Heartland
Financial USA, Inc.
2005
Long-Term Incentive Plan
NQSO
Award Terms
The
Participant specified below has been granted this Option by Heartland Financial
USA, Inc., a Delaware corporation (the “
Company
”)
under
the
terms
of
the
Heartland Financial USA, Inc. 2005 Long-Term Incentive Plan (the “
Plan
”).
The Option shall be subject to the following terms and
conditions
(the “
Option
Terms
”):
Section
1.
Terms
of Award
.
The
following words and phrases relating to the grant of the Option shall have
the
following meanings:
(a)
The
“
Participant
”
is
«FirstName»
«LastName»
.
(b)
The
“
Grant
Date
”
is
February
6, 2006
.
(c)
The
number of “
Covered
Shares
”
shall
be
«Shares»
shares
of Stock.
(d)
The
“
Exercise
Price
”
is
$
21.60
per
share.
Except
where
the context clearly implies to the contrary, any capitalized term in this award
shall have the meaning ascribed to that term under the Plan.
Section
2.
Non-Qualified
Stock Option
.
The
Option is not intended to constitute an “incentive stock option” as that term is
used in Code section 422.
Section
3.
Date
of Exercise
.
Subject
to the limitations of
the
Option Terms
,
each
installment of Covered Shares of the Option (“
Installment
”)
shall
become vested and exercisable on and after the “
Vesting
Date
”
for
such Installment as described in the following schedule (but only if the Date
of
Termination
has not occurred before the Vesting Date):
|
INSTALLMENT
|
VESTING
DATE
APPLICABLE
TO INSTALLMENT
|
|
1/3
of Covered Shares
|
February
6, 2009
|
|
1/3
of Covered Shares
|
February
6, 2010
|
|
1/3
of Covered Shares
|
February
6, 2011
|
(a)
Notwithstanding
the foregoing provisions of this
Section
3
,
the
Option shall become fully exercisable upon a Date of Termination
(as
defined in
Section
8(c)
)
that
occurs by reason of the Participant’s death, Disability (as defined in
Section
8(d)
)
or
Retirement (as defined in
Section
8(e)
.
(b)
Notwithstanding
the foregoing provisions of this
Section
3
,
the
Option shall become fully exercisable upon a Change in Control
that
occurs on or before the Date of Termination.
(c)
The
Option may only be exercised on or after the Date of Termination only as to
that
portion of the Covered Shares for which it
was
exercisable immediately prior to the Date of Termination, or became exercisable
on the Date of Termination.
Section
4.
Expiration
.
The
Option shall not be exercisable after the Company’s close of business on the
last business day that occurs prior
to
the
Expiration Date. The “Expiration Date” shall be the earliest to occur
of:
(a)
the
ten-year anniversary of the Grant Date;
(b)
the
one-year anniversary of the Date of Termination if the termination of employment
occurs due to death or Disability;
(c)
the
six-month anniversary of the Date of Termination if the termination of
employment occurs for reasons other than death or
Disability;
provided,
however,
that
if
the Participant dies during such six-month period following the Date of
Termination, then the one-year anniversary
of
the
date of death;
d)
the
date
on which the Participant engages in conduct which constitutes Cause;
or
(e)
the
date
on which the Participant, Competes with the Company or any
Subsidiary.
Section
5.
Method
of Option Exercise
.
Subject
to the Option Terms and the Plan, the Option may be exercised in whole or in
part by filing a written notice
with
the
Secretary of the Company at its corporate headquarters prior to the Company’s
close of business on the last business day that occurs prior to the
Expiration
Date.
Such notice shall specify the number of shares of Stock which the Participant
elects to purchase, and shall be accompanied by payment of the Exercise Price
for
such
shares of Stock indicated by the Participant’s election. Payment may be by cash
or by check payable to the Company, or except as otherwise provided by
the
Committee before the Option is exercised: (i) all or a portion of the
Exercise Price may be paid by the Participant by delivery of shares of Stock
(by
actual delivery
or
by
attestation) owned by the Participant and acceptable to the Committee having
an
aggregate Fair Market Value (valued as of the date of exercise) that is equal
to
the
amount of cash that would otherwise be required; and (ii) the Participant
may pay the Exercise Price by authorizing a third party to sell shares of Stock
(or a
sufficient
portion of the shares) acquired upon exercise of the Option and remit to the
Company a sufficient portion of the sale proceeds to pay the entire Exercise
Price
and
any tax withholding resulting from such exercise. Except as otherwise
provided by the Committee prior to exercise, payments made with shares of
Stock
in
accordance with clause (i) above shall be limited to shares held by the
Participant for not less than six (6) months prior to the payment date.
The Option shall not be
exercisable
if and to the extent the Company determines that such exercise would violate
applicable state or Federal securities laws or the rules and regulations
of
any
securities exchange on which the Stock is traded and shall not be exercisable
during any blackout period established by the Company from time to
time.
Section
6.
Withholding
.
The
exercise of the Option is subject to withholding of all applicable taxes.
At the election of the Participant, and subject to such
rules
and
limitations as may be established by the Committee from time to time, such
withholding obligations may be satisfied (i) through cash payment by the
Participant;
(ii) through the surrender of shares of Stock by (actual delivery or by
attestation) which the Participant already owns (
provided,
however,
that
to
the
extent
shares described in this clause (ii) are used to satisfy more than the minimum
statutory withholding obligation, as described below, then, except as otherwise
provided
by the Committee, payments made with shares of Stock in accordance with this
clause (ii) shall be limited to shares held by the Participant for not less
than
six
months prior to the payment date); or (iii) through the surrender of shares
of Stock to which the Participant is otherwise entitled under the Plan;
provided,
however,
that
such
shares under this clause (iii) may be used to satisfy not more than the
Company’s minimum statutory withholding obligation (based on minimum statutory
withholding
rates for Federal and state tax purposes, including payroll taxes, that are
applicable to such supplemental taxable income).
Section
7.
Transferability
.
The
Option is not transferable by the Participant other than by will or by the
laws
of descent and distribution, and during the
Participant’s
life, may be exercised only by the Participant. It may not be assigned,
transferred (except as aforesaid), pledged or hypothecated by the Participant
in
any
way
whether by operation of law or otherwise, and shall not be subject to execution,
attachment or similar process. Any attempt at assignment, transfer, pledge
or
hypothecation, or other disposition of this Option contrary to the provisions
hereof, and the levy of any attachment or similar process upon this option,
shall
be
null
and void and without effect.
Section
8.
Definitions
.
For
purposes of the Option Terms, words and phrases shall be defined as
follows:
(a)
“
Cause
”
shall
mean: (
i
) a
material violation by Participant of any applicable material law or regulation
respecting the business of
Company
or Subsidiary; (
ii
) Participant
being found guilty of a felony or an act of dishonesty in connection with the
performance of his duties as an employee or officer
of
the
Company or Subsidiary, or which disqualifies Participant from serving as an
officer or director of the Company or Subsidiary; (
iii
) the
willful or negligent failure
of
Participant to perform his duties hereunder in any material respect;
(
iv
) Participant
engages in one or more unsafe or unsound banking practices that have a material
adverse
effect on the Company or Subsidiary; or (
v
) Participant
is removed or suspended from banking pursuant to Section 8(e) of the
Federal Deposit Insurance Act,
as
amended, or any other applicable state or federal law.
(b)
“Compete”
shall
mean, except with the express prior written consent of the Company, within
a
period of two (2) years after the Date of Termination,
the
direct or indirect competition with the business of the Company or Subsidiary,
including the direct or indirect owning, managing, operating, controlling,
financing
or
serving as an officer, employee, director or consultant to, or by soliciting
or
inducing, or attempting to solicit or induce, any employee or agent of the
Company
or
Subsidiary to terminate employment and become employed by, any person, firm,
partnership, corporation, trust or other entity which owns or operates, within
a
fifty
(50)
mile
radius of the office of the Company or Subsidiary in which the Participant
is
principally located, (i) a bank, savings and loan association, credit
union,
consumer
finance company, brokerage firm, or similar financial institution, (ii) an
insurance business, agency or similar entity which has as a material component
of its
business
the sale or brokerage of insurance products and services similar to those
offered by the Company or Subsidiary as of the Date of Termination, or
(c) a fleet
leasing
company, fleet management company or similar entity which provides as a material
component of its business the products and services offered by the Company
or
a
Subsidiary as of the Date of Termination.
(c)
“
Date
of Termination
”
shall
mean the first day occurring on or after the Grant Date on which the Participant
is not employed by the Company
or
any
Subsidiary, regardless of the reason for the termination of employment;
provided
that a
termination of employment shall not be deemed to occur by reason
of
a
transfer of the Participant between the Company and a Subsidiary or between
two
Subsidiaries; and further
provided
that the
Participant’s employment shall
not
be
considered terminated while the Participant is on a leave of absence from the
Company or a Subsidiary approved by the Participant’s employer. If, as a
result
of
a sale
or other transaction, the Participant’s employer ceases to be a Subsidiary (and
the Participant’s employer is or becomes an entity that is separate from the
Company),
and the Participant is not, at the end of the 30-day period following the
transaction, employed by the Company or an entity that is then a Subsidiary,
then
the
date
of the occurrence of such transaction shall be treated as the Participant’s Date
of Termination caused by the Participant being discharged by the
employer.
(d)
“
Disability
”
shall
mean a physical or mental disability (within the meaning of
Section 22(e)(3) of the Code) which impairs the individual’s ability
to
substantially perform his or her current duties for a period of at least six
(6)
consecutive months, as determined by the Committee.
(e)
“
Retirement
”
of
the
Participant means, the occurrence of the Participant’s Date of Termination on or
after the date (i) the Participant reaches the age
of
fifty-five (55) and has ten (10) years of combined service with the Company
or
Subsidiary (as determined by the Committee), or (ii) the Participant
retires pursuant to
the
provisions of any defined benefit retirement plan sponsored by the Company
or
its subsidiaries that is then applicable to the Participant, all of the
foregoing as
approved
by the Committee.
Section
9.
Heirs
and Successors
.
The
Option Terms shall be binding upon, and inure to the benefit of, the Company
and
its successors and assigns, and
upon
any
person acquiring, whether by merger, consolidation, purchase of assets or
otherwise, all or substantially all of the Company’s assets and business.
If
any
rights of the Participant or benefits distributable to the Participant under
this Agreement have not been exercised or distributed, respectively, at the
time
of the
Participant’s
death, such rights shall be exercisable by the Designated Beneficiary, and
such
benefits shall be distributed to the Designated Beneficiary, in
accordance
with
the
provisions of this Agreement and the Plan. The “
Designated
Beneficiary
”
shall
be the beneficiary or beneficiaries designated by the Participant in a writing
filed
with the Committee in such form and at such time as the Committee shall require.
If a deceased Participant fails to designate a beneficiary, or if the Designated
Beneficiary
does not survive the Participant, any rights that would have been exercisable
by
the Participant and any benefits distributable to the Participant shall
be
exercised
by or distributed to the legal representative of the estate of the Participant.
If a deceased Participant designates a beneficiary and the Designated
Beneficiary
survives
the Participant but dies before the Designated Beneficiary’s exercise of all
rights under this Agreement or before the complete distribution of benefits
to
the
Designated
Beneficiary under this Agreement, then any rights that would have been
exercisable by the Designated Beneficiary shall be exercised by the legal
representative
of
the
estate of the Designated Beneficiary, and any benefits distributable to the
Designated Beneficiary shall be distributed to the legal representative of
the
estate of
the
Designated Beneficiary.
Section
10.
Administration
.
The
authority to manage and control the operation and administration of the Option
Terms shall be vested in the Committee,
and
the
Committee shall have all powers with respect to the Option Terms as it has
with
respect to the Plan. Any interpretation of the Option Terms by the Committee
and
any
decision
made by it with respect to the Option Terms is final and binding on all
persons.
Section
11.
Plan
Governs
.
Notwithstanding
anything in the Option Terms to the contrary, the Option Terms shall be subject
to the terms of the Plan, a copy
of
which
may be obtained by the Participant from the office of the Secretary of the
Company; and the Option Terms is subject to all interpretations, amendments,
rules
and
regulations promulgated by the Committee from time to time pursuant to the
Plan.
Section
12.
Not
An Employment Contract
.
The
Option will not confer on the Participant any right with respect to continuance
of employment or other
service
with the Company or any Subsidiary, nor will it interfere in any way with any
right the Company or any Subsidiary would otherwise have to terminate or modify
the
terms
of
such Participant’s employment or other service at any time.
Section
13.
No
Rights As Shareholder
.
The
Participant shall not have any rights of a shareholder with respect to the
Shares subject to the Option, until a stock
certificate
has been duly issued following exercise of the Option as provided
herein.
Section
14.
Amendment
.
The
Option Terms may be amended in accordance with the provisions of the Plan,
and
may otherwise be amended by written
agreement
of the Participant and the Company without the consent of any other
person.
HEARTLAND
FINANCIAL USA, INC.
By:
Mark
C.
Falb
Chairman,
Nominating/Compensation Committee