PINNACLE BANKSHARES CORP
S-8, 1998-09-14
NATIONAL COMMERCIAL BANKS
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   As filed with the Securities and Exchange Commission on September 14, 1998
                                                Registration No.: 333-_________
- --------------------------------------------------------------------------------

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549
                                   -----------

                                    FORM S-8

                          REGISTRATION STATEMENT UNDER
                           THE SECURITIES ACT OF 1933
                                   -----------

                         PINNACLE BANKSHARES CORPORATION
             (Exact name of registrant as specified in its charter)

        Virginia                                         54-1832714
(State of Incorporation                        (IRS Employer Identification No.)
    or Organization)

                      622 Broad Street
                     Altavista, Virginia                         24517
          (Address of Principal Executive Offices)             (Zip Code)

            PINNACLE BANKSHARES CORPORATION 1997 INCENTIVE STOCK PLAN
                             (Full name of the Plan)
                                   -----------
                                                               Copy to:
            Robert H. Gilliam, Jr.                      Fred W. Palmore, III
     President and Chief Executive Officer            Mays & Valentine, L.L.P.
        Pinnacle Bankshares Corporation                  1111 East Main St.,
               622 Broad Street                          NationsBank Center
           Altavista, Virginia 24517                  Richmond, Virginia 23219
          Telephone: (804) 369-3000                   Telephone: (804) 697-1396
      -----------------------------------             -------------------------
(Name and Address of Agent for Service Process)

    Approximate date of proposed commencement of sales pursuant to the Plans:
               Upon effectiveness of this Registration Statement.
<TABLE>
                         CALCULATION OF REGISTRATION FEE
<CAPTION>
                                                           Proposed              Proposed
                                                            Maximum               Maximum
      Title of Securities          Amount to be         Offering Price           Aggregate                  Amount of
       to be Registered             Registered           Per Share(1)        Offering Price(1)          Registration Fee
- ------------------------------------------------------------------------------------------------------------------------
<S> <C>
         Common Stock
        $3.00 par value               25,000                $32.00               $800,000                    $236.00
</TABLE>

        (1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) and (h) under the Securities Act of 1933, as amended
(the "Securities Act"), on the basis of $32.00 per share. The proposed maximum
offering price per share of $32.00 was calculated based on the average of the
bid and asked prices of the shares of the Registrant as reported on the
over-the-counter market on September 10, 1998.

<PAGE>

                                     PART II

               INFORMATION REQUIRED IN THE REGISTRATION STATEMENT


Item 3.  Incorporation of Documents by Reference.

        Pinnacle Bankshares Corporation (the "Company") will furnish
shareholders with annual reports containing audited financial statements.
Quarterly reports containing unaudited financial statements are available upon
written request. Copies of the annual reports, and any other communications sent
to the Company's shareholders generally, also will be furnished to all employees
eligible to participate in the Plans.

        The Company hereby incorporates herein by reference the following
documents filed by the Company with the Commission:

         (a) Annual Report on Form 10-KSB for the year ended December 31, 1997,
filed pursuant to Section 13 of the 1934 Act;

         (b) Quarterly Reports on Form 10-QSB for the Quarters ended March 31,
1998 and June 30, 1998 filed pursuant to Section 13 of the 1934 Act; and

        (c) The description of the Company's Common Stock contained in the
"Description of Holding Company Capital Stock" in the Company's Proxy
Statement/Prospectus filed as part of the Registration Statement on Form S-4,
Registration No. 333-20399, with the Securities and Exchange Commission on
January 24, 1997, as amended on January 30, 1997 (Pre-Effective Amendment No.
1), is hereby incorporated by reference.

        All documents filed by the Company after the date of this Registration
Statement pursuant to Sections 13(a), 13(c), 14 and 15(d) of the 1934 Act, prior
to the filing of a post-effective amendment which indicates that all the
Company's Common Stock offered hereby has been sold or which deregisters such
Company Common Stock then remaining unsold, shall be deemed to be incorporated
herein by reference and to be a part hereof from the date of filing such
documents. Any statement contained in a document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for purposes of this Registration Statement to the extent that a statement
contained herein or in any other subsequently filed document which also is or is
deemed to be incorporated by reference herein modifies or supersedes such
statement. Any such statement so modified or superseded shall not be deemed,
except as so modified or superseded, to constitute a part of this Registration
Statement.

Item 4.  Description of Securities.

        Not Applicable.

Item 5.  Interests of Named Experts and Counsel.

        Not applicable.

                                      II-1
<PAGE>

Item 6.  Indemnification of Directors and Officers.

        The Virginia Stock Corporation Act (the "Virginia Act") permits a
corporation with shareholder approval to indemnify its officers and directors
against liability incurred in all proceedings, including derivative proceedings,
arising out of their service to the corporation as long as they have not engaged
in willful misconduct or a knowing violation of a criminal law. The Registrant'
Articles of Incorporation require the Registrant to indemnify its directors, and
permit it to indemnify officers, in all such proceedings if they have not
violated this standard of conduct.

        The Virginia Act places a limit on the liability of a director or
officer in derivative and shareholder proceedings equal to the lesser of: (i)
the amount specified in the corporation's articles of incorporation or
shareholder-approved bylaw; or (ii) the greater of (a) $100,000 or (b) twelve
months of cash compensation received by the officer or director. The limit does
not apply in the event the director or officer has engaged in willful misconduct
or a knowing violation of a criminal law or a federal or state securities law.
The effect of the Company's Articles of Incorporation, together with the
Virginia Act, is accordingly to limit liability of directors and officers for
money damages to one dollar in shareholder and derivative proceedings, as long
as the required standard of conduct is met.

Item 7.  Exemption from Registration Claimed.

        Not Applicable.

Item 8.  Exhibits.

        An index of Exhibits appears at page II-6 hereof.

Item 9.  Undertakings.

        (1)      The undersigned hereby undertakes:

        a. To file, during any period in which it offers or sells securities, a
        post-effective amendment to the registration statement:

                         (i) to include any prospectus required by Section
                 10(a)(3) of the Securities Act of 1933;

                         (ii) to reflect in the prospectus any facts or events
                 which, individually or together, represent a fundamental change
                 in the information in the registration statement; and

                         (iii) to include any additional or changed information
                 on the plan of distribution.

                         Provided, however, that paragraphs (a) (i) and (a) (ii)
                 do not apply if the information required to be included in a
                 post-effective amendment by those paragraphs is contained in
                 periodic reports filed by the registrant pursuant to Section 13
                 or Section 15(d) of the Exchange Act that are incorporated by
                 reference in the registration statement;

        b. That, for the purpose of determining liability under the Securities
        Act of 1933, each post-effective amendment shall be treated as a new
        registration statement relating to the securities offered, and the
        offering of the securities at that time shall be deemed to be the
        initial bona fide offering thereof; and

        c. To remove from registration by means of a post-effective amendment
        any of the securities being registered which remain unsold at the
        termination of the offering.

                                      II-2
<PAGE>


                                   SIGNATURES

        Pursuant to the requirements of the Securities Act of 1933, the
undersigned certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-8 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Altavista, Commonwealth of Virginia, on the 8th
day of September, 1998.

                                      PINNACLE BANKSHARES CORPORATION
                                      Altavista, Virginia



                                      By:      /s/ Robert H. Gilliam, Jr.
                                               --------------------------
                                               Robert H. Gilliam, Jr.
                                               President and
                                               Chief Executive Officer


         Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated:
<TABLE>
<CAPTION>
                   NAME                                         TITLE                                   DATE
                   ----                                         -----                                   ----
<S> <C>
                                                    President and Chief Executive Officer
   /s/ Robert H. Gilliam, Jr.                       (Principal Executive Officer) and Director    September 8, 1998
   ----------------------------------------
   Robert H. Gilliam, Jr.

                                                    Secretary, Treasurer and Chief Financial
                                                    Officer (Principal Financial
   /s/ Dawn P. Crusinberry                          and Accounting Officer)                       September 8, 1998
   ----------------------------------------
   Dawn P. Crusinberry


   /s/ Alvah P. Bohannon, III                       Director                                      September 8, 1998
   ----------------------------------------
   Alvah P. Bohannon, III


   /s/ Robert L. Finch                              Director                                      September 8, 1998
   ----------------------------------------
   Robert L. Finch


   /s/ James P. Kent, Jr.                           Director                                      September 8, 1998
   ----------------------------------------
   James P. Kent, Jr.


   /s/ Kenneth S. Tyler, Jr.                        Director                                      September 8, 1998
   ----------------------------------------
   Kenneth S. Tyler, Jr.


   /s/ James E. Burton, IV                          Director                                      September 8, 1998
   ----------------------------------------
   James E. Burton, IV


                                      II-4
<PAGE>

                                                    Director                                     September __, 1998
   ----------------------------------------
   John P. Erb


   /s/ R. B. Hancock, Jr.                           Director                                      September 8, 1998
   ----------------------------------------
   R. B. Hancock, Jr.


   /s/ Percy O. Moore                               Director                                      September 8, 1998
   ----------------------------------------
   Percy O. Moore


   /s/ Herman P. Rogers, Jr.                        Director                                      September 8, 1998
   ----------------------------------------
   Herman P. Rogers, Jr.


   /s/ Carroll E. Shelton                           Director                                      September 8, 1998
   ----------------------------------------
   Carroll E. Shelton


   /s/ John L. Waller                               Director                                      September 8, 1998
   ----------------------------------------
   John L. Waller


   /s/ A. Willard Arthur                            Director                                      September 8, 1998
   ----------------------------------------
   A. Willard Arthur
</TABLE>



                                      II-5


<PAGE>


                                  EXHIBIT INDEX



Exhibit Description                            Exhibit Number
- -------------------                            --------------

Articles of Incorporation                      4.1 [Incorporated by reference
                                               from the Registration Statement
                                               on Form S-4, No. 333-20399, dated
                                               January 24, 1997 (Exhibit 3(i)),
                                               amended January 30, 1997 (Exhibit
                                               3(i))]

Bylaws                                         4.2 [Incorporated by reference
                                               from the Registration Statement
                                               on Form S-4, No. 333-20399, dated
                                               January 24, 1997 (Exhibit 3(ii))]

Pinnacle Bankshares Corporation                4.3
1997 Incentive Stock Plan, filed herewith

Opinion of Mays & Valentine, L.L.P., with      5
respect to the validity of the
Common Stock, filed herewith.

Consent of KPMG Peat Marwick LLP,              23.1
Independent Public Accountants dated
September 14, filed herewith.

Consent of Mays & Valentine, L.L.P.,           23.2 
contained in their opinion filed as
Exhibit 5 hereto.


                                                                     EXHIBIT 4.3
                         PINNACLE BANKSHARES CORPORATION
                            1997 INCENTIVE STOCK PLAN


                                    ARTICLE I
                      Establishment, Purpose, and Duration

         1.1 Establishment of the Plan. Pinnacle Bankshares Corporation, a
Virginia corporation (the "Company"), hereby establishes an incentive
compensation plan for the Company and its subsidiaries to be known as the "1997
Incentive Stock Plan", as set forth in this document. Unless otherwise defined
herein, all capitalized terms shall have the meanings set forth in Section 2.1
herein. The Plan permits the grant of Incentive Stock Options, Non-qualified
Stock Options, Stock Appreciation Rights and Restricted Stock.

         The Plan was adopted by the Board of Directors of the Company on April
8, 1997, and shall become effective on May 1, 1997 (the "Effective Date"),
subject to the approval by vote of shareholders of the Company in accordance
with applicable laws.

         1.2 Purpose of the Plan. The purpose of the Plan is to promote the
success of the Company and its subsidiaries by providing incentives to Key
Employees that will promote the identification of their personal interest with
the long-term financial success of the Company and with growth in shareholder
value. The Plan is designed to provide flexibility to the Company including its
subsidiaries, in its ability to motivate, attract, and retain the services of
Key Employees upon whose judgment, interest, and special effort the successful
conduct of its operation is largely dependent.

         1.3 Duration of the Plan. The Plan shall commence on the Effective
Date, as described in Section 1.1 herein, and shall remain in effect, subject to
the right of the Board of Directors to terminate the Plan at any time pursuant
to Article XI herein, until April 30, 2007, at which time it shall terminate
except with respect to Awards made prior to, and outstanding on, that date which
shall remain valid in accordance with their terms.

                                   ARTICLE II
                                   Definitions

         2.1 Definitions. Except as otherwise defined in the Plan, the following
terms shall have the meanings set forth below:

                  (a) "Affiliate" and "Associate" shall have the respective
         meanings ascribed to such terms in Rule 12b-2 under the Securities
         Exchange Act of 1934, as amended (the "Exchange Act").

                  (b) "Agreement" means a written agreement implementing the
         grant of each Award signed by an authorized officer of the Company and
         by the Participant.

                  (c) "Award" means, individually or collectively, a grant under
         this Plan of Incentive Stock Options, Non-qualified Stock Options,
         Stock Appreciation Rights, and Restricted Stock.

                  (d) "Award Date" or "Grant Date" means the date on which an
         Award is made by the Committee under this Plan.

                  (e) "Beneficial Owner" shall have the meaning ascribed to such
         term in Rule 13d-3 under the Exchange Act.

                  (f) "Board" or "Board of Directors" means the Board of
         Directors of the Company, unless otherwise indicated.

                  (g) "Change in Control" shall be deemed to have occurred if
         the conditions set forth in any one of the following paragraphs shall
         have been satisfied:

                           (i) any Person (other than the Company, any
                  Subsidiary, a trustee or other fiduciary holding securities
                  under any employee benefit plan of the Company, or its
                  Subsidiaries), who or which, together with all Affiliates and
                  Associates of such Person, is or becomes the Beneficial Owner,
                  directly or indirectly, of securities of the Company
                  representing 20% or more of the combined voting power of the
                  Company's then outstanding securities; or

                          (ii) if, at any time after the Effective Date, the
                  composition of the Board of Directors of the Company shall
                  change such that a majority of the Board of the \Company shall
                  no longer consist of Continuing Directors; or

                         (iii) if at any time, (1) the Company shall consolidate
                  with, or merge with, any other Person and the Company shall
                  not be the continuing or surviving corporation, (2) any Person
                  shall consolidate with or merge with the Company, and the
                  Company shall be the continuing or surviving corporation and,
                  in connection therewith, all or part of the outstanding Stock
                  shall be changed into or exchanged for stock or other
                  securities of any other Person or cash or any other property,
                  (3) the Company shall be a party to a statutory share exchange
                  with any other Person after which the Company is a subsidiary
                  of any other Person, or (4) the Company shall sell or
                  otherwise transfer 50% or more of the assets or earning power
                  of the Company and its Subsidiaries (taken as a whole) to any
                  Person or Persons.

                  (h) "Code" means the Internal Revenue Code of 1986, as amended
         from time to time.

                  (i) "Committee" means the committee of the Board of Directors
         of the Company or its banking subsidiary to administer the Plan
         pursuant to Article III herein, all of the members of which shall be
         "non-employee directors" as defined in Rule 16b-3, as amended, under
         the Exchange Act or any similar or successor rule. There shall be no
         fewer than three, nor more than 7, members on the Committee. The
         Committee may consult with the Personnel Committee of The First
         National Bank of Altavista with respect to its decisions, but shall not
         be obligated to do so unless specifically required by the Board of
         Directors of the Company. Unless otherwise determined by the Board of
         Directors of the Company, the non-employee directors of the Personnel
         Committee of The First National Bank of Altavista, the wholly-owned
         subsidiary of the Company, shall constitute the Committee.

                  (j) "Company" means Pinnacle Bankshares Corporation, or any
         successor thereto as provided in Article XIII herein.

                  (k) "Continuing Director" means an individual who was a member
         of the Board of Directors of the Company on the Effective Date or whose
         subsequent nomination for election or re-election to the Board of
         Directors of the Company was recommended or approved by the affirmative
         vote of two-thirds of the Continuing Directors then in office.

                  (l) "Exchange Act" means the Securities Exchange Act of 1934,
         as amended.

                  (m) "Fair Market Value" of a Share means the fair market value
         as determined pursuant to a reasonable method adopted by the Committee
         in good faith for such purpose.

                  (n) "Incentive Stock Option" or "ISO" means an option to
         purchase Stock, granted under Article VI herein, which is designated as
         an incentive stock option and is intended to meet the requirements of
         Section 422A of the Code.

                  (o) "Key Employee" means an officer or other key employee of
         the Company or its Subsidiaries, who, in the opinion of the Committee,
         can contribute significantly to the growth and profitability of, or
         perform services of major importance to, the Company and its
         Subsidiaries.

                  (p) "Non-qualified Stock Option" or "NQSO" means an option to
         purchase Stock, granted under Article VI herein, which is not intended
         to be an Incentive Stock Option.

                  (q) "Option" means an Incentive Stock Option or a
         Non-qualified Stock Option.

                  (r) "Participant" means a Key Employee who is granted an Award
         under the Plan.

                  (s) "Period of Restriction" means the period during which the
         transfer of Shares of Restricted Stock is restricted, pursuant to
         Article VIII herein.

                  (t) "Person" shall have the meaning ascribed to such term in
         Section 3(a)(9) of the Exchange Act and used in Sections 13(d) and
         14(d) thereof, including a "group" as defined in Section 13(d).

                  (u) "Plan" means the Pinnacle Bankshares Corporation 1997
         Incentive Stock Plan, as described and as hereafter from time to time
         amended.

                  (v) "Related Option" means an Option with respect to which a
         Stock Appreciation Right has been granted.

                  (w) "Restricted Stock" means an Award of Stock granted to a
         Participant pursuant to Article VIII herein.

                  (x) "Stock" or "Shares" means the common stock of the Company.

                  (y) "Stock Appreciation Right" or "SAR" means an Award,
         designated as a stock appreciation right, granted to a Participant
         pursuant to Article VII herein.

                  (z) "Subsidiary" shall mean a corporation at least 50% of the
         total combined voting power of all classes of stock of which is owned
         by the Company, either directly or through one or more of its
         Subsidiaries.

                                   ARTICLE III
                                 Administration

         3.1 The Committee. Except as otherwise reserved for consideration and
approval by the Board of Directors, the Plan shall be administered by the
Committee which shall have all powers necessary or desirable for such
administration.

                  (a) Subject to the provisions of the Plan, the Committee shall
have the following plenary powers: (i) to establish, amend or waive rules or
regulations for the Plan's administration; (ii) except in those instances in
which a dispute arises, to construe and interpret the Agreements and the Plan;
and (iii) to make all other determinations and take all other actions necessary
or advisable for the administration of the Plan.

                  (b)(1) Subject to the provisions of the Plan, the Committee
shall have the following qualified powers that shall be subject to approval,
amendment and modification by the Board of Directors: (i) to determine the terms
and conditions upon which the Awards may be made and exercised; (ii) to
determine all terms and provisions of each Agreement, which need not be
identical; (iii) to construe and interpret the Agreements and the Plan in the
event of a dispute between the Participant and the Committee; and (iv) to
accelerate the exercisability of any Award or the termination of any Period of
Restriction.

                  (2) In approving the Committee's determinations or other
recommendations under (b)(1), the Board of Directors may make such amendments,
modifications or qualifications as it deems in the best interest of the Company,
and the Board shall provide specific instructions to the Committee for
implementation of the same.

                  (3) In its sole discretion, the Board of Directors may waive
by resolution one or more of its approval rights under (b)(1) and authorize the
Committee to proceed without seeking further approvals either on a case by case
basis or permanently until further notice from the Board. Such waiver shall be
communicated in writing to the Committee which shall maintain a permanent record
of such waiver(s).

                  (c) The express grant in this Plan of any specific power to
the Committee shall not be construed as limiting any power or authority of the
Committee, except as otherwise stated in paragraph 3.1(b).

         3.2 Selection of Participants. The Committee shall have the authority
to grant Awards under the Plan, from time to time, to such Key Employees as may
be selected by it. Each Award shall be evidenced by an Agreement.

         3.3 Decisions Binding. All determinations and decisions made by the
Board or the Committee pursuant to the provisions of the Plan shall be final,
conclusive and binding.

         3.4 Rule 16b-3 Requirements. Notwithstanding any other provision of the
Plan, the Board or the Committee may impose such conditions on any Award, and
amend the Plan in any such respects, as may be required to satisfy the
requirements of Rule 16b-3, as amended (or any successor or similar rule), under
the Exchange Act.

         3.5 Indemnification of Committee. In addition to such other rights of
indemnification as they may have as directors or as members of the Committee,
the members of the Committee shall be indemnified by the Company against
reasonable expenses, including attorneys' fees, actually and reasonably incurred
in connection with the defense of any action, suit or proceeding, or in
connection with any appeal therein, to which they or any of them may be a party
by reason of any action taken or failure to act under or in connection with the
Plan or any Award granted or made hereunder, and against all amounts reasonably
paid by them in settlement thereof or paid by them in satisfaction of a judgment
in any such action, suit or proceeding, if such members acted in good faith and
in a manner which they believed to be in, and not opposed to, the best interests
of the Company and its Subsidiaries.

         3.6 Certain Determinations. In connection with the Committee's good
faith determination of "Fair Market Value" as required herein, the Committee
may, as guidance, take into consideration the book value of the Common Stock of
the Company, the relationship between the traded price and book value of shares
for financial institutions of similar size and similar operating results to the
Company and its subsidiary bank, any reasonably recent trades of the Common
Stock of the Company brought to the attention of the Committee and such
additional relevant information as the Committee in its judgment deems
necessary. In its sole discretion, the Committee may, but is not obligated to,
consult with and/or engage an investment banker or other appropriate advisor to
advise the Committee in connection with its good faith determination of "Fair
Market Value" herein.

                                   ARTICLE IV
                            Stock Subject to the Plan

         4.1 Number of Shares. Subject to adjustment as provided in Section 4.3
herein, the maximum aggregate number of Shares that may be issued pursuant to
Awards made under the Plan shall not exceed 25,000. No more than one-third of
the aggregate number of such Shares shall be issued in connection with
Restricted Stock Awards. Except as provided in Sections 4.2 herein, the issuance
of Shares in connection with the exercise of, or as other payment for Awards,
under the Plan shall reduce the number of Shares available for future Awards
under the Plan.

         4.2 Lapsed Awards or Forfeited Shares. If any Award granted under this
Plan (for which no material benefits of ownership have been received, including
dividends) terminates, expires, or lapses for any reason other than by virtue of
exercise of the Award, or if Shares issued pursuant to Awards (for which no
material benefits of ownership have been received, including dividends) are
forfeited, any Stock subject to such Award again shall be available for the
grant of an Award under the Plan, subject to Section 7.2.

         4.3 Capital Adjustments. The number and class of Shares subject to each
outstanding Award, the Option Price and the aggregate number and class of Shares
for which Awards thereafter may be made shall be subject to such adjustment, if
any, as the Committee in its sole discretion deems appropriate to reflect such
events as stock dividends, stock splits, recapitalizations, mergers,
consolidations or reorganizations of or by the Company.

                                    ARTICLE V
                                   Eligibility

         Persons eligible to participate in the Plan include all employees of
the Company and its Subsidiaries who, in the opinion of the Committee, are Key
Employees. Key Employees may not include directors of the Company who are not
employees of the Company or its Subsidiaries.

                                   ARTICLE VI
                                  Stock Options

         6.1 Grant of Options. Subject to the terms and provisions of the Plan,
Options may be granted to Key Employees at any time and from time to time as
shall be determined by the Committee. The Committee shall have complete
discretion in determining the number of Shares subject to Options granted to
each Participant, provided, however, that the aggregate Fair Market Value
(determined at the time the Award is made) of Shares with respect to which any
Participant may first exercise ISOs granted under the Plan during any calendar
year may not exceed $100,000 or such amount as shall be specified in Section
422A of the Code and rules and regulation thereunder.

         6.2 Option Agreement. Each Option grant shall be evidenced by an
Agreement that shall specify the type of Option granted, the Option Price (as
hereinafter defined), the duration of the Option, the number of Shares to which
the Option pertains, any conditions imposed upon the exercisability of Options
in the event of retirement, death, disability or other termination of
employment, and such other provisions as the Committee shall determine. The
Agreement shall specify whether the Option is intended to be an Incentive Stock
Option within the meaning of Section 422A of the Code, or Nonqualified Stock
Option not intended to be within the provisions of Section 422A of the Code.

         6.3 Option Price. The exercise price per share of Stock covered by an
Option ("Option Price") shall be determined by the Committee subject to the
following limitations. The Option Price shall not be less than 100% of the Fair
Market Value of such Stock on the Grant Date. An ISO granted to an employee who,
at the time of grant, owns (within the meaning of Section 425(d) of the Code)
Stock possessing more than 10% of the total combined voting power of all classes
of Stock of the Company, shall have an Option Price which is at least equal to
110% of the Fair Market Value of the Stock.

         6.4 Duration of Options. Each Option shall expire at such time as the
Committee shall determine at the time of grant provided, however, that no ISO
shall be exercisable later than the tenth (10th) anniversary date of its Award
Date.

         6.5 Exercisability. Options granted under the Plan shall be exercisable
at such times and be subject to such restrictions and conditions as the
Committee shall determine, which need not be the same for all Participants. No
Option, however, shall be exercisable until the expiration of at least six
months after the Award Date, except that such limitation shall not apply in the
case of death or disability of the Participant.

         6.6 Method of Exercise. Options shall be exercised by the delivery of a
written notice to the Company in the form prescribed by the Committee setting
forth the number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares. The Option Price shall be payable to
the Company in full either in cash, by delivery of Shares of Stock valued at
Fair Market Value at the time of exercise, delivery of a promissory note (in the
Committee's discretion) or by a combination of the foregoing. As soon as
practicable, after receipt of written notice and payment, the Company shall
deliver to the Participant, stock certificates in an appropriate amount based
upon the number of Options exercised, issued in the Participant's name. No
Participant who is awarded Options shall have rights as a shareholder until the
date of exercise of the Options.

         6.7 Restrictions on Stock Transferability. The Committee shall impose
such restrictions on any Shares acquired pursuant to the exercise of an Option
under the Plan as it may deem advisable, including, without limitation,
restrictions under the applicable Federal securities law, under the requirements
of the National Association of Securities Dealers, Inc. or any stock exchange
upon which such Shares are then listed and under any blue sky or state
securities laws applicable to such Shares.

         6.8 Nontransferability of Options. No Option granted under the Plan may
be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated,
otherwise than by will or by the laws of descent and distribution. Further, all
Options granted to a Participant under the Plan shall be exercisable during his
lifetime only by such Participant or his guardian or legal representative.

                                   ARTICLE VII
                            Stock Appreciation Rights

         7.1 Grant of Stock Appreciation Rights. Subject to the terms and
conditions of the Plan, Stock Appreciation Rights may be granted to
Participants, at the discretion of the Committee in connection with the grant,
and exercisable in lieu of Options ("Tandem SARs").

         7.2 Exercise of Tandem SARs. Tandem SARs may be exercised with respect
to all or part of the Shares subject to the Related Option. The exercise of
Tandem SARs shall cause a reduction in the number of Shares subject to the
Related Option equal to the number of Shares with respect to which the Tandem
SAR is exercised. Conversely, the exercise, in whole or in part, of a Related
Option, shall cause a reduction in the number of Shares subject to the Related
Option equal to the number of Shares with respect to which the Related Option is
exercised. Shares with respect to which the Tandem SAR shall have been exercised
may not be subject again to an Award under the Plan.

         Notwithstanding any other provision of the Plan to the contrary, a
Tandem SAR shall expire no later than the expiration of the Related Option,
shall be transferable only when and under the same conditions as the Related
Option and shall be exercisable only when the Related Option is eligible to be
exercised. In addition, if the Related Option is an ISO, a Tandem SAR shall be
exercised for no more than 100% of the difference between the Option Price of
the Related Option and the Fair Market Value of Shares subject to the Related
Option at the time the Tandem SAR is exercised.

         7.3 Other Conditions Applicable to Tandem SARs. No Tandem SAR granted
under the Plan shall be exercisable until the expiration of at least six months
after the Grant Date, except that such limitation shall not apply in the case of
the death or disability of the Participant. In no event shall the term of any
Tandem SAR granted under the Plan exceed ten years from the Grant Date. A Tandem
SAR may be exercised only when the Fair Market Value of a Share exceeds the
Option Price of the Related Option. A Tandem SAR shall be exercised by delivery
to the Committee of a notice of exercise in the form prescribed by the
Committee.

         7.4 Payment Upon Exercise of Tandem SARs. Subject to the provisions of
the Agreement, upon the exercise of a Tandem SAR, the Participant is entitled to
receive, without any payment to the Company (other than required tax withholding
amounts), an amount equal to the product of multiplying (i) the number of Shares
with respect to which the Tandem SAR is exercised by (ii) an amount equal to the
excess of (A) the Fair Market Value per Share on the date of exercise of the
Tandem SAR over (B) the Option Price of the Related Option.

         Payment to the Participant shall be made in Shares, valued at the Fair
Market Value of the date of exercise, in cash if the Participant has so elected
in his written notice of exercise and Committee has consented thereto, or a
combination thereof. To the extent required to satisfy the conditions of Rule
16b-3(e) under the Exchange Act, or any successor or similar rule, or as
otherwise provided in the Agreement, the Committee shall have the sole
discretion to consent to or disapprove the election of any Participant to
receive cash in full or partial settlement of a Tandem SAR. In cases where an
election of settlement in cash must be consented to by the Committee, the
Committee may consent to, or disapprove, such election at any time after such
election, or within such period for taking action as is specified in the
election, and failure to give consent shall be disapproval. Consent may be given
in whole or as to a portion of the Tandem SAR surrendered by the Participant. If
the election to receive cash is disapproved in whole or in part, the Tandem SAR
shall be deemed to have been exercised for Shares, or, if so specified in the
notice of exercise and election, not to have been exercised to the extent the
election to receive cash is disapproved.

         7.5 Nontransferability of Tandem SARs. No Tandem SAR granted under the
Plan may be sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, otherwise than by will or by the laws of descent and distribution.
Further, all Tandem SARs granted to a Participant under the Plan shall be
exercisable during his lifetime only by such Participant or his guardian or
legal representative.

                                  ARTICLE VIII
                                Restricted Stock

         8.1 Grant of Restricted Stock. Subject to the terms and provisions of
the Plan, the Committee, at any time and from time to time, may grant shares of
Restricted Stock under the Plan to such Participants and in such amounts as it
shall determine. Participants receiving Restricted Stock Awards are not required
to pay the Company therefor (except for applicable tax withholding) other than
the rendering of services.

         8.2 Restricted Stock Agreement. Each Restricted Stock grant shall be
evidenced by an Agreement that shall specify the Period of Restriction, the
number of Restricted Stock Shares granted, and such other provisions as the
Committee shall determine.

         8.3 Transferability. Except as provided in this Article VIII and
subject to the limitation in the next sentence, the Shares of Restricted Stock
granted hereunder may not be sold, transferred, pledged, assigned, or otherwise
alienated or hypothecated until the termination of the applicable Period of
Restriction or upon earlier satisfaction of other conditions as specified by the
Committee in its sole discretion and set forth in the Agreement. No shares of
Restricted Stock shall be sold until the expiration of at least six months after
the Award Date, except that such limitation shall not apply in the case of death
or disability of the Participant. All rights with respect to the Restricted
Stock granted to a Participant under the Plan shall be exercisable during his
lifetime only by such Participant or his guardian or legal representative.

         8.4 Other Restrictions. The Committee shall impose such other
restrictions on any Shares of Restricted Stock granted pursuant to the Plan as
it may deem advisable including, without limitation, restrictions under
applicable Federal or state securities laws, and may legend the certificates
representing Restricted Stock to give appropriate notice of such restrictions.

         8.5 Certificate Legend. In addition to any legends placed on
certificates pursuant to Section 8.4 herein, each certificate representing
shares of Restricted Stock granted pursuant to the Plan shall bear the following
legend:

         The sale or other transfer of the Shares of Stock represented by this
         certificate, whether voluntary, involuntary, or by operation of law, is
         subject to certain restrictions on transfer set forth in the 1997
         Incentive Stock Plan of Pinnacle Bankshares Corporation, in the rules
         and administrative procedures adopted pursuant to such Plan, and in an
         Agreement dated ____________. A copy of the Plan, such rules and
         procedures, and such Restricted Stock Agreement may be obtained from
         the Secretary of Pinnacle Bankshares Corporation.

         8.6 Removal of Restrictions. Except as otherwise provided in this
Article, Shares of Restricted Stock covered by each Restricted Stock Award made
under the Plan shall become freely transferable by the Participant after the
last day of the Period of Restriction. Once the Shares are released from the
restrictions, the Participant shall be entitled to have the legend required by
Section 8.5 herein removed from his Stock certificate.

         8.7 Voting Rights. During the Period of Restriction, Participants
holding Shares of Restricted Stock granted hereunder may exercise full voting
rights with respect to those Shares.

         8.8 Dividends and Other Distributions. During the Period of
Restriction, Participants holding shares of Restricted Stock granted hereunder
shall be entitled to receive all dividends and other distributions paid with
respect to those shares while they are so held. If any such dividends or
distributions are paid in Shares, the Shares shall be subject to the same
restrictions on transferability as the Shares of Restricted Stock with respect
to which they were distributed.

         8.9 Termination of Employment Due to Retirement. Unless otherwise
provided in the Agreement, in the event that a Participant terminates his
employment with the Company or one of its Subsidiaries because of normal
retirement (as defined in the rules of the Company in effect at the time), any
remaining Period of Restriction applicable to the Restricted Stock Shares
pursuant to Section 8.3 herein shall automatically terminate and, except as
otherwise provided in Section 8.4 herein the Shares of Restricted Stock shall
thereby be free of restrictions and freely transferable. Unless otherwise
provided in the Agreement, in the event that a Participant terminates his
employment with the Company because of early retirement (as defined in the rules
of the Company in effect at the time), the Committee, in its sole discretion,
may waive the restrictions remaining on any or all Shares of Restricted Stock
pursuant to Section 8.3 herein and add such new restrictions to those Shares of
Restricted Stock as it deems appropriate.

         8.10 Termination of Employment Due to Death or Disability. In the event
a Participant's employment is terminated because of death or disability during
the Period of Restriction, any remaining Period of Restriction applicable to the
Restricted Stock pursuant to Section 8.3 herein shall automatically terminate
and, except as otherwise provided in Section 8.4 herein the shares of Restricted
Stock shall thereby be free of restrictions and fully transferable.

         8.11 Termination of Employment for Other Reasons. Unless otherwise
provided in the Agreement, in the event that a Participant terminates his
employment with the Company for any reason other than for death, disability, or
retirement, as set forth in Sections 8.9 and 8.10 herein, during the Period of
Restriction, then any shares of Restricted Stock still subject to restrictions
as of the date of such termination shall automatically be forfeited and returned
to the Company.

                                   ARTICLE IX
                                Change in Control

         In the event of a Change in Control of the Company, the Committee, as
constituted before such Change in Control, in its sole discretion may, as to any
outstanding Award, either at the time the Award is made or any time thereafter,
take any one or more of the following actions: (i) provide for the acceleration
of any time periods relating to the exercise or realization of any such Award so
that such Award may be exercised or realized in full on or before a date
initially fixed by the Committee; (ii) provide for the purchase or settlement of
any such Award by the Company, upon a Participant's request, for an amount of
cash equal to the amount which could have been obtained upon the exercise of
such Award or realization of such Participant's rights had such Award been
currently exercisable or payable; (iii) make such adjustment to any such Award
then outstanding as the Committee deems appropriate to reflect such Change in
Control; or (iv) cause any such Award then outstanding to be assumed, or new
rights substituted therefor, by the acquiring or surviving corporation in such
Change in Control.

                                    ARTICLE X
                 Modification, Extension and Renewals of Awards

         Subject to the terms and conditions and within the limitations of the
Plan, the Committee may modify, extend or renew outstanding Awards, or, if
authorized by the Board, accept the surrender of outstanding Awards (to the
extent not yet exercised) granted under the Plan and authorize the granting of
new Awards pursuant to the Plan in substitution therefor, and the substituted
Awards may specify a lower exercise price than the surrendered Awards, a longer
term than the surrendered Awards or may contain any other provisions that are
authorized by the Plan. The Committee may also modify the terms of any
outstanding Agreement. Notwithstanding the foregoing, however, no modification
of an Award, shall, without the consent of the Participant, adversely affect the
rights or obligations of the Participant.

                                   ARTICLE XI
               Amendment, Modification and Termination of the Plan

         11.1 Amendment, Modification and Termination. At any time and from time
to time, the Board may terminate, amend, or modify the Plan. Such amendment or
modification may be without shareholder approval except to the extent that such
approval is required by the Code, pursuant to the rules under Section 16 of the
Exchange Act, by any national securities exchange or system on which the Stock
is then listed or reported, by any regulatory body having jurisdiction with
respect thereto or under any other applicable laws, rules or regulations.

         11.2 Awards Previously Granted. No termination, amendment or
modification of the Plan other than pursuant to Section 4.3 herein shall in any
manner adversely affect any Award theretofore granted under the Plan, without
the written consent of the Participant.

                                   ARTICLE XII
                                   Withholding

         12.1 Tax Withholding. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy Federal, State and local taxes (including the
Participant's FICA obligation) required by law to be withheld with respect to
any grant, exercise, or payment made under or as a result of this Plan.

         12.2 Stock Withholding. With respect to withholding required upon the
exercise of Nonqualified Stock Options, or upon the lapse of restrictions on
Restricted Stock, or upon the occurrence of any other similar taxable event,
participants may elect, subject to the approval of the Committee, to satisfy the
withholding requirement, in whole or in part, by having the Company withhold
Shares of Stock having a Fair Market Value equal to the amount required to be
withheld. The value of the Shares to be withheld shall be based on Fair Market
Value of the Shares on the date that the amount of tax to be withheld is to be
determined. All elections shall be irrevocable and be made in writing, signed by
the Participant on forms approved by the Committee in advance of the day that
the transaction becomes taxable.

                                  ARTICLE XIII
                                   Successors

         All obligations of the Company under the Plan, with respect to Awards
granted hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation or otherwise, of all or substantially all of the business
and/or assets of the Company.

                                   ARTICLE XIV
                                     General

         14.1 Requirements of Law. The granting of Awards and the issuance of
Shares of Stock under this Plan shall be subject to all applicable laws, rules,
and regulations, and to such approvals by any governmental agencies or self
regulatory organizations (i.e. exchanges) as may be required.

         14.2 Effect of Plan. The establishment of the Plan shall not confer
upon any Key Employee any legal or equitable right against the Company, a
Subsidiary or the Committee, except as expressly provided in the Plan. The Plan
does not constitute an inducement or consideration for the employment of any Key
Employee, nor is it a contract between the Company or any of its Subsidiaries
and any Key Employee. Participation in the Plan shall not give any Key Employee
any right to be retained in the service of the Company or any of its
Subsidiaries.

         14.3 Creditors. The interests of any Participant under the Plan or any
Agreement are not subject to the claims of creditors and may not, in any way, be
assigned, alienated or encumbered.

         14.4 Governing Law. The Plan, and all Agreements hereunder, shall be
governed, construed and administered in accordance with and governed by the laws
of the Commonwealth of Virginia and the intention of the Company is that ISOs
granted under the Plan qualify as such under Section 422A of the Code.

         14.5 Severability. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.




                                                             Exhibits 5 and 23.2


                      [Mays & Valentine, L.L.P. Letterhead]




                               September 14, 1998




Board of Directors
Pinnacle Bankshares Corporation
622 Broad Street
Altavista, Virginia  24517

            Pinnacle Bankshares Corporation 1997 Incentive Stock Plan

Ladies and Gentlemen:

         This letter is delivered to you in connection with the actions taken
and proposed to be taken by Pinnacle Bankshares Corporation, a Virginia
corporation ("Pinnacle Bankshares"), with respect to the Pinnacle Bankshares
Corporation 1997 Incentive Stock (the "Plan"). As counsel to Pinnacle
Bankshares, we have reviewed the registration statement on Form S-8 (the
"Registration Statement") to be filed by Pinnacle Bankshares on or about
September 14, 1998, with the Securities and Exchange Commission to effect the
registration of 25,000 shares of common stock of Pinnacle Bankshares under the
Securities Act of 1933, as amended (the "Act") for issuance under the Plan.

         In this regard, we have examined the Articles of Incorporation and
Bylaws of Pinnacle Bankshares, records of proceedings of the Board of Directors
of Pinnacle Bankshares, the Plan and such other records and documents as we have
deemed necessary or advisable in connection with the opinions set forth herein.
In addition, we have relied as to certain matters on information obtained from
public officials, officers of Pinnacle Bankshares and other sources believed by
us to be reliable.

         Based upon our examination and inquiries, we are of the opinion that
the shares which constitute original issuance securities will, when issued
pursuant to the terms and conditions of the Plans, be validly issued, fully paid
and nonassessable. The foregoing opinion is limited to the laws of the
Commonwealth of Virginia and we express no opinion as to the effect of the laws
of any other jurisdiction.

         We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement.

                                     Very truly yours,



                                     /s/ Mays & Valentine, L.L.P.




                                                                    Exhibit 23.1

                     [Letterhead of KPMG Peat Marwick, LLP.]

The Board of Directors
Pinnacle Bankshares


We consent to the use of our report included in the Annual Report on Form 10-KSB
for the year ended December 31, 1997 incorporated herein by reference.


                                            /s/  KPMG Peat Marwick, LLP

Roanoke, Virginia
September 14, 1998


557411


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