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Exhibit 10.4

NOTICE: THIS AGREEMENT IS SUBJECT TO ARBITRATION PURSUANT

TO THE SOUTH CAROLINA UNIFORM ARBITRATION ACT

AMENDED NONCOMPETITION, SEVERANCE AND EMPLOYMENT AGREEMENT

THIS AMENDED NONCOMPETITION, SEVERANCE AND EMPLOYMENT AGREEMENT (the

"Agreement") is made and entered into as of this 17th day of October, 2007, 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 Company, the Bank and the Executive entered into a

Noncompetition, Severance and Employment Agreement dated as of January 18, 2006

(the "Original Agreement"); and

WHEREAS, the Company, the Bank and the Executive desire to amend the

Original Agreement in compliance with the recently enacted Internal Revenue Code

Section 409A and associated federal regulations; and

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; and

WHEREAS, the Company desires to continue to employ the Executive as

President and Chief Operating Officer of the Company, and the Bank desires to

continue to employ the Executive as President and Chief Executive Officer of the

Bank; and

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 to amend and restate the Original Agreement 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 Operating 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.

2. Definitions. For purposes of this Agreement, the following terms

shall have the meanings specified below.

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2.1 "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

one Person, or more than one Person acting as a group, immediately

after which such Person or group has ownership of more than 50% 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 or group 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 or group in connection

with a "Non-Control Transaction" (as hereinafter defined); or

(b) The date a majority of the individuals who, as of the date

of this Agreement, are members of the Board of Directors of the Company

(the "Incumbent Board") are replaced for any reason during any twelve

month period; 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 a majority of the Incumbent Board, such

new director shall, for purposes of this Agreement, be considered as a

member of the Incumbent Board; or

(c) 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 a majority of the combined voting

power of the outstanding voting securities of the corporation

resulting from such merger or consolidation or reorganization

(the "Surviving Corporation"), 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 a majority of the members of the board of directors of

the Surviving Corporation.

(A transaction described in clauses (c)(i) and (ii) shall

herein be referred to as a "Non-Control Transaction"); or

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(d) 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

related person as set forth in 26 C.F.R. 1.409A-3(i)(5)(vii)(B)) over a

consecutive 12-month period.

2.2 "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

(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:

(i) unless (x) there shall have been delivered to the

Executive a written notice setting forth with specificity the

reasons that the Board of the Company or the Bank believes the

Executive's conduct meets the criteria set forth in clause

(a); (y) the Executive shall have been provided the

opportunity to be heard in person by the Board of the Company

or the Bank, as applicable (with assistance of the Executive's

counsel if the Executive so desires); and (z) after such

opportunity to be heard, the termination is evidenced by a

resolution adopted in good faith by two-thirds of the members

of the Board of the Company or the Bank, as applicable (other

than the Executive); or

(ii) if such conduct (x) was believed by the Executive in good

faith to have been in, or not opposed to, the interests of the

Company and the Bank, and (y) was not intended to, and did

not, result in the direct or indirect gain to or personal

enrichment of the Executive.

2.3 "Confidential Information" shall mean all business and

other information relating to the business of the Company or the Bank, including

without limitation, technical or non-technical data, programs, methods,

techniques, processes, financial data, financial plans, product plans, and lists

 

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of actual or potential customers, which (a) derives economic value, actual or

potential, from not being generally known to, and not being readily

ascertainable by proper means by, other Persons, and (b) 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.

2.4 "Disability" or "Disabled" shall mean (a) the Executive is

unable to engage in any substantial gainful activity by reason of any medically

determinable physical or mental impairment that can be expected to result in

death or can be expected to last for a continuous period of not less than 12

months; or (b) the Executive is, by reason of any medically determinable

physical or mental impairment that can be expected to result in death or can be

expected to last for a continuous period of not less than 12 months, receiving

income replacement benefits for a period of not less than three months under an

accident and health plan covering employees of the Company or t


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