5. Notes Payable

6 Months Ended

Nov. 30, 2013

Notes Payable

Notes payable as of November 30, 2013 and May 31, 2013 are as follows:

	November 30,			May 31,
	2013			2013
Note payable to F&M Bank & Trust Company, prime rate of interest but not less than 4.5%, due March 13, 2015, monthly principal payments of $76,561 plus interest	$	4,134,285		$	4,593,650
Note payable by GRE to F&M Bank & Trust Company, prime rate of interest but not less than 4.75%, due February 15, 2016, monthly installments $35,512, secured by buildings and land		3,232,827			3,366,108
Capitalized lease payable, 5% interest		326,953			381,727
Note payable to Robert Rosene, 7.5% interest, due January 15, 2015		2,066,000			2,066,000
Note payable to Warren Kruger, 7.5% interest, due January 15, 2015		527,716			527,716
Other note payable		44,825			66,979
		10,332,606			11,002,180
Less: Current portion		(1,353,905	)		(1,344,160	)
Long-term debt	$	8,978,701		$	9,658,020

The prime rate of interest as of November 30, 2013 was 3.25%.

Loans with F&M Bank & Trust Company

Greystone, GSM, GRE, Warren F. Kruger, President and CEO, and Robert B. Rosene, Jr., a Greystone director, are parties to a loan agreement (the “F&M Agreement”) dated as of March 4, 2005, as amended, with F&M Bank & Trust Company (“F&M”).  There are two loans outstanding under the F&M Agreement as follows:

(a)   A term loan as listed above in the amount of $4,134,285 at November 30, 2013 with GSM as the borrower and Greystone, Mr. Kruger and Mr. Rosene as guarantors.

(b)   A term loan with a balance of $3,356,000 at November 30, 2013, with Messrs. Kruger and Rosene as borrowers and a maturity date of March 15, 2014.  The loan is collateralized with 25,000 shares of Greystone’s Series 2003 Preferred Stock owned by Mr. Kruger and 25,000 shares of Greystone’s Series 2003 Preferred Stock owned by Mr. Rosene. This term loan is the personal liability of Messrs. Kruger and Rosene and, accordingly, is not included in the Greystone financial statements.

All indebtedness outstanding under the F&M Agreement and the loan agreement governing the loan to GRE is cross-collateralized, which means that if an event of default occurs under the F&M Agreement, F&M could foreclose on the collateral that secures the indebtedness outstanding under the loan agreement with GRE in order to satisfy the indebtedness outstanding under the F&M Agreement, and vice versa.  In addition, all of the indebtedness outstanding under the F&M Agreement and the loan agreement with GRE is cross-defaulted, which means that an event of default under the F&M Agreement is also an event of default under the loan agreement with GRE, and vice versa

The F&M Agreement contains certain financial covenants and restricts the payments of dividends. GSM’s note payable to F&M is secured by cash, accounts receivable, inventory and equipment.

As of November 30, 2013, the parties to the F&M Agreement were in compliance with the covenants under the F&M Agreement and GRE was in compliance with its covenants under the loan agreement between F&M and GRE.

Capitalized Lease Payable

Effective January 2, 2014, Greystone paid $114,641 to buy out the capitalized lease.  The difference of $212,312 between the outstanding debt balance and the purchase amount will be applied against the asset’s carrying value.