Subscription and Shareholder Agreement
Exhibit
10.1
________________________
This Subscription
and Shareholder Agreement (this “Agreement”) dated as
of September 21, 2007, is among Heartland Financial USA, Inc.,
a Delaware corporation (the "Company"), and those individuals
or entities who have signed this Agreement and whose subscriptions have been
accepted by the Company (individually referred to as an
"Investor" and collectively as the
"Investors").
Recitals
A. The
Company, certain Investors and B-Opportunities LLC entered into that certain
Agreement to Organize dated as of August 2, 2006 (the “Initial
Agreement”), and relating to the evaluation of bank charter and
acquisition opportunities in the Minneapolis-St. Xxxx metropolitan area
(“Market Area”).
B. The
Company and the Investors (collectively, the “Organizers”)
desire to organize a new bank under the laws of the State of Minnesota with
its
main office to be located in the Market Area, to be known as “Minnesota Bank
& Trust” (the “Bank”).
C. Pursuant
to
the terms of this Agreement, the Organizers intend to provide the initial
capitalization of the Bank, to take all steps necessary to obtain authorization
for and prepare the Bank to engage in the business of banking and to effect
all
of the other actions contemplated by this Agreement (collectively,
the “Transaction”).
D. The
Organizers understand that the Transaction requires the approval of the Board
of
Governors of the Federal Reserve System (“Federal Reserve”),
Minnesota Department of Commerce (“Commerce”), and Federal
Deposit Insurance Corporation (“FDIC”).
E. Upon
approval of the organization of the Bank, the Organizers will cause the Bank
to
issue shares of its capital stock (“Bank Stock”) to each of the
Organizers in proportion to their aggregate investment in the Bank’s
organization and capitalization and as otherwise provided in this
Agreement.
F. The
Organizers desire to impose certain restrictions on the sale, transfer or other
disposition of the Bank Stock owned by the Organizers and to give the Company
and the Investors the option to purchase and sell the shares of Bank Stock
owned
by them under certain circumstances specified in this Agreement.
Now,
Therefore, in consideration of the mutual covenants
herein contained and for other good and valuable consideration, the receipt
of
which is hereby acknowledged, each of the Organizers, intending to be legally
bound hereby, agrees as follows:
Agreements
Article
1
Bank
Organization and Stock Subscription
Section
1.1 Charter. The
Organizers agree to take all actions reasonably required to prepare and file
all
regulatory applications, including, but not limited to, applications with the
Federal Reserve, Commerce and FDIC, and to use their reasonable best efforts
to
obtain all approvals and authorizations as may be deemed necessary or advisable
to establish and authorize the Bank to engage in the business of banking and
otherwise to effect the Transaction. The date the Bank commences
banking business with the public is referred to as the “Charter
Date.” Each of the undersigned authorizes Xxxx X. Xxxxxxx,
an executive officer of the Company, or such other individual who may be chosen
from time to time by the Company, to serve as the undersigned’s lawful agent in
connection with the Transaction (the “Agent”), and further
acknowledges employment of Xxxx Xxxxx as the Bank’s proposed
president (the “President”) effective July 9,
2007. The Agent and the President, from and after the effective date
of her employment, shall be primarily responsible for: (a) preparing and filing
all regulatory applications deemed by them to be necessary to effect the
Transaction, including, but not limited to, applications with the Federal
Reserve, Commerce and FDIC (the “Applications”); (b) the
preparation of all related market studies, business plans, policies, procedures
and other documentation necessary to support the Applications; (c) the selection
of the Bank’s main office location; (d) the identification and recruitment of
the Bank’s senior management team; and (e) the identification and engagement of
legal, accounting and other professionals to assist in the preparation of the
Applications and organization of the Bank. The President shall be
compensated in the manner provided in the Offer of Employment from the Company
to the President (the “Employment Offer”). Each of the
Organizers agrees to cooperate fully with the President and the Agent in such
efforts.
Section
1.2 Subscriptions
for Bank Stock.
(a) The
aggregate investment in the organization and initial capitalization of the
Bank
shall be Sixteen Million Dollars ($16,000,000) and the Bank’s initial
capitalization shall be the amount of such investment paid in as of the Charter
Date, net of any pre-opening and organizational expenses that may not be
included in the Bank’s capitalization (the “Initial
Capitalization”) and shall be comprised of sixteen thousand (16,000)
shares with a par value of ten dollars ($10) per share. The
Organizers agree to the following subscriptions for Bank Stock and to cause
the
Bank to accept the same upon the completion of its formation:
(i) the
Company agrees to subscribe for and purchase Twelve Thousand Eight Hundred
(12,800) shares of Bank Stock representing eighty percent (80%) of the initial
issuance of Bank Stock, for an aggregate investment of Twelve Million Eight
Hundred Thousand Dollars ($12,800,000); and
(ii) the
Investors severally, and not jointly, agree to subscribe for and purchase that
number of shares of Bank Stock set forth on his, her or its signature page
to
this Agreement, which shall not, in the aggregate, exceed Three Thousand Two
Hundred (3,200) shares of Bank Stock or represent more than twenty percent
(20%)
of the initial issuance of Bank Stock, for an aggregate investment of up to
Three Million Two Hundred Thousand Dollars ($3,200,000) (the “Investor
Subscription Pool”). The Organizers may reserve a portion of the Bank
Stock in the Investor Subscription Pool, to be allocated to Bank directors,
senior management and additional key investors, as further provided in Section
2.3 of this Agreement. If, as a result of such allocation, the entire aggregate
investment amount will not be paid or earned on or before the Charter Date,
then
the number of shares initially issued from the Investor Subscription Pool may
be
reduced as necessary and the un-issued portion of such shares shall be issued
by
the Bank as and when paid for or earned.
(b) Except
as
provided below in this Section
1.2(b), payment by an Organizer of the aggregate cash amount for
the Organizer’s subscription for Bank Stock (the “Subscription
Amount”) shall be made in two installments, with the first installment
in an amount equal to ten percent (10%) of the Organizer’s aggregate
Subscription Amount (the “First Installment”), and the second
installment equal to the balance of the Organizer’s Subscription Amount (the
“Second Installment”). Each of the Organizers
irrevocably agrees to deliver to the Agent either cash, or check(s) made payable
to “Minnesota Bank & Trust – Escrow Account”:
(i) In
the
amount of the Organizer’s First Installment concurrently with the date of each
Organizer’s execution of this Agreement; and
(ii) In
the
amount of the Organizer’s Second Installment as and when required in order to
complete the organization of the Bank and satisfy the conditions or requirements
of any regulatory applications or approvals, but no later than the Charter
Date,
unless the Agent and the President jointly determine additional funds are needed
prior to that time to complete the Transaction, in which case the Agent and
President may jointly request that all or a portion of each Organizer’s Second
Installment be paid in advance of such date; and in each case as reflected
in a
written notice to the Organizers delivered at least ten (10) days prior to
the
due date for payment of the Second Installment or any portion
thereof.
(c) The
Organizers agree that if the Charter Date shall not have occurred by the date
which is eighteen (18) months after the date of this Agreement
(“Termination Date”), unless such time is extended by written
agreement of the Company and Investors who have subscribed for not less than
a
majority of the shares in the Investor Subscription Pool, this Agreement shall
terminate and each of the Organizers shall:
(i) receive
a
pro rata portion of that portion of the Subscription Amount previously
paid by the Organizers after satisfaction of all expenses incurred in attempting
to organize the Bank and complete the Transaction; and
(ii) accept
such distribution in full satisfaction of any amounts due under this Agreement
to or from any of the other Organizers, including the Company.
Notwithstanding
the foregoing, in the event the Investors do not agree to extend the Termination
Date in the manner provided above and the Charter Date has not occurred before
the originally scheduled Termination Date, then the Company shall have the
option, in its sole discretion and in lieu of terminating this Agreement, to
assume the rights, duties and obligations of the Investors with respect to
the
Transaction, the Bank and the Investor Subscription Pool by paying each of
the
Investors the entire Subscription Amount previously paid by them and not
otherwise reimbursed in accordance with this Section.
Section
1.3 Deposit
and Pre-Opening Expenditure of Organizers’
Funds. All funds collected from the
Organizers pursuant to this Agreement (the “Organizers’ Funds”)
shall be deposited into a non-interest bearing account (the
“Organization Account”) established with the Dubuque Bank and
Trust Company, Dubuque, Iowa (the “Escrow
Bank”). Upon the signature of the President or Agent, funds
may be withdrawn from the Organization Account only to be used to pay normal
and
customary expenses relating to the Transaction, including, but not limited
to,
the following:
(a) expenses
arising from or relating to the organization, capitalization and operation
of
the Bank, including the filing of all necessary regulatory applications with
the
Federal Reserve, Commerce and FDIC to effect the Transaction;
(b) accounting,
auditing, legal, market study, investment banking, due diligence and appraisal
expenses relating to or in connection with the Transaction;
(c) salary
payments to the President and to any other proposed officers or employees of
the
Bank that are deemed necessary by the Agent;
(d) expenses
relating to the lease, acquisition or development of real estate for the Bank’s
main office; and
(e) other
expenses arising from or directly relating to the Transaction;
provided,
however, that any expenditure in excess of Five Thousand Dollars ($5,000)
shall require the joint authorization of the President and the
Agent. The President and the Agent shall jointly compile a budget of
estimated expenses relating to the Transaction (the “Operating
Budget”). The Organizers hereby acknowledge that the
President and the Agent may begin making withdrawals from the Organization
Account immediately, and accordingly, if the Transaction were not consummated,
the Organizers would not receive a refund of 100% of the Subscription Amount
paid by the Organizers, as provided in Section 1.2. The Organizers further
acknowledge and agree that B-Opportunities LLC has incurred expenses on behalf
of the Investors which shall not be eligible for payment from the Organizers’
Funds but for which B-Opportunities may seek reimbursement from the Investors
who were not party to the Initial Agreement in an aggregate amount not to exceed
thirty thousand dollars ($30,000).
Section
1.4 Books
and Records. The President shall ensure
that proper records of all expenditures from the Organization Account are
maintained and such records shall be available for inspection by any
Organizer.
Article
2
Restrictions
on Transfer and Issuance of Bank Stock
Section
2.1 Transfer
Restrictions. Except as otherwise provided in this
Agreement, from the date of this Agreement through the seventh anniversary
of
the Charter Date (the “Restriction Period”) each of the
Investors hereby agrees that he, she or it shall not: (a) directly or
indirectly, sell, exchange, assign, transfer, pledge, hypothecate, give away
(by
lifetime transfer) or otherwise encumber or dispose of any Bank Stock at any
time owned by him, her or it, and (b) for Investors that are entities or trusts,
issue or permit the sale, exchange, transfer, pledge, hypothecation, gift,
encumbrance or disposal of any stock, membership interests, partnership
interests, or other beneficial interest in such entity or trust, or otherwise
effect a change in the individual or individuals that control such entity or
trust at the time the entity or trust became an Investor, whether in their
capacity as trustee, general partner, manager or otherwise (each act or
occurrence described in (a) or (b) individually and collectively a
“Transfer”) without the express prior written consent of the
Company, provided, however, that the foregoing shall not prohibit the
Transfer of Bank Stock without prior written consent of the Company by an
Investor that is not an entity or trust, subject to the restrictions, terms
and
conditions of this Agreement, to any "Permitted Transferee"
which, as to each Investor shall mean an entity or trust which is and will
continue to be for so long as it holds Bank Stock: (a) controlled by such
Investor or by such Investor and one or more other Investors, and (b) owned
by
or for the benefit of such Investor(s), the parents, spouse, lineal descendants
or siblings of such Investor(s), and/or an entity or trust that itself satisfies
the foregoing criteria; provided that each recipient of any Bank Stock
Transferred pursuant to this paragraph is or becomes a party to this Agreement
and agrees to be bound by its terms, and provided further that for
Investors that are entities or trusts, that no prior written consent is required
for a Transfer of any stock, membership interests, partnership interests, or
other beneficial interest in such entity or trust that would not effect a change
in the individual or individuals that control such entity or trust at the time
the entity or trust became an Investor.
Section
2.2 Involuntary
Transfers. If there is an involuntary Transfer or
proposed involuntary Transfer of an Investor’s Bank Stock (e.g. through
divorce, bankruptcy, etc.) at any time (an “Involuntary
Transfer”), then each of the Investor, the Investor’s creditor,
trustee, or other person or entity in possession of the power of sale over
any
Bank Stock, and the involuntary transferee or transferees of any Bank Stock,
as
the case may be, shall give the Company at least sixty (60) days prior written
notice of any proposed, pending, or threatened Transfer, or, with respect to
an
Involuntary Transfer that does not permit the delivery of such prior notice,
as
soon as permitted after the Investor has knowledge of an actual or proposed
Involuntary Transfer. Upon receipt of such notice, the Company shall have the
option, in its sole discretion, to purchase from the Investor, any actual or
intended transferee, or person or entity with the power of sale, any Bank Stock
subject to the actual or proposed Involuntary Transfer, in the manner provided
in Article 3 of this Agreement. In the event the Company fails
to exercise its option under this Section and Article 3, then
the Investor, intended transferee or person or entity with the power of sale
for
such Bank Stock shall be entitled to all of the benefits and subject to all
of
the restrictions applicable to Investors and their Bank Stock, as set forth
in
this Agreement.
Section
2.3 Other
Additional Capital.
(a) The
Organizers agree that the Bank may, from time to time, issue additional shares
of Bank Stock to senior management and directors of the Bank, either as
compensation, or in exchange for the investment of additional capital or both
(“Management Stock”), or to other individuals that the Board of
Directors of the Bank (the “Board”) determines are likely to
make a material contribution to the growth and successful operation of the
Bank
in exchange for additional capital (“Key Investor Stock”),
provided that:
(i) from
and
after the date any Management Stock or Key Investor Stock is issued, such shares
shall be deemed Bank Stock covered by this Agreement and each new investor
in
shares of Bank Stock shall execute and become an Investor under this
Agreement;
(ii) no
more
than Five Hundred Thousand Dollars ($500,000) worth of Management Stock and
Key
Investor Stock will be so issued without the prior written consent of a majority
of the Investors;
(iii) except
as
otherwise provided in this Agreement, the value or price used for determining
the amount of compensation or the investment required for any issuance of
Management Stock or Key Investor Stock authorized by the Organizers on or before
the Charter Date shall be the same per share price applicable to the Organizers
and thereafter shall be as determined by the Board, based on such factors as
the
Board may deem reasonable and appropriate, including, but not limited to the
book value and market value of Bank Stock as well as the value of the
anticipated contributions of the officer, director or key investor to receive
the new shares, but in no event at a value or for a price less than book value;
and
(iv) the
Company shall be entitled to purchase that number of additional shares of Bank
Stock necessary to maintain the Company’s percentage ownership of all
outstanding shares of Bank Stock at eighty percent (80%) and at the same per
share price applicable to the proposed issuance of Management Stock or Key
Investor Stock.
(b) The
Organizers agree that, except as otherwise provided in this Section 2.3, any
additional capital needed by the Bank may be contributed by the Company in
return for the issuance of additional Bank Stock, provided, however,
that:
(i) the
price
per share shall be as determined by the Board, based on such factors as the
Board may deem reasonable and appropriate, including, but not limited to the
book value and market value of Bank Stock, but in no event at a price less
than
book value;
(ii) prior
to
any proposed issuance of additional Bank Stock, the Company shall allow the
Investors the right to purchase additional Bank Stock up to that number of
shares that would be necessary to allow the Investors to maintain the same
percentage ownership of outstanding Bank Stock they enjoyed prior to the
issuance of any additional Bank Stock;
(iii) any
right
of an Investor to purchase any additional shares of Bank Stock pursuant to
the
provisions of this Section shall not be transferable or assignable (except
as
provided in Section 2.1) and any shares of Bank Stock
purchased in connection with the exercise of such right would be subject to
all
the terms of this Agreement;
(iv) any
purchase of additional Bank Stock by an Investor pursuant to the terms of this
Section must be made on the same terms and conditions as the Company;
and
(v) any
such
offer to purchase additional Bank Stock shall be made to all the Investors
in
compliance with applicable laws and regulations.
Except
as
expressly provided in this Section or as required by applicable law, each of
the
Investors hereby acknowledges that they shall have no rights to subscribe for
additional Bank Stock.
Article
3
Repurchase
Options
Section
3.1 Repurchase
Option Following Fifth Anniversary.
(a) Beginning
on the fifth anniversary of the Charter Date (the “Fifth
Anniversary”) and as of the end of each calendar quarter thereafter,
the Company shall have the option, but is not obligated to, purchase from the
Investors, and each of the Investors agrees, upon exercise of such option,
to
sell to the Company, all Bank Stock then owned by the Investors on the terms
set
forth in this Section (“Company
Option”). The Company may exercise the Company Option by
delivering written notice to all Investors no later
than thirty (30) days after the later of the Fifth
Anniversary or the end of the most recent calendar quarter, stating that the
Company Option is being exercised. The total purchase price for the Investors’
Stock shall be an amount equal to the Repurchase Price, as defined
below.
(b) Except
as
provided in this Section, the “Repurchase Price” shall be the
appraised value of Bank Stock as of the later of the Fifth Anniversary or the
end of the most recent calendar quarter (“Appraisal Date”), as
determined by Xxxx Xxxxxxxxxx Management Services, Inc. or its successor, or
if
neither such firm nor its successor is still in existence and performing
appraisals of the stock of commercial banks, then by an independent, nationally
recognized appraisal firm with no less than ten (10) years of experience in
appraising the stock of commercial banks, jointly selected by the Company and
the Investors (the “Appraised Value”). In no event shall the
Appraised Value be an amount that is less than the Floor (defined below) or
greater than the Cap (defined below). For purposes of this Agreement, the
“Floor” shall be an amount equal to a six percent (6%)
compounded annual return on the Investors’ investment, provided that in the
event the Company Option is not exercised as of Fifth Anniversary, the
compounded annual rate of return shall be Prime plus two percent (2%) for the
period following the Fifth Anniversary. For purposes of this
Agreement, the “Cap” shall be: (x) an amount equal to 3.0 times
the tangible book value of Bank Stock as of the Appraisal Date if the book
value
of the Bank’s total assets is two hundred million ($200,000,000) or more, the
Bank has a net profit for the prior twelve month period or on average over
the
prior two years, and the Bank is not subject to a regulatory enforcement order,
civil money penalty notice, memorandum of understanding or similar enforcement
action, or (y) in all other circumstances, an amount equal to 2.25 times the
tangible value of Bank Stock as of the Appraisal Date. For purposes
of this Section: (i) the Appraised Value of Bank Stock shall be determined
as if
100% of the Bank were being sold; (ii) if the value of the Bank or Bank Stock
is
presented as a range, the Appraised Value shall be the mid-point of such range;
(iii) the Bank’s net income and book value shall be adjusted on an after tax
basis to exclude any expenses for the management performance pool, as described
in the President’s Employment Offer under “Additional Bonus”, provided that the
aggregate Repurchase Price shall also be reduced by the amount of such excluded
after tax expenses unless the Repurchase Price is equal to the Floor or Cap;
and
(iv) if corporate overhead is allocated by the Company to the Bank in a manner
which is inconsistent with established company methodology for allocations
to
its affiliates and subsidiaries, then the Bank’s net income and book value will
be adjusted on an after tax basis to reflect a corporate overhead allocation
consistent with such methodology.
(c) The
Repurchase Price shall be paid to Investors (pro rata based upon their
respective percentage ownership of Bank Stock) in two parts:
(i) the
first
part of the Repurchase Price, which shall be equal to each Investor’s total
investment as reflected on such Investor’s signature page to this Agreement,
shall be paid to the Investor, at the Investor’s election (but subject to
compliance with any applicable securities laws) in cash, common stock of the
Company (“Company Stock”) or a combination of cash and Company
Stock; and
(ii) the
second part of the Repurchase Price, which shall be equal to each Investor’s pro
rata share of the remaining balance of the total Repurchase Price, shall be
paid
to each Investor, at the Company’s election (but subject to compliance with any
applicable securities laws) in cash, Company Stock or a combination of cash
and
Company Stock.
For
purposes of this Section, the per share value of Company Stock shall be equal
to
the VWAP, which means the volume weighted average price per share of Company
Stock, rounded to the nearest one-hundredth of a cent, during the
ninety (90) days prior to the Fifth Anniversary. For purposes of
this Agreement, the VWAP shall be calculated using the default criteria for
the
function known as “Bloomberg VWAP” of the AQR function for Company Stock on the
automated quote and analytical system distributed by Bloomberg Financial
LP.
Section
3.2 Other
Sales to or Purchases by the Company. At any time after the date
hereof, an Investor may offer to sell all or part of his, her or its Bank Stock
to the Company and, upon acceptance of such offer by the Company in its sole
discretion, such Bank Stock may be sold to the Company, for a purchase price
of
not less than such Investor’s total investment as reflected on such Investor’s
signature page to this Agreement, plus a six percent (6%) annually compounded
rate of return on such investment, and on such other terms
and conditions as such Investor and the Company may mutually agree. If at any
time after the date hereof, any Bank Stock of an Investor is subject to an
Involuntary Transfer, then the Company shall have the option, in its sole
discretion, to purchase such Bank Stock for a purchase price equal to such
Investor’s total investment as reflected on such Investor’s signature page to
this Agreement, plus a six percent (6%) annually compounded rate of return
on
such investment (the “Involuntary Transfer Option”). The
Company’s Involuntary Transfer Option may be exercised by delivery of notice to
the Investor, intended transferee or person or entity with the power of sale
of
such Bank Stock within thirty (30) days after the Company receives actual notice
of a proposed, pending, or actual Involuntary
Transfer. Notwithstanding the foregoing, an Investor shall first
offer all, but not less than all, of his, her or its Bank Stock to the other
Investors on a pro rata basis provided that such sale or transfer lawfully
is
exempt from registration under the Act, as hereinafter defined, and state
securities laws.
Section
3.3 Repurchase
Upon Company Change of Control. If at
any time after the date hereof there is a proposed “Change of Control” (as
defined below), then immediately prior to such Change of Control, either (a)
the
Company, or its successor, shall purchase from the Investors, and each Investor
agrees to sell to the Company or its successor, all of the Bank Stock then
owned
by the Investors at a price per share equal to the Control Premium Price
(defined below) or, (b) the Investors may elect to exchange their shares of
Bank
Stock for the same consideration to be received by holders of common stock
of
the Company in the transaction comprising the Change of Control, on an as if
converted basis using a per share exchange ratio equal to the book value per
share of Bank Stock divided by the book value per share of Company common stock
as of the end of the most recent calendar quarter. For purposes of
this Section, a “Change of Control” shall mean a transaction
resulting in the acquisition by any person or entity (a “Company
Acquirer”) of:
(a) legal
or
beneficial ownership (as defined by Rule 13d-3 promulgated under the
Securities Exchange Act of 1934, as amended) of greater than two thirds (2/3)
of
the then issued and outstanding Company Stock through any transaction;
or
(b) all
or
substantially all of the assets of the Company.
The
“Control Premium Price” shall be equal to the per share book
value of the Investor’s equity interest in the Bank, multiplied by the same
multiple of book value as paid by the Company Acquirer for the stock or assets
of the Company. For example, if the Company is sold to another entity
for three times the Company’s book value, the Control Premium Price would be
equal to three times the per share book value of the Investor’s equity interest
in the Bank. In the event the consideration to be paid by the Company Acquirer
is not comprised entirely of cash, then, for purposes of determining the Control
Premium Price, any non-cash consideration shall be valued as agreed to by the
parties or, absent such an agreement, the value provided in the applicable
acquisition agreement or, if no value is provided, the VWAP of any publicly
traded securities or the appraised fair market value of any other non-cash
consideration. For purposes of this section, VWAP shall mean the volume weighted
average price per share of such securities, rounded to the nearest one-hundredth
of a cent, during the ninety (90) days prior to repurchase by the
Company.
Section
3.4 Terms,
Time and Place of Closing.
(a) Except
as
otherwise specifically provided by the terms of this Article, the purchase
price
of any Bank Stock purchased by the Company or its successor from any Investor
pursuant to the terms of this Article 3 shall be paid by wire transfer of
immediately available funds to the selling Investor or Investors in the amount
of the purchase price prescribed by the terms of this Article 3.
(b) Except
as
otherwise specifically provided by the terms of this Article 3, the closing
of
the purchase and sale of any Bank Stock to be purchased and sold pursuant to
the
provisions of this Article (the “Closing”) shall be held at
such place and time and on such date as may mutually be agreed upon in writing
by the Investor and the Company, or, if they fail to agree, at the main office
of the Company at 10:00 a.m. on the later of:
(i) the
tenth (10th) Business
Day (as
defined below) following the determination of the purchase price to be paid
in
connection with such purchase of such Bank Stock;
(ii) thirty (30)
Business Days following the action or occurrence that triggers the obligation
to
purchase such Bank Stock; and
(iii) five (5)
Business Days after the receipt of any necessary regulatory approvals for such
purchase.
(c) Except
as
otherwise specifically provided by the terms of this Article 3, at the Closing,
the Company shall make the delivery described in subsection (a) of this
Section and the selling Investor shall deliver to the Company free and clear
of
all liens, claims and encumbrances (other than those imposed by this Agreement
and evidenced by the legend provided for below), a certificate or certificates
representing the Bank Stock to be purchased and sold, duly endorsed in blank,
with all taxes on the transfer, if any, paid by the transferor
thereof.
(d) The
consummation of any purchase of Bank Stock pursuant to this Article (the
“Sale Stock”) shall be subject to the receipt by the Company of
any necessary regulatory approvals, which the Company agrees to use its
commercially reasonable best efforts to obtain as soon as practicable,
provided, however, that if the Company is unable to obtain such
regulatory approvals within one hundred twenty (120) days after the last
date provided in Section 3.4(b)(i)
or Section 3.4(b)(ii), or such
longer period of time as may be mutually agreed upon by the Company and the
sellers of the Sale Stock, then:
(i) each
of
the prospective sellers of the Sale Stock shall be released from any further
obligations pursuant to the terms of this Agreement solely with respect to
such
Sale Stock and shall be free to sell the Sale Stock to any person or entity
free
of any lien or encumbrance imposed by the terms of this Agreement;
and
(ii) the
Company shall be released from any further obligations pursuant to the terms
of
this Agreement with respect to the purchase of the Sale Stock and shall have
no
further rights or obligations with respect to the Sale Stock, other than as
set
forth in Section 3.5 and Section
3.6.
Section
3.5 Tag
Along Right. If the Company proposes to
sell or transfer control of more than a fifty percent (50%) interest in the
Bank
to any non-Affiliate of the Company in one transaction or in a series of related
transactions (a “Tag Along Sale”), then the Investors shall
each have the right to participate in such Tag Along Sale on the following
terms:
(a) The
Company shall give the Investors not less than thirty (30) days written
notice (“Tag Along Sale Notice”) of its intention, describing
the price offered, all other material terms and conditions of the Tag Along
Sale
and, if the consideration payable pursuant to the Tag Along Sale consists in
whole or in part of consideration other than cash, such information relating
to
such other consideration as any Investor may reasonably request.
(b) In
connection with any Tag Along Sale, each Investor shall have the right, in
his,
her or its sole discretion, to participate in such sale on a pro rata basis
and
upon substantially the same terms and conditions, including the amount and
form
of consideration, as the Company, with respect to all, but not less than all,
of
such Investor’s Bank Stock. The Investor shall exercise the rights
under this Section 3.5 (if at all)
within thirty (30) days after receipt of the Tag Along Sale Notice by
submitting written notice of such exercise to the Company. Upon the
exercise of such rights, each Investor shall deliver his, her or its Bank Stock
to the purchaser on substantially the same terms and conditions as the Company
as set forth in the Tag Along Sale Notice.
(c) For
purposes of this Agreement,
(i) “Person”
means any individual, bank, corporation, partnership, limited liability company,
association, joint-stock company, business trust or unincorporated organization;
and
(ii) “Affiliate”
means a Person that directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with, the first mentioned
Person. For purposes of this definition, “control” means the
possession, direct or indirect, of the power to direct or cause the direction
of
management and policies of a Person, whether through the ownership of voting
securities, by contract or otherwise.
Section
3.6 Right
to Compel Sale.
(a) Subject
to the provisions of this Section, if at any time the Company proposes to sell
shares of Bank Stock representing more than a 50% interest in the Bank, then
the
Company shall have the right, exercisable as set forth below, to compel all
of
the Investors to sell to the third party purchaser (a “Compelled
Sale”) all, but not less than all, of the Bank Stock then held by
them. In connection with any Compelled Sale, such Investors will
receive the same consideration payable to the Company and be on the same terms
and conditions applicable to the Company.
(b) If
the
Company elects to exercise its right to cause a Compelled Sale, it will deliver
written notice (a “Compelled Sale Notice”) to each Investor,
setting forth the consideration and describing all other material terms and
conditions of the Compelled Sale, including the proposed closing date, which
shall not be less than thirty (30) days after the date the Compelled Sale
Notice is delivered. Each Investor will deliver the Bank Stock held
by each such Investor to the third party purchaser in accordance with the terms
set forth in the Compelled Sale Notice upon receipt of the consideration
provided for therein.
(c) Notwithstanding
the provisions of Section 3.6(a)
and Section 3.6(b), and in lieu of
complying with the Compelled Sale Notice, any Investor shall have the right
to
purchase from the Company all, but not less than all, of the shares of Bank
Stock the Company desires to sell, but only on the same terms and conditions
as
described in the Compelled Sale Notice, including the proposed closing date
(the
“Minority Right of First Refusal”). If by no later
than thirty (30) days after the date the Compelled Sale Notice is
delivered, an Investor delivers to the Company his, her or its binding written
commitment to exercise this Minority Right of First Refusal and specifying
all
of the terms of such purchase, together with evidence reasonably satisfactory
to
the Company of the financial capability to consummate such exercise (the
“Notice of Exercise”), then all Investors shall be released
from their obligation to participate in the Compelled Sale, provided,
however, that if the exercise of the Minority Right of First Refusal
described in the Notice of Exercise does not occur in accordance with the terms
specified therein, then all Investors shall again be subject to the obligation
to participate in the Compelled Sale. If more than one Investor delivers Notice
of Exercise, as required by this Section, then such Investors’ rights to
purchase the shares of Bank Stock the Company desires to sell shall be allocated
among such Investors, pro-rata based on their ownership of Bank Stock prior
to
such transaction.
Article
4
Representations,
Warranties And Covenants
Section
4.1 Bank
and Bank Operations. Each of the
Organizers agrees to use its, his or her best efforts to cause the Bank to
be
successful. Each of the Organizers acknowledges and agrees that in
addition to core deposit growth, the Organizers will work to expand the Bank’s
operations through selected acquisitions of banks and other financial
institutions in the Market Area, provided, however, that no offer will
be made for any such institution without the prior consent of the
Company.
Section
4.2 Representations,
Warranties and Covenants. Each of the
undersigned Organizers hereby represents and warrants to, and acknowledges
to
and agrees with, the Agent, the President and each other Organizer as
follows:
(a) The
Organizer and, if applicable, the attorney, accountant, executive officer or
financial investment advisor for the Organizer (collectively,
“Advisor”), has had a reasonable opportunity to ask questions
of and receive information and answers from the other Organizers and persons
acting on behalf of the Bank concerning the Transaction and investment in Bank
Stock, all such questions asked have been answered and all such information
requested has been provided to the full satisfaction of the Organizer or the
Organizer’s Advisor. Such information and future oral and written statements of
the Organizers, the Company, the Bank or their management may contain
projections or forward-looking statements with respect to the Bank’s financial
condition, results of operations, plans, objectives, future performance and
business. Projections and forward-looking statements, which may be based upon
beliefs, expectations and assumptions of the Organizers, the Company, the Bank
or their management and on information currently available to management, are
generally identifiable by the use of words such as believe, expect, anticipate,
plan, intend, estimate, may, will, would, could, should or similar expressions.
Additionally, all such information, including projections and other
forward-looking statements, speak only as of the date they are made, and the
Organizers, the Company, the Bank or their management undertake no obligation
to
update any statement in light of new information or future events. A number
of
factors, many of which are beyond the ability of the Organizers, the Company,
the Bank or their management to control or predict, could cause actual results
to differ materially from those in its forward-looking statements. These factors
include, among others, the following: (i) the strength of the local and national
economy; (ii) the economic impact of past and any future terrorist threats
and
attacks and any acts of war; (iii) changes in state and federal laws,
regulations and governmental policies concerning the Bank's general business;
(iv) changes in interest rates and prepayment rates of the Bank's assets; (v)
deposit and loan originations and growth; (vi) Bank asset quality and provisions
for loan losses; (vii) non-interest expense and overhead; (viii) increased
competition in the financial services sector and the inability to attract new
customers; (ix) changes in technology and the ability to develop and maintain
secure and reliable electronic systems; (x) the loss of key executives or
employees; (xi) changes in consumer spending; (xii) unexpected results of
acquisitions; (xiii) unexpected outcomes of new litigation involving the Bank;
and (xiv) changes in accounting policies and practices. Each Organizer
acknowledges that these risks and uncertainties should be considered in
evaluating projections and forward-looking statements and undue reliance should
not be placed on such projections or statements.
(b) Each
Investor acknowledges that he, she or it has received and had an opportunity
to
review the Company’s most recent Form 10-K in connection with such Investor’s
agreement to accept Company Stock upon exercise of the Company Option, to the
extent and in the manner provided in Section 3.1. No offering
memorandum, prospectus, private placement memorandum or financial projections
have been prepared and provided to any Organizer with respect to their
investment in Bank Stock or the Transaction and no oral or written
representations have been made or oral or written information furnished to
the
Organizer or the Organizer’s Advisor(s) in connection with the Organizer’s
agreement to purchase Bank Stock that is in any way inconsistent with the
information stated in this Agreement. The Organizer is investing in a de
novo bank to be organized subsequent to his or her or its investment and
with no financial or operating history, and that the organization and operation
of the Bank therefore entails significant risks.
(c) The
Organizer is not investing as a result of or subsequent to any advertisement,
article, notice or other communication published in any newspaper, magazine
or
similar media or broadcast over television or radio, or presented at any seminar
or meeting, or any solicitation of a subscription by a person not previously
known to each of the undersigned generally or in connection with investments
in
securities.
(d) The
Organizer’s overall commitment to investments that are not readily marketable is
not disproportionate to the Organizer’s net worth and the Organizer’s investment
in the Bank will not cause such overall commitment to become disproportionate
to
the Organizer’s net worth.
(e) Each
Organizer that is an individual has reached the age of majority in the state
in
which the Organizer resides, has adequate net worth and means of providing
for
the Organizer’s current needs and personal contingencies, is able to bear the
substantial economic risks of the investment in the Bank as evidenced by this
Agreement, understands the purchase of the Bank Stock is a long-term investment
and has no need for liquidity in such investment, is in a financial position
to
hold the investment in Bank Stock for an indefinite period of time, and, at
the
present time, could afford a complete loss of such investment.
(f) The
Organizer, individually or acting through its executive officers, has such
knowledge and experience in financial and business matters so as to enable
the
Organizer to utilize the information made available to him, her or it in
connection with his, her or its investment in the Bank in order to evaluate
the
merits and risks of such an investment and to make an informed investment
decision with respect thereto and the Organizer has carefully evaluated the
risk
of such investment.
(g) The
Organizer is not relying on the Agent, the President, any other Organizer or
any
other person acting on behalf of the Bank, the Agent, the President or any
of
the other Organizers with respect to the Organizer’s economic considerations
relating to this investment; and in regard to such considerations, the Organizer
has relied on the advice of, or has consulted with, his, her or its own
Advisor(s).
(h) Each
Organizer that is also an Investor has reviewed with the Organizer’s own tax
advisors the federal, state, local and foreign tax consequences of this
investment and the transactions contemplated by this Agreement, and have and
will rely solely on such advisors and not on any statements or representations
of the Company or any of its agents. The Organizer understands that
the Organizer (and not the Company) shall be responsible for the Organizer’s own
tax liability that may arise as a result of this investment or the transactions
contemplated by this Agreement.
(i) Each
Organizer that is also an Investor represents and warrants that he, she or
it is
a bona fide resident of, is domiciled in and received the offer and made the
decision to invest in the Bank Stock in the state set forth on such Organizer’s
signature page below under “Addresses” and that the shares are being purchased
in the Organizer’s name solely for his, her or its own beneficial interest and
not as nominee for, or on behalf of, or for the beneficial interest of, or
with
the intention to transfer to, any other person, trust or
organization.
(j) Each
Organizer that is also an Investor acknowledges that the Company is under no
obligation to register any Company Stock that the Organizer may receive pursuant
to the terms of this Agreement, and further acknowledges that the receipt by
the
Organizer of any Company Stock is subject to the Company’s ability to satisfy
the requirements of any applicable federal or state securities laws,
provided, however, that during the two and one-half (2½) year period
following the issuance by the Company to any Investor of any shares of the
Company’s common stock pursuant to the terms of this Agreement, the Company
agrees to use its best efforts to file in a timely manner all reports required
to be filed with the Securities and Exchange Commission.
(k) Each
Organizer that is also an Investor represents and warrants that none of the
funds the Organizer will use to purchase Bank Stock will be borrowed
funds.
(l) The
Organizer recognizes that an investment in Bank Stock involves a number of
significant risks, including, without limitation, the following
considerations:
(i) no
Federal or state agency has passed upon the Bank Stock or made any finding
or
determination as to the fairness of the investment in Bank Stock;
(ii) the
shares of Bank Stock have not been registered under the Securities Act of 1933,
as amended (the “Act”), or under the securities laws of any state;
(iii) there
is
no established market for the Bank Stock and it is unlikely that a public market
for the Bank Stock will develop; and
(iv) the
transferability of shares of Bank Stock will be further restricted and governed
by this Agreement.
(m) EACH
ORGANIZER THAT IS AN INVESTOR ACKNOWLEDGES THAT THE INVESTMENT REPRESENTATIONS
AND DECLARATIONS MADE ON SUCH ORGANIZER’S SIGNATURE PAGE TO THIS AGREEMENT ARE
REQUIRED IN CONNECTION WITH THE EXEMPTIONS FROM THE ACT AND STATE LAWS BEING
RELIED ON BY THE BANK WITH RESPECT TO THE OFFER AND SALE OF THE SECURITIES,
ARE
TRUE AND CORRECT AS OF THE DATE OF HIS, HER OR ITS EXECUTION OF THIS AGREEMENT
AND WILL BE TRUE AND CORRECT AS OF THE CHARTER DATE. ALL OF SUCH INFORMATION
WILL BE KEPT CONFIDENTIAL AND WILL BE REVIEWED ONLY BY THE COMPANY AND ITS
COUNSEL. EACH ORGANIZER THAT IS AN INVESTOR AGREES TO FURNISH ANY ADDITIONAL
INFORMATION WHICH THE COMPANY AND ITS COUNSEL DEEM NECESSARY TO VERIFY THE
RESPONSES SET FORTH BELOW.
(n) The
Organizer acknowledges that a legend will be placed on each certificate
representing the Bank Stock substantially as follows:
The
Securities represented by this certificate have not been registered under the
Securities Act of 1933, as amended (the “Act”), and have not been registered
under any state securities laws. These Securities may not be sold,
offered for sale or transferred without first obtaining (i) an opinion of
counsel satisfactory to the Bank that such sale or transfer lawfully is exempt
from registration under the Act and under the applicable state securities laws,
or (ii) such registration.
Voluntary
and involuntary transfer of any of the shares represented by this certificate
are governed by and in all respects subject to the terms and conditions of
that
certain Subscription and Shareholder Agreement among Heartland Financial USA,
Inc. and certain other holders of this Bank’s capital stock dated as of ________
__, 200___, an executed copy of which has been deposited with the Secretary
of
the Bank at its registered office in ____________, Minnesota. Such
Agreement imposes certain obligations on the holder of these shares in certain
circumstances, which obligations and circumstances are described
therein. No transfer of such shares will be made on the books of the
Company unless accompanied by evidence of compliance with the terms of such
Agreement.
(o) Within
five (5) days after receipt of a request from the Agent or the President, the
Organizer hereby agrees to provide such information and to execute and deliver
such documents as may be reasonably necessary to comply with any and all laws
and ordinances to which the Bank is subject.
(p) The
foregoing representations, warranties and agreements, together with all other
representations and warranties made or given by the Organizer in any other
written statement or document delivered in connection with the transactions
contemplated hereby, shall be true and correct in all respects on and as of
the
date of the delivery of such statement or document and as of the Charter Date,
as if made on and as of such dates, and shall survive such date.
Section
4.3 Indemnification. Each
Organizer agrees to indemnify and hold harmless the Bank, the Agent, the
President and each of the other Organizers and all of their respective agents
and representatives who are associated with the Transaction and investment
in
Bank Stock and all of the proposed officers and directors of the Bank against
any and all loss, liability, claim, damage and expense whatsoever (including,
but not limited to, any and all expenses reasonably incurred in investigating,
preparing or defending against any litigation commenced or threatened or any
claim whatsoever) arising out of or based upon any false representations or
warranty or breach or failure by the undersigned to comply with any covenant
or
agreement made by the undersigned herein or in any other document furnished
by
the undersigned to any of the foregoing in connection with the Transaction
and
investment in Bank Stock.
Section
4.4 Additional
Information. Each of the undersigned
hereby acknowledges and agrees that the Agent or the President may make or
cause
to be made such further inquiry and obtain such additional information from
any
of the undersigned as the Agent or President may deem appropriate,
and each of the undersigned hereby agrees to cooperate fully with the Agent
and
the President in this regard.
Section
4.5 Irrevocability;
Binding Effect. Each of the undersigned
hereby acknowledges and agrees that:
(a) the
undersigned is not entitled to cancel, terminate or revoke this Agreement or
any
agreements of each of the undersigned hereunder; and
(b) this
Agreement and such other agreements shall survive the death or disability of
each of the undersigned and shall be binding upon and inure to the benefit
of
the parties and their heirs, executors, administrators, successors, legal
representatives and assigns.
Article
5
Miscellaneous
Section
5.1 Modification. Neither
this Agreement nor any provisions hereof shall be waived, modified, discharged
or terminated except by an instrument in writing signed by the Company, on
the
one hand, and those Investors subscribing for or holding a majority of the
shares of Bank Stock in the Investor Subscription Pool, on the other
hand. The Bank and all of its Organizers shall be bound by any such
modification, waiver, discharge or termination.
Section
5.2 Notices. All
notices, consents, waivers and other communications under this Agreement must
be
in writing (which shall include telecopier communication) and will be deemed
to
have been duly given if delivered by hand or by nationally recognized overnight
delivery service (receipt requested), mailed with first class postage prepaid
or
telecopied if confirmed immediately thereafter by also mailing a copy of any
notice, request or other communication by mail with first class postage prepaid
to any Organizer at the address set forth on each Organizer’s signature page
hereto or to such other person or place as an Organizer shall furnish to the
other Organizers in writing. Except as otherwise provided herein, all
such notices, consents, waivers and other communications shall be
effective:
(a) if
delivered by hand, when delivered;
(b) if
mailed
in the manner provided in this Section, five (5) Business Days after
deposit with the United States Postal Service;
(c) if
delivered by overnight express delivery service (receipt requested), on the
next
Business Day after deposit with such service; and
(d) if
by
telecopier, on the next Business Day if also confirmed by mail in the manner
provided in this Section.
For
purposes of this Agreement, “Business Day” means any day except
Saturday, Sunday and any day on which the Escrow Bank is authorized or required
by law or other government action to close.
Section
5.3 Counterparts. This
Agreement may be executed through the use of separate signature pages or in
any
number of counterparts, and each of such counterparts shall, for all purposes,
constitute one agreement binding on all parties, notwithstanding that all
parties are not signatories to the same counterpart.
Section
5.4 Entire
Agreement. This Agreement contains the
entire agreement of the parties and supersedes all prior oral or written
agreements or understandings with respect to the subject matter hereof,
including but not limited to the Initial Agreement, and there are no
representations, covenants or other agreements except as stated or referred
to
herein.
Section
5.5 Severability. Each
provision of this Agreement is intended to be severable from every other
provision, and the invalidity or illegality of any portion hereof shall not
affect the validity or legality of the remainder hereof.
Section
5.6 Assignability. This
Agreement is not transferable or assignable by any of the undersigned, except
as
otherwise specifically provided in Articles 2 and 3.
Section
5.7 Governing
Law, Jurisdiction and Venue. This
Agreement shall be governed by and construed in accordance with the laws of
the
State of Iowa applied to residents of that state executing contracts wholly
to
be performed in that state. Each of the undersigned irrevocably
agrees that, subject to Section 5.8, any action or proceeding in any way, manner
or respect arising out of this Agreement or any amendment, instrument, document
or agreement delivered or which may in the future be delivered in connection
herewith shall be litigated only in the courts having situs within the City
of
Dubuque, the State of Iowa, and each of the undersigned hereby consents and
submits to the jurisdiction of any state or federal court located within such
city and state. Each of the undersigned hereby waives any right the
Organizer may have to transfer or change the venue of any litigation brought
against the undersigned by the Bank or the Agent.
Section
5.8 Dispute
Resolution. Unless otherwise
specifically provided for in this Agreement, all disputes, controversies, claims
or disagreements arising out of or relating to this Agreement, (singularly,
a
“Dispute,” and collectively, “Disputes”) shall
be resolved in the following manner (the “Dispute Resolution
Process”), provided, however, that the Dispute Resolution
Process shall be commenced only if (x) requested in a written notice (the
“Notice of Dispute”) describing the Dispute that is delivered
to all parties to this Agreement and signed by either the Company, or by
Investors subscribing for or holding a majority of the shares of Bank Stock
in
the Investor Subscription Pool and representing the joint position of all such
Investors signing the Notice of Dispute and (y) the Dispute has a
liquidated monetary value of greater than Five Hundred Thousand Dollars
($500,000):
(a) First,
within ten (10) days after the receipt of Notice of Dispute, the parties
representing the two opposing sides of the Dispute, or representatives of such
parties with decision making authority (collectively, the “Dispute
Parties,” and individually, a “Dispute Party”) shall
meet and negotiate in good faith for a period of fifteen (15) days in an
effort to resolve the Dispute.
(b) Second,
if within such fifteen (15) day period, the Dispute Parties have not succeeded
in negotiating a resolution of the Dispute, they agree to submit the Dispute
to
mediation in Chicago, Illinois, in accordance with the Commercial Mediation
Rules of the American Arbitration Association (“Mediation”) and
to bear equally the costs of the Mediation. The Dispute Parties will
jointly appoint a mutually acceptable mediator, provided, however, that
if they are unable to agree upon such appointment within ten (10) days from
the conclusion of the negotiation period described in Section 5.8(a), then the Dispute
Parties shall request the American Arbitration Association to appoint an
appropriate mediator. The Dispute Parties shall agree to participate
in good faith in the Mediation and negotiations related thereto for a period
of
thirty (30) days.
(c) Third,
if the Dispute Parties are still unable to resolve the Dispute within such
thirty (30) day mediation period, the Dispute Parties shall resolve the Dispute
by submitting the Dispute to binding arbitration in Chicago, Illinois, pursuant
to the procedures set forth in Section
5.8(d) (“Arbitration”).
(d) Each
Dispute Party shall submit the Dispute to Arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association in Chicago,
Illinois, and under the jurisdiction of the American Arbitration Association
in
Chicago, Illinois, subject to the following provisions:
(i) Each
Dispute Party shall set forth in writing and deliver to the arbitrators its
position on the issue(s) in Dispute, provided, however, that in all
Disputes, there shall be only two positions: the Company’s position
and the joint position of all Investors who signed the related Dispute
Notice. The arbitrators shall have the authority only to rule in
favor of one of the two stated positions of one of the Dispute Parties with
respect to each different issue, with no compromises or alternative solutions
permitted. The arbitrators shall have the authority to rule for a
different Dispute Party with respect to each different issue
presented. If one of the Dispute Parties fails to submit its position
to the arbitrators within the time period provided therefor, the arbitrators
shall rule in favor of the stated position of the Dispute Party submitting
such
position.
(ii) Within
ten (10) days after submittal of the Dispute to Arbitration, the Dispute
Parties shall agree upon an arbitrator. If the Dispute Parties are
unable to agree upon an arbitrator, within fifteen (15) days after
submittal to arbitration, each Dispute Party shall appoint an arbitrator and
within ten (10) days of their appointment the two arbitrators so chosen
shall nominate a third arbitrator. If within such ten (10) day
period the two arbitrators fail to nominate the third arbitrator, upon written
request of either Dispute Party, the third arbitrator shall be appointed by
the
American Arbitration Association from its commercial dispute panel of
arbitrators and both Dispute Parties shall be bound by the appointment so
made. If either of the Dispute Parties shall fail to appoint an
arbitrator as required under this Section
5.8(d)(ii), the arbitrator appointed by the other Dispute Party
shall be the sole arbitrator of the matter.
(iii) The
decision of the arbitrators (or such single arbitrator) shall be made within
thirty (30) days of the close of the hearing in respect of the Arbitration
(or such longer time as may be agreed to, if necessary, which agreement shall
not be unreasonably withheld, conditioned or delayed) and the award rendered
by
a majority of the panel of arbitrators (or such single arbitrator) when reduced
to writing and signed by them shall be final, conclusive and binding upon the
Dispute Parties. Any award rendered shall be final and conclusive
upon the Dispute Parties and upon all other Investors and a judgment thereon
may
be entered in the highest court of a forum, state or federal, having
jurisdiction. The expenses of the Arbitration shall be borne equally
by the Dispute Parties, provided that each party shall pay for and bear the
cost
of its own experts, evidence and attorneys’ fees, provided, however,
that in the discretion of the arbitrators, any award may include the fees and
costs of a Dispute Party’s attorney if the arbitrator expressly determines that
the Dispute Party against whom such award is entered has caused the Dispute,
controversy or claim to be submitted to Arbitration in bad faith or as a
dilatory tactic. No Arbitration shall be commenced after the date
when institution of legal or equitable proceedings based upon such subject
matter would be barred by the applicable statute of limitations.
(iv) Notwithstanding
anything contained in this Section
5.8(d), any Dispute Party shall be entitled to:
(A) commence
legal proceedings seeking such mandatory, declaratory or injunctive relief
as
may be necessary to define or protect the rights and enforce the obligations
contained herein or to maintain the “status quo ante”
of the parties to this Agreement pending the settlement
of a Dispute in
accordance with the arbitration procedures set forth in this Section 5.8(d);
(B) commence
legal proceedings involving the enforcement of an Arbitration decision or award
or judgment arising out of this Agreement, or
(C) join
any
Arbitration or legal proceeding arising out of this Agreement with any other
Arbitration or legal proceeding arising out of this Agreement.
The
“status quo ante” is defined as the last peaceable, uncontested status
between the parties to this Agreement, provided, however, that neither the
party
bringing the action nor the party defending the action thereby waives its right
to Arbitration of any dispute, controversy or claim arising out of or in
connection with or relating to this Agreement.
Section
5.9 Certificate
of Non-Foreign Status. Each of the
undersigned declares that, to the best of the Organizer’s knowledge and belief,
the following statements are true, correct and complete with respect to such
Investor:
(a) unless
an
Internal Revenue Service Form 4224 has been completed, each of the
undersigned is not a foreign person for purposes of U.S. income taxation
(i.e., the Organizer is not a nonresident alien, nor executing this
document as an officer of a foreign corporation, as a partner in a foreign
partnership, or as a fiduciary of a foreign employee benefit plan, foreign
trust
or foreign estate);
(b) the
following information, as provided by such Investor and contained elsewhere
in
the subscription documents is true, correct and complete: the U.S. taxpayer
or
employee identification number (e.g., social security number) and
the home address; and
(c) the
undersigned agrees to inform the Bank promptly if the undersigned becomes a
nonresident alien.
Section
5.10 Director
Benefits. To the extent permissible
under applicable state and federal laws and regulations, directors of the Bank
may be afforded directors fees and benefits consistent with those generally
provided to directors of the Company’s other financial institution
subsidiaries.
Section
5.11 Non-Compete,
Solicitation of Customers or Employees.
(a) In
addition to such duties as may be applicable to Organizers serving as officers
or directors of the Bank, each of the Organizers agrees that he, she or it
will
use their best efforts to promote the interests of the Bank in the Market Area
and consistent with the business plans and strategies as may be adopted by
the
Bank from time to time, but in each case only to the extent permitted by
applicable laws and regulations. Each of the Organizers further
agrees that he, she or it will not, without the prior written consent of all
of
the holders of Bank Stock, From the date of this Agreement until
twelve (12) months after such Organizer has sold all of his, her or its
Bank Stock, directly or indirectly (i) own, manage, operate, control,
or finance a Financial Institution (as defined below) to provide community
banking services within the Market Area; (ii) serving as the agent, broker
or
representative of, or otherwise assisting, any person or entity in establishing
or acquiring a Financial Institution to provide community banking services
within the Market Area; (iii) directly or indirectly serve as an employee,
officer or director of a Financial Institution providing community banking
services within the Market Area; or (iv) provide consulting services relating
to
community banking services relative to the Market area for a Financial
Institution, either currently located within the Market Area or attempting
to
enter the Market Area.
For
purposes of the foregoing, a “Financial Institution” means a
bank, savings and loan association, credit union or similar financial
institution, or any person, firm, partnership, corporation, trust or other
entity which owns or operates any of the foregoing. Notwithstanding
anything contained herein to the contrary, and to eliminate any doubt, the
provisions of this Agreement shall not prohibit each of the Organizers from
continuing to conduct their current businesses, nor shall it prohibit the
Company or any of its current subsidiaries and affiliates from continuing to
engage in banking and lending activities within the Market
Area. Further, nothing contained in this Section 5.11 shall be deemed
to prohibit the ownership by an Investor of up to two percent (2%) of the stock
of a publicly-traded Financial Institution.
(b) Commencing
with the date of this Agreement and ending on the date that is two (2) years
after the effective date of the sale by an Investor of all of his, her or its
Bank Stock (the “Non-Solicitation Period”), such Investor shall
not, directly or indirectly, call on, sell to, solicit banking business from
or
render banking services to any of the Bank’s customers who were customers of the
Bank at the commencement of, and during, the Non-Solicitation Period, or
recruit, persuade or attempt to recruit or persuade any employee of the Bank
who
was an employee of the Bank at the commencement of the Non-Solicitation Period
and at the time of any such prohibited act, to leave the Bank’s employ, or to
become employed by any other person or entity other than the
Bank. For purposes of clarification, and not by way of limitation,
this Section 5.11 shall not
prevent any Investor from calling on, selling to, or soliciting business from
any Bank customer if the purpose of such activity is not related to any business
or service which is at that time offered by the Bank to any of its
customers. Notwithstanding anything contained herein to the contrary,
if any Investor is a party to an agreement with the Company, the Bank or the
affiliates of either of them which other agreement contains similar
non-solicitation provisions as contained in this Section 5.11, then the
Non-Solicitation Period applicable to such Investor shall be the longer of
the
Non-Solicitation Period in this Section
5.11, or the period contained in such other similar
agreement.
Section
5.12 Affiliate
Services. The Organizers acknowledge
and agree that the Bank will, from time to time, purchase certain product,
operations, compliance, accounting and other standard support and services
from
the Company and its affiliates and that the Company determines are best provided
on a pooled or combined basis, subject to applicable affiliate transaction
regulations and provided that the charges for such support and services is
allocated among the Bank and the Company’s other subsidiaries based upon the
method or allocation used by the Company for its other
subsidiaries.
Section
5.13 Federal
and State Securities and Other
Laws. Each of the undersigned should
also be aware of the following additional considerations:
THE
INVESTMENTS EVIDENCED BY THIS AGREEMENT ARE NOT, AND THE STOCK TO BE ISSUED
WILL
NOT BE, SAVINGS ACCOUNTS OR DEPOSITS AND ARE NOT AND WILL NOT BE INSURED BY
THE
FEDERAL DEPOSIT INSURANCE CORPORATION, ANY OTHER GOVERNMENT AGENCY OR
OTHERWISE.
THE
INTERESTS EVIDENCED BY THIS AGREEMENT HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OR THE SECURITIES LAWS OF ANY STATES OR UNDER OTHER APPLICABLE
BANKING LAWS OR REGULATIONS. SUCH INTERESTS HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION, ANY STATE SECURITIES
COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF THE FOREGOING
AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF SUCH INTERESTS. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
[Signatures
are on following pages.]
Signatures
In
witness whereof, this Agreement has been executed by
the undersigned Organizers on the date(s) indicated below:
Agent President
____________________
_______________________
Xxxx X. Xxxxxxx Xxxxxxxxx X. Xxxxx
Xxxx X. Xxxxxxx Xxxxxxxxx X. Xxxxx
Company
Heartland
Financial USA, Inc.
By
_________________________________
Its
________________________________
Address:
[Investor
Signatures on Following Pages]
INVESTOR
SIGNATURES
By
signing where indicated below and subject to acceptance by the Company, I/we
hereby agree to the terms and conditions of the Subscription and Shareholder
Agreement, dated as of _________ ___, 2007, by and among Heartland Financial
USA, Inc. and such other investors as may enter into such agreement from time
to
time, and relating to the organization and capitalization of the Bank (the
“Agreement”) and hereby subscribe for the purchase of ___
shares of Bank Stock, for an aggregate investment of ___________________________
Dollars ($_________).
Pursuant
to the terms and conditions of the Agreement, I/we further acknowledge,
represent and warrant to the Organizers that:
|
(A)
|
The
manner in which title to Bank Stock is to be held is
as:
|
|
|
|
Individual
|
|
Joint
Tenants with Right of
|
|
|
|
Trust
|
Survivorship
|
Family Limited
Partnership
|
(B)
|
The
name in which title is to be held (Please Print—the certificates will be
issued in this name):
|
|
(C)
|
The
Address of my/our domicile and bona fide residence is
:
|
________________________
Street
________________________
City, State and Zip Code
City, State and Zip Code
|
(D)
|
My/our
Social Security or Tax ID Numbers (Both if grantor trust or partnership)
is/are:
|
(E) Accredited
Status. I/we further represent and warrant as follows (CHECK
AS APPLICABLE):
ACCREDITED
INVESTOR
|
______ (i)
|
The
undersigned is an individual with a net worth, or a joint net worth
together with his or her spouse, in excess of $1,000,000. (In
calculating net worth, you may include equity in personal property
and
real estate, including your principal residence, cash, short term
investments, stock and securities. Equity in personal property
and real estate should be based on the fair market value of such
property
minus debt secured by such
property.)
|
|
______ (ii)
|
The
undersigned is an individual that had an individual income in excess
of
$200,000 in each of the prior two years and reasonably expects an
income
in excess of $200,000 in the current year.
|
|
______ (iii)
|
The
undersigned is an individual that had with his/her spouse joint income
in
excess of $300,000 in each of the prior two years and reasonably
expects
joint income in excess of $300,000 in the current
year.
|
|
______ (iv)
|
The
undersigned is an actual or proposed director or executive officer
of the
Bank.
|
|
______ (v)
|
The
undersigned, if other than an individual, is an entity all of whose
equity
owners meet one of the tests set forth in (i) through (iv)
above. (If relying on this category alone, each equity owner
must complete a separate copy of this
Agreement.)
|
NON-ACCREDITED
INVESTOR
|
______ (vi)
|
The
undersigned does not meet any of the financial qualifications set
forth in
(i)-(v) above, but represents, either alone or with its purchaser
representative, that the undersigned has such knowledge and experience
in
financial and business matters that the undersigned is capable of
evaluating the merits and risks of an investment in Bank
Stock. If relying on a purchaser representative, please provide
name, address and telephone number:
|
|
(F)
|
Signatures:
|
|
|
(i)
|
Individual
Signatures (If you are purchasing as joint tenants or tenants in
common,
both parties must sign):
|
|
|
(ii)
|
Trust
or Family Limited Partnership
|
(Name
of entity)
By ______________________
Its ____________________
Date:
_____________ , 2007
Accepted
by Heartland Financial USA, Inc., as of the date indicated above
Heartland
Financial USA,
Inc.
By ______________________
Its _____________________
