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On July 21, 2020, pursuant to that certain Indenture dated July 23, 2019 (the “Indenture”), by and between Limestone Bancorp, Inc. (the “Company”) and Wilmington Trust, National Association, as trustee (“Trustee”), the Company authorized and directed the Trustee (the “Company Order”) to (i) increase the aggregate principal amount of the 5.75% Fixed-to-Floating Rate Subordinated Notes due 2029 (the “Notes”) to be issued under the Indenture from $17,000,000 to $25,000,000, and (ii) reopen the series of Notes for issuances of additional Notes in the aggregate principal amount of $8,000,000 (the “Additional Notes”).  On July 21, 2020, the Company entered into Subordinated Note Purchase Agreements (collectively, the “Purchase Agreement”) with certain qualified institutional buyers and institutional accredited investors (the “Purchasers”) pursuant to which the Company will sell and issue the Additional Notes on July 31, 2020 at a price equal to 99% of the principal amount thereof. The Additional Notes are being offered and sold by the Company to eligible purchasers in a private offering in reliance on the exemption from the registration requirements of Section 4(a)(2) of the Securities Act of 1933, as amended (the “Securities Act”).  The Company intends to use the net proceeds from the offering to retire the Company’s $5.0 million senior debt.  The remaining net proceeds will be used for general corporate purposes.  The fees of the placement agents and other costs of issuance will be paid directly by the Company from cash on hand.

 

The Additional Notes have a July 31, 2029 stated maturity date and will bear interest from and including the date of issuance to but excluding July 31, 2024, at a fixed annual rate of 5.75%, payable semi-annually in arrears. From and including July 31, 2024 to but excluding the maturity date or early redemption date, the interest rate shall reset quarterly to an interest rate per annum equal to the then-current three-month LIBOR (provided, however, that in the event three-month LIBOR is less than zero, three-month LIBOR shall be deemed to be zero) plus 395 basis points, payable quarterly in arrears.  The Additional Notes will not be redeemed prior to July 31, 2025 so long as they constitute Tier 2 capital, and may be redeemed at any time upon the occurrence of certain events. The Purchase Agreement contains certain customary representations, warranties and covenants made by the Company, on the one hand, and the Purchasers, severally and not jointly, on the other hand.

The Additional Notes are not subject to any sinking fund and are not convertible into or exchangeable for any other securities or assets of the Company or any of its subsidiaries. The Additional Notes are not subject to redemption at the option of the holder. The Additional Notes are unsecured, subordinated obligations of the Company only and are not obligations of, and are not guaranteed by, any subsidiary of the Company. The Additional Notes will rank junior in right to payment to the Company’s current and future senior indebtedness. The Additional Notes qualify as Tier 2 capital for regulatory capital purposes for the Company.

 

 

On July 22, 2020, the Company completed a voluntary stock exchange transaction in which the Company issued 220,000 newly issued Common Shares in exchange for 220,000 outstanding Non-Voting Common Shares (the “Exchange”).

 

The securities issued and sold in the Exchange were offered and sold by the Company in reliance upon an exemption from registration pursuant to Section 3(a)(9) of the Securities Act. The Exchange was a private share-for-share exchange transaction directly between the Company and the holders of the Non-Voting Common Shares.  The Company did not pay any placement fees, commission or other remuneration in this transaction.

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