Item 1.01 Entry into a Material Definitive Agreement.
On September 18, 2020, Pinnacle Bankshares Corporation (the Company) entered into a Subordinated Note Purchase
Agreement (the Purchase Agreement) with certain qualified institutional buyers and accredited investors (the Purchasers) pursuant to which the Company sold and issued $8.0 million in aggregate principal
amount of 5.25% fixed-to-floating rate subordinated notes due 2030 (the Notes).
The Notes will initially bear interest at 5.25% per annum, beginning September 18, 2020 to but excluding September 30, 2025, payable
quarterly in arrears. From and including September 30, 2025 to but excluding September 30, 2030, or up to an early redemption date, the interest rate shall reset quarterly to an interest rate per annum equal to the then current three-month
SOFR plus 513 basis points, payable quarterly in arrears. Beginning on September 30, 2025 through maturity, the Notes may be redeemed, at the Companys option, on any scheduled interest payment date. The Notes will mature on
September 30, 2030. The Purchase Agreement contains certain customary representations, warranties and covenants made by the Company, on the one hand, and the Purchasers, severally and not jointly, on the other hand.
If certain events of default occur, such as the bankruptcy of the Company, the holder of a Note may declare the principal amount of the Note
to be due and immediately payable. The Notes will be unsecured, subordinated obligations of the Company and will rank junior in right of payment to the Companys existing and future senior indebtedness. The Notes are not convertible into common
stock or preferred stock, and are not callable by the holders.
The Notes have been structured to qualify as Tier 2 capital under bank
regulatory guidelines, and the proceeds from the sale of the Notes will be utilized to pay a portion of the cash consideration to be paid by the Company in connection with its pending merger with Virginia Bank Bankshares, Inc., if consummated, and
to provide optionality for various growth opportunities and for general corporate purposes.
The Notes were offered and sold in reliance
on the exemptions from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and Rule 506(b) of Regulation D thereunder.
The foregoing descriptions of the Purchase Agreement and the Notes do not purport to be complete and are qualified in their entirety by
reference to the forms of the Purchase Agreement and the Note which are attached hereto as Exhibits 10.1 and 4.1, respectively, and are incorporated herein by reference.