corporation or other
         entity,  unless in each case (x) the  shares  of  Designated  Preferred
         Stock  remain  outstanding  or,  in the  case  of any  such  merger  or
         consolidation  with respect to which the Issuer is not the surviving or
         resulting  entity,  are  converted  into or  exchanged  for  preference

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<PAGE>

         securities of the surviving or resulting entity or its ultimate parent,
         and  (y)  such  shares   remaining   outstanding  or  such   preference
         securities,  as  the  case  may  be,  have  such  rights,  preferences,
         privileges and voting powers, and limitations and restrictions thereof,
         taken as a whole,  as are not materially  less favorable to the holders
         thereof than the rights, preferences, privileges and voting powers, and
         limitations and  restrictions  thereof,  of Designated  Preferred Stock
         immediately  prior to such  consummation,  taken as a whole;

provided,  however,  that for all purposes of this Section 7(c), any increase in
the amount of the  authorized  Preferred  Stock,  including  any increase in the
authorized amount of Designated  Preferred Stock necessary to satisfy preemptive
or similar  rights  granted by the Issuer to other  persons prior to the Signing
Date, or the creation and issuance,  or an increase in the  authorized or issued
amount,  whether  pursuant to preemptive or similar rights or otherwise,  of any
other  series  of  Preferred  Stock,  or  any  securities  convertible  into  or
exchangeable  or exercisable  for any other series of Preferred  Stock,  ranking
equally with and/or  junior to  Designated  Preferred  Stock with respect to the
payment of dividends  (whether such dividends are cumulative or  non-cumulative)
and the  distribution of assets upon  liquidation,  dissolution or winding up of
the  Issuer  will not be deemed to  adversely  affect the  rights,  preferences,
privileges  or voting  powers,  and shall not  require the  affirmative  vote or
consent of, the holders of outstanding shares of the Designated Preferred Stock.

         (d) Changes after Provision for  Redemption.  No vote or consent of the
holders of Designated Preferred Stock shall be required pursuant to Section 7(c)
above if, at or prior to the time when any such vote or consent would  otherwise
be required pursuant to such Section,  all outstanding  shares of the Designated
Preferred  Stock  shall  have  been  redeemed,  or shall  have been  called  for
redemption upon proper notice and sufficient  funds shall have been deposited in
trust for such redemption, in each case pursuant to Section 5 above.

         (e)  Procedures  for Voting and Consents.  The rules and procedures for
calling and conducting any meeting of the holders of Designated  Preferred Stock
(including,  without  limitation,  the  fixing  of a record  date in  connection
therewith), the solicitation and use of proxies at such a meeting, the obtaining
of written consents and any other aspect or matter with regard to such a meeting
or such consents shall be governed by any rules of the Board of Directors or any
duly  authorized  committee of the Board of Directors,  in its  discretion,  may
adopt  from  time to time,  which  rules and  procedures  shall  conform  to the
requirements of the Charter, the Bylaws, and applicable law and the rules of any
national  securities  exchange or other  trading  facility  on which  Designated
Preferred Stock is listed or traded at the time.

         Section  8.  Record  Holders.   To  the  fullest  extent  permitted  by
applicable law, the Issuer and the transfer agent for Designated Preferred Stock
may deem and treat the record holder of any share of Designated  Preferred Stock
as the true and lawful owner  thereof for all  purposes,  and neither the Issuer
nor such transfer agent shall be affected by any notice to the contrary.

         Section  9.  Notices.  All  notices  or  communications  in  respect of
Designated  Preferred Stock shall be sufficiently  given if given in writing and
delivered in person or by first class mail, postage prepaid, or if given in such
other manner as may be permitted in this  Certificate  of  Designations,  in the
Charter or Bylaws or by applicable law. Notwithstanding the foregoing, if shares
of  Designated  Preferred  Stock  are  issued in  book-entry  form  through  The

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Depository Trust Company or any similar  facility,  such notices may be given to
the  holders  of  Designated  Preferred  Stock in any manner  permitted  by such
facility.

         Section 10. No  Preemptive  Rights.  No share of  Designated  Preferred
Stock shall have any rights of preemption whatsoever as to any securities of the
Issuer,  or any  warrants,  rights or  options  issued or granted  with  respect
thereto, regardless of how such securities, or such warrants, rights or options,
may be designated, issued or granted.

         Section 11.  Replacement  Certificates.  The Issuer  shall  replace any
mutilated certificate at the holder's expense upon surrender of that certificate
to the Issuer.  The Issuer shall  replace  certificates  that become  destroyed,
stolen or lost at the holder's expense upon delivery to the Issuer of reasonably
satisfactory  evidence that the certificate has been destroyed,  stolen or lost,
together with any indemnity that may be reasonably required by the Issuer.

         Section 12. Other  Rights.  The shares of  Designated  Preferred  Stock
shall not have any rights, preferences, privileges or voting powers or relative,
participating, optional or other special rights, or qualifications,  limitations
or restrictions thereof,  other than as set forth herein or in the Charter or as
provided by applicable law.

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