Document:

Exhibit 10.01 2005 Long term incentive

HEARTLAND
FINANCIAL USA, INC.

2005
LONG-TERM INCENTIVE PLAN

Article
1

GENERAL

Section
1.1 Purpose,
Effective Date and Term. 
The purpose of this HEARTLAND
FINANCIAL USA, INC. 2005 LONG-TERM INCENTIVE PLAN (the
“Plan”) is to promote the long-term financial success of HEARTLAND
FINANCIAL USA, INC.,
a
Delaware corporation (the “Company”) and
its subsidiaries by providing a means to attract, retain and reward individuals
who can and do contribute to such success and to further align their interests
with those of the Company’s stockholders. The “Effective
Date” of the
Plan is February 10, 2005, subject to approval of the Plan by the Company’s
stockholders. The Plan shall be unlimited in duration and, in the event of Plan
termination, shall remain in effect as long as any awards under it are
outstanding; provided,
however, that no
awards may be granted under the Plan after the ten-year anniversary of the most
recent approval of the Plan by the Company’s stockholders.

Section
1.2 Administration. 
The authority to control and manage the operation of the Plan shall be vested in
a committee of the Company’s Board of Directors (the “Committee”) in
accordance with Section
5.1.

Section
1.3 Participation. 
Each employee or director of, or service provider to, the Company or any
Subsidiary of the Company who is granted an award in accordance with the terms
of the Plan shall be a “Participant” in the
Plan. Awards under the Plan shall be limited to employees and directors of, and
service providers to, the Company; provided,
however, that an
award (other than an award of an ISO) may be granted to an individual prior to
the date on which he or she first performs services as an employee or a
director, provided that such award does not become vested prior to the date such
individual commences such services.

Section
1.4 Definitions. 
Capitalized terms in the Plan shall be defined as set forth in the Plan
(including the definition provisions of
Article 8.

Article
2

AWARDS

 

Section
2.1 General. 
Any award under the Plan may be granted singularly, in combination with another
award (or awards), or in tandem whereby the exercise or vesting of one award
held by a Participant cancels another award held by the Participant. Each award
under the Plan shall be subject to the terms and conditions of the Plan and such
additional terms, conditions, limitations and restrictions as the Committee
shall provide with respect to such award. Subject to Section
2.3, an
award may be granted as an alternative to or replacement of an existing award
under the Plan or any other plan of the Company or any Subsidiary or as the form
of payment for grants or rights earned or due under any other compensation plan
or arrangement of the Company or its subsidiaries, including without limitation
the plan of any entity acquired by the Company or any Subsidiary. The types of
awards that may be granted under the Plan include:

(a) Stock
Options.  A
stock option represents the right to purchase shares of Stock at an Exercise
Price established by the Committee. Any option may be either an incentive stock
option (an “ISO”) that
is intended to satisfy the requirements applicable to an “incentive stock
option” described in Code Section 422(b) or a non-qualified option that is not
intended to be an ISO, provided, that no
ISOs may be: (i) granted after the ten-year anniversary of the earlier of the
date of adoption or stockholder approval of the Plan; or (ii) granted to a
non-employee. Unless otherwise specifically provided by its terms, any option
granted under the Plan shall be a non-qualified option.

(b) Stock
Appreciation Rights.  A
stock appreciation right (a “SAR”) is a
right to receive, in cash or Stock, an amount equal to or based upon the excess
of: (a) the Fair Market Value of a share of Stock at the time of exercise;
over (b) an Exercise Price established by the Committee.

(c) Stock
Awards.  A
stock award is a grant of shares of Stock or a right to receive shares of Stock
(or their cash equivalent or a combination of both) in the future. Such awards
may include, but shall not be limited to, bonus shares, stock units, performance
shares, performance units, restricted stock or restricted stock
units.

(d) Cash
Incentive Awards.  A
cash incentive award is the grant of a right to receive a payment of cash,
determined on an individual basis or as an allocation of an incentive pool (or
Stock having a value equivalent to the cash otherwise payable) that is
contingent on the achievement of performance objectives established by the
Committee.

 

Section
2.2 Exercise
of Options and SARs.  An
option or SAR shall be exercisable in accordance with such terms and conditions
and during such periods as may be established by the Committee. In no event,
however, shall an option or SAR expire later than ten years after the date of
its grant (five years in the case of a 10% Stockholder with respect to an ISO).
The “Exercise
Price” of each
option and SAR shall not be less than 100% of the Fair Market Value of a share
of Stock on the date of grant (or, if greater, the par value of a share of
Stock); provided,
however, that the
Exercise Price of an ISO shall not be less than 110% of Fair Market Value of a
share of Stock on the date of grant in the case of a 10% Stockholder. The
payment of the Exercise Price of an option shall be by cash or, subject to
limitations imposed by applicable law, by such other means as the Committee may
from time to time permit, including: (a) by promissory note; (b) by
tendering, either actually or by attestation, shares of Stock acceptable to the
Committee, and valued at Fair Market Value as of the day of exercise;
(c) by irrevocably authorizing a third party, acceptable to the Committee,
to sell shares of Stock (or a sufficient portion of the shares) acquired upon
exercise of the option and to remit to the Company a sufficient portion of the
sale proceeds to pay the entire Exercise Price and any tax withholding resulting
from such exercise; or (d) by any combination thereof.

 

Section
2.3 Repricing
is Subject to Stockholder Approval. 
Except for adjustments pursuant to Section
3.4
(relating to the adjustment of shares), and reductions of the Exercise Price
approved by the Company’s stockholders, the Exercise Price for any outstanding
option may not be decreased after the date of grant nor may an outstanding
option granted under the Plan be surrendered to the Company as consideration for
the grant of a replacement option with a lower exercise price.

Section
2.4 Performance-Based
Compensation. Any
award under the Plan which is intended to be “performance-based compensation”
within the meaning of Code Section 162(m) shall be conditioned on the
achievement of one or more objective performance measures, to the extent
required by Code Section 162(m) as may be determined by the
Committee.

(a) Performance
Measures. 
Such performance measures may be based on any one or more of the following:
earnings (e.g.,
earnings
before interest and taxes; earnings before interest, taxes, depreciation and
amortization; or earnings per share); financial return ratios (e.g.,
return on
investment, return on invested capital, return on equity or return on assets);
increase in revenue, operating or net cash flows; cash flow return on
investment; total stockholder return; market share; net operating income,
operating income or net income; debt load reduction; expense management;
economic value added; stock price; assets, asset quality level, charge offs,
loan reserves, non-performing assets, loans, deposits, growth of loans, deposits
or assets; interest sensitivity gap levels, regulatory compliance, improvement
of financial rating, achievement of balance sheet or income statement
objectives, and strategic business objectives, consisting of one or more
objectives based on meeting specific cost targets, business expansion goals and
goals relating to acquisitions or divestitures. Performance measures may be
based on the performance of the Company as a whole or of any one or more
Subsidiaries or business units of the Company or a Subsidiary and may be
measured relative to a peer group, an index or a business plan.

(b) Partial
Achievement. 
The terms of any award may provide that partial achievement of the performance
measures may result in a payment or vesting based upon the degree of
achievement.

(c) Extraordinary
Items.  In
establishing any performance measures, the Committee may provide for the
exclusion of the effects of the following items, to the extent identified in the
audited financial statements of the Company, including footnotes, or in the
Management Discussion and Analysis section of the Company’s annual report:
(i) extraordinary, nusual, and/or nonrecurring items of gain or loss; (ii)
gains or losses on the disposition of a business; (iii) changes in tax or
accounting principles, regulations or laws; or (iv) mergers or acquisitions. To
the extent not specifically excluded, such effects shall be included in any
applicable performance measure.

Section
2.5 Dividends
and Dividend Equivalents. 
Any award under the Plan, including any option or SAR, may provide the
Participant with the right to receive dividend payments or dividend equivalent
payments with respect to Stock subject to the award, which payments may be
either made currently or credited to an account for the Participant, and may be
settled in cash or Stock.

 

Section
2.6 Deferral
of Payment. 
Subject to Section
2.7 (Code
Section 409A), to the extent permitted by the Committee or the terms of any
award under the Plan, a Participant may defer receipt of the cash or Stock
otherwise payable under the award and be credited with interest or dividend
equivalents with respect thereto; provided,
however, that any
award otherwise payable in stock shall continue to be payable only in
stock. 

 

Section
2.7 Code
Section 409A. Any
stock option, SAR, stock award or cash incentive award, and any deferrals of
such awards under
Section 2.6, which
constitutes “deferred compensation” under Code Section 409A (“409A
Award”), and
any rules and regulations promulgated thereunder, shall be subject to the
following:

(a) All 409A
Award documents and agreements, or rules and regulations created by the
Committee pertaining to 409A Awards, shall provide for the required procedures
under Code Section 409A, including the timing of deferral elections and the
timing and method of payment distributions.

(b) With
respect to all 409A Awards, the Committee and its delegates shall operate the
Plan at all times in conformity with the known rules, regulations and guidance
promulgated under Code Section 409A, and the Committee shall reserve the right
(including the right to delegate such right) to unilaterally amend any 409A
Award granted under the Plan, without the consent of the Participant, to
maintain compliance with Code Section 409A. A Participant’s acceptance of any
award under the Plan constitutes acknowledgement and consent to such rights of
the Committee. 

 

Article
3

SHARES
SUBJECT TO PLAN

Section
3.1 Available
Shares. 
The shares of Stock with respect to which awards may be made under the Plan
shall be shares currently authorized but unissued or currently held or, to the
extent permitted by applicable law, subsequently acquired by the Company as
treasury shares, including shares purchased in the open market or in private
transactions.

 

Section
3.2 Share
Limitations. 

(a) Share
Reserve. Subject
to the following provisions of this Section
3.2, the
maximum number of shares of Stock that may be delivered to Participants and
their beneficiaries under the Plan shall be equal to One Million (1,000,000)
shares of Stock (all of which may be granted as ISOs) and any shares of Stock
that are represented by awards under the Heartland Financial USA, Inc. 2003
Stock Option Plan (the “Prior Plan”) that are forfeited, expire or are cancelled
after the Effective Date with delivery of shares of Stock or which result in the
forfeiture of shares of Stock back to the Company to the extent that such shares
would have been added back to the reserve under the terms of the Prior Plan. The
maximum number of shares of Stock that may be issued in conjunction with awards
other than options and SARs shall be 30% of that number of shares in the
immediately preceding sentence. As of
the date of stockholder approval of the Plan, no additional awards shall be
granted under the Prior Plan.

(b) Reuse
of Shares.  To the
extent any shares of Stock covered by an award, under the Plan or the Prior
Plan, are forfeited or are not delivered to a Participant or beneficiary for any
reason, including because the award is forfeited or canceled, such shares shall
not be deemed to have been delivered for purposes of determining the maximum
number of shares of Stock available for delivery under the Plan.

 

Section
3.3 Limitations
on Grants to Individuals.

(a) Options
and SARs.  The
maximum number of shares of Stock that may be subject to options or SARs granted
to any one Participant during any calendar year shall be One Hundred Thousand
(100,000).

(b) Stock
Awards.  The
maximum number of shares of Stock that may be subject to stock awards described
under Section
2.1(c) which
are granted to any one Participant during any calendar year and are intended to
be “performance-based compensation” (as that term is used for purposes of Code
Section 162(m)), shall be One Hundred Thousand (100,000).

(c) Cash
Incentive Awards.  The
maximum dollar amount that may be payable to a Participant pursuant to cash
incentive awards described under Section
2.1(d) which
are granted to any one Participant during any calendar year and are intended to
be “performance-based compensation” (as that term is used for purposes of Code
Section 162(m)), shall be One Million Dollars ($1,000,000).

(d) Director
Fees. The
maximum number of shares of stock that may be covered by awards granted to any
one individual non-employee director pursuant to Section
2.1(a) and
Section
2.1(b)
(relating to options and SARs) shall be Ten Thousand (10,000) shares during any
calendar year and the maximum number of shares that may be covered by awards
granted to any one individual non-employee director pursuant to Section
2.1(c) (Stock
Awards) shall be Five Thousand (5,000) shares during any calendar year. The
foregoing limitations shall not apply to cash-based director fees that the
non-employee Director elects to receive in the form of Stock or Stock units
equal in value to the cash-based director fee, so long as such Stock or Stock
units are purchased from the open market or paid from treasury shares held by
the Company.

(e) Dividend,
Dividend Equivalents and Earnings.  For
purposes of determining whether an award is intended to be qualified as
performance-based compensation under the foregoing limitations of this
Section
3.3, (i) the
right to receive dividends and dividend equivalents with respect to any award
which is not yet vested shall be treated as a separate award; and (ii) if the
delivery of any shares or cash under an award is deferred, any earnings,
including dividends and dividend equivalents, shall be disregarded.

 

Section
3.4 Corporate
Transactions.  In
the event of a corporate transaction involving the Company or the shares of
Stock of the Company (including any stock dividend, stock split, extraordinary
cash dividend, recapitalization, reorganization, merger, consolidation,
split-up, spin-off, combination or exchange of shares), all outstanding awards
under the Plan, the number of shares reserved for issuance under the Plan under
Section
3.2 and each
of the specified share limitations set forth in Section
3.3 shall
automatically be adjusted to reflect such transaction; provided,
however, the
Committee may otherwise adjust awards (or prevent such automatic adjustment) as
it deems necessary, in its sole discretion, to preserve the benefits or
potential benefits of the awards and the Plan. Action by the Committee may
include: (i) adjustment of the number and kind of shares which may be delivered
under the Plan; (ii) adjustment of the number and kind of shares subject to
outstanding awards; (iii) adjustment of the Exercise Price of outstanding
options and SARs; and (iv) any other adjustments that the Committee determines
to be equitable (which may include, (A) replacement of awards with other
awards which the Committee determines have comparable value and which are based
on stock of a company resulting from the transaction, and (B) cancellation
of the award in return for cash payment of the current value of the award,
determined as though the award were fully vested at the time of payment,
provided that in the case of an option or SAR, the amount of such payment shall
be no less than the excess of the value of the Stock subject to the option or
SAR at the time of the transaction over the Exercise Price).

Section
3.5 Delivery
of Shares. 
Delivery of shares of Stock or other amounts under the Plan shall be subject to
the following:

(a) Compliance
with Applicable Laws.  Notwithstanding
any other provision of the Plan, the Company shall have no obligation to deliver
any shares of Stock or make any other distribution of benefits under the Plan
unless such delivery or distribution complies with all applicable laws
(including, the requirements of the Securities Act of 1933), and the applicable
requirements of any securities exchange or similar entity.

(b) Certificates. 
To the
extent that the Plan provides for the issuance of shares of Stock, the issuance
may be affected on a non-certificated basis, to the extent not prohibited by
applicable law or the applicable rules of any stock exchange.

 

Article
4

CHANGE
IN CONTROL

Section
4.1 Subject
to the provisions of Section
3.4
(relating to the adjustment of shares), and except as otherwise provided in the
Plan or the in terms of any Award Agreement:

(a) If a
Participant who is an employee or a Director of, or a service provider to, the
Company or a Subsidiary at the time of a Change in Control then holds one or
more outstanding options or SARs, all such options and SARs then held by the
Participant shall become fully exercisable immediately prior to the Change in
Control (subject to the expiration provisions otherwise applicable to the option
or SAR).

(b) If a
Participant who is an employee or a Director of, or a service provider to, the
Company or a Subsidiary at the time of a Change in Control then holds one or
more stock awards described in Section
2.1(c) or cash
incentive awards described in Section
2.1(d), such
awards shall be fully earned and vested.

(c) Notwithstanding
the forgoing, if the vesting of an outstanding award is conditioned upon the
achievement of performance measures, then the award shall be subject to the
following:

(i) If, at
the time of the Change in Control, the established performance measures are less
than fifty percent (50%) attained (as determined in the sole discretion of the
Committee, based upon a pro rata determination through the date of the Change in
Control), then such award shall become vested and exercisable on a fractional
basis with the numerator being equal to the percentage of attainment and the
denominator being fifty percent (50%).

(ii) If at the
time of the Change in Control, the established performance measures are at least
fifty percent (50%) attained (as determined in the sole discretion of the
Committee, based upon a pro rata determination through the date of the Change in
Control), then such award shall become fully vested and exercisable.

Section
4.2 Change
in Control.  For
purposes of the Plan, unless otherwise provided in an Award Agreement, the term
“Change
in Control” shall
be deemed to have occurred on the earliest of the following dates: 

(a) the
consummation of the acquisition by any person (as such term is defined in
Section 13(d) or 14(d) of the Exchange Act) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act) of fifty-one percent
(51%) or more of the combined voting power of the then outstanding Voting
Securities of the Company; or

(b) the
individuals who, as of the date hereof, are members of the Board cease for any
reason to constitute a majority of the Board, unless the election or nomination
for election by the stockholders of any new director was approved by a vote of a
majority of the Board, in which case such new director shall for purposes of
this Plan be considered as a member of the Board; or

(c) the
consummation by the Company of: (i) a merger or consolidation if the
Company’s stockholders, immediately before such merger or consolidation, do not,
as a result of such merger or consolidation, own, directly or indirectly, more
than fifty-one percent (51%) of the combined voting power of the then
outstanding Voting Securities of the entity resulting from such merger or
consolidation in substantially the same proportion as their ownership of the
combined voting power of the Voting Securities of the Company outstanding
immediately before such merger or consolidation; or (ii) a complete
liquidation or dissolution or an agreement for the sale or other disposition of
all or substantially all of the assets of the Company.

Notwithstanding
the foregoing, a Change in Control shall not be deemed to occur solely because
fifty-one percent (51%) or more of the combined voting power of the then
outstanding securities of the Company are acquired by: (x) a trustee or other
fiduciary holding securities under one or more employee benefit plans maintained
for employees of the entity; or (y) any corporation which, immediately
prior to such acquisition, is owned directly or indirectly by the stockholders
in the same proportion as their ownership of stock immediately prior to such
acquisition.

 

Article
5

COMMITTEE

 

Section
5.1 Administration. 
The authority to control and manage the operation and administration of the Plan
shall be vested in the Committee in accordance with this Section
5. The
Committee shall be selected by the Board and may be comprised of two (2) or more
members of the Board, each of whom are both a “non-employee director” (within
the meaning of Rule 16b-3 promulgated under the Exchange Act) and an “outside
director” (within the meaning of Code Section 162(m)). Subject to applicable
stock exchange rules, if the Committee does not exist, or for any other reason
determined by the Board, the Board may take any action under the Plan that would
otherwise be the responsibility of the Committee. Notwithstanding the foregoing,
with respect to any action, determination, interpretation or modification with
respect to a specific award granted to a non-employee Director, other than
ministerial actions, the Committee shall be comprised of the Board.

Section
5.2 Powers
of Committee. 
The Committee’s administration of the Plan shall be subject to the
following:

(a) Subject
to the provisions of the Plan, the Committee will have the authority and
discretion to select from among the Company’s employees, directors and service
providers those persons who shall receive awards, to determine the time or times
of receipt, to determine the types of awards and the number of shares covered by
the awards, to establish the terms, conditions, performance criteria,
restrictions, and other provisions of such awards, and (subject to the
restrictions imposed by Article
6) to
cancel or suspend awards.

(b) The
Committee will have the authority and discretion to interpret the Plan, to
establish, amend and rescind any rules and regulations relating to the Plan, and
to make all other determinations that may be necessary or advisable for the
administration of the Plan.

(c) Any
interpretation of the Plan by the Committee and any decision made by it under
the Plan is final and binding on all persons.

(d) In
controlling and managing the operation and administration of the Plan, the
Committee shall take action in a manner that conforms to the articles and bylaws
of the Company and applicable state corporate law.

Section
5.3 Delegation
by Committee. 
Except to the extent prohibited by applicable law, the applicable rules of a
stock exchange or the Plan, or as necessary to comply with the exemptive
provisions of Rule 16b-3 under the Exchange Act, the Committee may allocate all
or any portion of its responsibilities and powers to any one or more of its
members and may delegate all or any part of its responsibilities and powers to
any person or persons selected by it, including: (a) delegating to a
committee of one or more members of the Board who are not “independent
directors” within the meaning of Code Section 162(m), the authority to grant
awards under the Plan to eligible persons who are either: (i) not then “covered
employees,” within the meaning of Code Section 162(m) and are not expected to be
“covered employees” at the time of recognition of income resulting from such
award; or (ii) not persons with respect to whom the Company wishes to
comply with Code Section 162(m); and/or (b) delegating to a committee of one or
more members of the Board who are not “non-employee directors,” within the
meaning of Rule 16b-3, the authority to grant awards under the Plan to eligible
persons who are not then subject to Section 16 of the Exchange Act. Any such
allocation or delegation may be revoked by the Committee at any time. To the
extent permitted by applicable law and resolution of the Board, the Committee
may delegate all or any part of its responsibilities to any officer of the
Company.

Section
5.4 Information
to be Furnished to Committee.  As
may be permitted by applicable law, the Company and its Subsidiaries shall
furnish the Committee with such data and information as it determines may be
required for it to discharge its duties. The records of the Company and its
Subsidiaries as to an employee’s or Participant’s employment, termination of
employment, leave of absence, reemployment and compensation shall be conclusive
on all persons unless determined by the Committee to be manifestly incorrect.
Subject to applicable law, Participants and other persons entitled to benefits
under the Plan must furnish the Committee such evidence, data or information as
the Committee considers desirable to carry out the terms of the
Plan.

 

Article
6

AMENDMENT
AND TERMINATION

The Board
may, as permitted by law, at any time, amend or terminate the Plan, and may
amend any Award Agreement, provided that no amendment or termination (except as
provided in Section
2.7) may, in
the absence of written consent to the change by the affected Participant (or, if
the Participant is not then living, the affected beneficiary), adversely affect
the rights of any Participant or beneficiary under any award granted which was
granted under the Plan prior to the date such amendment is adopted by the Board;
provided, however, that, adjustments pursuant to Section
3.4 shall
not be subject to the foregoing limitations of this Article
6; and
further
provided, that,
no amendment may (i) remove the provisions of Section
2.3 (Option
Repricing); (ii) materially increase the benefits accruing to Participants
under the Plan; (iii) materially increase the aggregate number of
securities which may be issued under the Plan, other than pursuant to
Section
3.4, or
(iv) materially modify the requirements for participation in the Plan,
unless the amendment is approved by the Company’s stockholders.

Article
7

GENERAL
TERMS

Section
7.1 No
Implied Rights

(a) No
Rights to Specific Assets.  Neither a
Participant nor any other person shall by reason of participation in the Plan
acquire any right in or title to any assets, funds or property of the Company or
any Subsidiary whatsoever, including any specific funds, assets, or other
property which the Company or any Subsidiary, in its sole discretion, may set
aside in anticipation of a liability under the Plan. A Participant shall have
only a contractual right to the Stock or amounts, if any, payable or
distributable under the Plan, unsecured by any assets of the Company or any
Subsidiary, and nothing contained in the Plan shall constitute a guarantee that
the assets of the Company or any Subsidiary shall be sufficient to pay any
benefits to any person.

(b) No
Contractual Right to Employment or Future Awards.  The Plan
does not constitute a contract of employment, and selection as a Participant
will not give any participating employee the right to be retained in the employ
of the Company or any Subsidiary or any right or claim to any benefit under the
Plan, unless such right or claim has specifically accrued under the terms of the
Plan. Except as otherwise provided in the Plan, no award under the Plan shall
confer upon the holder thereof any rights as a stockholder of the Company prior
to the date on which the individual fulfills all conditions for receipt of such
rights.

Section
7.2 Transferability.  The
Committee may provide at the time it makes an award under the Plan or at any
time thereafter that such award may be transferable by the Participant, subject
to such limitations as the Committee may impose. Except as otherwise so provided
by the Committee, awards under the Plan are not transferable except as
designated by the Participant by will or by the laws of descent and
distribution.

Section
7.3 Award
Agreement. Each
award granted under the Plan shall be evidenced by an Award Agreement. A copy of
the Award Agreement shall be provided to the Participant, and the Committee may
but need not require that the Participant sign a copy of the Award
Agreement.

Section
7.4 Form
and Time of Elections. 
Unless otherwise specified herein, each election required or permitted to be
made by any Participant or other person entitled to benefits under the Plan, and
any permitted modification, or revocation thereof, shall be filed with the
Company at such times, in such form, and subject to such restrictions and
limitations, not inconsistent with the terms of the Plan, as the Committee shall
require.

Section
7.5 Evidence. 
Evidence required of anyone under the Plan may be by certificate, affidavit,
document or other information which the person acting on it considers pertinent
and reliable, and signed, made or presented by the proper party or
parties.

Section
7.6 Tax
Withholding. 
All distributions under the Plan are subject to withholding of all applicable
taxes and the Committee may condition the delivery of any shares or other
benefits under the Plan on satisfaction of the applicable withholding
obligations. Except as otherwise provided by the Committee, such withholding
obligations may be satisfied: (a) through cash payment by the Participant;
(b) through the surrender of shares of Stock which the Participant already
owns; or (c) through the surrender of shares of Stock to which the
Participant is otherwise entitled under the Plan; provided,
however, that
except as otherwise specifically provided by the Committee, such shares under
clause (c) may not be used to satisfy more than the Company’s minimum statutory
withholding obligation.

Section
7.7 Action
by Company or Subsidiary. 
Any action required or permitted to be taken by the Company or any Subsidiary
shall be by resolution of its board of directors, or by action of one or more
members of the board (including a committee of the board) who are duly
authorized to act for the board, or (except to the extent prohibited by
applicable law or applicable rules of any stock exchange) by a duly authorized
officer of the Company or such Subsidiary.

Section
7.8 Successors. 
All obligations of the Company under this Plan shall be binding upon and inure
to the benefit of any successor to the Company, whether the existence of such
successor is the result of a direct or indirect purchase, merger, consolidation
or otherwise, of all or substantially all of the business, stock, and/or assets
of the Company.

Section
7.9 Indemnification. The
Company shall indemnify members of the Committee and any agent of the Committee
who is an employee of the Company, against any and all liabilities or expenses
to which they may be subjected by reason of any act or failure to act with
respect to their duties on behalf of the Plan, except in circumstances involving
such person’s bad faith, gross negligence or willful misconduct.

Section
7.10 No
Fractional Shares. Unless
otherwise permitted by the Committee, no fractional shares of Stock shall be
issued or delivered pursuant to the Plan or any award. The Committee shall
determine whether cash, Stock or other property shall be issued or paid in lieu
of fractional shares or whether such fractional shares or any rights thereto
shall be forfeited or otherwise eliminated.

Section
7.11 Governing
Law. The
Plan, all awards granted hereunder, and all actions taken in connection herewith
shall be governed by and construed in accordance with the laws of the State of
Delaware without reference to principles of conflict of laws, except as
superseded by applicable federal law.

Section
7.12 Notice. Unless
otherwise provided in an Award Agreement, all written notices and all other
written communications to the Company provided for in the Plan, any Award
Agreement, shall be delivered personally or sent by registered or certified
mail, return receipt requested, postage prepaid
(provided that international mail shall be sent via overnight or two-day
delivery), or sent
by facsimile or prepaid overnight courier to the Company at the address set
forth below. Such notices, demands, claims and other communications shall be
deemed given:

(a) in the
case of delivery by overnight service with guaranteed next day delivery, the
next day or the day designated for delivery;

(b) in the
case of certified or registered U.S. mail, five days after deposit in the U.S.
mail; or

(c) in the
case of facsimile, the date upon which the transmitting party received
confirmation of receipt by facsimile, telephone or otherwise; provided,
however, that in
no event shall any such communications be deemed to be given later than the date
they are actually received; provided they are actually received. In the event a
communication is not received, it shall only be deemed received upon the showing
of an original of the applicable receipt, registration or confirmation from the
applicable delivery service provider. Communications that are to be delivered by
the U.S. mail or by overnight service to the Company shall be directed to the
attention of the Company’s senior human resource officer and Corporate
Secretary.

Article
8

DEFINED
TERMS; CONSTRUCTION

Section
8.1 In
addition to the other definitions contained herein, the following definitions
shall apply:

(a) “10%
Stockholder” means
an individual who, at the time such option is granted, owns stock possessing
more than 10% of the total combined voting power of all classes of stock of the
Company.

(b) “Award
Agreement” means the
document (in whatever medium prescribed by the Committee) which evidences the
terms and conditions of an award under the Plan. Such document is referred to as
an agreement regardless of whether any Participant signature is
required.

(c) “Board” means
the Board of Directors of the Company.

(d) “Change
in Control” has the
meaning ascribed to it in Section
4.2.

(e) “Code” means
the Internal Revenue Code of 1986, as amended. Regulations thereunder, as
modified from time to time.

(f) “Committee” means
the Committee acting under Article
5.

(g) “Director” means a
member of the Board.

(h) “Exchange
Act” means
the Securities Exchange Act of 1934, as amended from time to
time.

(i) “Exercise
Price” means
the price established with respect to an option or SAR pursuant to Section
2.2.

(j) “Fair
Market Value” means,
as of any date, the fair market value of a share of Stock as determined in good
faith by the Committee.

(k) “ISO” has the
meaning ascribed to it in Section
2.1(a).

(l) “Participant” means
any individual who has received an award under the Plan.

(m) “SAR” has the
meaning ascribed to it in Section
2.1(b).

(n) “Stock” means
the common stock of the Company, $1.00 par value per share.

(o) “Subsidiary” means
any corporation, bank or other entity which would be a subsidiary corporation
with respect to the Company as defined in Section 424(f) of the
Code.

(p) “Voting
Securities” means
any securities which ordinarily possess the power to vote in the election of
directors without the happening of any pre-condition or
contingency.

Section
8.2 In this
Plan, unless otherwise stated or the context otherwise requires, the following
uses apply:

(a) actions
permitted under this Plan may be taken at any time and from time to time in the
actor’s reasonable discretion;

(b) references
to a statute shall refer to the statute and any successor statute, and to all
regulations promulgated under or implementing the statute or its successor, as
in effect at the relevant time;

(c) in
computing periods from a specified date to a later specified date, the words
“from” and “commencing on” (and the like) mean “from and including,” and the
words “to,” “until” and “ending on” (and the like) mean “to, but
excluding”;

(d) references
to a governmental or quasi-governmental agency, authority or instrumentality
shall also refer to a regulatory body that succeeds to the functions of the
agency, authority or instrumentality; 

(e) indications
of time of day mean Dubuque, Iowa time;

(f) “including”
means “including, but not limited to”;

(g) all
references to sections, schedules and exhibits are to sections, schedules and
exhibits in or to this Plan unless otherwise specified;

(h) all words
used in this Plan will be construed to be of such gender or number as the
circumstances and context require;

(i) the
captions and headings of articles, sections, schedules and exhibits appearing in
or attached to this Plan have been inserted solely for convenience of reference
and shall not be considered a part of this Plan nor shall any of them affect the
meaning or interpretation of this Plan or any of its provisions;

(j) any
reference to a document or set of documents in this Plan, and the rights and
obligations of the parties under any such documents, shall mean such document or
documents as amended from time to time, and any and all modifications,
extensions, renewals, substitutions or replacements thereof;
and

(k) all
accounting terms not specifically defined herein shall be construed in
accordance with GAAP.Exhibit 10.02 ESPP 2006

HEARTLAND
FINANCIAL USA, INC.

2006
EMPLOYEE STOCK PURCHASE PLAN

Section
1. Purpose
of the Plan

The
purpose of the HEARTLAND
FINANCIAL USA, INC. 2006 EMPLOYEE STOCK PURCHASE PLAN (the
“Plan”) is to
secure for HEARTLAND
FINANCIAL USA, INC. (the
“Company”). and
its Related Corporations and its stockholders the benefits of the incentive
inherent in the ownership of common stock by Employees. The Plan is intended to
comply with the provisions of Code Section 423 and shall be administered,
interpreted and construed in accordance with such provisions.

Section
2. Eligibility

Each
Employee shall be eligible to participate in the Plan beginning on the Entry
Date coincident with or next following the date on which the Employee has been
employed. The Committee shall retain the right to change the eligibility
criteria for any Plan Year, in advance of such Plan Year, provided such criteria
is permissible under Code Section 423.

Section
3. Participation
and Payroll Deductions

(a) Enrollment. Each
Employee may elect to participate in the Plan for a Plan Year by completing an
enrollment form prescribed by the Committee and returning it to the Company on
or before the date specified by the Committee, which date shall precede the
Employee’s Entry Date. Each Employee shall be advised before the beginning of
each Offering Period of the method of determining the purchase price under
Section
4.

    (b) Amount
of Deduction. The
enrollment form may specify a payroll deduction amount based on a percentage of
Compensation, which shall be withheld from the Participant’s regular paychecks,
which may include bonus paychecks, for an Offering Period. The Committee, in its
sole discretion, may establish limitations, by number of shares or by dollar
amount, on the maximum level of participation for any Offering Period. The
Committee in its sole discretion may authorize payment in respect of any Option
exercised hereunder by personal check.

(c) Payroll
Deduction Accounts. Each
Participant’s payroll deduction shall be credited, as soon as practicable
following the relevant pay date within an applicable Offering Period, to a
Payroll Deduction Account, pending the purchase of Shares in accordance with the
provisions of the Plan. All such amounts shall be assets of the Company and may
be used by the Company for any corporate purpose. No interest shall accrue or be
paid on amounts credited to a Payroll Deduction Account.

(d) Subsequent
Offering Periods. Unless
otherwise specified prior to the beginning of any Plan Year on an enrollment
form prescribed by the Committee, a Participant shall be deemed to have elected
to participate in each Offering Period within a Plan Year and for each
subsequent Plan Year (and subsequent Offering Periods) for which the Participant
is eligible to the same extent and in the same manner as at the end of the prior
Offering Period based on the election form on file with the Company for such
prior Offering Period.

(e) Change
in Participation.

 

(i) A
Participant may cease participation in an Offering Period under the Plan by
completing and filing the form prescribed by the Committee with the Company at
least fifteen (15) days prior to the end of such Offering Period. Such cessation
will become effective as soon as practicable following receipt of such form by
the Company, whereupon no further payroll deductions will be made and the
Company shall pay to such Participant an amount equal to the balance in the
Participant’s Payroll Deduction Account as soon as practicable thereafter. To
the extent then eligible, any Participant who ceased to participate may elect to
participate again prior to any subsequent Entry Date.

(ii) Unless
otherwise provided by the Committee, at any time during an Offering Period (but
not more than once in any calendar quarter) a Participant may increase or
decrease the percentage of Compensation subject to payroll deduction within the
limits provided in Section
3(b) above
and Section
4(b) below,
by filing the form prescribed by the Committee with the Company. Such increase
or decrease shall become effective with the first pay period following receipt
of such form to which it may be practicably applied.

(iii) Notwithstanding
anything contained herein to the contrary, if the Committee determines under
Section
4 to
change the Purchase Price, each Participant shall be advised in advance of the
effective date of such change and afforded the opportunity to make a change in
participation under Section
3(e)(i) or
Section
3(e)(ii) before
such change in the Purchase Price takes effect.

 

Section
4. Offerings
and Purchase Price

(a) Maximum
Number of Shares. The
Committee will implement the Plan by making offerings of Shares on each Grant
Date until the maximum number of Shares available under the Plan have been
issued pursuant to the exercise of Options.

(b) Exercise
of Options. Subject
to Section
4(d), on each
Investment Date, each Participant shall be deemed, subject to Section
4(e), without
any further action, to have exercised rights under the Plan to purchase the
number of Shares determined by dividing the current balance of the Participant’s
Payroll Deduction Account through such date by the Purchase Price (as determined
in Section
4(c)
below).

(c) In
advance of any Offering Period, the Committee shall establish the method for
determining the Purchase Price. The Committee may establish the Purchase Price
using any of the following standards:

 

(i) the Fair
Market Value on the Grant Date;

(ii) the Fair
Market Value on the Investment Date;

(iii) the lower
of the Fair Market Value on the Grant Date or Investment Date;
or

(iv) a
pre-established percentage of any of the foregoing (but in no event less than
eighty-five percent (85%) of the Fair Market Value).

As of the
Effective Date, and until otherwise modified by the Committee, consistent with
this paragraph (c), the Purchase Price shall be one hundred percent (100%) of
the Fair Market Value on the Grant Date.

 

(d) Oversubscription
of Shares. If the
total number of Shares for which Options are exercised on any Investment Date
exceeds the maximum number of Shares available under the Plan, the Company shall
make a proportionate allocation among the Participants of the Shares available
for delivery and distribution in as nearly a uniform manner as shall be
practicable. 

(e) Limitations
on Grant and Exercise of Options.

(i) No Option
granted under this Plan shall permit a Participant to purchase Shares under all
employee stock purchase plans (as defined under Code Section 423(b)) of the
Company at a rate which, in the aggregate, exceeds $25,000 of the Fair Market
Value of such Shares (determined at the time the Option is granted) for each
calendar year in which the Option is outstanding at any time.

(ii) No
Employee who would own immediately after the Option is granted Shares possessing
five percent (5%) or more of the total combined voting power or value of all
classes of Shares of the Company (a “5%
Owner”) shall
be granted an Option. For purposes of determining whether an Employee is a 5%
Owner, the rules of Code Section 424(d) shall apply in determining the
Share ownership of an individual and Shares which the Employee may purchase
under outstanding Options shall be treated as Shares owned by the
Employee.

(iii) To comply
with the foregoing limitation, the Company unilaterally may decrease a
Participant’s payroll deduction at any time during an Offering
Period.

Section
5. Distributions
of Shares

(a) Distributions
of Shares. As soon
as practicable following an Investment Date, Shares deemed purchased pursuant to
Section
4(b) shall be
distributed to the Participant.

(b) Termination
of Employment. If a
Participant ceases for any reason during an Offering Period to be an Employee,
the balance of the Participant’s Payroll Deduction Account shall be refunded as
soon as practicable to the Participant or, in the event of the Participant’s
death, to the Participant’s estate. Notwithstanding the foregoing, if the
Participant’s termination is due to Retirement occurring in the last three (3)
months of an Offering Period, the Participant’s Payroll Deductions shall remain
in the Plan (subject to withdrawal rights under Section
3(e)(i) and used
to purchase Shares as if still employed on the Investment Date.

Section
6. Rights
as a Stockholder

When a
Participant purchases Shares pursuant to the Plan, the Participant shall have
all of the rights and privileges of a stockholder of the Company with respect to
the Shares so purchased or credited, whether or not certificates representing
such Shares shall have been issued.

Section
7. Options
Not Transferable

Options
granted under the Plan are not transferable by a Participant and are exercisable
during the Participant’s lifetime only by the Participant.

 

Section
8. Common
Stock

(a) Reserved
Shares.
Subject
to the provisions of Section
9 relating
to adjustments upon changes in the Company’s stock, there shall be reserved for
the issuance and purchase under the Plan an aggregate of Five Hundred Thousand
(500,000) Shares. Shares
subject to the Plan shall be Shares currently authorized but unissued, or
currently held or, to the extent permitted by applicable law, subsequently
acquired by the Company as treasury shares, including Shares purchased in the
open market or in private transactions.

(b) Restrictions
on Exercise. In its
sole discretion, the Board may require as conditions to the exercise of any
Option that Shares reserved for issuance upon the exercise of an Option shall
have been duly listed on any recognized national securities exchange, and that
either a registration statement under the Securities Act of 1933, as amended,
with respect to said Shares shall be effective, or the Participant shall have
represented at the time of purchase, in form and substance satisfactory to the
Company, that it is the Participant’s intention to purchase the Shares for
investment only and not for resale or distribution.

(c) Restriction
on Sale. Unless
otherwise provided by the Committee, Shares purchased under the Plan shall not
be transferable by a Participant for a period of twelve (12) months immediately
following the Investment Date on which such Shares were
purchased.

(d) Registration
of Shares. Shares
to be delivered to a Participant under the Plan will be registered in the name
of the Participant, or, if the Participant so directs by written notice to the
Treasurer of the Company prior to the Investment Date applicable thereto, in the
names of the Participant and one such other person as may be designated by the
Participant, as joint tenants with rights of survivorship or as tenants by the
entireties, to the extent permitted by applicable law.

(e) Fractional
Shares. Unless
otherwise provided by the Committee, fractional Shares will be credited to a
Participants’ account if the amount of payroll deductions accumulated during any
given Offering Period is not equally divisible by the Purchase Price for that
Offering Period. However, fractional Shares will not be distributed to a
Participant if the Participant requests that Shares be certified and
distributed. Upon a request for distribution of Shares in certificate form from
a Participant’s account, the Participant shall receive a certificate for the
whole Shares and a check for the fractional Share in an amount equal to the
proportionate Fair Market Value of a Share of common stock on the date the
distribution is made from the Participant’s account.

 

Section
9. Adjustment
Upon Changes In Capitalization 

(a) Subject
to any required action by the Company or its stockholders, and subject to the
provisions of applicable corporate law, if during an Offering Period the
outstanding Shares increase or decrease or change into or are exchanged for a
different number or kind of security or are otherwise affected by reason of any
recapitalization, reclassification, stock split, reverse stock split,
combination of Shares, exchange of Shares, stock dividend, or other distribution
payable in capital stock, or some other increase or decrease in such Shares
occurs without the Company’s receiving consideration therefore (any of which
being referred to as a “Capitalization
Event”), there
shall automatically be made, unless otherwise provided by the Committee, a
proportionate and appropriate adjustment in the number and kind of securities
underlying Options, so that the proportionate interest of each Participant
immediately following such event will, to the extent practicable, be the same as
immediately before such event. Any such adjustment to Options will not change
the total price with respect to Option or other securities underlying the
Participant’s election, but will include a corresponding proportionate
adjustment in the price of the Share, to the extent consistent with Code Section
424.

(b) Upon the
occurrence of a Capitalization Event, there shall automatically be made, unless
otherwise determined by the Committee, a commensurate change to the maximum
number and kind of Shares provided in
Section 8.

(c) Except as
expressly provided by this Section
9, no
issuance by the Company of any of its securities of any kind, including
securities convertible into shares of any class of stock, will affect, and no
adjustment by reason thereof will be made with respect to, the number of Shares
subject to any Options or the price to be paid for stock under the terms of the
Plan. The grant of an Option under the Plan will not affect in any way the right
or power of the Company to make adjustments, reclassifications, reorganizations
or changes of its capital or business structure, or to merge or to consolidate,
or to dissolve, liquidate, sell, or transfer all or any part of its business or
assets.

(d) Upon a
sale of all or substantially all of the assets of the Company, or the
consolidation or merger of the Company with or into another corporation, subject
to the Board’s right under Section
11 to
terminate the Plan, each outstanding Option shall be assumed or an equivalent
Option substituted by the successor corporation or a parent or Related
Corporation of the successor or purchasing corporation. If the successor or
purchasing corporation refuses to assume or substitute options for the Options
under the Plan, the Offering Period then in progress shall be shortened by
setting a new Investment Date (the “New
Investment Date”). The
New Investment Date shall be any date occurring before the effective date of the
Company’s proposed sale or merger. The Board shall notify each Participant in
writing, at least ten (10) business days prior to the New Investment Date, that
the Investment Date for the Participant’s Option has been changed to the New
Investment Date and that the Participant’s Option shall be exercised
automatically on the New Investment Date, unless prior to such date the
Participant has withdrawn from the Offering Period as provided in Section
3
hereof.

 

Section
10. Administration

(a) Appointment. The
Plan shall be administered by the Committee provided that the Committee shall be
comprised solely of at least two (2) non-employee, disinterested directors
appointed by the Board. A disinterested director is any member of the Board who
is a “Non-Employee Director” within the meaning of paragraph (b)(3)(i) of
Securities and Exchange Commission Rule 16b-3 (“Rule
16b-3”).

(b) Authority. The
Committee has full authority and discretion to make, administer and interpret
such rules and regulations as it deems necessary to administer the Plan
(including rules and regulations deemed necessary to comply with the
requirements of Code Section 423). The Committee will have final and binding
authority to: (i) establish and/or change the duration of any Offering
Period; (ii) limit or increase the frequency and/or number of changes in
the amounts withheld during an Offering Period; (iii) establish reasonable
waiting and adjustment periods and/or accounting and crediting procedures to
ensure that amounts applied toward the purchase of common stock for each
Participant properly correspond with amounts withheld from the Participant’s
Compensation; (iv) delegate its functions to officers or employees of the
Company or other persons; (v) establish additional terms and conditions
with respect to the purchase of Shares under the Plan; and (vi) establish
such other limitations or procedures as it determines in its sole discretion
advisable and consistent with the administration of the Plan. The Committee
shall take any of the foregoing actions that are necessary to assure the
continued availability of the exemption provided in Rule 16b-3. If and to the
extent required by Rule 16b-3 or any successor exemption under which the
Committee believes it is appropriate for the Plan to qualify, the Committee may
restrict a Participant’s ability to participate in the Plan or sell any Shares
received under the Plan for such period as the Committee deems appropriate or
may impose such other conditions in connection with participation or
distributions under the Plan as the Committee deems
appropriate.

(c) Duties
of Committee. The
Committee shall establish and maintain records of the Plan and of each Payroll
Deduction Account established for any Participant hereunder.

(d) Plan
Expenses. The
Company shall pay the fees and expenses of accountants, counsel, agents and
other personnel and all other costs of administration of the
Plan.

(e) Indemnification. The
Company shall indemnify members of the Committee and any agent of the Committee
who is an employee of the Company, against any and all liabilities or expenses
to which they may be subjected by reason of any act or failure to act with
respect to their duties on behalf of the Plan, except in circumstances involving
such person’s bad faith, gross negligence or willful
misconduct.

Section
11. Amendment
and Termination 

(a) Amendment. Subject
to the provisions of Code Section 423, the Board may amend the Plan in any
respect; provided, however, that the Plan may not be amended in any manner that
will retroactively impair or otherwise adversely affect in any material manner
the rights of any Participant to benefits under the Plan which have accrued
prior to the date of such action.

(b) Adjustments
Due to Financial Accounting. If the
Board determines that the ongoing operation of the Plan may result in
unfavorable financial accounting consequences, the Board may, in its discretion
and, to the extent necessary or desirable, modify or amend the Plan to reduce or
eliminate such accounting consequence including:

(i) altering
the Purchase Price for any Offering Period, including an Offering Period
underway at the time of the change in Purchase Price;

(ii) shortening
any Offering Period so that the Offering Period ends on any other Investment
Date, including an Offering Period underway at the time of the Board action;
and

(iii) allocating
Shares.

Such
modifications or amendments shall not require stockholder approval or the
consent of any Participant.

(c) Termination. The Plan
will terminate on the earlier of: (i) the date on which there are no
additional Shares reserved under the Plan for issuance to Participants; or
(ii) the tenth (10th) anniversary of the Effective Date. In addition, the
Plan may be terminated at any time, in the sole discretion of the Board. In the
event of Plan termination, the Company shall refund to each Participant the
amount of payroll deductions credited to their Payroll Deduction Account as soon
as practicable following the effective date of such termination.

Section
12. Effective
Date

The Plan
was adopted by the Board with an Effective Date of January 1, 2006, subject
to approval by the holders of the majority of Shares present and represented at
an annual or special meeting of the stockholders held within twelve (12) months
of the date the Plan is adopted. The Plan shall not become effective unless so
approved.

Section
13. Governmental
and Other Regulations

The Plan
and the grant and exercise of Options to purchase Shares hereunder, and the
Company’s obligations to sell and deliver Shares upon the exercise of Options to
purchase Shares, shall be subject to all applicable federal, state and foreign
laws, rules and regulations, and to such approvals by any regulatory or
governmental agency as, in the opinion of counsel to the Company, may be
required.

Section
14. No
Implied Rights

(a) No
Rights to Specific Assets. 
Neither a Participant nor any other person shall by reason of participation in
the Plan acquire any right in or title to any assets, funds or property of the
Company or any Related Corporation, including any specific funds, assets, or
other property which the Company or any Related Corporation, in its sole
discretion, may set aside in anticipation of a liability under the Plan. A
Participant shall have only a contractual right to the stock or amounts, if any,
payable or distributable under the Plan, unsecured by any assets of the Company
or any Related Corporation, and nothing contained in the Plan shall constitute a
guarantee that the assets of the Company or any Related Corporation shall be
sufficient to pay any benefits to any Participant.

(b) No
Contractual Right to Employment or Future Awards. The
Plan does not constitute a contract of employment, and selection as a
Participant will not give any participating Employee the right to be retained in
the employ of the Company or any Related Corporation or any right or claim to
any benefit under the Plan, unless such right or claim has specifically accrued
under the terms of the Plan. Except as otherwise provided in the Plan, no Option
under the Plan shall confer upon the holder thereof any rights as a stockholder
of the Company prior to the date on which the individual fulfills all conditions
for receipt of such rights.

Section
15. Withholding

As a
condition to receiving Shares under the Plan, the Company may require the
Participant to make a cash payment to the Company of, or the Company may
withhold from any Shares distributable under the Plan, an amount necessary to
satisfy all federal, state, local or other taxes as may be required to be
withheld in respect of such payments pursuant to any law or governmental
regulation or ruling.

Section
16. Offsets

To the
extent permitted by law, the Company shall have the absolute right to withhold
any amounts payable to any Participant under the terms of the Plan to the extent
of any amount owed for any reason by such Participant to the Company and to set
off and apply the amounts so withheld to payment of any such amounts owed to the
Company, whether or not such amounts shall then be immediately due and payable
and in such order or priority as among such amounts owed as the Committee, in
its sole discretion, shall determine.

Section
17. Notices,
Etc.

All
elections, designations, requests, notices, instructions and other
communications from a Participant to the Committee or the Company required or
permitted under the Plan shall be in such form as is prescribed from time to
time by the Committee, shall be mailed by first-class mail or delivered to such
location as shall be specified by the Committee, and shall be deemed to have
been given and delivered only upon actual receipt thereof at such
location.

 

    Section
18. Effect
of Plan

The
provisions of the Plan shall be binding upon, and inure to the benefit of, all
successors of the Company and each Participant, including such Participant’s
estate and the executors, administrators or trustees thereof, heirs and
legatees, and any receiver, trustee in bankruptcy or representative of creditors
of such Participant.

Section
19. Governing
Law

The Plan,
all awards granted hereunder and all actions taken in connection herewith shall
be governed by and construed in accordance with the laws of the State of
Delaware without reference to principles of conflict of laws, except as
superseded by applicable federal law.

Section
20. Defined
Terms

When used
herein, the following terms shall have the following meanings:

(a) “Board” shall
mean the Board of Directors of the Company.

(b) “Code” shall
mean the Internal Revenue Code of 1986, and any amendments
thereto.

(c) “Committee” shall
mean the committee acting under Section
10.

(d) “Compensation” unless
otherwise provided by the Committee, shall mean “compensation” as defined under
the Heartland Financial Retirement Plan (the “Retirement
Plan”) for
purposes of non-discretionary employer contributions.

(e) “Effective
Date” shall
mean January 1, 2006.

(f) “Employee” shall
mean an employee of an Employer.

(g) “Employer” shall
mean the Company or any Related Corporation, unless otherwise determined by the
Company.

(h) “Entry
Date” shall
mean the first day of each Plan Year.

(i) “Fair
Market Value" shall
mean, as of any date, the fair market value of a Share as determined in good
faith by the Committee.

(j) “Grant
Date” shall
mean the first day of each Offering Period, or such other date as may be
determined by the Committee in its sole discretion.

(k) “Investment
Date” shall
mean the last day of each Offering Period, or such other date as may be
determined by the Committee in its sole discretion.

(l) “Offering
Period” shall
mean the period of twelve (12) months starting on January 1 of each year and
ending on December 31 of each year or any other shorter period(s) within a Plan
Year as may be determined by the Committee in its sole discretion from time to
time.

(m) “Participant” shall
mean an Employee who has met the requirements of Section
2 and has
properly elected to participate in the Plan pursuant to Section
3.

(n) “Payroll
Deduction Account” shall
mean the bookkeeping account established by the Company pursuant to Section
3 for each
Participant.

(o) “Option” shall
mean the right of a Participant to acquire Shares pursuant to the terms of the
Plan.

(p) “Plan
Year” shall
mean January 1 through December 31 of each year.

(q) “Purchase
Price” shall
mean the price per Share as determined pursuant to Section
4(c).

(r) “Related
Corporation” shall
mean a corporation which would be a parent or subsidiary corporation with
respect to the Company as defined in Code Section 424(e) or
(f).

(s) “Retirement” shall
mean the Participant’s termination on or after the date (i) the Participant
reaches the age of fifty-five (55) and has ten (10) years of combined service
with the Company or Subsidiary (as determined by the Committee), or
(ii) the Participant retires pursuant to the provisions of any defined
benefit retirement plan sponsored by the Company or its subsidiaries that is
then applicable to the Participant, all of the foregoing as approved by the
Committee.

(t) “Share” shall
mean a share of the Company’s common stock, par value $1.00 per
share.

Section
21. Construction

In this
Plan, unless otherwise stated or the context otherwise requires, the following
uses apply:

(a) actions
permitted under this Plan may be taken at any time and from time to time in the
actor’s reasonable discretion;

(b) references
to a statute shall refer to the statute and any successor statute, and to all
regulations promulgated under or implementing the statute or its successor, as
in effect at the relevant time;

(c) in
computing periods from a specified date to a later specified date, the words
“from” and “commencing on” (and the like) mean “from and including,” and the
words “to,” “until” and “ending on” (and the like) mean “to, but
excluding”;

(d) references
to a governmental or quasi-governmental agency, authority or instrumentality
shall also refer to a regulatory body that succeeds to the functions of the
agency, authority or instrumentality; 

(e) indications
of time of day mean Dubuque, Iowa time;

(f) “including”
means “including, but not limited to”;

(g) all
references to sections, schedules and exhibits are to sections, schedules and
exhibits in or to this Plan unless otherwise specified;

(h) all words
used in this Plan will be construed to be of such gender or number as the
circumstances and context require;

(i) the
captions and headings of articles, sections, schedules and exhibits appearing in
or attached to this Plan have been inserted solely for convenience of reference
and shall not be considered a part of this Plan nor shall any of them affect the
meaning or interpretation of this Plan or any of its provisions;

(j) any
reference to a document or set of documents in this Plan, and the rights and
obligations of the parties under any such documents, shall mean such document or
documents as amended from time to time, and any and all modifications,
extensions, renewals, substitutions or replacements thereof;
and

(k) all
accounting terms not specifically defined herein shall be construed in
accordance with generally accepted accounting principles as consistently applied
in the United States of America.

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