Heartland Financial USA, Inc.
Heartland
Financial USA, Inc.
2005
Long-Term Incentive Plan
THIS
PERFORMANCE
RESTRICTED STOCK AGREEMENT
(this
“Agreement”),
entered into as of the Grant Date (as defined in Section
1(b)),
by and
between the Participant and Heartland Financial USA, Inc., a Delaware
corporation (the “Company”);
WITNESSETH
THAT:
WHEREAS,
the
Company maintains the Heartland Financial USA, Inc. 2005 Long-Term Incentive
Plan (the “Plan”),
which
is incorporated into and forms a part of this Agreement, and the Participant
has
been selected by the committee administering the Plan (the “Committee”)
to
receive a Restricted Stock Award under the Plan;
NOW,
THEREFORE, IT IS AGREED, by
and
between the Company and the Participant, as follows:
Section
1. Terms
of Award.
The
following terms used in this Agreement shall have the meanings set forth in
this
Section
1:
(a) The
“Participant”
is
.
(b) The
“Grant
Date”
is
.
(c) The
number of “Covered Shares” awarded under this Agreement is
shares.
“Covered
Shares”
are
shares of Stock granted under this Agreement and are subject to the terms and
conditions of this Agreement and the Plan.
Except
where the context clearly implies to the contrary, any capitalized term in
this
Agreement shall have the meaning ascribed to that term under Section
9
of this
Agreement or the Plan.
Section
2. Award.
The
Participant is hereby granted the number of Covered Shares set forth in
Section
1(c),
subject
to the terms and conditions of this Agreement and the Plan.
Section
3. Dividends
and Voting Rights.
(a) No
dividends shall be payable to or for the benefit of the Participant for Covered
Shares with respect to record dates occurring prior to the Vesting Date of
such
shares.
(b) The
Participant shall be entitled to vote the Covered Shares during the Restricted
Period to the same extent as would have been applicable to the Participant
if
the Participant was then vested in the shares; provided,
however, that
the
Participant shall not be entitled to vote the shares with respect to record
dates for such voting rights arising prior to the Grant Date, or with respect
to
record dates occurring on or after the date, if any, on which the Participant
has forfeited those Covered Shares.
Section
4. Retention
of Covered Shares.
Each
share of Stock issued with respect to the Covered Shares granted under this
Agreement shall be registered in the name of the Participant and shall be
retained by the Company during the applicable Restricted Period (as defined
in
Section
5(a)).
Section
5. Vesting
and Forfeiture of Shares.
(a) Covered
Shares may not be sold, assigned, transferred, pledged or otherwise encumbered
(“Restrictions”)
until
the expiration of the Restricted Period or, if earlier, until the Participant
is
vested in the shares. Except as otherwise provided in this Section
5,
the
Participant shall forfeit the unvested Covered Shares (whether or not earned)
as
of a Date of Termination (as defined in Section
9(i))
that
occurs during the Restricted Period.
All
Covered Shares shall be forfeited as of December 31, 2009, to the extent not
earned as of such date. A Participant shall earn and later vest in the Covered
Shares and then own the shares free and clear of all Restrictions pursuant
to
this Section 5. With respect to all Covered Shares, the “Restricted
Period”
shall
begin on the Grant Date and shall end on the “Vesting
Date”
applicable to such shares (subject to the “Slip-Back” exception provided in
paragraph (g) below).
(b) Portions
of the Covered Shares shall be eligible to be earned upon on the attainment
of
Performance Measures (provided in Exhibit
A)
based
on the following allocations:
|
PERCENTAGE
OF COVERED SHARES -
FOR
COMPANY EMPLOYEES
|
||
|
COVERED
SHARES
|
EARNINGS
GROWTH
|
ASSET
GROWTH
|
|
100%
BASED ON COMPANY PERFORMANCE
|
70%
(“Company
Earnings Shares”)
|
30%
(“Company
Asset Shares”)
|
|
PERCENTAGE
OF COVERED SHARES -
FOR
BANK EMPLOYEES
|
||
|
COVERED
SHARES
|
EARNINGS
GROWTH
|
ASSET
GROWTH
|
|
50
% BASED ON COMPANY PERFORMANCE
|
35%
(“Company
Earnings Shares”)
|
15%
(“Company
Asset Shares”)
|
|
50
% BASED ON BANK PERFORMANCE
|
35%
(“Bank
Earnings Shares”)
|
15%
(“Bank
Asset Shares”)
|
(c) As
of
each December 31 during the Restricted Period (a “Measurement
Date”),
the
Company will determine the actual growth in the earnings and the assets at
both
the Company and Bank level and calculate the number of Covered Shares earned
as
of such date.
(d) The
“Earned
Shares”
for
any
Measurement Date shall be the sum of the following products:
(i) Company
Earnings Shares times the Company Earnings Percentage;
(ii) Company
Asset Shares times the Company Asset Percentage;
(iii) Bank
Earnings Shares times the Bank Earnings Percentage; plus
(iv) Bank
Asset Shares times the Bank Asset Percentage.
(e)
Subject
to paragraph (g)(iii),
as of
each Measurement Date, the excess of the Earned Shares for such Measurement
Date
over the number of Earned Shares as of the last Measurement Date are
“Newly
Earned Shares.”
(f) Only
Earned Shares will be eligible for vesting. Newly Earned Shares will vest,
and
become “Vested
Shares”
upon
the two-year anniversary of the Measurement Date on which they became Newly
Earned Shares (such anniversary, the “Vesting
Date”)
if the
Participant has remained continually employed through such two-year
period;
provided,
however,
if as of
the scheduled Vesting Date there is a “Slip-Back” (as defined in Section
9(o)),
then
such Earned Shares shall not vest on such date. If there is a Slip-Back, the
applicable Vesting Date for such Earned Shares shall be delayed and shall,
if
ever, occur on the first Measurement Date following the Slip-Back, on which
the
Performance Measures applicable to such shares are met, at which time the Earned
Shares shall become Vested Shares and the Participant shall own the shares
free
of all Restrictions otherwise imposed by this Agreement; provided,
however,
that no
such Vesting Date may occur, if at all, later than December 31,
2011.
(g) Not
withstanding the foregoing provisions of this Section
5:
(i) Upon
a
Date of Termination, which occurs due to the Participant’s death, Disability (as
defined in Section
9(l))
or due
to the termination of the Participant’s employment for reasons other than Cause
(as defined in Section
9(h)),
prior
to the end of the Restricted Period, the Participant shall become vested in
the
Earned Shares, become owner of all of such Covered Shares free of all
Restrictions otherwise imposed by this Agreement and all unearned Covered Shares
shall be immediately forfeited as of such Date of Termination.
(ii) Upon
a
Date of Termination, which occurs due to the Participant’s Retirement (as
defined in Section
9(m)),
prior
to the end of the Restricted Period and after the Participant has at least
10
years of service and has attained the age of 55; (A) all unearned Covered Shares
shall continue to be subject to the earning provisions of this Section
5
as if
Participant’s employment continued throughout the original Restriction Period
and such shares will become Vested Shares if, and when, they become Earned
Shares, and (B) all Earned Shares at the time of Retirement shall immediately
become Vested Shares; provided,
however, that
all
unearned Covered Shares shall be immediately forfeited if the Participant
violates any applicable confidentiality, non-solicitation or non-competition
agreement in effect between the Participant and the Company or Subsidiary.
If at
the time of the Participant’s Retirement, the Participant does not have least 10
years of service with the Company or has not attained the age of 55, then the
provisions of (A) in the immediately preceding sentence will not apply and
all
unearned Covered Shares shall be immediately forfeited as of such Date of
Termination.
(iii) Upon
a
Change in Control of the Company; (A) all Earned Shares shall immediately become
Vested Shares, and (B) all unearned shares shall become Vested Shares if the
Plan and this Agreement are not fully assumed in such Change in Control
transaction; provided,
however,
that
after a Change in Control, to the extent the Plan and this Agreement are
assumed, the unearned Covered Shares will become Vested Shares upon the
Participant’s termination of employment by the Company (or successor entity) for
reasons other than Cause or by the Participant for Good Reason (as defined
in
Section
9(m)),
where
either termination occurs within twelve (12) months following
the Change in Control.
Section
6. Adjustments.
In
addition to any adjustments to this Agreement permitted under the Plan, the
Committee may, in its sole discretion, make any reasonable adjustments to the
Performance Measures and targets that it deems appropriate to reflect
effects
of the following items, to the extent identified in the audited financial
statements of the Company, including footnotes, or in the Management Discussion
and Analysis section of the Company’s annual report: (i) extraordinary,
unusual, and/or nonrecurring items of gain or loss; (ii) gains or losses on
the
disposition of a business; (iii) changes in tax or accounting principles,
regulations or laws; or (iv) mergers or acquisitions.
The
foregoing adjustments shall only be permissible by the Committee, as determined
in the sole discretion of the Committee, to the extent such adjustments do
not
unfairly benefit or penalize the Participant.
Section
7. Circuit
Breaker.
As of
any Measurement Date, no unearned Covered Shares may become Earned Shares if
as
of such date there exists a material weakness in safety, soundness, and
compliance (e.g., a regulatory memorandum of understanding), at the Company
level or the Bank level, as determined in the sole discretion of the Committee
(a “Circuit
Breaker”),
such
that a Circuit Breaker at the Bank level will prevent the earning of Covered
Shares for Participants employed by that Bank and that a Circuit Breaker at
the
Company level shall prevent the earning of Covered Shares by all Participants
as
of such Measurement Date.
Section
8. Withholding.
The
grant
and vesting of shares of Stock under this Agreement are 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 through the surrender of shares
of
Stock which the Participant already owns, or to which the Participant is
otherwise entitled under the Plan.
Section
9. Definitions.
For
purposes of this Agreement, words and phrases shall be defined as
follows:
(a) “Actual
Bank Asset Growth”
shall
mean the actual bank asset growth as determined by the Committee, but in no
event greater than the Target Bank Asset Growth.
(b) “Actual
Cumulative Bank Earnings”
shall
mean the actual bank earnings growth as determined by the Committee, but in
no
event greater than the Target Cumulative Bank Earnings.
(c) “Actual
Company Asset Growth”
shall
mean the actual company asset growth as determined by the Committee, but in
no
event greater than the Target Company Asset Growth.
(d) “Actual
Cumulative Company Earnings”
shall
mean the actual company earnings growth as determined by the Committee, but
in
no event greater than the Target Cumulative Company Earnings.
(e) “Bank”
shall
mean the Participant’s employer, as may be applicable.
(f) “Bank
Asset Percentage”
shall
mean the Actual Bank Asset Growth as of a particular Measurement Date divided
by
the Target Bank Asset Growth.
(g) “Bank
Earnings Percentage”
shall
mean the Annual Cumulative Bank Earnings as of a particular Measurement Date
divided by the Target Cumulative Bank Earnings.
(h) “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.
(i) “Company
Asset Percentage”
shall
mean the Actual Company Asset Growth as of a particular Measurement Date divided
by the Target Company Asset Growth.
(j) “Company
Earnings Percentage”
shall
mean the Annual Cumulative Company Earnings as of a particular Measurement
Date
divided by the Target Cumulative Company Earnings.
(k) “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
occurrence of such transaction shall be treated as the Participant’s Date of
Termination caused by the Participant being discharged by the
employer.
(l) “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.
(m) “Good
Reason”
shall
mean upon the occurrence of any one of the following events:
(i) Participant
is not re-elected or is removed from the position with the Company or
Subsidiary, other than as a result of Participant’s election or appointment to a
position or positions of equal or superior scope and responsibility;
(ii) Participant
shall fail to be vested by Company or Subsidiary with the powers, authority
and
support services of any of said position or positions;
(iii) The
Participant is subjected to objectively difficult or unpleasant working
conditions to the extent that a reasonable employee would feel compelled to
resign, provided the Company has been given at least fifteen (15) days notice
of
such conditions and Participant's intent to resign and the Company fails to
remedy such conditions within such fifteen (15) days;
(iv) Participant
is subjected to conditions constituting constructive discharge, as defined
by
Iowa statute or common law.
(n) “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.
(o) “Slip-Back”
shall
mean
where,
as of any Vesting Date, the Performance Measures utilized to determine whether
such Covered Shares became Earned Shares are not currently met or exceeded.
The
Slip-Back shall continue until such Performance Measures are
attained.
(p) “Target
Bank Asset Growth”
shall
mean the set dollar amount reflected on Exhibit
A
with
respect to the Participant’s employer.
(q) “Target
Company Asset Growth”
shall
mean the set dollar amount reflected on Exhibit
A.
(r) “Target
Cumulative Bank Earnings”
shall
mean the set dollar amount reflected on Exhibit
A
with
respect to the Participant’s employer.
(s) “Target
Cumulative Company Earnings”
shall
mean the set dollar amount reflected on Exhibit
A.
Section
10. Heirs
and Successors.
This
Agreement 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
11. Administration.
The
authority to manage and control the operation and administration of this
Agreement shall be vested in the Committee, and the Committee shall have all
powers with respect to this Agreement as it has with respect to the Plan. Any
interpretation of the Agreement by the Committee and any decision made by it
with respect to the Agreement is final and binding.
Section
12. Plan
Governs.
Notwithstanding
anything in this Agreement to the contrary, the terms of this Agreement 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.
Section
13. Amendment.
This
Agreement 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.
IN
WITNESS WHEREOF, the
Participant has executed this Agreement, and the Company has caused these
presents to be executed in its name and on its behalf, all as of the Grant
Date.
PARTICIPANT
HEARTLAND
FINANCIAL USA, INC.
By:
Its:
Heartland
Financial USA, Inc.
2005
Long-Term Incentive Plan
Exhibit
A
Performance
Targets for January 2005
Performance-Based
Restricted Stock Awards
|
ENTITY
|
TARGET
CUMULATIVE EARNINGS
|
TARGET
ASSET GROWTH
|
|
Heartland
Financial USA, Inc.
|
||
|
Arizona
Bank & Trust
|
||
|
Dubuque
Bank & Trust
|
||
|
First
Community Bank
|
||
|
Galena
State Bank & Trust
|
||
|
Heartland
Business Bank
|
||
|
New
Mexico Bank & Trust
|
||
|
Riverside
Community Bank
|
||
|
Rocky
Mountain Bank
|
||
|
Wisconsin
Community Bank
|
