Greer Bancshares Inc. (fka GRBS)

[Enterprising Investor]

Greer Bancshares Issues Notes To Repay TARP Preferred (6/11/14)

On June 11, 2014, after receiving regulatory approval, Greer Bancshares Incorporated (the “Company”) issued an aggregate principal amount of $1,980,000 of Series A 5% Subordinated Notes due 2022 (the “Series A Notes”) in a private placement pursuant to certain exemptions from registration under the Securities Act of 1933, as amended (the “Securities Act”), and state securities laws. All of the Series A Notes were issued to “accredited investors” as that term is defined in Rule 501(a) of Regulation D under the Securities Act.

Also on June 11, 2014, after receiving regulatory approval, the Company used the entire proceeds from the Series A Notes to repurchase an aggregate principal amount of $1,980,000 of the Company’s preferred stock (the “TARP Preferred”) that was issued to the U.S. Treasury Department in January 2009 under the Troubled Assets Relief Program. The sole purpose of the Series A Note offering was to repurchase a portion of the Company’s outstanding TARP Preferred. The dividend rate on most of the TARP Preferred increased from 5% to 9% on February 16, 2014. (The dividend rate on $500,000 in principal amount of the TARP Preferred was 9% from the date of issuance.) The remaining outstanding principal amount of the Company’s TARP Preferred is $5,363,000.

The Series A Notes will initially accrue interest at a rate of 5% per annum, payable at the end of each calendar quarter. The interest rate will increase to 7% per annum, effective July 1, 2017. Delay of payment prior to the maturity date due to restrictions imposed by applicable law or government regulatory agencies (“Regulatory Action”) will not constitute a default under, or breach of, the Series A Notes. The Series A Notes mature on June 30, 2022. The Company may prepay all or any part of the outstanding principal amount of the Series A Notes at any time after June 30, 2016. The Series A Notes are not convertible into the common stock or any other securities of the Company and are not secured by any collateral, guaranty, insurance, sinking fund or other form of security. There is no limitation on the Company’s right to issue additional indebtedness on par with or senior to the Series A Notes.

Holders of a majority of the principal amount of the Series A Notes may declare the principal and interest on all of the notes to be immediately due and payable if there is an Event of Default, which generally is defined as any of the following: (a) an interest payment on any Series A Note remains unpaid for 30 days after its due date (unless the failure results from Regulatory Action), (b) the Company fails to repay in full the principal of any Series A Note within 30 days of the maturity date (though if the failure is the result of Regulatory Action, there is no Event of Default unless the failure to pay continues after the first anniversary of the due date), (c) the Company fails to perform any obligation under the Series A Notes other than the obligation to pay principal or interest and that failure continues for a period of 60 days after the Company’s receipt of written notice and a request to cure from a holder of a Series A Note or (d) the Company files for bankruptcy or takes, or is subject to, other similar actions for the protection of creditors as described in the Series A Notes.

All of the Series A Notes were issued to the following participating members of the Company’s board of directors or their family members: Charles D. Wall, his son James E. Wall, Gary M. Griffin, Jeffery M. Howell, Linda S. Hannon and Walter M. Burch.

The foregoing description of the Series A Notes is qualified in its entirety by the form of Series A Note filed herewith as Exhibit 10.1 to this Current Report on Form 8-K, which exhibit is incorporated herein by reference. As previously reported on the Company’s Current Report on Form 8-K dated June 2, 2014, the Memorandum of Understanding between the Company and the Federal Reserve Bank of Richmond indentified in the Series A Notes has been terminated.

Each Series A Note was issued pursuant to a subscription agreement in the form filed herewith as Exhibit 10.2 between the Company and the note purchaser, which exhibit is incorporated herein by reference. The form of Subscription Agreement is included in this Current Report to provide information regarding its terms. It is not provided to give factual information about the Company or any other parties thereto. In addition, the representations, warranties and covenants contained in the Subscription Agreements were made only for purposes of those agreements and as of specific dates, were solely for the benefit of the parties to those agreements, and may be subject to limitations agreed to by the contracting parties, including being qualified by disclosures exchanged between the parties in connection with the execution of the agreements. The representations and warranties may have been made for the purposes of allocating contractual risk between the parties to the agreements instead of establishing these matters as facts, and may be subject to standards of materiality applicable to the contracting parties that differ from those applicable to investors. Investors are not third-party beneficiaries under the Subscription Agreements and should not view the representations, warranties and covenants or any descriptions thereof as characterizations of the actual state of facts or conditions of the Company.

http://www.sec.gov/Archives/edgar/data/1145547/000114544314000879/d31437.htm