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<title>Palmetto Bancshare, Inc. Form 8-K</title>


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<body lang=EN-US link=blue vlink=purple>



<p align="center"><b><font size="2">UNITED STATES<br>
SECURITIES AND EXCHANGE
COMMISSION<br>
WASHINGTON, D.C.&nbsp; 20549</font></b></p>



<p align="center"><b><font size="2">FORM 8-K</font></b></p>

<p align="center"><b><font size="2">CURRENT REPORT PURSUANT<br>
&nbsp;TO SECTION 13 or 15(d) OF THE <br>
SECURITIES
EXCHANGE ACT OF 1934</font></b></p>



<p align=center style='text-align:center'><font size="2">Date of Report (Date
of earliest event reported): May 2, 2007</font></p>





<div align="center">





<table class=MsoNormalTable border=0 cellpadding=0
 style='border-collapse:collapse' width="100%">
 <tr>
  <td width="22%" valign=top style='padding:0in; '>

  </td>
  <td colspan=5 valign=top style='padding:0in; '>

  </td>
  <td width="13%" valign=top style='padding:0in; '>

  </td>
 </tr>
 <tr>
  <td colspan=7 valign=top style='padding:0in; '>
  <p align=center style='text-align:center'><b><font size="2">Palmetto Bancshares,
  Inc.<br>
	</font></b><font size="2">(Exact name of
  registrant as specified in charter)</font></p>
  </td>
 </tr>
 <tr>
  <td width="22%" valign=top style='padding:0in; '>

  </td>
  <td colspan=2 valign=top style='padding:0in; '>

  </td>
  <td width="30%" valign=top style='padding:0in; '>

  <font size="2">&nbsp; </font>

  </td>
  <td colspan=2 valign=top style='padding:0in; '>

  </td>
  <td width="13%" valign=top style='padding:0in; '>

  </td>
 </tr>
 <tr>
  <td width="22%" valign=top style='padding:0in; '>

  </td>
  <td colspan=2 valign=top style='padding:0in; '>

  </td>
  <td width="30%" valign=top style='padding:0in; '>

  <font size="2">&nbsp; </font>

  </td>
  <td colspan=2 valign=top style='padding:0in; '>

  </td>
  <td width="13%" valign=top style='padding:0in; '>

  </td>
 </tr>
 <tr>
  <td colspan=2 valign=top style='padding:0in; '>
  <p style='margin-right:-17.05pt'><u><font size="2">South
  Carolina&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></u></p>
  </td>
  <td width="8%" valign=top style='padding:0in; '>

  </td>
  <td width="30%" valign=top style='padding:0in; '>
  <p align=center style='text-align:center'><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;
  0-26016&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;</font></u></p>
  </td>
  <td width="7%" valign=top style='padding:0in; '>

  </td>
  <td colspan=2 valign=top style='padding:0in; '>
  <p align=right style='text-align:right'><u><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  74-2235055</font></u></p>
  </td>
 </tr>
 <tr>
  <td colspan=3 valign=top style='padding:0in; '>
  <p><font size="2">State or other jurisdiction of incorporation </font> </p>

  </td>
  <td width="30%" valign=top style='padding:0in; '>
  <p align=center style='text-align:center'><font size="2">Commission File
  Number</font></p>
  </td>
  <td colspan=3 valign=top style='padding:0in; '>
  <p align=right style='text-align:right'><font size="2">&nbsp;IRS Employer
  I.D. number</font></p>
  </td>
 </tr>
 <tr>
  <td colspan=2 valign=top style='padding:0in; '>

  <font size="2">&nbsp; </font>

  </td>
  <td width="8%" valign=top style='padding:0in; '>

  </td>
  <td width="30%" valign=top style='padding:0in; '>

  </td>
  <td width="7%" valign=top style='padding:0in; '>

  </td>
  <td colspan=2 valign=top style='padding:0in; '>

  </td>
 </tr>
 <tr>
  <td colspan=2 valign=top style='padding:0in; '>

  <font size="2">&nbsp; </font>

  </td>
  <td width="8%" valign=top style='padding:0in; '>

  </td>
  <td width="30%" valign=top style='padding:0in; '>

  </td>
  <td width="7%" valign=top style='padding:0in; '>

  </td>
  <td colspan=2 valign=top style='padding:0in; '>

  </td>
 </tr>
 <tr>
  <td colspan=4 valign=top style='padding:0in; '>
  <p><u><font size="2">301 Hillcrest Drive, Laurens, South Carolina</font></u></p>
  </td>
  <td width="7%" valign=top style='padding:0in; '>

  </td>
  <td colspan=2 valign=top style='padding:0in; '>
  <p align=right style='text-align:right'><u><font size="2">29360</font></u></p>
  </td>
 </tr>
 <tr>
  <td colspan=4 valign=top style='padding:0in; '>
  <p><font size="2">Address of principal executive offices</font></p>
  </td>
  <td width="7%" valign=top style='padding:0in; '>

  </td>
  <td colspan=2 valign=top style='padding:0in; '>
  <p align=right style='text-align:right'><font size="2">Zip Code</font></p>
  </td>
 </tr>
 <tr>
  <td colspan=2 valign=top style='padding:0in; '>

  <font size="2">&nbsp;</font></td>
  <td width="8%" valign=top style='padding:0in; '>

  </td>
  <td width="30%" valign=top style='padding:0in; '>

  </td>
  <td width="7%" valign=top style='padding:0in; '>

  </td>
  <td colspan=2 valign=top style='padding:0in; '>

  </td>
 </tr>
 <tr>
  <td colspan=2 valign=top style='padding:0in; '>

  <font size="2">&nbsp;</font></td>
  <td width="8%" valign=top style='padding:0in; '>

  </td>
  <td width="30%" valign=top style='padding:0in; '>

  </td>
  <td width="7%" valign=top style='padding:0in; '>

  </td>
  <td colspan=2 valign=top style='padding:0in; '>

  </td>
 </tr>
 <tr>
  <td colspan=7 valign=top style='padding:0in; ' align="center">

  <p style='margin-right:-15.25pt'><font size="2">&nbsp;</font><u><font size="2">(864) 984-4551</font></u></p>

  </td>
 </tr>
 <tr>
  <td colspan=7 valign=top style='padding:0in; '>
  <p align=center style='text-align:center'><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
  Registrant's telephone number </font> </p>
  </td>
 </tr>
 <tr height=0>
  <td width="22%" style='border:none'><font size="2">&nbsp;</font></td>
  <td width="6%" style='border:none'></td>
  <td width="8%" style='border:none'></td>
  <td width="30%" style='border:none'></td>
  <td width="7%" style='border:none'></td>
  <td width="14%" style='border:none'></td>
  <td width="13%" style='border:none'></td>
 </tr>
</table>



</div>



<p align="center"><font size="2"><u>Not Applicable<br>
</u>(Former Name or
Former Address, if Changed Since Last Report)</font></p>





<p><font size="2">Check the appropriate box
below if the Form 8-K filing is intended to simultaneously satisfy the filing
obligation of the registrant under any of the following provisions (see General
Instruction A.2. below)</font></p>



<p style='margin-left:.25in;text-indent:-.25in'><font size="2">[&nbsp; ]&nbsp; Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)</font></p>



<p style='margin-left:.25in;text-indent:-.25in'><font size="2">[&nbsp; ]&nbsp;
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)</font></p>



<p style='margin-left:.25in;text-indent:-.25in'><font size="2">[&nbsp; ]&nbsp;
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))</font></p>



<p style='margin-left:.25in;text-indent:-.25in'><font size="2">[&nbsp; ]&nbsp;
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))</font></p>
<p style='margin-left:.25in;text-indent:-.25in'>&nbsp;</p>







<hr color="#000080">







<b><font size="2"><br clear=all
style='page-break-before:always'>
</font>
</b>

<p style='text-align:justify;page-break-after:avoid'><b><font size="2">Item
1.01.&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Entry into a Material Definitive Agreement.</font></b></p>

<p style="text-align: justify; margin-left: 0in; margin-right: 0in">
<font size="2">On May 2, 2007, The Palmetto Bank (hereinafter referred to as
&quot;we&quot; or &quot;us&quot;), a wholly-owned subsidiary of Palmetto Bancshares, Inc., entered
into a Commercial Lease (Build-to-Suit) (the &quot;Lease Agreement&quot;) with Charles E.
Howard and Doris H. Howard (&quot;Lessor&quot;).&nbsp; The Lease Agreement generally
provides that the Lessor will combine the parcel owned by them (located at 306
East North Street, Greenville, South Carolina which is currently leased to us
housing our current downtown Greenville location pursuant to a lease agreement
dated May 1984 (the &quot;Prior Lease&quot;) with two adjacent parcels (which we currently
own and have agreed to convey to the Lessor as described below) and build a new
headquarters building on the combined parcel.&nbsp; Once completed the combined
parcels and new headquarters building will be leased to us by the Lessor.&nbsp;
</font></p>
<p style="text-align: justify; margin-left: 0in; margin-right: 0in">
<font size="2">Under the terms of the Lease Agreement, upon completion of the
construction described below, we agree to convey to the Lessor two parcels of
land and improvements located at 308 East North Street and 105 North Church
Street, Greenville, South Carolina and adjacent to the property currently owned
by Lessor (located at 306 East North Street, Greenville, South Carolina) for a
purchase price of $1,651,174.&nbsp; </font></p>
<p style="text-align: justify; margin-left: 0in; margin-right: 0in">
<font size="2">Pursuant to the Lease Agreement, the Lessor will complete site
work and construct an approximately 42,000 square foot building and lease the
combined parcels and building to us to be used as our new corporate
headquarters.&nbsp; If the actual cost of the site work and improvements exceed
Lessor's budgeted cost of $10 million, we will be responsible for the excess
costs.&nbsp; Lessor's obligations under the Lease Agreement are contingent upon
Lessor obtaining financing for the construction on terms and conditions
acceptable to Lessor in Lessor's sole but reasonable discretion.&nbsp; </font>
</p>
<p style="text-align: justify; margin-left: 0in; margin-right: 0in">
<font size="2">During construction of our new corporate headquarters, branch
operations will be temporarily housed and conducted within the existing building
and parking facilities located at 105 North Church Street (one of two parcels we
currently own as previously discussed).&nbsp; Until the Rent Commencement Date
(as defined below) under the Lease Agreement, we will continue to pay rent to
Lessor pursuant to the Prior Lease.</font></p>
<p style="text-align: justify; margin-left: 0in; margin-right: 0in">
<font size="2">The term of the Lease Agreement begins on the Rent Commencement
Date and end 15 years after the Rent Commencement Date.&nbsp; The Rent
Commencement Date is the earlier of the date of delivery of possession of the
improvements in accordance with the Lease Agreement or the date on which we open
the premises to the public for business.&nbsp; The initial term of the Lease
Agreement will automatically extend for 5 successive periods of 5 years each
unless we give Lessor written notice of termination of the Lease Agreement at
least 90 days prior to expiration of the initial term or any extension term.</font></p>
<p style="text-align: justify; margin-left: 0in; margin-right: 0in">
<font size="2">Beginning on the Rent Commencement Date, we will pay to Lessor in
equal monthly installments, the following annual rental rate:</font></p>
<div align="center">
	<table border="0" style="border-collapse: collapse" width="75%" id="table1">
		<tr>
			<td width="393"><font size="2">Years 1 through 5 </font></td>
			<td>
			<p style="text-align: justify; margin-left: 0in; margin-right: 0in">
			<font size="2">$1,430,347</font></td>
		</tr>
		<tr>
			<td width="393"><font size="2">Years 6 through 10 </font></td>
			<td>
			<p style="text-align: justify; margin-left: 0in; margin-right: 0in">
			<font size="2">$1,490,347</font></td>
		</tr>
		<tr>
			<td width="393"><font size="2">Years 11 through 12</font></td>
			<td>
			<p style="text-align: justify; margin-left: 0in; margin-right: 0in">
			<font size="2">$1,553,347</font></td>
		</tr>
		<tr>
			<td width="393"><font size="2">Year 13</font></td>
			<td>
			<p style="text-align: justify; margin-left: 0in; margin-right: 0in">
			<font size="2">$1,568,347</font></td>
		</tr>
		<tr>
			<td width="393"><font size="2">Year 14</font></td>
			<td>
			<p style="text-align: justify; margin-left: 0in; margin-right: 0in">
			<font size="2">$1,598,347</font></td>
		</tr>
		<tr>
			<td width="393"><font size="2">Year 15</font></td>
			<td>
			<p style="text-align: justify; margin-left: 0in; margin-right: 0in">
			<font size="2">$1,648,347</font></td>
		</tr>
	</table>
</div>

<hr color="#000080"><font size="2">

<br clear=all
style='page-break-before:always'>


</font>


<p style="text-align: justify; margin-left: 0in; margin-right: 0in">
<font size="2">During each extension term, if any, the annual rental rate will
be the market rental rate for the applicable period for a comparable commercial
parcel of land located in Greenville, South Carolina of equivalent quality,
size, utility, and location, as determined pursuant to the terms of the Lease
Agreement and subject to, during the first three extension terms, to floor and
ceiling amounts set forth in the Lease Agreement.&nbsp; </font></p>
<p style="text-align: justify; margin-left: 0in; margin-right: 0in">
<font size="2">We are responsible for paying all taxes, insurance, repairs,
maintenance, and other costs and expenses attributable to the leased property.</font></p>
<p style="text-align: justify; margin-left: 0in; margin-right: 0in">
<font size="2">The Lease Agreement provides that in an event of default, the
Lessor may terminate the lease and require us to pay the entire amount of rent
that would have been payable during the remainder of the current term of the
lease.&nbsp; The Lease Agreement contains other default provisions and covenants
that we consider customary.</font></p>
<p style="text-align: justify; margin-left: 0in; margin-right: 0in">
<font size="2">The foregoing description is qualified in its entirety by the
provisions of the Lease Agreement itself, which is attached as Exhibit 10.1 to
this Form 8-K and is incorporated herein by reference.</font></p>
<p><b><font size="2">Item 9.01&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Financial Statements
and Exhibits</font></b></p>



<p style='page-break-after:avoid'><font size="2">(d)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Exhibits.</font></p>



<p style='margin-left:.5in;page-break-after:avoid'><font size="2">10.1&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp; Lease
Agreement dated as of May 2, 2007 between The Palmetto Bank and Charles E.
Howard and Doris H. Howard.</font></p>



<p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</font> </p>

<hr color="#000080"><font size="2">

<br clear=all
style='page-break-before:always'>


</font>


<p align=center style='margin-right:-9.0pt;text-align:center'><font size="2">SIGNATURES</font></p>



<p style='margin-right:-9.0pt;text-align:justify'><font size="2">Pursuant to
the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.</font></p>







<p style='margin-right:-9.0pt;text-align:justify'><font size="2">PALMETTO
BANCSHARES, INC.</font></p>





<p style='margin-right:-9.0pt;text-align:justify'><font size="2">By:</font></p>



<p style='margin-right:-9.0pt;text-align:justify'><font size="2"><u>/s/ L. Leon
Patterson&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<br>
</u>&nbsp;L. Leon
Patterson<br>
&nbsp;Chairman and
Chief Executive Officer<br>
&nbsp;Palmetto
Bancshares, Inc.</font></p>



<p style='margin-right:-9.0pt;text-align:justify'><font size="2"><u>/s/ Paul W.
Stringer&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
<br>
</u>&nbsp;Paul W.
Stringer<br>
&nbsp;President
and Chief Operating Officer<br>
&nbsp;Chief
Accounting Officer</font></p>





<p style='margin-right:-9.0pt'><font size="2">Date: June 26, 2007</font></p>

<p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</font> </p>





<p><font size="2">&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;
</font> </p>
<p>&nbsp;</p>
<p>&nbsp;</p>
<p><font size="2">&nbsp;</font></p>





</body>

</html>
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{"company-data": {"conformed-name": "PALMETTO BANCSHARES INC", "cik": "0000706874", "assigned-sic": "6022", "irs-number": "742235055", "state-of-incorporation": "SC", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "8-K", "act": "34", "file-number": "000-26016", "film-number": "07940250"}, "business-address": {"street1": "301 HILLCREST DR", "street2": "P O BOX 49", "city": "LAURENS", "state": "SC", "zip": "29360", "phone": "8649844551"}}
Palmetto Bancshare, Inc. Form 8-K
UNITED STATES
SECURITIES AND EXCHANGE
COMMISSION
WASHINGTON, D.C.  20549
FORM 8-K
CURRENT REPORT PURSUANT
TO SECTION 13 or 15(d) OF THE
SECURITIES
EXCHANGE ACT OF 1934
Date of Report (Date
of earliest event reported): May 2, 2007
Palmetto Bancshares,
  Inc.
(Exact name of
  registrant as specified in charter)
South
  Carolina
0-26016
74-2235055
State or other jurisdiction of incorporation
Commission File
  Number
IRS Employer
  I.D. number
301 Hillcrest Drive, Laurens, South Carolina
29360
Address of principal executive offices
Zip Code
(864) 984-4551
Registrant's telephone number
Not Applicable
(Former Name or
Former Address, if Changed Since Last Report)
Check the appropriate box
below if the Form 8-K filing is intended to simultaneously satisfy the filing
obligation of the registrant under any of the following provisions (see General
Instruction A.2. below)
[  ]  Written
communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[  ] 
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[  ] 
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[  ] 
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
Item
1.01.              Entry into a Material Definitive Agreement.
On May 2, 2007, The Palmetto Bank (hereinafter referred to as
"we" or "us"), a wholly-owned subsidiary of Palmetto Bancshares, Inc., entered
into a Commercial Lease (Build-to-Suit) (the "Lease Agreement") with Charles E.
Howard and Doris H. Howard ("Lessor").  The Lease Agreement generally
provides that the Lessor will combine the parcel owned by them (located at 306
East North Street, Greenville, South Carolina which is currently leased to us
housing our current downtown Greenville location pursuant to a lease agreement
dated May 1984 (the "Prior Lease") with two adjacent parcels (which we currently
own and have agreed to convey to the Lessor as described below) and build a new
headquarters building on the combined parcel.  Once completed the combined
parcels and new headquarters building will be leased to us by the Lessor.
Under the terms of the Lease Agreement, upon completion of the
construction described below, we agree to convey to the Lessor two parcels of
land and improvements located at 308 East North Street and 105 North Church
Street, Greenville, South Carolina and adjacent to the property currently owned
by Lessor (located at 306 East North Street, Greenville, South Carolina) for a
purchase price of $1,651,174.
Pursuant to the Lease Agreement, the Lessor will complete site
work and construct an approximately 42,000 square foot building and lease the
combined parcels and building to us to be used as our new corporate
headquarters.  If the actual cost of the site work and improvements exceed
Lessor's budgeted cost of $10 million, we will be responsible for the excess
costs.  Lessor's obligations under the Lease Agreement are contingent upon
Lessor obtaining financing for the construction on terms and conditions
acceptable to Lessor in Lessor's sole but reasonable discretion.
During construction of our new corporate headquarters, branch
operations will be temporarily housed and conducted within the existing building
and parking facilities located at 105 North Church Street (one of two parcels we
currently own as previously discussed).  Until the Rent Commencement Date
(as defined below) under the Lease Agreement, we will continue to pay rent to
Lessor pursuant to the Prior Lease.
The term of the Lease Agreement begins on the Rent Commencement
Date and end 15 years after the Rent Commencement Date.  The Rent
Commencement Date is the earlier of the date of delivery of possession of the
improvements in accordance with the Lease Agreement or the date on which we open
the premises to the public for business.  The initial term of the Lease
Agreement will automatically extend for 5 successive periods of 5 years each
unless we give Lessor written notice of termination of the Lease Agreement at
least 90 days prior to expiration of the initial term or any extension term.
Beginning on the Rent Commencement Date, we will pay to Lessor in
equal monthly installments, the following annual rental rate:
Years 1 through 5
$1,430,347
Years 6 through 10
$1,490,347
Years 11 through 12
$1,553,347
Year 13
$1,568,347
Year 14
$1,598,347
Year 15
$1,648,347
During each extension term, if any, the annual rental rate will
be the market rental rate for the applicable period for a comparable commercial
parcel of land located in Greenville, South Carolina of equivalent quality,
size, utility, and location, as determined pursuant to the terms of the Lease
Agreement and subject to, during the first three extension terms, to floor and
ceiling amounts set forth in the Lease Agreement.
We are responsible for paying all taxes, insurance, repairs,
maintenance, and other costs and expenses attributable to the leased property.
The Lease Agreement provides that in an event of default, the
Lessor may terminate the lease and require us to pay the entire amount of rent
that would have been payable during the remainder of the current term of the
lease.  The Lease Agreement contains other default provisions and covenants
that we consider customary.
The foregoing description is qualified in its entirety by the
provisions of the Lease Agreement itself, which is attached as Exhibit 10.1 to
this Form 8-K and is incorporated herein by reference.
Item 9.01               Financial Statements
and Exhibits
(d)           Exhibits.
10.1         Lease
Agreement dated as of May 2, 2007 between The Palmetto Bank and Charles E.
Howard and Doris H. Howard.
SIGNATURES
Pursuant to
the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
PALMETTO
BANCSHARES, INC.
By:
/s/ L. Leon
Patterson
L. Leon
Patterson
Chairman and
Chief Executive Officer
Palmetto
Bancshares, Inc.
/s/ Paul W.
Stringer
Paul W.
Stringer
President
and Chief Operating Officer
Chief
Accounting Officer
Date: June 26, 2007