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): April 13, 2010

PINNACLE BANKSHARES CORPORATION

(Exact name of registrant as specified in its charter)

Virginia	000-23909	54-1832714
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)
622 Broad Street, Altavista, Virginia		24517
(Address of principal executive offices)		(Zip Code)

Registrant’s telephone number, including area code (434) 369-3000

N/A

(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:

¨ 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 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

Following the 2010 Annual Meeting of Shareholders, on April 13, 2010, James P. Kent, Jr., age 70, retired from the Board of Directors of Pinnacle Bankshares Corporation (the “Company”) and from the Board of Directors of the Company’s banking subsidiary, First National Bank (the “Bank”), in connection with the limitation in the Company’s bylaws providing that no individual may be nominated for election or elected as a director if on the date of election, the individual would be age 70 or older. The Company is grateful to Mr. Kent for his many years of dedicated service to the Company and the Bank.

Item 5.07. Submission of Matters to a Vote of Security Holders.

The 2010 Annual Meeting of Shareholders of Pinnacle Bankshares Corporation was held on April 13, 2010, at which one proposal was submitted to the Company’s shareholders. The proposal is described in detail in the Company’s proxy statement for the 2010 Annual Meeting of Shareholders filed with the Securities and Exchange Commission on March 8, 2010. The final results for the votes regarding the proposal are set forth below.

Proposal 1 – The Company’s shareholders elected four Class I directors to serve until the 2013 Annual Meeting of Shareholders, one Class II director to serve until the 2011 Annual Meeting of Shareholders and one Class III director to serve until the 2012 Annual Meeting of Shareholders. The votes regarding these director nominees were as follows:

Name	Votes For	Votes Withheld	Broker Non-Votes
Class I
A. Willard Arthur	1,070,324	11,609	—
John P. Erb	1,068,256	13,677	—
Robert H. Gilliam, Jr.	1,037,264	44,699	—
R.B. Hancock, Jr.	1,070,324	11,609	—
Class II
A. Patricia Merryman	1,070,324	11,609	—
Class III
C. Bryan Stott	1,069,676	12,257	—

The following Class II and III directors continued in office after the 2010 Annual Meeting of Shareholders:

Class II Serving until the 2011 Annual Meeting	Class III Serving until the 2012 Annual Meeting
James E. Burton, IV	Carroll E. Shelton
Thomas F. Hall	John L. Waller
William F. Overacre	Michael E. Watson

No other matters were voted on during the meeting.

Item 8.01. Other Events.

At a meeting of the Board of Directors held following the 2010 Annual Meeting of Shareholders, the Board of Directors elected John P. Erb to serve as Chairman of the Board and James E. Burton, IV to serve as Vice Chairman of the Board, effective April 13, 2010.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits.

10.10	Form of Restricted Stock Agreement under Pinnacle Bankshares Corporation 2004 Incentive Stock Plan, as amended February 9, 2010
10.11	Form of Restricted Stock Agreement (with non-competition and consulting provision) under Pinnacle Bankshares Corporation 2004 Incentive Stock Plan, as amended February 9, 2010
10.12	Form of Incentive Stock Option Agreement with Tandem Stock Appreciation Right under Pinnacle Bankshares Corporation 2004 Incentive Stock Plan, as amended February 9, 2010

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 hereunto duly authorized.

	PINNACLE BANKSHARES CORPORATION
Date: April 19, 2010	By:	/S/    BRYAN M. LEMLEY
		Bryan M. Lemley
		Treasurer and Chief Financial Officer

EX-10.10

Exhibit 10.10

FORM OF

PINNACLE BANKSHARES CORPORATION

2004 INCENTIVE STOCK PLAN

RESTRICTED STOCK AGREEMENT

Granted [INSERT AWARD DATE]

This Restricted Stock Agreement (“Agreement”) is entered into as of [INSERT AWARD DATE] pursuant to the 2004 Incentive Stock Plan (the “Plan”) of Pinnacle Bankshares Corporation, a Virginia corporation (the “Company”), and evidences the grant of Restricted Stock (as defined in the Plan), and the terms, conditions and restrictions pertaining thereto, to «name» (the “Employee”).

1. Award of Shares. Pursuant to the Plan, effective on [INSERT AWARD DATE] (the “Award Date”), the Company awarded to the Employee a restricted stock award (the “Award”) covering «shares» shares of the Company’s Stock (the “Award Shares”) subject to the terms, conditions and restrictions set forth in this Agreement.

2. Period of Restriction and Vesting in the Award Shares.

(a) Subject to accelerated vesting or forfeiture as hereinafter provided, the Employee’s interest in the Award Shares shall become non-forfeitable (“Vested” or “Vesting”) on the earlier of [INSERT VESTING DATE/SCHEDULE], the Employee’s death or termination of employment due to the Employee’s permanent and total disability as defined in Section 22(e)(3) of the Code (such date being the “Vesting Date” and the period from the Award Date through the Vesting Date being the “Period of Restriction”), provided he remains in employment with the Company and/or any of its Subsidiaries until such Vesting Date.

(b) Except as contemplated in Paragraph 2(c), the Award Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, otherwise than by will or by the laws of descent and distribution, during the Period of Restriction. Except as otherwise provided pursuant to Paragraph 2(c), the Award Shares shall become freely transferable by the Employee as of the last day of the Period of Restriction.

(c) Subject to earlier forfeiture as provided below, in the event of the occurrence of a Transaction Date while the Employee is an employee of the Company or one of its Subsidiaries, the Award Shares shall become Vested and freely transferable on such Transaction Date provided such Transaction Date occurs not less than six (6) months after the Award Date. For purposes hereof, a “Transaction Date” shall mean the date on which an offeror other than the Company shall first publicly offer to acquire shares of Stock of the Company pursuant to a tender offer or exchange offer or the date of mailing of proxy material to the stockholders of the Company with respect to a merger or other reorganization that will result in the Stock of the Company being converted into cash or securities of another entity.

3. Stock Certificates.

(a) The Company shall issue the Award Shares either: (i) in certificate form as provided in Paragraph 3(b) below; or (ii) in book-entry form, registered in the name of the Employee with notations regarding the applicable restrictions on transfer imposed under this Agreement.

(b) Any certificates representing the Award Shares shall be held by the Company until such time as the restrictions hereunder lapse and such Award Shares become transferable, or are forfeited hereunder. Any Award Shares issued in book-entry form shall be subject to the following legend and any certificates representing the Award Shares shall bear the following legend, until such time as the restrictions hereunder lapse and such shares become transferable:

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 2004 Incentive Stock Plan of Pinnacle Bankshares Corporation, in the rules and administrative procedures adopted pursuant to such Plan, and in a Restricted Stock Agreement dated [INSERT AWARD DATE]. A copy of the Plan, such rules and procedures, and such Restricted Stock Agreement may be obtained from the Secretary of Pinnacle Bankshares Corporation.

(c) Promptly after the end of the Period of Restriction with respect to any of the Award Shares, the Company shall, as applicable, either remove the notations on any of the Award Shares issued in book-entry form as to which the restrictions have lapsed or deliver to the Employee a certificate or certificates evidencing the number of Award Shares as to which the restrictions have lapsed.

(d) The Committee may require, concurrently with the execution and delivery of this Agreement, the Employee to deliver to the Company an executed stock power, in blank, with respect to the Award Shares. The Employee, by acceptance of the Award, shall be deemed to appoint, and does so appoint by execution of this Agreement, the Company and each of its authorized representatives as the Employee’s attorney(s) in fact to effect any transfer of forfeited shares (or shares otherwise reacquired or withheld by the Company hereunder) to the Company as may be required pursuant to the Plan or this Agreement and to execute such documents as the Company or such representatives deem necessary or advisable in connection with any such transfer.

4. Voting Rights. During the Period of Restriction, the Employee may exercise full voting rights with respect to the Award Shares.

5. Dividends and Other Distributions. During the Period of Restriction, the Employee shall be entitled to receive currently all dividends and other distributions paid with respect to the

Award Shares (other than dividends or distributions which are paid in shares of Stock). If, during the Period of Restriction, any such dividends or distributions are paid in shares of Stock with respect to the Award Shares, such shares shall be registered in the name of the Employee and, if issued in certificate form, deposited with the Company as provided in Paragraph 3, and shall be subject to the same restrictions on transferability as the Award Shares with respect to which they were paid.

6. Termination of Employment. If the Employee’s employment with the Company and its Subsidiaries ceases prior to the end of the Period of Restriction and Paragraph 2(c) does not apply or has not applied, then any Award Shares subject to restrictions at the date of such cessation of employment shall be automatically forfeited to the Company. For purposes of this Agreement, transfer of employment among the Company and its Subsidiaries shall not be considered a termination or cessation of employment.

7. Withholding Taxes. The Company, or any of its Subsidiaries, shall have the right to retain and withhold the amount of taxes required by any government to be withheld or otherwise deducted and paid with respect to the Award Shares. The Committee may require the Employee or any successor in interest to pay or reimburse the Company, or any of its Subsidiaries, for any such taxes required to be withheld by the Company, or any of its Subsidiaries, and to withhold any distribution in whole or in part until the Company, or any of its Subsidiaries, is so paid or reimbursed. In lieu thereof, the Company, or any of its Subsidiaries, shall have the right to withhold from any other cash amounts due to or to become due from the Company, or any of its Subsidiaries, to or with respect to the Employee an amount equal to such taxes required to be withheld by the Company, or any of its Subsidiaries, to pay or reimburse the Company, or any of its Subsidiaries, for any such taxes or to retain and withhold a number of shares of the Company’s Stock having a Fair Market Value not less than the amount required to be withheld and cancel any such shares so withheld in order to pay or reimburse the Company, or any of its Subsidiaries, for any such taxes. The Employee or any successor in interest is authorized to deliver shares of the Company’s Stock in satisfaction of minimum statutorily required tax withholding obligations (whether or not such shares have been held for more than six months and including Vested shares acquired pursuant to this Award).

8. Administration of Plan. The Plan is administered by the Committee appointed by the Company’s Board of Directors. The Committee has the authority to construe and interpret the Plan, to make rules of general application relating to the Plan, to amend outstanding awards pursuant to the Plan, and to require of any person receiving an award, at the time of such receipt or lapse of restrictions, the execution of any paper or the making of any representation or the giving of any commitment that the Committee shall, in its discretion, deem necessary or advisable by reason of the securities laws of the United States or any State, or the execution of any paper or the payment of any sum of money in respect of taxes or the undertaking to pay or have paid any such sum that the Committee shall in its discretion, deem necessary by reason of the Code or any rule or regulation thereunder, or by reason of the tax laws of any State.

9. Plan and Prospectus. This Award is granted pursuant to the Plan and is subject to the terms thereof (including all applicable vesting, forfeiture, settlement and other provisions). A copy of the Plan, as well as a prospectus for the Plan, has been provided to the Employee, and the Employee acknowledges receipt thereof.

10. Construction and Capitalized Terms. This Agreement shall be administered, interpreted and construed in accordance with the applicable provisions of the Plan. Capitalized terms in this Agreement have the meaning assigned to them in the Plan, unless this Agreement provides, or the context requires, otherwise.

11. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the Commonwealth of Virginia.

12. Successors. This Agreement shall be binding upon and inure to the benefit of the successors, assigns, heirs and legal representatives of the respective parties.

13. Entire Agreement. This Agreement contains the entire understanding of the parties and shall not be modified or amended except in writing signed by the parties.

14. Severability. The various provisions of this Agreement are severable in their entirety. Any determination of invalidity or unenforceability of any one provision shall have no effect on the continuing force and effect of the remaining provisions.

To evidence their agreement to the terms, conditions and restrictions hereof, the Company and the Employee have signed this Agreement as of the date first above written.

PINNACLE BANKSHARES CORPORATION
By
	Its
EMPLOYEE
	<<name>>

EX-10.11

Exhibit 10.11

FORM OF

PINNACLE BANKSHARES CORPORATION

2004 INCENTIVE STOCK PLAN

RESTRICTED STOCK AGREEMENT

Granted [INSERT AWARD DATE]

This Restricted Stock Agreement (“Agreement”) is entered into as of [INSERT AWARD DATE] pursuant to the 2004 Incentive Stock Plan (the “Plan”) of Pinnacle Bankshares Corporation, a Virginia corporation (the “Company”), and evidences the grant of Restricted Stock (as defined in the Plan), and the terms, conditions and restrictions pertaining thereto, to [INSERT NAME] (the “Employee”).

1. Award of Shares. Pursuant to the Plan, effective on [INSERT AWARD DATE] (the “Award Date”), the Company awarded to the Employee a restricted stock award (the “Award”) covering «shares» shares of the Company’s Stock (the “Award Shares”) subject to the terms, conditions and restrictions set forth in this Agreement.

2. Period of Restriction and Vesting in the Award Shares.

(a) Subject to accelerated vesting or forfeiture as hereinafter provided, the Employee’s interest in the Award Shares shall become non-forfeitable (“Vested” or “Vesting”) on the earlier of [INSERT VESTING DATE/SCHEDULE], the Employee’s death or termination of employment due to the Employee’s permanent and total disability as defined in Section 22(e)(3) of the Code (such date being the “Vesting Date” and the period from the Award Date through the Vesting Date being the “Period of Restriction”), provided he remains in employment with the Company and/or any of its Subsidiaries or, after any cessation of his employment which does not result in Vesting of the Award Shares, he fulfills the Consulting and Non-competition Requirement described in Paragraph 2(d) until such Vesting Date.

(b) Except as contemplated in Paragraph 2(c), the Award Shares may not be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, otherwise than by will or by the laws of descent and distribution, during the Period of Restriction. Except as otherwise provided pursuant to Paragraph 2(c), the Award Shares shall become freely transferable by the Employee as of the last day of the Period of Restriction.

(c) Subject to earlier forfeiture as provided below, in the event of the occurrence of a Transaction Date while the Employee is an employee of the Company or one of its Subsidiaries or while he is complying with the Consulting and Non-competition Requirement described in Paragraph 2(d), the Award Shares shall become Vested and freely transferable on such Transaction Date provided such Transaction Date occurs not less than six (6) months after the Award Date. For purposes hereof, a “Transaction Date” shall mean the date on which an offeror other than the Company shall first publicly offer to acquire shares of Stock of the Company

pursuant to a tender offer or exchange offer or the date of mailing of proxy material to the stockholders of the Company with respect to a merger or other reorganization that will result in the Stock of the Company being converted into cash or securities of another entity.

(d) For purposes hereof, the “Consulting and Non-competition Requirement” is that, after his cessation of employment and prior to Vesting of the Award Shares, (i) the Employee provides such reasonable consulting services commensurate with his knowledge and experience to the Company and/or any of its Subsidiaries, not in excess of five (5) hours per calendar month, which the Board reasonably requests in writing or, if accepted by the Employee, orally with sufficient advance notice to the Employee and at the Company’s headquarters or within twenty-five (25) miles thereof (with the Company paying any reasonable expenses which the Employee incurs in connection therewith) and (ii) the Employee not engage in Competition.

(e) For purposes hereof, “Competition” means the Employee’s engaging without the written consent of the Board or a person authorized thereby, in any activity as an officer, a director, an employee, a partner, a more than one percent shareholder or other owner, an agent, a consultant, or in any other individual or representative capacity within fifty (50) miles of the Company’s headquarters or any branch office of the Company or any of its Subsidiaries (unless the Employee’s duties, responsibilities and activities, including supervisory activities, for or on behalf of such activity, are not related in any way to or involved materially in such competitive activity) if it involves:

(A) engaging in or entering into the business of any banking, lending, investment or insurance or any other business activity in which the Company or any of its Subsidiaries is actively engaged at the time the Employee’s employment ceases, or

(B) soliciting or contacting, either directly or indirectly, any of the customers or clients of the Company or any of its Subsidiaries for the purpose of competing with the products or services provided by the Company or any of its Subsidiaries, or

(C) employing or soliciting for employment any employees of the Company or any of its Subsidiaries for the purpose of causing them to terminate employment with the Company or any of its Subsidiaries or competing with the Company or any of its Subsidiaries.

For purposes of this Agreement, “customers” or “clients” of the Company or any of its Subsidiaries means individuals or entities to whom the Company or any of its Subsidiaries has provided banking, lending, investment, insurance or other similar financial services at any time after [INSERT AWARD DATE], but only within the one (1) year period prior to the date the Employee’s employment with the Company and its Subsidiaries ceases.

3. Stock Certificates.

(a) The Company shall issue the Award Shares either: (i) in certificate form as provided in Paragraph 3(b) below; or (ii) in book-entry form, registered in the name of the Employee with notations regarding the applicable restrictions on transfer imposed under this Agreement.

(b) Any certificates representing the Award Shares shall be held by the Company until such time as the restrictions hereunder lapse and such Award Shares become transferable, or are forfeited hereunder. Any Award Shares issued in book-entry form shall be subject to the following legend and any certificates representing the Award Shares shall bear the following legend, until such time as the restrictions hereunder lapse and such shares become transferable:

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 2004 Incentive Stock Plan of Pinnacle Bankshares Corporation, in the rules and administrative procedures adopted pursuant to such Plan, and in a Restricted Stock Agreement dated [INSERT AWARD DATE]. A copy of the Plan, such rules and procedures, and such Restricted Stock Agreement may be obtained from the Secretary of Pinnacle Bankshares Corporation.

(c) Promptly after the end of the Period of Restriction with respect to any of the Award Shares, the Company shall, as applicable, either remove the notations on any of the Award Shares issued in book-entry form as to which the restrictions have lapsed or deliver to the Employee a certificate or certificates evidencing the number of Award Shares as to which the restrictions have lapsed.

(d) The Committee may require, concurrently with the execution and delivery of this Agreement, the Employee to deliver to the Company an executed stock power, in blank, with respect to the Award Shares. The Employee, by acceptance of the Award, shall be deemed to appoint, and does so appoint by execution of this Agreement, the Company and each of its authorized representatives as the Employee’s attorney(s) in fact to effect any transfer of forfeited shares (or shares otherwise reacquired or withheld by the Company hereunder) to the Company as may be required pursuant to the Plan or this Agreement and to execute such documents as the Company or such representatives deem necessary or advisable in connection with any such transfer.

4. Voting Rights. During the Period of Restriction, the Employee may exercise full voting rights with respect to the Award Shares.

5. Dividends and Other Distributions. During the Period of Restriction, the Employee shall be entitled to receive currently all dividends and other distributions paid with respect to the Award Shares (other than dividends or distributions which are paid in shares of Stock). If, during

the Period of Restriction, any such dividends or distributions are paid in shares of Stock with respect to the Award Shares, such shares shall be registered in the name of the Employee and, if issued in certificate form, deposited with the Company as provided in Paragraph 3, and shall be subject to the same restrictions on transferability as the Award Shares with respect to which they were paid.

6. Termination of Employment and Failure to Comply with the Consulting and Non-competition Requirement. Subject to the next sentence of this Paragraph, if the Employee’s employment with the Company and its Subsidiaries ceases prior to the end of the Period of Restriction and Paragraph 2(c) does not apply or has not applied, then any Award Shares subject to restrictions at the date of such cessation of employment shall be automatically forfeited to the Company. Notwithstanding the foregoing, no forfeiture shall occur while the Employee is complying with the Consulting and Non-competition Requirement after a cessation of his employment which does not result in Vesting of the Award Shares. For purposes of this Agreement, transfer of employment among the Company and its Subsidiaries shall not be considered a termination or cessation of employment.

7. Withholding Taxes. The Company, or any of its Subsidiaries, shall have the right to retain and withhold the amount of taxes required by any government to be withheld or otherwise deducted and paid with respect to the Award Shares. The Committee may require the Employee or any successor in interest to pay or reimburse the Company, or any of its Subsidiaries, for any such taxes required to be withheld by the Company, or any of its Subsidiaries, and to withhold any distribution in whole or in part until the Company, or any of its Subsidiaries, is so paid or reimbursed. In lieu thereof, the Company, or any of its Subsidiaries, shall have the right to withhold from any other cash amounts due to or to become due from the Company, or any of its Subsidiaries, to or with respect to the Employee an amount equal to such taxes required to be withheld by the Company, or any of its Subsidiaries, to pay or reimburse the Company, or any of its Subsidiaries, for any such taxes or to retain and withhold a number of shares of the Company’s Stock having a Fair Market Value not less than the amount required to be withheld and cancel any such shares so withheld in order to pay or reimburse the Company, or any of its Subsidiaries, for any such taxes. The Employee or any successor in interest is authorized to deliver shares of the Company’s Stock in satisfaction of minimum statutorily required tax withholding obligations (whether or not such shares have been held for more than six months and including Vested shares acquired pursuant to this Award).

8. Administration of Plan. The Plan is administered by the Committee appointed by the Company’s Board of Directors. The Committee has the authority to construe and interpret the Plan, to make rules of general application relating to the Plan, to amend outstanding awards pursuant to the Plan, and to require of any person receiving an award, at the time of such receipt or lapse of restrictions, the execution of any paper or the making of any representation or the giving of any commitment that the Committee shall, in its discretion, deem necessary or advisable by reason of the securities laws of the United States or any State, or the execution of any paper or the payment of any sum of money in respect of taxes or the undertaking to pay or have paid any such sum that the Committee shall in its discretion, deem necessary by reason of the Code or any rule or regulation thereunder, or by reason of the tax laws of any State.

9. Plan and Prospectus. This Award is granted pursuant to the Plan and is subject to the terms thereof (including all applicable vesting, forfeiture, settlement and other provisions). A copy of the Plan, as well as a prospectus for the Plan, has been provided to the Employee, and the Employee acknowledges receipt thereof.

10. Construction and Capitalized Terms. This Agreement shall be administered, interpreted and construed in accordance with the applicable provisions of the Plan. Capitalized terms in this Agreement have the meaning assigned to them in the Plan, unless this Agreement provides, or the context requires, otherwise.

11. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the Commonwealth of Virginia.

12. Successors. This Agreement shall be binding upon and inure to the benefit of the successors, assigns, heirs and legal representatives of the respective parties.

13. Entire Agreement. This Agreement contains the entire understanding of the parties and shall not be modified or amended except in writing signed by the parties.

14. Severability. The various provisions of this Agreement are severable in their entirety. Any determination of invalidity or unenforceability of any one provision shall have no effect on the continuing force and effect of the remaining provisions.

To evidence their agreement to the terms, conditions and restrictions hereof, the Company and the Employee have signed this Agreement as of the date first above written.

PINNACLE BANKSHARES CORPORATION
By
	Its
EMPLOYEE
	[INSERT NAME]

EX-10.12

Exhibit 10.12

FORM OF

PINNACLE BANKSHARES CORPORATION

2004 INCENTIVE STOCK PLAN

INCENTIVE STOCK OPTION AGREEMENT

WITH TANDEM SAR

Granted [INSERT AWARD DATE]

This Incentive Stock Option Agreement with Tandem SAR (“Agreement”) is entered into as of [INSERT AWARD DATE] pursuant to the 2004 Incentive Stock Plan (the “Plan”) of Pinnacle Bankshares Corporation, a Virginia corporation (the “Company”), and evidences the grant of an Option and Tandem SAR (as defined in the Plan), and the terms, conditions and restrictions pertaining thereto, to «name» (the “Employee”).

1. Award of Shares. Pursuant to the Plan, effective on [INSERT AWARD DATE] (the “Award Date”), the Company awarded to the Employee the right and option to purchase (the “Award”), upon the terms and conditions hereinafter set forth, all or any part of a total of «number» of shares of the Company’s Stock at the Option Price of $«price» per share.

2. Time and Limitations on Exercise of Option. This Option shall not be exercisable after [INSERT OPTION EXPIRATION DATE]; provided, however, that this Option may be terminated earlier as provided below. In addition and except as provided in Paragraph 6 below, this Option shall first be exercisable [INSERT VESTING DATE/SCHEDULE] (e.g., the Employee will not be able to exercise this Option [INSERT VESTING DATE/SCHEDULE]). In addition, this Option may only be exercised for whole shares of the Company’s Stock.

3. Conditions of Exercise of Option During Employee’s Lifetime. During the Employee’s lifetime, this Option may be exercised only by him, and then only if the Employee has been an employee of the Company or one or more of its Subsidiaries continuously from the Award Date to the date of exercise; provided, however, that if the Employee or the Company terminates his employment for any reason (including termination because of retirement or permanent and total disability), the Employee shall be entitled to exercise this Option only to the extent it was exercisable by the Employee at the date of such termination of employment, and further provided that this Option shall not be exercisable more than twelve (12) months after such termination of employment. The Board of Directors of the Company, or a committee thereof, reserves the right, however, to extend this twelve month period up to two years after the date of termination of employment (but not beyond [INSERT OPTION EXPIRATION DATE]). Notwithstanding the foregoing, the Company reserves the right to terminate and declare forfeited all or any unexercised portion of this Option held by the Employee in the event (i) his employment is terminated as a result of any illegal act or intentional act evidencing bad faith by the Employee toward the Company or one of its Subsidiaries or (ii) during the period this Option remains exercisable following termination of his employment for any reason, whether such termination was voluntary or involuntary, the Employee accepts employment with or provides services to a company or organization that, in the sole discretion of the Company, competes with the Company or any Subsidiary or affiliate of the Company.

4. Option Nontransferable during Employee’s Lifetime; Conditions of Exercise After Employee’s Death. This Option shall not be transferable by the Employee other than by his will or by the laws of descent and distribution. If the employment of the Employee terminates by death while in the employ of the Company or a Subsidiary, then this Option may be exercised at any time during the three (3) year period following the Employee’s date of death, to the extent that the Employee was entitled to exercise this Option on the date of his death, by the person or persons to whom the Employee’s rights under this Option shall pass by will or by applicable law. In no event may this Option be exercised after the expiration date specified in Paragraph 1.

5. Method of and Effective Date of Exercising Option. This Option may be exercised from time to time on any business day upon delivery to the Company of (a) a Notice of Exercise in the form attached to this Agreement, and (b) payment in full of the Option Price (which Option Price may be paid by the Employee in cash or in shares of Stock of the Company, or in any combination thereof, provided payment of the Option Price, in whole or in part, in shares of Stock of the Company is permitted under applicable state and federal law). No person shall acquire any rights or privileges of a stockholder of the Company with respect to any shares issuable upon such exercise until the effective date of such exercise.

6. Acceleration of Exercise Period. Notwithstanding the limitations set forth in Paragraph 2 above on the exercise of this Option, the Employee may exercise all or any portion of this Option on or after a Transaction Date as defined below, provided this Option shall have been granted not less than six (6) months previously. For purposes of this paragraph, a “Transaction Date” shall mean the date on which an offer or other than the Company shall first publicly offer to acquire shares of Stock of the Company pursuant to a tender offer or exchange offer or the date of mailing of proxy material to the stockholders of the Company with respect to a merger or other reorganization that will result in the Stock of the Company being converted into cash or securities of another entity.

7. Tandem SAR. In connection with the grant of this Option, the Employee is also granted a Tandem SAR with this Option, which Tandem SAR may be exercisable in lieu of all or part of this Option (to the extent exercisable at the time in question). The number of shares of the Company’s Stock to which the Tandem SAR pertains shall be equal to the number of shares of the Company’s Stock subject to this Option, determined as of the date the Tandem SAR is exercised. The Tandem SAR shall have an exercise price per share equal to the Option Price per share of Stock to which it pertains. The Tandem SAR granted hereunder shall be exercisable, in whole or in part, at the same time and to the same extent as this Option. Any exercise of the Tandem SAR shall reduce the number of shares of the Company’s Stock subject to this Option by the number of shares with respect to which the Tandem SAR is exercised. Upon any exercise of the Tandem SAR, the Employee shall receive from the Company that number of shares of the Company’s Stock equal to the product determined by dividing (a) the product obtained by multiplying (i) the excess of (A) the Fair Market Value per share of the Stock on the date of exercise over (B) the Tandem SAR exercise price by (ii) the number of shares of Stock with respect to which the Tandem SAR is exercised as of the date of exercise, by (b) the Fair Market Value per share of the Stock on the date of exercise. In the event the amount determined in (a) exceeds the product of the Fair Market Value per share of the Stock on the date of exercise multiplied by the number of shares of Stock issued on the exercise of the Tandem SAR, the excess shall immediately be paid in cash to the Employee.

8. Capital Adjustments. The number of shares of Stock of the Company covered by this Option and the Tandem SAR herein, and the Option Price and Tandem SAR exercise price thereof, will be subject to an appropriate and equitable adjustment as determined by the Committee as provided in Section 4.3 of the Plan.

9. Prohibition Against Pledge, Attachment, etc. Except as otherwise herein provided, this Option and the Tandem SAR herein and the rights and privileges conferred hereby shall not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to execution, attachment or similar process.

10. Administration of Plan. The Plan is administered by the Committee appointed by the Company’s Board of Directors. The Committee has the authority to construe and interpret the Plan, to make rules of general application relating to the Plan, to amend outstanding awards pursuant to the Plan, and to require of any person receiving an award, at the time of such receipt or lapse of restrictions, the execution of any paper or the making of any representation or the giving of any commitment that the Committee shall, in its discretion, deem necessary or advisable by reason of the securities laws of the United States or any State, or the execution of any paper or the payment of any sum of money in respect of taxes or the undertaking to pay or have paid any such sum that the Committee shall in its discretion, deem necessary by reason of the Code or any rule or regulation thereunder, or by reason of the tax laws of any State.

11. Plan and Prospectus. This Option and the Tandem SAR herein are granted pursuant to the Plan and are subject to the terms thereof (including all applicable vesting, forfeiture, settlement and other provisions). A copy of the Plan, as well as a prospectus for the Plan, has been provided to the Employee, and the Employee acknowledges receipt thereof.

12. Withholding Taxes. The Company, or any of its Subsidiaries, shall have the right to withhold any federal, state or local taxes required to be withheld by law with respect to the exercise of this Option (including exercise of the Tandem SAR herein). The Committee may require the Employee or any successor in interest to pay or reimburse the Company, or any of its Subsidiaries, for any such taxes required to be withheld by the Company, or any of its Subsidiaries, and to withhold any distribution in whole or in part until the Company, or any of its Subsidiaries, is so paid or reimbursed. In lieu thereof, the Company, or any of its Subsidiaries, shall have the right to withhold from any other cash amounts due to or to become due from the Company, or any of its Subsidiaries, to or with respect to the Employee an amount equal to such taxes required to be withheld by the Company, or any of its Subsidiaries, to pay or reimburse the Company, or any of its Subsidiaries, for any such taxes or to retain and withhold a number of shares of the Company’s Stock having a Fair Market Value not less than the amount required to be withheld and cancel any such shares so withheld in order to pay or reimburse the Company, or any of its Subsidiaries, for any such taxes. The Employee or any successor in interest is authorized to deliver shares of the Company’s Stock in satisfaction of minimum statutorily required tax withholding obligations (whether or not such shares have been held for more than six months and including shares acquired pursuant to this Award if the restrictions thereon have lapsed).

13. Incentive Stock Option. This Option is intended to qualify as an incentive stock option (an ISO as defined in the Plan) within the meaning of Section 422(b) of the Code, and the provisions hereof shall be construed consistent with that intent. If this Option fails or ceases to qualify as an incentive stock option within the meaning of Section 422(b) of the Code, it shall continue in effect as a Non-qualified Stock Option.

14. Construction and Capitalized Terms. This Agreement shall be administered, interpreted and construed in accordance with the applicable provisions of the Plan. Capitalized terms in this Agreement have the meaning assigned to them in the Plan, unless this Agreement provides, or the context requires, otherwise.

15. Governing Law. This Agreement shall be construed in accordance with and governed by the laws of the Commonwealth of Virginia.

16. Successors. This Agreement shall be binding upon and inure to the benefit of the successors, assigns, heirs and legal representatives of the respective parties.

17. Entire Agreement. This Agreement contains the entire understanding of the parties and shall not be modified or amended except in writing signed by the parties.

18. Severability. The various provisions of this Agreement are severable in their entirety. Any determination of invalidity or unenforceability of any one provision shall have no effect on the continuing force and effect of the remaining provisions.

To evidence their agreement to the terms, conditions and restrictions hereof, the Company and the Employee have signed this Agreement as of the date first above written.

PINNACLE BANKSHARES CORPORATION
By
	Its
EMPLOYEE
	<<name>>

PINNACLE BANKSHARES CORPORATION

2004 INCENTIVE STOCK PLAN

INCENTIVE STOCK OPTION AGREEMENT

WITH TANDEM SAR

NOTICE OF EXERCISE

[    ] Option Exercise

I                                          (Name) hereby exercise the Option granted to me as of [INSERT AWARD DATE] and elect to purchase                      (Number) shares of the Stock of Pinnacle Bankshares Corporation at the Option Price of $             per share. I am enclosing a check made payable to the Company for $             and/or              shares of the Stock of the Company as payment in full for the shares of Stock of the Company to be acquired upon exercise of this Option.

[    ] Tandem SAR Exercise

I                                          (Name) hereby exercise the Tandem SAR granted to me as of [INSERT AWARD DATE] with respect to                      (Number) shares of the Stock of Pinnacle Bankshares Corporation covered by the Tandem SAR.

Tax Withholding Select one of the following methods for payment of withholding taxes and fees generated by the exercise of the Option or Tandem SAR.

[    ] Cash	I am remitting payment to the Company for the full amount due for withholding taxes.
[    ] Common Stock	I am remitting Stock for the full amount due for withholding taxes.
[    ] Not Applicable	This transaction is an ISO exercise.

General

I agree to provide the Company with such other documents and representations as it deems appropriate in order for me to exercise this Option and/or Tandem SAR.

Date: