SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
SCHEDULE 13E-3
RULE 13e-3 TRANSACTION STATEMENT
UNDER SECTION 13(e) OF THE SECURITIES EXCHANGE ACT OF 1934
GrandSouth Bancorporation
(Name of Issuer)
GrandSouth Bancorporation
Ronald K. Earnest Harold E. Garrett Baety O. Gross, Jr.
Mason Y. Garrett Michael L. Gault J. Calhoun Pruitt, Jr.
S. Hunter Howard, Jr. S. Blanton Phillips
(Names of Person(s) Filing Statement)
Common Stock 386627 10 3
(Title of Class of Securities) (CUSIP Number of Class of Securities)
Ronald K. Earnest Copies To:
President George S. King, Jr., Esq.
GrandSouth Bancorporation Suzanne Hulst Clawson, Esq.
381 Halton Road Haynsworth Sinkler Boyd P.A.
Greenville, South Carolina 29607 1201 Main Street, 22nd Floor
(864) 770-1000 Columbia, South Carolina 29201
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(Name, address, and telephone numbers (803) 779-3080
of person authorized to receive notices and
communications on behalf of filing persons)
This statement is filed in connection with (check the appropriate box):
a. [X]The filing of solicitation materials or an information statement
subject to Regulation 14A, Regulation 14C or Rule 13e-3(c) under the
Securities Exchange Act of 1934.
b. [ ]The filing of a registration statement under the Securities Act of
1933.
c. [ ]A tender offer.
d. [ ]None of the above.
Check the following box if the soliciting materials or information
statement referred to in checking box (a) are preliminary copies: |X|
Check the following box if the filing is a final amendment reporting the results
of the transaction: [ ]
Calculation of Filing Fee
Transaction valuation* Amount of filing fee
---------------------------------------- -------------------------------------
$1,892,025.76 $105.58
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* For purposes of calculating the fee only. This amount assumes 290,188 shares
of common stock of the subject company will be exchanged for 290,188 shares
of Series A Preferred Stock of the subject company. Pursuant to Rule
0-11(a)(4), because there is no market for the common stock, the transaction
value is based on the book value of the common stock of the subject company
as of June 30, 2009, which was $6.52 per share. The amount of the filing fee
equals $55.80 per every $1 million in aggregate transaction value.
[ ] Check the box if any part of the fee is offset as provided by Rule
0-11(a)(2) and identify the filing with which the offsetting fee was
previously paid. Identify the previous filing by registration statement
number or the Form or Schedule and the date of its filing.
Amount Previously Paid: Filing Party:
Form or Registration No.: Date Filed:
TRANSACTION STATEMENT UNDER SECTION 13(e) OF
THE SECURITIES EXCHANGE ACT OF 1934 AND RULE 13e-3 THEREUNDER
This Rule 13e-3 Transaction Statement on Schedule 13E-3 (the "Schedule") is
being filed by the filing persons listed on the cover of this Schedule in
connection with an amendment to the articles of incorporation of GrandSouth
Bancorporation ("GrandSouth" or the "Company"), which provides for the
reclassification (the "Reclassification") of shares of the Company's common
stock held by shareholders of record of fewer than 2,001 shares into the
Company's common stock into a like number of shares of Series A Preferred Stock.
The Reclassification is designed to reduce the number of shareholders of record
of the Company's common stock to below 300 in order to allow the Company to
terminate registration of its common stock under Section 12 of the Securities
Exchange Act of 1934 (the "Exchange Act") and to suspend its obligation to file
reports under Section 15(d) of the Exchange Act. The proposed amendment is
attached as Appendix A to the Proxy Statement filed by the Company concurrently
with this Schedule. The Proxy Statement is being filed under cover of Schedule
14A pursuant to Regulation 14A of the Exchange Act, and is incorporated by
reference herein including appendices. The Proxy Statement relates to the
special meeting of shareholders at which the Company's shareholders will
consider and vote upon the proposed amendments.
All information contained in this Schedule 13E-3 concerning the Company has been
supplied by the Company. Capitalized terms not otherwise defined herein shall
have the meaning given to them in the Proxy Statement.
Item 1. Summary Term Sheet
The required information is incorporated herein by reference to the sections of
Exhibit 1 entitled "QUESTIONS AND ANSWERS ABOUT, AND SUMMARY TERMS, OF THE
RECLASSIFICATION."
Item 2. Subject Company Information
The subject company is GrandSouth Bancorporation. The principal executive
offices of the subject company are located at 381 Halton Road, Greenville, South
Carolina 29607, and its telephone number is (864) 770-1000. As of June 30, 2009,
there were 3,573,695 shares of the Company's common stock outstanding. The
required information relating to trading market, price, dividends, prior public
offerings and prior stock purchases is incorporated herein by reference to the
section of Exhibit 1 entitled "MARKET PRICE OF GRANDSOUTH BANCORPORATION COMMON
STOCK AND DIVIDEND INFORMATION."
Item 3. Identity and Background of Filing Person
The business address and telephone number of each filing person listed on the
cover of this Schedule is c/o GrandSouth Bancorporation, 381 Halton Road,
Greenville, South Carolina 29607, telephone (864) 770-1000. Each filing person
is a citizen of the United States and is a director of the Company. Mason Y
Garrett is also the Chairman and Chief Executive Officer of the Company and
Ronald K. Earnest is the President and Chief Operating Officer of the Company.
The other required information regarding the filing persons and persons
specified in Instruction C to the Schedule is incorporated herein by reference
to the section of Exhibit 1 entitled "INFORMATION ABOUT GRANDSOUTH AND ITS
AFFILIATES - Directors and Executive Officers."
Item 4. Terms of the Transaction
The required information is incorporated herein by reference to the sections of
Exhibit 1 entitled "SPECIAL FACTORS -- Overview of the Amendment to our Articles
of Incorporation and the Reclassification," "-- Purpose and Structure of the
Reclassification," "-- Reasons for the Reclassification; Fairness of the
Reclassification; Board Recommendation," "-- Our Position as to the Fairness of
the Reclassification," "-- Effects of the Reclassification on GrandSouth
Bancorporation," "-- Effects of the Reclassification on Shareholders of
GrandSouth Bancorporation," "-- Material Federal Income Tax Consequences of the
Reclassification," "-- Dissenters' Rights," and" "-- Accounting Treatment;"
"DESCRIPTION OF CAPITAL STOCK - Common Stock," "-- Preferred Stock," "-- Series
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A Preferred Stock;" and "INFORMATION REGARDING THE SPECIAL MEETING OF
SHAREHOLDERS - Vote Required and Method of Counting Votes."
Item 5. Past Contacts, Transactions, Negotiations and Agreements
The required information is incorporated herein by reference to the sections of
Exhibit 1 entitled "CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS;"
"INFORMATION ABOUT GRANDSOUTH AND ITS AFFILIATES - Stock Ownership by
Affiliates;" "SPECIAL FACTORS - Effects of the Reclassification on GrandSouth
Bancorporation - Effect on Outstanding Options," "-- Effect on Our Directors and
Executive Officers," "-- Elimination of Protection Under Section 16 of the
Exchange Act," "-- Interests of Certain Persons in the Reclassification;" and
"QUESTIONS AND ANSWERS ABOUT, AND SUMMARY TERMS OF, THE RECLASSIFICATION AND
SPECIAL MEETING - Do your directors and officers have different interests in the
Reclassification?"
During the past two years, there have been no negotiations, transactions or
material contacts between any of the filing persons and GrandSouth
Bancorporation or any of its affiliates concerning any merger, consolidation,
acquisition, tender offer for, or other acquisition of, any class of GrandSouth
Bancorporation's securities, election of GrandSouth Bancorporation's directors,
or sale or other transfer of a material amount of assets of GrandSouth
Bancorporation, nor have there been any such negotiations or material contacts
concerning such matters between any affiliates of GrandSouth Bancorporation, or
GrandSouth Bancorporation or any of its affiliates and any person not affiliated
with GrandSouth Bancorporation who would have a direct interest in such matters.
Item 6. Purposes of the Transaction and Plans or Proposals
The shares of common stock reclassified to Series A Preferred Stock in the
transaction will be cancelled and become authorized but unissued common stock.
Other than the Reclassification described in response to Item 4, there are no
plans, proposals or negotiations relating to or that would result in:
(1) any extraordinary transaction, such as a merger, reorganization
or liquidation, involving GrandSouth or any subsidiary;
(2) any purchase, sale or transfer of a material amount of assets of
GrandSouth or any subsidiary;
(3) any material change in GrandSouth's present dividend rate or
policy or in its indebtedness or capitalization;
(4) any change in GrandSouth's present board of directors or
management, including but not limited to plans or proposals to
change the number or term of directors or to fill any existing
vacancies on the board or to change any material term of any
executive officer's employment contract;
(5) any other material change in GrandSouth's corporate structure or
business;
(6) any class of GrandSouth's equity securities to be delisted from
a national securities exchange or cease to be authorized to be
quoted in an automated quotation system operated by a national
securities association;
(7) except as disclosed in response to Item 7 relating to the
prospective termination of registration of the GrandSouth common
stock under the Exchange Act, any class of GrandSouth's equity
securities becoming eligible for termination of registration
under Section 12(g)(4) of the Exchange Act; or
(8) except as described in response to Item 7, the suspension of
GrandSouth's obligation to file reports under Section 15(d) of
the Exchange Act.
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Item 7. Purposes, Alternatives, Reasons and Effects
The required information is incorporated herein by reference to the sections of
Exhibit 1 entitled "SPECIAL FACTORS - Overview of the Amendments and the
Reclassification," "-- Purpose and Structure of the Reclassification," "--
Background of the Reclassification," "-- Reasons for the Reclassification;"
Fairness of the Reclassification; Board Recommendation," "-- Our Position as to
the Fairness of the Reclassification," "-- Effects of the Reclassification on
GrandSouth Bancorporation," "-- Effects of the Reclassification on Shareholders
of GrandSouth Bancorporation," and "-- Material Federal Income Tax Consequences
of the Reclassification."
Item 8. Fairness of the Transaction
The required information is incorporated herein by reference to the sections of
Exhibit 1 entitled "SPECIAL FACTORS - Reasons for the Reclassification; Fairness
of the Reclassification; Board Recommendation," and "-- Our Position as to the
Fairness of the Reclassification."
Item 9. Reports, Opinions, Appraisals and Negotiations
The required information is incorporated herein by reference to the sections of
Exhibit 1 entitled "SPECIAL FACTORS - Reasons for the Reclassification; Fairness
of the Reclassification; Board Recommendation," "-- Our Position as to the
Fairness of the Reclassification;" and "OTHER MATTERS - Reports, Opinions,
Appraisals and Negotiations." No written materials were furnished to the board
of directors by any outside party (other than counsel) relating to the
transaction.
Item 10. Source and Amount of Funds or Other Consideration
The required information is incorporated herein by reference to the sections of
Exhibit 1 entitled "SPECIAL FACTORS - Financing of the Reclassification;" and
"-- Fees and Expenses."
Item 11. Interest in Securities of the Subject Company
The required information is incorporated herein by reference to the section of
Exhibit 1 entitled "INFORMATION ABOUT GRANDSOUTH AND ITS AFFILIATES - Stock
Ownership by Affiliates;" and "DESCRIPTION OF CAPITAL STOCK - Transactions
Involving our Securities."
Item 12. The Solicitation or Recommendation
The required information is incorporated herein by reference to the section of
Exhibit 1 entitled "QUESTIONS AND ANSWERS ABOUT, AND SUMMARY TERMS OF, THE
RECLASSIFICATION AND THE SPECIAL MEETING - What is the recommendation of our
Board of Directors regarding the proposal to amend our Articles of
Incorporation?"
Item 13. Financial Statements
The required information is incorporated herein by reference to the sections of
Exhibit 1 entitled "SELECTED HISTORICAL FINANCIAL INFORMATION;" "UNAUDITED PRO
FORMA CONSOLIDATED FINANCIAL INFORMATION;" and "OTHER MATTERS - Information
Incorporated by Reference."
Item 14. Persons/Assets Retained, Employed, Compensated or Used
The required information is incorporated herein by reference to the section of
Exhibit 1 entitled "INFORMATION ABOUT THE SPECIAL MEETING OF SHAREHOLDERS -
Solicitation of Proxies."
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Item 15. Additional Information
Not applicable.
Item 16. Exhibits
1. Preliminary Proxy Statement, Notice of the Annual Meeting of
Shareholders and related cover letter, including:
Appendix A Amendment .to the Articles of Incorporation and
Terms of Series A Preferred Stock
Appendix B South Carolina Dissenters' Rights Statute
Appendix C Information Incorporated by reference
o Quarterly Reports on Form 10-Q of GrandSouth
Bancorporation for the quarters ended March
31, 2009 and June 30, 2009 (without
exhibits); and
o The following portions of the GrandSouth
Bancorporation Annual Report to Shareholders,
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which are filed as a part of Exhibit 13 to
the Form 10-K for the fiscal year ended
December 31, 2008:
o Management's Discussion and Analysis of
Financial Condition and Results of
Operations
o Report of Independent Registered Public
Accounting Firm
o Consolidated Balance Sheets at December
31, 2008 and 2007
o Consolidated Statements of Income for
the years ended December 31, 2008, 2007
and 2006
o Consolidated Statements of Changes in
Shareholders' Equity and Comprehensive
Income for the years ended December 31,
2008, 2007 and 2006
o Consolidated Statements of Cash Flows
for the years ended December 31, 2008,
2007 and 2006
o Notes to Consolidated Financial
Statements
(Incorporated by reference to the preliminary proxy statement
relating to this transaction filed under cover of Schedule 14A;
File No. 000-31937)
2. GrandSouth Bancorporation 1998 Stock Option Plan, as amended
(Incorporated by reference to Registrant's Proxy Statement for the
2005 Annual Meeting of Shareholders).
3. GrandSouth Bancorporation 2009 Stock Option Plan (Incorporated by
reference to Registrant's Proxy Statement for the 2009Annual Meeting
of Shareholders).
4. Terms of Series T and Series W Preferred Stock as set forth in
Registrant's Articles of Incorporation, as amended (Incorporated by
reference to exhibits to Registrant's Quarterly Report on Form 10-Q
for the Quarter ended March 31, 2009).
5. Letter Agreement, dated January 9, 2009 between the Company and the
United States Department of the Treasury relating to issuance and sale
of the Series T and Series W Preferred Stock and Warrant (Incorporated
by reference to exhibits to Registrant's Current Report on Form 8-K
filed January 12, 2009).
6. Warrant for Purchase of Series W Preferred Stock (Incorporated by
reference to exhibits to Registrant's Current Report on Form 8-K filed
January 12, 2009).
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SIGNATURES & POWER OF ATTORNEY
After due inquiry and to the best of my knowledge and belief, I certify that the
information set forth in this statement is true, complete and correct.
Date: September 16, 2009 GRANDSOUTH BANCORPORATION
By: s/Ronald K. Earnest
------------------------------
Ronald K. Earnest
President
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KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears below
constitutes and appoints each of Ronald K. Earnest and John B. Garrett as his
true and lawful attorney-in-fact and agent, with full power of substitution and
resubstitution, for him and in his name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Rule 13e-3 Transaction Statement on Schedule 13E-3, and to file the
same, with all exhibits thereto and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto each of said
attorneys-in-fact and agents, full power and authority to do and perform each
and every act and thing required or necessary to be done in and about the
premises, as fully to all intents and purposes as he or she might or could do in
person, hereby ratifying and confirming all that each of said attorneys-in-fact
and agents, or their substitutes, could lawfully do or cause to be done by
virtue hereof.
Date: September 16, 2009 OTHER FILING PERSONS:
s/Ronald K. Earnest
--------------------------------------------
Ronald K. Earnest
s/Harold E. Garrett
--------------------------------------------
Harold E. Garrett
s/Mason Y. Garrett
--------------------------------------------
Mason Y Garrett
s/Michael L. Gault
--------------------------------------------
Michael L. Gault
s/Baety O. Gross, Jr.
--------------------------------------------
Baety O. Gross, Jr.
s/S. Hunter Howard, Jr.
--------------------------------------------
S. Hunter Howard, Jr.
s/S. Blanton Phillips
--------------------------------------------
S. Blanton Phillips
s/J. Calhoun Pruitt, Jr.
--------------------------------------------
J. Calhoun Pruitt, Jr.
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EXHIBIT INDEX
1. Preliminary Proxy Statement, Notice of the Annual Meeting of
Shareholders and related cover letter, including:
Appendix A Amendment to the Articles of Incorporation and
Terms of Series A Preferred Stock
Appendix B South Carolina Dissenters' Rights Statute
Appendix C Information Incorporated by reference
o Quarterly Reports on Form 10-Q of GrandSouth
Bancorporation for the quarters ended March
31, 2009 and June 30, 2009 (without
exhibits); and
o The following portions of the GrandSouth
Bancorporation Annual Report to Shareholders,
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which are filed as a part of Exhibit 13 to
the Form 10-K for the fiscal year ended
December 31, 2008:
o Management's Discussion and Analysis of
Financial Condition and Results of
Operations
o Report of Independent Registered Public
Accounting Firm
o Consolidated Balance Sheets at December
31, 2008 and 2007
o Consolidated Statements of Income for
the years ended December 31, 2008, 2007
and 2006
o Consolidated Statements of Changes in
Shareholders' Equity and Comprehensive
Income for the years ended December 31,
2008, 2007 and 2006
o Consolidated Statements of Cash Flows
for the years ended December 31, 2008,
2007 and 2006
o Notes to Consolidated Financial
Statements
(Incorporated by reference to the preliminary proxy statement relating
to this transaction filed under cover of Schedule 14A; File No.
000-31937.)
2. GrandSouth Bancorporation 1998 Stock Option Plan, as amended
(Incorporated by reference to Registrant's Proxy Statement for the
2005 Annual Meeting of Shareholders).
3. GrandSouth Bancorporation 2009 Stock Option Plan (Incorporated by
reference to Registrant's Proxy Statement for the 2009Annual Meeting
of Shareholders).
4. Terms of Series T and Series W Preferred Stock as set forth in
Registrant's Articles of Incorporation, as amended (Incorporated by
reference to exhibits to Registrant's Quarterly Report on Form 10-Q
for the Quarter ended March 31, 2009).
5. Letter Agreement, dated January 9, 2009 between the Company and the
United States Department of the Treasury relating to issuance and sale
of the Series T and Series W Preferred Stock and Warrant (Incorporated
by reference to exhibits to Registrant's Current Report on Form 8-K
filed January 12, 2009).
6. Warrant for Purchase of Series W Preferred Stock (Incorporated by
reference to exhibits to Registrant's Current Report on Form 8-K filed
January 12, 2009).
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