exhibit101093007.htm

Exhibit
    10.1


    Subscription
      and Shareholder Agreement

    


    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. Paul 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 John K. Schmidt,
      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  Kate Kelly 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 Alex Sheshunoff 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 (21⁄2) 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

    ____________________                               
_______________________             

John
      K.
      Schmidt                                                                 Catherine
      T. Kelly

    


    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

    


    
      	
              (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  _____________________