SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [ X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[ X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
HEARTLAND FINANCIAL USA, INC.
(Name of Registrant as Specified in its Charter)
(Name of Person(s) Filing Proxy Statement,
if other than Registrant)
Payment of Filing Fee (Check the appropriate box):
[ X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction
applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (Set forth
the amount on which the filing fee is calculated and
state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule, or Registration Statement No.:
3) Filing Party:
4) Date Filed:
[LOGO]
Heartland Financial USA, Inc.
April 9, 2003
Dear Fellow Stockholder:
You are cordially invited to attend the annual stockholders'
meeting of Heartland Financial USA, Inc. to be held at our
corporate headquarters, located at 1398 Central Avenue, Dubuque,
Iowa, on Wednesday, May 21, 2003, at 1:30 p.m. The accompanying
notice of annual meeting of stockholders and proxy statement
discuss the business to be conducted at the meeting. A copy of
our 2002 Annual Report to Stockholders is also enclosed. At the
meeting we will report on operations and the outlook for the year
ahead.
Your board of directors has nominated two persons to serve
as Class I directors. The board also recommends that you approve
the adoption of the Heartland Financial USA, Inc. 2003 Stock
Option Plan. Additionally, we have selected and recommend that
you ratify the selection of KPMG LLP to continue as our
independent public accountants for the year ending December 31,
2003.
We recommend that you vote your shares for each of the
director nominees and in favor of the adoption of the stock
option plan and the ratification of our accountants.
We encourage you to attend the meeting in person. Whether or
not you plan to attend, however, please complete, sign and date
the enclosed proxy and return it in the accompanying postpaid
return envelope as promptly as possible. This will ensure that
your shares are represented at the meeting.
We look forward with pleasure to seeing you and visiting
with you at the meeting.
With best personal wishes,
/s/ Lynn B. Fuller
-----------------------------
Lynn B. Fuller
Chairman of the Board
1398 Central Avenue - Dubuque, Iowa 52001 - (563) 589-2100
[LOGO]
Heartland Financial USA, Inc.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 21, 2003
TO THE STOCKHOLDERS:
The annual meeting of stockholders of HEARTLAND FINANCIAL
USA, INC. will be held at our corporate headquarters, 1398
Central Avenue, Dubuque, Iowa, on Wednesday, May 21, 2003, at
1:30 p.m., for the purpose of considering and voting upon the
following matters:
1. to elect two Class I directors;
2. to approve the adoption of the Heartland Financial USA,
Inc. 2003 Stock Option Plan;
3. to ratify the appointment of KPMG LLP as independent
public accountants for the fiscal year ending December
31, 2003; and
4. to transact such other business as may properly be
brought before the meeting or any adjournments or
postponements of the meeting.
The board of directors is not aware of any other business to
come before the meeting. Stockholders of record at the close of
business on March 24, 2003, are the stockholders entitled to vote
at the meeting and any adjournments or postponements of the
meeting. In the event there is an insufficient number of votes
for a quorum or to approve or ratify any of the foregoing
proposals at the time of the annual meeting, the meeting may be
adjourned or postponed in order to permit further solicitation of
proxies.
By order of the Board of
Directors
/s/ Lois K. Pearce
-------------------------
Lois K. Pearce
Secretary
Dubuque, Iowa
April 9, 2003
IMPORTANT: THE PROMPT RETURN OF PROXIES WILL SAVE US THE EXPENSE
OF FURTHER REQUESTS FOR PROXIES TO ENSURE A QUORUM AT THE
MEETING. A SELF-ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR
CONVENIENCE. NO POSTAGE IS REQUIRED IF MAILED WITHIN THE UNITED
STATES.
[LOGO]
Heartland Financial USA, Inc.
PROXY STATEMENT
This proxy statement is furnished in connection with the
solicitation by the board of directors of Heartland Financial
USA, Inc. of proxies to be voted at the annual meeting of
stockholders to be held at our headquarters located at 1398
Central Avenue, Dubuque, Iowa, on Wednesday, May 21, 2003, at
1:30 p.m. local time, or at any adjournments or postponements of
the meeting. We first mailed this proxy statement on or about
April 9, 2003.
Heartland Financial USA, Inc., a Delaware corporation, is a
diversified financial services holding company headquartered in
Dubuque, Iowa. We offer full-service community banking through
six banking subsidiaries with a total of 33 banking locations in
Iowa, Illinois, Wisconsin and New Mexico. In addition, we have
separate subsidiaries in the consumer finance, vehicle
leasing/fleet management, insurance agency and investment
management businesses. Our primary strategy is to balance our
focus on increasing profitability with asset growth and
diversification through acquisitions, de novo bank formations,
branch openings and expansion into non-bank subsidiary
activities.
Our shares are traded in the over-the-counter market under
the symbol "HTLF" and are eligible for quotation on the OTC
Bulletin Board. Our common stock has been approved by The Nasdaq
Stock Market, Inc. for quotation on the Nasdaq National Market
System. We expect to begin listing on Nasdaq early in the second
quarter of 2003 under the same symbol.
The following information regarding the meeting and the
voting process is presented in a question and answer format.
Why am I receiving this proxy statement and proxy card?
You are receiving a proxy statement and proxy card from us
because on March 24, 2003, you owned shares of our common stock.
This proxy statement describes the matters that will be presented
for consideration by the stockholders at the annual meeting. It
also gives you information concerning the matters to be voted
upon to assist you in making an informed decision.
When you sign the enclosed proxy card, you appoint the proxy
holder as your representative at the meeting. The proxy holder
will vote your shares as you have instructed in the proxy card,
thereby ensuring that your shares will be voted whether or not
you attend the meeting. Even if you plan to attend the meeting,
you should complete, sign and return your proxy card in advance
of the meeting just in case your plans change.
If you have signed and returned the proxy card and an issue
comes up for a vote at the meeting that is not identified on the
form, the proxy holder will vote your shares, pursuant to your
proxy, in accordance with his or her judgment.
What matters will be voted on at the meeting?
You are being asked to vote on the election of two Class I
directors of Heartland for a term expiring in 2006, the adoption
of the 2003 stock option plan and the ratification of KPMG LLP as
our independent auditors for 2003. These matters are more fully
described in this proxy statement.
How do I vote?
You may vote either by mail or in person at the meeting. To
vote by mail, complete and sign the enclosed proxy card and mail
it in the enclosed pre-addressed envelope. No postage is required
if mailed in the United States. If you mark your proxy card to
indicate how you want your shares voted, your shares will be
voted as you instruct.
If you sign and return your proxy card but do not mark the
form to provide voting instructions, the shares represented by
your proxy card will be voted "for" both nominees named in this
proxy statement, "for" the adoption of the 2003 stock option plan
and "for" the ratification of our auditors.
If you want to vote in person, please come to the meeting. We
will distribute written ballots to anyone who wants to vote at
the meeting. Please note, however, that if your shares are held
in the name of your broker (or in what is usually referred to as
"street name"), you will need to arrange to obtain a separate
proxy from your broker in order to vote in person at the meeting.
What does it mean if I receive more than one proxy card?
It means that you have multiple holdings reflected in our
stock transfer records and/or in accounts with stockbrokers.
Please sign and return ALL proxy cards to ensure that all your
shares are voted.
If I hold shares in the name of a broker, who votes my shares?
If you received this proxy statement from your broker, your
broker should have given you instructions for directing how your
broker should vote your shares. It will then be your broker's
responsibility to vote your shares for you in the manner you
direct.
Under the rules of various national and regional securities
exchanges, brokers may generally vote on routine matters, such as
the election of directors, but cannot vote on non-routine
matters, such as an amendment to the certificate of
incorporation, the adoption or amendment of a stock option plan,
unless they have received voting instructions from the person for
whom they are holding shares. If your broker does not receive
instructions from you on how to vote particular shares on matters
on which your broker does not have discretionary authority to
vote, your broker will return the proxy form to us, indicating
that he or she does not have the authority to vote on these
matters. This is generally referred to as a "broker non-vote" and
will affect the outcome of the voting as described below, under
"How many votes are needed for approval of each proposal?"
Therefore, we encourage you to provide directions to your broker
as to how you want your shares voted on all matters to be brought
before the meeting. You should do this by carefully following the
instructions your broker gives you concerning its procedures.
This ensures that your shares will be voted at the meeting.
What if I change my mind after I return my proxy?
If you hold your shares in your own name, you may revoke your
proxy and change your vote at any time before the polls close at
the meeting. You may do this by:
- signing another proxy with a later date and returning
that proxy to Ms. Lois K. Pearce, Secretary, Heartland
Financial USA, Inc., 1398 Central Avenue, Dubuque, Iowa
52001;
- sending notice to us that you are revoking your proxy; or
- voting in person at the meeting.
If you hold your shares in the name of your broker and desire
to revoke your proxy, you will need to contact your broker to
revoke your proxy.
How many votes do we need to hold the annual meeting?
A majority of the shares that are outstanding and entitled to
vote as of the record date must be present in person or by proxy
at the meeting in order to hold the meeting and conduct business.
Shares are counted as present at the meeting if the
stockholder either:
- is present and votes in person at the meeting; or
- has properly submitted a signed proxy card or other
proxy.
On March 24, 2003, the record date, there were 9,927,755
shares of common stock issued and outstanding. Therefore, at
least 4,963,878 shares need to be present at the annual meeting
in order to hold the meeting and conduct business.
What happens if a nominee is unable to stand for re-election?
The board may, by resolution, provide for a lesser number of
directors or designate a substitute nominee. In the latter case,
shares represented by proxies may be voted for a substitute
nominee. You cannot vote for more than two nominees. The board
has no reason to believe any nominee will be unable to stand for
re-election.
What options do I have in voting on each of the proposals?
You may vote "for" or "withhold authority to vote for" each
nominee for director. You may vote "for," "against" or "abstain"
on any other proposal that may properly be brought before the
meeting. Abstentions and broker non-votes will be considered in
determining the presence of a quorum but will not affect the vote
required for the election of directors, the approval of the stock
option plan or the ratification of our auditors.
How many votes may I cast?
Generally, you are entitled to cast one vote for each share
of stock you owned on the record date.
How many votes are needed for each proposal?
The two individuals receiving the highest number of votes
cast "for" their election will be elected as directors of
Heartland. The approval of the stock option plan, the
ratification of our auditors and all other matters must receive
the affirmative vote of a majority of the shares present in
person or by proxy at the meeting and entitled to vote.
Where do I find the voting results of the meeting?
We will announce voting results at the meeting. The voting
results will also be disclosed in our Form 10-Q for the quarter
ended June 30, 2003.
Who bears the cost of soliciting proxies?
We will bear the cost of soliciting proxies. In addition to
solicitations by mail, officers, directors and employees of
Heartland or its subsidiaries may solicit proxies in person or by
telephone. These persons will not receive any special or
additional compensation for soliciting proxies. We may reimburse
brokerage houses and other custodians, nominees and fiduciaries
for their reasonable out-of-pocket expenses for forwarding proxy
and solicitation materials to stockholders.
ELECTION OF DIRECTORS
At the annual meeting to be held on May 21, 2003, you will be
entitled to elect two Class I directors for terms expiring in
2006. The directors are divided into three classes having
staggered terms of three years. In January of 2003, the board
appointed John W. Cox, Jr. as a Class I director to fill a
vacancy in that class. Each of the nominees for election as a
Class I director is an incumbent director. We have no knowledge
that any of the nominees will refuse or be unable to serve, but
if any of the nominees become unavailable for election, the
holders of proxies reserve the right to substitute another person
of their choice as a nominee when voting at the meeting.
Set forth below is information concerning the nominees for
election and for the other directors whose terms of office will
continue after the meeting, including the age, year first elected
a director and business experience of each during the previous
five years. The nominees for Class I directors, if elected at the
annual meeting, will serve for a three-year term expiring in
2006. The board of directors recommends that you vote your shares
FOR each of the nominees for director.
NOMINEES
Served as
Heartland
Financial Position with Heartland
USA, Inc. Financial USA, Inc. and
Name Director its Subsidiaries and
(Age) Since Principal Occupation
------------------ --------- ------------------------
CLASS I
(Term Expires 2006)
Lynn B. Fuller 1987 Chairman of the Board (2000-
(Age 53) present), President (1990-
present) and Chief Executive
Officer (1999-present) of
Heartland; Director, Vice
Chairman of the Board (2000-
present), President (1987-
1999) and Chief Executive
Officer (1986-1999) of Dubuque
Bank and Trust; Director of
Wisconsin Community Bank, New
Mexico Bank & Trust, Galena
State Bank, First Community
Bank, Riverside Community Bank
and Keokuk Bancshares;
Director and President of
Citizens Finance; Director and
Chairman of ULTEA
John W. Cox, Jr. 2003 Director of Galena State Bank;
(Age 55) Attorney at Law, Partner of
Cox & Ward, P.C.
CONTINUING DIRECTORS
Served as
Heartland
Financial Position with Heartland
USA, Inc. Financial USA, Inc. and
Name Director its Subsidiaries and
(Age) Since Principal Occupation
------------------ --------- ------------------------
CLASS II
(Term Expires 2004)
Mark C. Falb 1995 Vice Chairman of the Board
(Age 55) (2001-present); Chairman
(2001-present) and Director
(1984-present) of Dubuque Bank
and Trust; Director of
Citizens Finance; Chairman of
the Board and Chief Executive
Officer of Westmark
Enterprises, Inc. and
Kendall/Hunt Publishing
Company
John K. Schmidt 2001 Executive Vice President and
(Age 43) Chief Financial Officer of
Heartland; President and Chief
Executive Officer (2000-
present) and Senior Vice
President and Chief Financial
Officer (1992-2000) of Dubuque
Bank and Trust; Director of
Keokuk Bancshares, Inc.; Vice
President of ULTEA and
Treasurer of Citizens Finance
Robert Woodward 1987 Director of Dubuque Bank and
(Age 66) Trust and Citizens Finance;
Chairman of the Board (1992-
present) and Chief Executive
Officer (1992-2002) of
Woodward Communications, Inc.
CLASS III
(Term Expires 2005)
James F. Conlan 2000 Director of Dubuque Bank and
(Age 39) Trust (1999-present); Attorney
at Law, Partner of Sidley &
Austin
Thomas L. Flynn 2002 Director of Dubuque Bank and
(Age 47) Trust (2000-present),Citizens
Finance (2002-present); Iowa
State Senator (1994-2002);
President, Chief Executive
Officer and Chief Financial
Officer of Flynn Ready-Mix
Concrete
All of our directors will hold office for the terms
indicated, or until their respective successors are duly elected
and qualified. There are no arrangements or understandings
between Heartland and any other person pursuant to which any of
our directors have been selected for their respective positions.
With the exception of Mr. Conlan, who is the brother-in-law of
Mr. Fuller, no member of the board of directors is related to any
other member of the board of directors.
Board of Directors and Corporate Governance
There are currently seven members of the board of directors,
four of whom are deemed to be "independent" as defined by The
Nasdaq Stock Market, Inc. The board of directors holds regular
meetings quarterly and special meetings as necessary. During
2002, the board of directors held four regular meetings and eight
special meetings. All directors during their terms of office in
2002 attended at least 75% of the total number of meetings of the
board and of meetings held by all committees of the board on
which any such director served except that Mr. Woodward, who was
on medical leave, attended 50% of all meetings. We do not
currently have a standing nominating committee. Rather, the
entire board participates in the process of selecting nominees to
fill vacancies on the board. The board of directors will consider
nominees recommended by stockholders provided any such
recommendation is made in writing and delivered to the corporate
secretary as further provided in our bylaws.
Compensation Committee
The compensation committee, currently consisting of directors
Falb, Conlan, Cox, Flynn, and Woodward, meets to review the
performance and establish the salary and other compensation of
the chief executive officer and each of the other executive
officers named in the summary compensation table. Mr. Falb has
served as chairman of the compensation committee since April of
2001. Mr. Cox began serving on the committee in January of 2003.
Effective with the listing of our common stock on Nasdaq, Mr.
Conlan will no longer serve on the compensation committee as he
is the brother-in-law of Mr. Fuller and we intend to maintain a
compensation committee comprised of independent directors. During
2002, the compensation committee met four times.
Audit Committee
Currently, the members of the audit committee are directors
Falb, Conlan, Cox and Flynn. Mr. Falb has served as chairman of
the audit committee since May of 2001. Effective with the listing
of our common stock on Nasdaq, Mr. Conlan will no longer serve on
the audit committee as he is the brother-in-law of Mr. Fuller and
we intend to maintain an audit committee comprised of independent
directors. The functions performed by the audit committee
include, but are not limited to, the following:
- selecting and managing the relationship with our
independent auditors;
- reviewing the independence of the independent auditors;
- reviewing actions by management on recommendations of
the independent auditors and internal auditors;
- meeting with management, the internal auditors and the
independent auditors to review the effectiveness of our
system of internal control and internal audit
procedures;
- reviewing our earnings releases and reports filed with
the Securities and Exchange Commission; and
- reviewing reports of bank regulatory agencies and
monitoring management's compliance with recommendations
contained in those reports.
To promote independence of the audit function, the audit
committee consults separately and jointly with the independent
auditors, the internal auditors and management. The audit
committee has adopted a written charter, which sets forth the
committee's duties and responsibilities. A copy of the audit
committee charter is attached to this proxy statement as Appendix
A. The audit committee met three times in 2002.
Director Fees
Each of our directors is paid a fee of $500 for each board
meeting attended and $350 for each committee meeting attended,
except for Messrs. Fuller and Schmidt who, as executive officers,
do not receive any fees for their services as director.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information with
respect to the beneficial ownership of our common stock at March
24, 2003, by each person known by us to be the beneficial owner
of more than 5% of the outstanding common stock, by each director
or nominee, by each executive officer named in the summary
compensation table and by all directors and executive officers of
Heartland as a group. The address of each 5% stockholder is 1398
Central Avenue, Dubuque, Iowa 52001.
Amount and Nature
Name of Individual and of Beneficial Percent of
Number of Persons in Group Ownership (1) Class
-------------------------- ------------------ ----------
5% Stockholders and Directors
Dubuque Bank and Trust Company 2,093,893 (2) 21.1%
Lynn S. Fuller 892,820 (3) 9.0%
Heartland Partnership, L.P. 556,000 (4) 5.6%
James F. Conlan 48,210 (5) *
John W. Cox, Jr. 12,865 (6) *
Mark C. Falb 108,842 (7) 1.1%
Thomas L. Flynn 14,000 (8) *
Lynn B. Fuller 412,434 (9) 4.2%
John K. Schmidt 123,110 (10) 1.2%
Robert Woodward 420,807 (11) 4.2%
Other Executive Officers
Kenneth J. Erickson 132,233 (12) 1.3%
Edward H. Everts 107,529 (13) 1.1%
Douglas J. Horstmann 121,222 (14) 1.2%
All directors and
executive officers
as a group (11 persons) 1,596,753 16.1%
* Less than one percent
(1) The information contained in this column is based upon
information furnished to Heartland by the persons named above and
the members of the designated group. Amounts reported include
shares held directly as well as shares which are held in
retirement accounts and shares held by certain members of the
named individuals' families or held by trusts of which the named
individual is a trustee or substantial beneficiary, with respect
to which shares the respective director may be deemed to have
sole or shared voting and/or investment power. Also included are
shares obtainable through the exercise of options within 60 days
of the date of the information presented in this table in the
following amounts: Mr. Lynn B. Fuller - 19,000 shares; Mr.
Schmidt - 44,667 shares; Mr. Erickson - 57,000 shares; Mr.
Horstmann - 52,666 shares; Mr. Everts - 57,000 shares and all
directors and executive officers as a group - 258,833 shares. The
nature of beneficial ownership for shares shown in this column is
sole voting and investment power, except as set forth in the
footnotes below. Inclusion of shares shall not constitute an
admission of beneficial ownership or voting and investment power
over included shares.
(2) Includes 676,223 shares over which Dubuque Bank and
Trust, Heartland's lead bank subsidiary, has sole voting and
investment power and 109,784 shares over which Dubuque Bank and
Trust has shared voting or investment power.
(3) Includes shares held by the Heartland Partnership,
L.P., over which Mr. Fuller has sole voting and investment power,
as well as 38,034 shares held by a trust for which Mr. Fuller's
spouse is a trustee and 77,848 shares held in a trust for which
Mr. Fuller serves as co-trustee, over which Mr. Fuller has shared
voting and investment power.
(4) Mr. Lynn S. Fuller, a former director of Heartland and
a stockholder of more than 5% of the outstanding shares, is the
general partner of Heartland Partnership, L.P., and in such
capacity exercises sole voting and investment power over such
shares.
(5) Includes 19,000 shares held by Mr. Conlan's spouse,
over which Mr. Conlan has shared voting and investment power, and
14,000 shares held by the Heartland Partnership, L.P., over which
Mr. Conlan has no voting or investment power but in which Mr.
Conlan's spouse does have a beneficial interest.
(6) Includes 9,293 shares held by John W. Cox Jr. Inc., of
which Mr. Cox is a controlling shareholder.
(7) Includes 45,904 shares held by Mr. Falb's spouse, as
trustee, over which Mr. Falb has no voting or investment power.
(8) Includes 1,500 shares held by Mr. Flynn's spouse in an
individual retirement account, over which Mr. Flynn has no voting
or investment power.
(9) Includes an aggregate of 4,836 shares held by Mr.
Fuller's spouse and minor children and 77,848 shares held in a
trust for which Mr. Fuller serves as co-trustee, over which Mr.
Fuller has shared voting and investment power. Includes 14,000
shares held by the Heartland Partnership, L.P., over which Mr.
Fuller has no voting or investment power but in which Mr. Fuller
does have a beneficial interest.
(10) Includes an aggregate of 14,974 shares held by Mr.
Schmidt's spouse and minor children and 1,033 shares held by Mr.
Schmidt jointly with his spouse, over which Mr. Schmidt has
shared voting and investment power.
(11) Includes an aggregate of 210,000 shares held by various
trusts of which Mr. Woodward is a trustee and over which Mr.
Woodward has shared voting and investment power. Mr. Woodward
also has shared voting and investment power over 120,200 shares
held by Woodward Communications, Inc., of which Mr. Woodward is a
director on its board.
(12) Includes 6,333 shares held by Mr. Erickson jointly with
his spouse, over which Mr. Erickson has shared voting and
investment power.
(13) Includes 209 shares held by Mr. Evert's adult children,
over which Mr. Everts has no voting and investment power, and 200
shares held by Mr. Everts's spouse under a 401(k) plan, over
which Mr. Everts has no voting and investment power.
(14) Includes 18,000 shares held by Mr. Horstmann's spouse,
over which Mr. Horstmann has shared voting and investment power.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires
that our directors, executive officers and 10% stockholders file
reports of ownership and changes in ownership with the Securities
and Exchange Commission. Such persons are also required to
furnish us with copies of all Section 16(a) forms they file.
Based solely upon our review of such forms, we are not aware that
any of our directors, executive officers or 10% stockholders
failed to comply with the filing requirements of Section 16(a)
during 2002, except for the following:
- Mr. Flynn failed to include shares held in an individual
retirement account when filing his Form 3 in January of
2002;
- Mr. Conlan failed to timely file a Form 4 upon the
acquisition of shares in February of 2002; and
- Mr. Horstmann failed to timely file a Form 4 upon the
acquisition of shares in his 401(k) plan in January of
2002.
EXECUTIVE COMPENSATION
The following table sets forth information concerning the
compensation paid or granted to our chief executive officer and
to each of the other four most highly compensated executive
officers of Heartland or our subsidiaries for the fiscal year
ended December 31, 2002:
SUMMARY COMPENSATION TABLE
Annual Compensation
-------------------
(a) (b) (c) (d)
Fiscal
Year
Ended
Name and Principal December
Position 31 Salary(1) Bonus(2)
------------------------- ---------- --------- --------
Lynn B. Fuller 2002 $235,000 $160,254
President and Chief 2001 215,000 116,977
Executive Officer of 2000 200,000 103,231
Heartland
John K. Schmidt 2002 $175,000 $ 78,690
Executive Vice President 2001 150,000 66,311
and Chief Financial Officer 2000 135,000 64,143
of Heartland
Kenneth J. Erickson 2002 $140,000 $ 53,086
Executive Vice President 2001 130,000 42,119
of Heartland 2000 118,000 33,304
Douglas J. Horstmann 2002 $119,000 $ 44,401
Senior Vice President of 2001 116,000 32,147
Heartland 2000 108,000 26,072
Edward H. Everts 2002 $110,000 $ 38,655
Senior Vice President of 2001 100,000 32,674
Heartland 2000 97,000 22,682
Long-term
Compensation
Awards
---------------------
(a) (b) (f) (g) (h)
Fiscal
Year Securities
Ended Restricted Underlying All Other
Name and Principal December Stock Options/ Compensa-
Position 31 Awards SARs tion(3)
------------------ ---------- ---------- ---------- ----------
Lynn B. Fuller 2002 $ --- 5,500 $27,700
President and Chief 2001 --- 10,000 23,236
Executive Officer of 2000 --- 9,000 22,671
Heartland
John K. Schmidt 2002 $ --- 2,500 $27,085
Executive Vice 2001 --- 6,000 23,974
President and 2000 --- 6,000 20,719
Chief Financial
Officer of Heartland
Kenneth J. Erickson 2002 $ --- 1,500 $22,919
Executive Vice 2001 --- 2,000 20,696
President of 2000 --- 3,000 19,290
Heartland
Douglas J. Horstmann 2002 $ --- 1,000 $19,059
Senior Vice President 2001 --- 2,000 18,014
of Heartland 2000 --- 2,000 17,054
Edward H. Everts 2002 $ --- 1,500 $17,983
Senior Vice President 2001 --- 2,000 15,528
of Heartland 2000 --- 3,000 15,326
(1) Includes amounts deferred under our retirement plan.
(2) The amounts shown represent amounts received under our
management incentive compensation plan.
(3) The amounts shown represent amounts contributed on
behalf of the respective officer to our retirement plan and the
allocable portion of the premium paid for life insurance under
our executive death benefit program. For Mr. Fuller, the amounts
shown include an automobile allowance of $2,131 for 2002, $1,493
for 2001 and $1,611 for 2000. For Mr. Schmidt, the amounts shown
include an automobile allowance of $2,014 for 2002, $2,573 for
2001 and $2,280 for 2000. For 2002, 2001 and 2000, the amount
contributed for each officer under our retirement plan was
$24,886, $21,284 and $20,500 for Mr. Fuller, $24,886, $21,284 and
$20,581 for Mr. Schmidt, $22,661, $20,508 and $19,068 for Mr.
Erickson, $18,807, $17,849 and $16,864 for Mr. Horstmann and
$17,753, $15,360 and $15,128 for Mr. Everts.
Stock Option Information
The following table sets forth certain information concerning
the number and value of stock options granted in the last fiscal
year to the individuals named in the summary compensation table:
OPTION GRANTS IN LAST FISCAL YEAR
Individual Grants
(a) (b) (c) (d)
% of Total
Options Granted
to Employees Exercise or
Options in Fiscal Base Price
Name Granted(1) Year ($/Share)
----------------------- ------------ ----------- -----------
Lynn B. Fuller 5,500 11.40% $13.20
John K. Schmidt 2,500 5.18% 13.20
Kenneth J. Erickson 1,500 3.11% 13.20
Douglas J. Horstmann 1,000 2.07% 13.20
Edward H. Everts 1,500 3.11% 13.20
(a) (e) (f)
Grant Date
Expiration Present
Name Date Value(2)(3)
---------------------- ---------- -------------
Lynn B. Fuller 01/15/12 $ 14,135
John K. Schmidt 01/15/12 6,425
Kenneth J. Erickson 01/15/12 3,855
Douglas J. Horstmann 01/15/12 2,570
Edward H. Everts 01/15/12 3,855
(1) Options become exercisable in three equal portions on
the day after the third, fourth and fifth anniversaries of the
January 15, 2002, date of grant.
(2) The Black-Scholes valuation model was used to determine
the grant date present values. Significant assumptions include:
risk-free interest rate, 4.88%; expected option life, 10 years;
expected volatility, 15.35%; expected dividends, 3.03%.
(3) The ultimate value of the options will depend on the
future market price of our common stock, which cannot be forecast
with reasonable accuracy. The actual value, if any, an executive
may realize upon the exercise of an option will depend on the
excess of the market value of our common stock, on the date the
option is exercised, over the exercise price of the option.
The following table sets forth information concerning the
stock options at December 31, 2002, held by the named executive
officers.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END
OPTION/SAR VALUES
(a) (b) (c) (d)
Number of Securities
Shares Underlying Unexercised
Acquired On Value Options/SARs at FY-End
Name Exercise(1) Realized Exercisable Unexercisable
------------------ ----------- -------- ------------ -------------
Lynn B. Fuller 96,000 $321,600 24,000 48,500
John K. Schmidt 32,000 $144,640 48,000 30,500
Kenneth J. Erickson 16,000 $ 72,320 62,667 19,833
Douglas J. Horstmann 22,000 99,440 54,667 14,333
Edward H. Everts 16,000 63,040 62,667 19,833
(a) (e)
Value of Unexercised
In-the-Money
Options/SARs at FY-End
Name Exercisable Unexercisable
-------------------- ----------- -------------
Lynn B. Fuller $ 40,000 $ 84,775
John K. Schmidt 248,748 48,958
Kenneth J. Erickson 396,748 27,908
Douglas J. Horstmann 341,248 25,803
Edward H. Everts 396,478 27,908
(1) In February of 2003, each named executive acquired a
portion of the shares underlying exercisable options. Mr. Fuller
acquired 24,000 shares, Mr. Schmidt acquired 16,000 shares, Mr.
Erickson acquired 16,000 shares, Mr. Horstmann acquired 10,000
shares and Mr. Everts acquired 16,000 shares.
Change of Control Agreements
We have entered into a separate change of control agreement
with each of the named executive officers and certain other of
our officers. These agreements provide that if employment is
terminated six months prior to a change in control of Heartland
(as defined in the agreements) or within one year thereafter, the
terminated officer is to be paid severance compensation equal to
a multiple of such officer's total compensation (as defined in
the agreements) at the time of termination. The multiple varies
for each officer, up to a maximum of four times total
compensation. Additionally, the agreements provide for the
continuation of medical and dental benefits for up to two years
after such termination and the payment of expenses for out-
placement counseling for a period of one year, up to a maximum
amount equal to twenty-five percent of total compensation.
Messrs. Fuller, Schmidt and Erickson are prohibited by their
respective agreements from competing with us or our subsidiaries
within a designated geographic area for a period of two years
following the termination of employment.
Compensation Committee Report on Executive Compensation
The incorporation by reference of this proxy statement into
any document filed with the Securities and Exchange Commission by
Heartland shall not be deemed to include the following report
unless such report is specifically stated to be incorporated by
reference into such document.
The compensation committee administers our compensation
program. In determining appropriate levels of executive
compensation, the committee has at its disposal independent
reference information regarding compensation ranges and levels
for executive positions in comparable companies. In determining
compensation to be paid to executive officers, primary
consideration is given to quality long-term earnings growth
accomplished by achieving both financial and non-financial goals
such as return on equity, earnings per share and asset and
deposit growth. The primary objectives of this philosophy are to:
- encourage a consistent and competitive return to
stockholders;
- reward bank and individual performances;
- provide financial rewards for performance of those
having a significant impact on corporate profitability;
and
- provide competitive compensation in order to attract
and retain key personnel.
There are three major components of our executive officer
compensation: base salary, annual incentive awards and long-term
incentive awards. The process utilized by the committee in
determining executive officer compensation levels for all of
these components is based upon the committee's subjective
judgment and takes into account both qualitative and quantitative
factors. No specific weights are assigned to such factors with
respect to any compensation component. Among the factors
considered by the committee are the recommendations of the
president with respect to the compensation of our other key
executive officers. However, the committee makes the final
compensation decisions concerning such officers.
The Heartland Financial USA, Inc. 2003 Stock Option Plan,
adopted by our board on March 19, 2003, will, if approved by our
stockholders, replace our 1993 stock option plan, which expires
on May 15, 2003. The proposed stock option plan is more fully
described beginning on page 17. The granting of stock options is
intended to promote equity ownership in Heartland by our
directors and selected officers and employees to increase their
proprietary interest in the success of Heartland and to encourage
them to remain in the employ of Heartland or our subsidiaries. We
have also purchased split-dollar life insurance policies on each
of our executive officers.
The compensation of Mr. Fuller, the chief executive officer,
during 2002 was based upon a number of factors, including:
- our compensation program;
- the individual's performance, substantial experience,
expertise and length of service with our organization;
- progress toward our performance objectives, as discussed
above; and
- compensation of officers with similar duties and
responsibilities at comparable organizations.
Respectfully,
Mark C. Falb, James F. Conlan, Thomas L. Flynn, Robert Woodward
Compensation Committee Interlocks and Insider Participation in
Compensation Decisions
During the last completed fiscal year, at the
invitation of the compensation committee, in addition to each of
the members of the committee, Messrs. Fuller and Schmidt also
participated in committee deliberations concerning executive
compensation. However, neither participated in any discussions
regarding their own compensation and Mr. Schmidt did not
participate in discussions regarding Mr. Fuller's compensation.
Mr. Fuller serves as chairman of the board, president and chief
executive officer of Heartland. Mr. Schmidt is the executive vice
president and chief financial officer of Heartland and president
and chief executive officer of Dubuque Bank and Trust. All of the
regular members of the committee also serve as directors of
Dubuque Bank and Trust, except for Mr. Cox who serves as a
director of Galena State Bank and Trust.
Stockholder Return Performance Presentation
The incorporation by reference of this proxy statement into
any document filed with the Securities and Exchange Commission by
Heartland shall not be deemed to include the following
performance graph and related information unless such graph and
related information is specifically stated to be incorporated by
reference into such document.
The following graph shows a five-year comparison of
cumulative total returns for Heartland Financial USA, Inc., the
Nasdaq Stock Market (U.S.) and an index of Nasdaq Bank Stocks.
Figures for our common stock represent inter-dealer quotations,
without retail markups, markdowns or commissions and do not
necessarily represent actual transactions. The graph was prepared
at our request by Research Data Group, Inc.
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
ASSUMES $100 INVESTED ON DECEMBER 31, 1997
[GRAPH DEPICTING VALUES ON THE FOLLOWING TABLE]
*Total return assumes reinvestment of dividends
Cumulative Total Return Performance
December 31,
----------------------------------
1997 1998 1999 2000 2001 2002
Heartland Financial USA, Inc. 100 145 143 113 114 159
Nasdaq Stock Market (U.S.) 100 141 261 157 125 86
Nasdaq Bank 100 99 96 109 118 121
TRANSACTIONS WITH MANAGEMENT
Directors and officers of Heartland and our subsidiaries, and
their associates, were customers of and had transactions with us
and one or more of our subsidiaries during 2002. Additional
transactions may be expected to take place in the future. All
outstanding loans, commitments to loan, transactions in
repurchase agreements and certificates of deposit and depository
relationships, in the opinion of management, were made in the
ordinary course of business, on substantially the same terms,
including interest rates and collateral, as those prevailing at
the time for comparable transactions with other persons and did
not involve more than the normal risk of collectibility or
present other unfavorable features.
ADOPTION OF THE HEARTLAND FINANCIAL USA, INC. 2003 STOCK OPTION
PLAN
On March 19, 2003, our board of directors unanimously adopted
resolutions approving the Heartland Financial USA, Inc. 2003
Stock Option Plan, subject to stockholder approval, to promote
equity ownership of Heartland by our directors and selected
officers and employees, to increase their proprietary interest in
our success and to encourage them to remain in our employ. A
summary of the plan is set forth below. This summary is
qualified in its entirety by reference to the plan, a copy of
which is attached as Appendix B to this proxy statement. If
approved by stockholders, the plan will replace our current stock
option plan which was adopted in 1993 and will terminate on May
15, 2003.
Administration
The stock option plan is to be administered by the
compensation committee which will be comprised of at least two
non-employee directors appointed by our board of directors. The
committee will have the authority to select the directors,
officers and employees to whom awards may be granted, to
determine the terms of each award, to interpret the provisions of
the plan and to make all other determinations that it may deem
necessary or advisable for the administration of the plan.
The stock option plan provides for the grant of "incentive
stock options," as defined under Section 422(b) of the Internal
Revenue Code of 1986, as amended, options that do not so qualify
("nonstatutory options"), restricted stock and stock appreciation
rights, as determined in each individual case by the compensation
committee. Our board of directors has reserved 600,000 shares of
common stock for issuance under the plan. In general, if any
award (including an award granted to a non-employee director)
granted under the plan expires, terminates, is forfeited or is
cancelled for any reason, the shares of common stock allocable to
that award may again be made subject to an award granted under
the plan.
Awards
Directors, officers and employees of Heartland and our
subsidiaries are eligible to receive grants under the stock
option plan. Options may be granted subject to a vesting
requirement and will become fully vested upon a merger or change
of control of Heartland. The exercise price of incentive stock
options granted under the stock option plan must at least equal
the fair market value of the common stock subject to the option
(determined as provided in the plan) on the date the option is
granted. The exercise price of nonstatutory options and stock
appreciation rights will be determined by the committee.
An incentive stock option granted under the plan to an
employee owning more than 10% of the total combined voting power
of all classes of capital stock of Heartland is subject to the
further restriction that such option must have an exercise price
of at least 110% of the fair market value of the shares of common
stock issuable upon exercise of the option (determined as of the
date the option is granted) and may not have an exercise term of
more than five years. Incentive stock options are also subject to
the further restriction that the aggregate fair market value
(determined as of the date of grant) of common stock as to which
any such incentive stock option first becomes exercisable in any
calendar year, is limited to $100,000. To the extent options
covering more than $100,000 worth of common stock first become
exercisable in any one calendar year, the excess will be
nonstatutory options. For purposes of determining which, if any,
options have been granted in excess of the $100,000 limit,
options will be considered to become exercisable in the order
granted.
Each director, officer and employee eligible to participate
in the plan will be notified by the committee. To receive an
award under the stock option plan, an award agreement must be
executed which specifies the type of award to be granted, the
number of shares of common stock (if any) to which the award
relates, the terms and conditions of the award and the date
granted. In the case of an award of options, the award agreement
will also specify the price at which the shares of common stock
subject to the option may be purchased, the date(s) on which the
option becomes exercisable and whether the option is an incentive
stock option or a nonstatutory option.
The full exercise price for all shares of common stock
purchased upon the exercise of options granted under the plan may
be paid by cash, award surrender or common stock owned at the
time of exercise, as directed by the compensation committee.
Incentive stock options granted to employees under the plan may
remain outstanding and exercisable for ten years from the date of
grant or until the expiration of three months (or such lesser
period as the compensation committee may determine) from the date
on which the person to whom they were granted ceases to be
employed by Heartland or a subsidiary. Nonstatutory options and
stock appreciation rights granted under the plan remain
outstanding and exercisable for such period as the compensation
committee may determine.
Income Tax
Incentive stock options granted under the plan have certain
advantageous tax attributes to the recipient under the income tax
laws. No taxable income is recognized by the option holder for
income tax purposes at the time of the grant or exercise of an
incentive stock option, although neither is there any income tax
deduction available to Heartland as a result of such a grant or
exercise. Any gain or loss recognized by an option holder on the
later disposition of shares of common stock acquired pursuant to
the exercise of an incentive stock option generally will be
treated as capital gain or loss if such disposition does not
occur prior to one year after the date of exercise of the option,
or two years after the date the option was granted.
As in the case of incentive stock options, the grant of
nonstatutory stock options, restricted stock or stock
appreciation rights will not result in taxable income for income
tax purposes to the recipient of the awards, nor will Heartland
be entitled to an income tax deduction. Upon the exercise of
nonstatutory stock options or stock appreciation rights, or the
lapse of restrictions on restricted stock, the award holder will
generally recognize ordinary income for income tax purposes equal
to the difference between the exercise price and the fair market
value of the shares of common stock acquired or deemed acquired
on the date of exercise, and Heartland will be entitled to an
income tax deduction in the amount of the ordinary income
recognized by the option holder. In general, any gain or loss
realized by the option holder on the subsequent disposition of
such shares will be a capital gain or loss.
Amendment and Termination
The stock option plan expires ten years after its adoption,
unless sooner terminated by our board of directors. Our board of
directors has authority to amend the plan in such manner as it
deems advisable, except that our board of directors is not
permitted without our stockholders' approval to amend the plan in
a manner that would materially increase the number of shares of
common stock that may be granted as incentive stock options or
change the class of persons eligible to recent incentive stock
options. The plan provides for appropriate adjustment, as
determined by the compensation committee, in the number and kind
of shares subject to unexercised options, in the event of any
change in the outstanding shares of common stock by reason of a
stock split, stock dividend, combination or reclassification of
shares, recapitalization, merger or similar event.
Stockholder Vote Necessary For Approval of the Stock Option Plan
The affirmative vote of the holders of a majority of the
shares of common stock present in person or by proxy at the
annual meeting is required to approve the stock option plan. Our
board of directors recommends a vote FOR the proposed stock
option plan.
Aggregated Equity Plan Information
The table below sets forth the following information as of
December 31, 2002 for (i) all compensation plans previously
approved by our stockholders and (ii) all compensation plans not
previously approved by our stockholders:
(a) the number of securities to be issued upon the exercise
of outstanding options, warrants and rights;
(b) the weighted-average exercise price of such outstanding
options, warrants and rights; and
(c) other than securities to be issued upon the exercise of
such outstanding options, warrants and rights, the
number of securities remaining available for future
issuance under the plans.
EQUITY COMPENSATION PLAN INFORMATION
Number of Number of
securities to securities
be issued upon Weighted-Average remaining
exercise of exercise price of available
outstanding of outstanding for future
Plan Category options options issuance
------------- -------------- ----------------- ----------
Equity
compensation
plans approved
by security
holders 612,000 $13.30 357,234(1)
Equity
compensation
plans not
approved by
security
holders - - -
Total 612,000 $13.30 357,234(1)
(1) Includes 59,369 shares available for use under the
Heartland Financial USA, Inc. 1993 Stock Option Plan and 297,865
shares available for use under the Heartland Financial USA, Inc.
Employee Stock Purchase Plan.
AUDIT COMMITTEE REPORT
The incorporation by reference of this proxy statement into
any document filed with the Securities and Exchange Commission by
Heartland shall not be deemed to include the following report
unless such report is specifically stated to be incorporated by
reference into such document.
The audit committee assists the board in carrying out its
oversight responsibilities for our financial reporting process,
audit process and internal controls. The audit committee also
reviews the audited financial statements and recommends to the
board that they be included in our annual report on Form 10-K.
The audit committee has reviewed and discussed our audited
financial statements for the fiscal year ended December 31, 2002,
with our management and KPMG LLP, our independent auditors. The
committee has also discussed with KPMG LLP the matters required
to be discussed by SAS 61 (Codification for Statements on
Auditing Standards) as well as having received and discussed the
written disclosures and the letter from KPMG LLP required by
Independence Standards Board Statement No. 1 (Independence
Discussions with Audit Committees). Based on the review and
discussions with management and KPMG LLP, the committee has
recommended to the board that the audited financial statements be
included in our annual report on Form 10-K for the fiscal year
ended December 31, 2002, for filing with the Securities and
Exchange Commission.
Respectfully,
Mark C. Falb, James F. Conlan, John W. Cox, Jr., Thomas L. Flynn
RELATIONSHIP WITH INDEPENDENT AUDITORS
We have appointed KPMG LLP to be our independent auditors for
the fiscal year ending December 31, 2003, and our board of
directors recommends that the stockholders ratify the
appointment. KPMG LLP has been our auditor since June 1994. A
representative of KPMG LLP is expected to attend the meeting and
will be available to respond to appropriate questions and to make
a statement if he or she so desires. If the appointment of
independent auditors is not ratified, the matter of the
appointment will be considered by the audit committee of the
board of directors. The board of directors recommends that you
vote your shares FOR ratification of this appointment.
Audit Fees
Our independent auditor during 2002 was KPMG LLP. The
aggregate fees and expenses paid or accrued for payment to KPMG
LLP in connection with the audit of our annual financial
statements as of and for the year ended December 31, 2002, and
for the required review of our financial information included in
our Form 10-Q filings for the year 2002 was $95,400.
Financial Information Systems Design and Implementation Fees
There were no fees incurred for the performance of these
services by KPMG LLP during 2002.
Audit Related Services Fees
The aggregate fees and expenses paid or accrued for payment
to KPMG LLP for audit related services rendered to us during 2002
was $22,000. These fees were primarily related to the audits of
our employee benefit and retirement plans and our employee stock
purchase plan.
All Other Fees
The aggregate fees and expenses paid or accrued for payment
to KPMG LLP for all other services rendered to us during 2002 was
$21,119.
The audit committee, after consideration of the matter, does
not believe the rendering of these services by KPMG LLP is
incompatible with maintaining its independence as our principal
auditor.
STOCKHOLDER PROPOSALS FOR 2004 ANNUAL MEETING
Any proposals of stockholders intended for presentation at
the 2004 annual meeting of stockholders must be received by us on
or before December 10, 2003, and must otherwise comply with our
bylaws, if such proposal is to be included in the proxy statement
pertaining to the 2004 annual meeting.
FAILURE TO INDICATE CHOICE
If any stockholder fails to indicate a choice in items (1),
(2) or (3) on the proxy card, the shares of such stockholder
shall be voted FOR in each instance.
By order of the Board of
Directors
/s/ Lynn B. Fuller
------------------------
Lynn B. Fuller
Chairman of the Board
Dubuque, Iowa
April 9, 2003
ALL STOCKHOLDERS ARE URGED TO SIGN
AND MAIL THEIR PROXIES PROMPTLY
EXHIBIT A
HEARTLAND FINANCIAL USA, INC.
CHARTER OF THE AUDIT COMMITTEE
OF THE BOARD OF DIRECTORS
I. Audit Committee Purpose
The Audit Committee is appointed by the Board of Directors to
assist the Board in fulfilling its oversight responsibilities.
The Audit Committee's primary duties and responsibilities are to:
- Monitor the integrity of the Company's financial reporting
process and systems of internal controls regarding finance,
accounting, and legal compliance;
- Monitor the independence and performance of the Company's
independent auditors and internal auditing department;
- Provide an avenue of communication among the independent
auditors, management, the internal audit function, and the
Board of Directors;
- Encourage adherence to, and continuous improvement of, the
Company's policies, procedures, and practices at all levels;
- Review areas of potential significant financial risk to the
Company; and
- Monitor compliance with legal and regulatory requirements.
The Audit Committee has the authority to conduct any
investigation appropriate to fulfilling its responsibilities, and
it has direct access to the independent auditors and the internal
audit function, as well as anyone in the organization. The Audit
Committee has the ability to retain, at the Company's expense,
special legal, accounting, or other consultants or experts it
deems necessary in the performance of its duties.
II. Audit Committee Composition and Meetings
The Audit Committee shall be comprised of three and not more than
six directors as determined by the Board, each of whom shall in
the judgment of the Board meet the independence, literacy and
expertise requirements of the NASD, the Sarbanes-Oxley Act of
2002 (the "Act"), the Security and Exchange Commission (the
"SEC") and other such regulatory agencies to which the Company
may be subject. One member shall be designated in the judgment of
the Committee as the "financial expert" of the Committee, as such
term is defined by the rules and regulations promulgated by the
SEC pursuant to the Act.
Audit Committee members shall be appointed by the Board on
recommendation of the Nominating Committee. If an Audit Committee
Chair is not designated or present, the members of the Committee
may designate a Chair by majority vote of the Committee
membership.
The Committee shall meet at least three times annually, or more
frequently as circumstances dictate, and make regular reports to
the Board.
III. Audit Committee Responsibilities and Duties
The Audit Committee shall:
1. Review and reassess the adequacy of this Charter at least
annually, and recommend any proposed changes to the Board
for approval.
2. Review the Company's annual audited financial statements
prior to filing or distribution. Discuss with management and
independent auditors significant issues regarding accounting
principles, practices and judgments.
3. Be available (or designate the Chairman of the Audit
Committee to be available) at the request of the independent
auditors, management or the Board to discuss the Company's
quarterly financial results or other items required to be
communicated by the independent auditors under SAS No. 61 or
SAS No. 90 either prior to the release of earnings or before
filing as considered appropriate in the circumstances.
Include a discussion of any significant changes to the
Company's accounting. The Chair of the Audit Committee may
represent the entire Audit Committee for purposes of this
review.
4. In consultation with management, the independent auditors
and the internal audit function, consider the integrity of
the Company's financial reporting processes and controls.
Participate in regularly scheduled meetings with management,
the internal audit function and the independent auditors to
discuss any significant risk exposures and the steps
management has taken to monitor, control and report such
exposures. Review significant findings reported by the
independent auditors and the internal audit function,
together with management responses.
5. The independent auditors are ultimately accountable to the
Audit Committee and the Board of Directors. The Audit
Committee shall review the independence and performance of
the auditors and annually approve the appointment of the
independent auditors or approve any discharge of auditors
when circumstances warrant.
6. Receive and review the annual engagement letter, and approve
the fees and other compensation to be paid to the
independent auditors.
7. On an annual basis, the Committee should receive from the
independent auditors the letter required by Independence
Standards Board Statement No. 1 (and any related
amendments), and discuss with the independent auditors all
significant relationships they have with the Company that
could impair the auditors' independence.
8. Review the independent auditors' audit plan - discuss scope,
staffing, locations, reliance upon management, and internal
audit function and general audit approach, prior to the
audit, and approve all audit services to be provided by the
independent auditor thereunder. Additionally, review and
approve all other proposed audit services to be provided by
the independent auditor, including all matters other than of
a de minimus nature as defined in the Act. The Committee
shall require pre-approval by the Committee or a designee
thereof of all allowed non-audit related services to be
provided by the independent auditors.
9. Discuss with the independent auditor the matters required to
be discussed by Statement on Auditing Standards No. 61 and
90 relating to the conduct of the audit. Such review should
also include:
(a) Any problems or difficulties encountered in the
course of the audit work, including any restrictions
on the scope of activities or access to required
information;
(b) Any management letter provided by the auditor and
the Company's response to that letter;
(c) Any changes required in the planned scope of the
internal audit;
(d) The internal audit vendor responsibilities;
(e) Selection of new or changes to accounting policies
or a change in the application of existing
accounting policies;
(f) Significant estimates, judgments and uncertainties
in management's preparation of financial statements;
and
(g) Unusual transactions.
Additionally attempt to resolve all disagreements between
the Company's independent auditors and management
regarding financial reporting.
10. Consider the independent auditor's judgment about the
quality and appropriateness of the Company's accounting
principles as applied in its financial reporting.
11. Review the Annual Internal Audit Plan of the internal audit
function, and its performance under said plan, including the
fees to be paid. The internal audit function shall be
responsible to senior management, but have a direct
reporting responsibility to the Board of Directors through
the Committee. Changes in the internal audit function shall
be subject to Committee approval.
12. Review the appointment, performance and replacement of the
internal audit function (firm). Discuss with the internal
audit function all significant relationships they have with
the Company that would impair their objectivity in
accordance with Statement on Auditing Standards No. 60.
Retain or replace the vendor performing the function.
13. Review significant reports prepared by the internal audit
function together with management's response and follow-up
to these reports.
14. On at least an annual basis obtain from the external
auditors all copies of attorney letters discussing any legal
matters that could have a significant impact on the
Company's financial statements, the Company's compliance
with applicable laws and regulations and inquiries received
from regulators or governmental agencies. Review all reports
concerning any significant fraud or regulatory noncompliance
that occurs at the Company. This review should include
consideration of the internal controls that should be
strengthened to reduce the risk of a similar event in the
future.
15. Assure preparation of the report to shareholders as required
by the Securities and Exchange Commission. The report should
be included in the Company's annual proxy statement.
16. Advise the Board with respect to the Company's policies and
procedures regarding compliance with applicable laws and
regulations and with the Company's Code of Conduct as
reported to Committee by regulatory agencies, external and
internal auditors and legal counsel.
17. Meet as needed with the chief financial officer, the
internal audit function and the independent auditor in
executive sessions.
18. Perform any other activities consistent with this Charter,
the Company's by-laws, and governing law, as the Committee
or the Board deems necessary or appropriate.
19. Maintain minutes of meetings and periodically report to the
Board of Directors on significant results of the foregoing
activities.
20. Review and approve all related party transactions
disclosable pursuant to Item 404(a) of the Regulation S-K.
21. Annually designate and disclose a member of the Committee as
the "financial expert" for the Committee.
22. Assure procedures are developed and in place for the
receipt, retention and treatment of complaints received by
the Company regarding accounting, internal accounting
controls, or auditing matters, and the confidential,
anonymous submission by employees of the Company of concerns
regarding questionable accounting or auditing matters,
conduct investigations, to address disagreements, if any,
between management and the independent auditor or to address
compliance with laws and regulations and the Company's Code
of Conduct.
The Audit Committee has the responsibilities and powers set
forth in this Charter. The Committee's responsibility is one of
oversight. The responsibility for the completeness and accuracy
of the financial statements rests with the Company's management.
It is the responsibility of the Company's auditors to perform an
audit of the Company's financial statements and to express an
opinion on such financial statements. In fulfilling their
responsibilities hereunder, each member of the Committee may rely
on (i) the integrity of those persons and organizations within
and outside the Company from which he or she receives
information, (ii) the accuracy of the financial and other
information provided to the Committee by such persons or
organizations absent actual knowledge to the contrary (which
shall be promptly reported to the Board) and (iii)
representations made by the Company's management as to any
information technology, internal audit and other non-audit
services provided by the Company's auditors.
APPENDIX B
HEARTLAND FINANCIAL USA, INC.
2003 STOCK OPTION PLAN
Section 1. Purpose of the Plan.
THE HEARTLAND FINANCIAL USA, INC. 2003 STOCK OPTION PLAN
(the "Plan") is intended to provide a means whereby directors and
employees of HEARTLAND FINANCIAL USA, INC., a Delaware
corporation (the "Company"), and the Related Corporations may
sustain a sense of proprietorship and personal involvement in the
continued development and financial success of the Company and
the Related Corporations, and to encourage them to remain with
and devote their best efforts to the business of the Company and
the Related Corporations, thereby advancing the interests of the
Company and its stockholders. Accordingly, the Company may
permit certain directors and employees to acquire Shares or
otherwise participate in the financial success of the Company, on
the terms and conditions established herein.
Section 2. Definitions.
The following terms, when used herein and unless the context
clearly requires otherwise, shall have the following meanings
(such meanings to be equally applicable to both the singular and
plural forms of the terms defined):
(a) "Board" means the board of directors of the Company.
(b) "Cause" means the commission of fraud, the
misappropriation of or intentional material damage to the
property or business of the Company or the Related Corporations,
the substantial failure to fulfill the duties and
responsibilities of a regular position and/or comply with the
Company's or the Related Corporations' policies, rules or
regulations, or the conviction of a felony.
(c) "Change of Control" means:
(i) 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
(ii) 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, and such
new director shall, for purposes of this
Agreement, be considered as a member of the
Board; or(iii) the consummation by the Company
of: (1) a merger or consolidation if the
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 (2) 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: (1) a trustee or other fiduciary
holding securities under one or more employee benefit plans
maintained for employees of the entity; or (2) 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.
(d) "Code" means the Internal Revenue Code of 1986, as
amended from time to time, and the rules and regulations
promulgated thereunder.
(e) "Committee" means the Compensation Committee of the
Board, which is comprised solely of two (2) or more non-employee
directors appointed by the Board.
(f) "Compete" means, except with the express prior written
consent of the Company, within a period of two (2) years after
the Termination of Service, the direct or indirect competition
with the business of the Company or a Related Corporation,
including, but not by way of limitation, the direct or indirect
owning, managing, operating, controlling, financing or serving as
an officer, employee, director or consultant to, or by soliciting
or inducing, or attempting to solicit or induce, any employee or
agent of the Company or a Related Corporation to terminate
employment and become employed by, any person, firm, partnership,
corporation, trust or other entity which owns or operates, within
a fifty (50) mile radius of the office of the Company or a
Related Corporation in which the individual is principally
located, (a) a bank, savings and loan association, credit union,
consumer finance company, brokerage firm, or similar financial
institution, (b) an insurance business, agency or similar entity
which has as a material component of its business the sale or
brokerage of insurance products and services similar to those
offered by the Company or a Related Corporation at the time of
the individual's Termination of Service, or (c) a fleet leasing
company, fleet management company or similar entity which
provides as a material component of its business the products and
services offered by the Company or a Related Corporation at the
time of the individual's Termination of Service.
(g) "Disability" means a physical or mental disability
(within the meaning of Section 22(e)(3) of the Code) which
impairs the individual's ability to substantially perform his or
her current duties for a period of at least six (6) consecutive
months, as determined by the Committee.
(h) "Early Retirement" means age fifty-five (55) and ten
(10) years of service.
(i) "ERISA" means the Employee Retirement Income Security
Act of 1974, as amended from time to time, and the rules and
regulations promulgated thereunder.
(j) "Exchange Act" means the Securities Exchange Act of
1934, as amended from time to time, and the rules and regulations
promulgated thereunder.
(k) "Incentive Stock Option" means an award under the Plan
that satisfies the general requirements of Section 422 of the
Code, namely: (i) grantees must be employees; (ii) the exercise
price may not be less than the fair market value of the
underlying Shares at the date of grant; (iii) no more than
$100,000 worth of Shares may become exercisable in any year;
(iv) the maximum duration of an award may be ten (10) years;
(v) awards must be exercised within three (3) months after
termination of employment, except in the event of Disability or
death; and (vi) Shares received upon exercise must be retained
for the greater of two (2) years from the date of grant or one
(1) year from the date of exercise.
(l) "Nonqualified Option" means an option award under the
Plan that is not an Incentive Stock Option.
(m) "Normal Retirement" means age sixty-five (65).
(n) "Related Corporation" means any corporation, bank or
other entity which would be a parent or subsidiary corporation
with respect to the Company as defined in Section 424(e) or (f),
respectively, of the Code.
(o) "Rule 16b-3" means Rule 16b-3 promulgated under the
Exchange Act, as amended from time to time.
(p) "Shares" means shares of the common stock of the
Company.
(q) "Stock Appreciation Rights" means rights entitling the
grantee to receive the appreciation in the market value of a
stated number of Shares.
(r) "Securities Act" means the Securities Act of 1933, as
amended from time to time, and the rules and regulations
promulgated thereunder.
(s) "Termination of Service" means the termination of a
person's status as a director or employee of the Company or a
Related Corporation.
(t) "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 3. Administration of the Plan.
The Plan shall be administered by the Committee The
Committee, shall have sole authority to:
(a) select the directors and employees to whom awards shall
be granted under the Plan;
(b) establish the amount and conditions of each such award;
(c) prescribe any legend to be affixed to certificates
representing such awards;
(d) interpret the Plan; and
(e) adopt such rules, regulations, forms and agreements,
not inconsistent with the provisions of the Plan, as it may deem
advisable to carry out the Plan.
All decisions made by the Committee in administering the
Plan shall be subject to Board ratification.
Section 4. Shares Subject to the Plan.
The aggregate number of Shares that may be obtained by
directors and employees under the Plan shall be 600,000 Shares.
Any Shares that remain unissued at the termination of the Plan
shall cease to be subject to the Plan, but until termination of
the Plan, the Company shall at all times make available
sufficient Shares to meet the requirements of the Plan.
Section 5. Stock Options.
(a) Type of Options. The Company may issue options that
constitute Incentive Stock Options to employees and Nonqualified
Options to directors and employees under the Plan. The grant of
each option shall be confirmed by a stock option agreement that
shall be executed by the Company and the optionee as soon as
practicable after such grant. The stock option agreement shall
expressly state or incorporate by reference the provisions of the
Plan and state whether the option is an Incentive Stock Option or
a Nonqualified Option.
(b) Terms of Options. Except as provided in paragraphs (c)
and (d) of this Section, each option granted under the Plan shall
be subject to the terms and conditions set forth by the Committee
in the stock option agreement including, without limitation,
option price, vesting schedule and option term.
(c) Additional Terms Applicable to All Options. Each
option shall be subject to the following terms and conditions:
(i) Written Notice. An option may be exercised only
by giving written notice to the Company specifying the number of
Shares to be purchased.
(ii) Method of Exercise. The aggregate option
price may be paid in any one or a combination of cash, personal
check, Shares already owned or Plan awards which the optionee has
an immediate right to exercise.
(iii) Term of Option. No option may be exercised
more than the (10) years after the date of grant. No option may
be exercised more than six (6) months after the optionee
terminates employment with the Company, except in the event of
Disability or death as provided in subparagraph (c)(iv) below.
(iv) Disability or Death of Optionee. If an
optionee's Termination of Service occurs due to Disability or
death prior to exercise in full of any options, he or she, or his
or her beneficiary, executor, administrator or personal
representative, shall have the right to exercise the options
within a period of twelve (12) months after the date of such
termination to the extent that the right was exercisable at the
date of such termination as provided in the stock option
agreement, or as may otherwise be provided by the Committee.
(v) Transferability. No option may be transferred,
assigned or encumbered by an optionee, except by will or the laws
of descent and distribution.
(d) Additional Terms Applicable to Incentive Options. Each
Incentive Stock Option shall be subject to the following terms
and conditions:
(i) Option Price. The option price per Share shall
not be less than 100% of the fair market value of a Share on the
date the option is granted. Notwithstanding the preceding
sentence, the option price per Share granted to 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 (a "10% Stockholder") shall not be less
than 110% of the fair market value of a Share on the date the
option is granted.
(ii) Term of Option. No option may be exercised
more than ten (10) years after the date of grant. No option
granted to a 10% Stockholder may be exercised more than five (5)
years after the date of grant. Notwithstanding any other
provisions hereof, no option may be exercised more than three (3)
months after the optionee terminates employment with the Company,
except in the event of death or Disability, in which case the
option may be exercised as provided in subparagraph (c)(iv) of
this Section.
(iii) Annual Exercise Limit. The aggregate fair
market value of Shares which first become exercisable during any
calendar year shall not exceed $100,000. For purposes of the
preceding sentence, the fair market value of each Share shall be
determined on the date the option with respect to such Share is
granted. To the extent the $100,000 limitation is exceeded, the
excess shall be deemed a Nonqualified Option.
(iv) Transferability. No option may be
transferred, assigned or encumbered by an optionee, except by
will or the laws of descent and distribution, and during the
optionee's lifetime an option may only be exercised by him or
her.
Section 6. Stock Appreciation Rights.
(a) Grants. An award of Stock Appreciation Rights under
the Plan ("SARs") may be granted separately or in tandem with or
by reference to an option granted prior to or simultaneously with
the grant of such rights, to such eligible directors and
employees, as may be selected by the Committee, and shall be
evidenced by a written agreement in such form and consistent with
the Plan as the Committee shall approve from time to time.
(b) Terms of Grant. SARs may be granted in tandem with or
with reference to a related option, in which event the grantee
may elect to exercise either the option or the SAR, but not both.
SARs shall not be transferable, except: (i) by will or the laws
of descent and distribution; (ii) by gifting for the benefit of
descendants for estate planning purposes; or (iii) pursuant to a
certified domestic relations order, and shall be exercisable for
no more than ten (10) years after the date of grant.
(c) Payment on Exercise. Upon exercise of a SAR, the
grantee shall be paid the excess of the then fair market value of
the number of Shares to which the SAR relates over the fair
market value of such number of Shares at the date of grant of the
SAR or of the related option, as the case may be. Such excess
shall be paid in cash or in such other form as the Committee
shall determine.
Section 7. Right of First Refusal
(a) Restrictions on Transfer. As a condition to the
receipt of any award under this Plan and without the express
prior written consent of the Company, an owner of any Shares
issued under the Plan ("Plan Shares") shall not sell any Plan
Shares without first complying with the terms of this Section.
Any owner of Plan Shares (the "Owner") who receives a bona fide
offer to purchase all or any portion of the Owner's Plan Shares
(the "Offer") shall first offer the Plan Shares to the Company in
accordance with the terms of this Section. The Owner shall give
written notice to the Company stating that he or she has received
the Offer, stating the number of Plan Shares to be sold, the name
and address of the person(s) making the Offer and the purchase
price and terms of payment described in the Offer. The Company
or any assignee named by the Company shall have five (5) business
days to exercise the Company's right to purchase the Plan Shares
that are the subject of the Offer. If the Company assigns such
right to purchase, then such assignee shall have all of the
rights of the Company with respect to such right to purchase as
described in this Section. If neither the Company nor any
assignee of the Company decides to purchase the Plan Shares, the
Owner may accept the Offer and sell the Plan Shares, but only in
strict accordance with the terms of the Offer and only if
consummated within fifteen (15) business days after the
expiration of the Company's 5-day exercise period. If the
Company or its assignee decides to purchase the Plan Shares, the
closing of such purchase shall be completed within five (5)
business days of the Company's or assignee's notification to the
Owner of the exercise of the right to purchase the Plan Shares.
For purposes of this Section, the Owner shall include any person
who acquires Shares from any other person and for any reason;
including, without limitation, by gift, death or sale.
(b) Additional Restrictions on Transfer. Notwithstanding
anything to the contrary contained in this Plan, an Owner may not
sell or otherwise transfer Plan Shares at any time in which (i)
the Company or any of its executive officers are prohibited from
engaging in a transaction of the Company's securities pursuant to
the terms of the Company's insider trading policy then in effect;
or (ii) the Company is unable to purchase the Plan Shares
pursuant to (A) the Exchange Act or (B) the rules governing any
securities exchange or quotation service on which the Plan Shares
are quoted or listed for trading.
(c) Legends. Each certificate issued by the Company that
represents any Plan Shares shall bear the following legends:
"This certificate and the shares represented hereby are
subject to the terms and conditions (including
forfeiture and restrictions against transfer) contained
in the Heartland Financial USA, Inc. 2003 Stock Option
Plan. Release from such terms and conditions shall be
obtained only in accordance with the provisions of such
Plan, a copy of which is on file in the office of the
Secretary of said Company."
Section 8. Amendment or Termination of the Plan
The Board may amend, suspend or terminate the Plan or any
portion thereof at any time, but (except as provided in
Section 12 below) no amendment shall be made without approval of
the stockholders of the Company which shall: (a) increase the
aggregate number of Shares with respect to which Incentive Stock
Option awards may be made under the Plan; or (b) change the class
of persons eligible to receive Incentive Stock Option awards
under the Plan; provided, however, that no amendment, suspension
or termination shall impair the rights of any individual, without
his or her consent, in any award theretofore made pursuant to the
Plan.
Section 9. Term of Plan.
The Plan shall be effective upon the date of its adoption by
the Board, which date is March 19, 2003 (the "Effective Date");
provided that Incentive Stock Options may be granted only if the
Plan is approved by the stockholders within twelve (12) months
before or after the date of adoption by the Board. Unless sooner
terminated under the provisions of Section 8 above, Shares and
SARs shall not be granted under the Plan after the expiration of
ten (10) years from the Effective Date of the Plan. However,
awards may be exercisable after the end of the term of the Plan.
Section 10. Rights as Stockholder.
Upon delivery of any Share to a director or employee, such
person shall have all of the rights of a stockholder of the
Company with respect to such Share, including the right to vote
such Share and to receive all dividends or other distributions
paid with respect to such Share.
Section 11. Merger or Consolidation.
In the event the Company is merged or consolidated with
another corporation and the Company is not the surviving
corporation, the surviving corporation shall exchange options and
SARs issued under this Plan for options and SARs (with the same
aggregate option price) to acquire and participate in that number
of shares in the surviving corporation that have a fair market
value equal to the fair market value (determined on the date of
such merger or consolidation) of Shares that the grantee is
entitled to acquire and participate in under this Plan on the
date of such merger or consolidation. In the event of a Change
of Control, options and SARs shall become immediately and fully
exercisable.
Section 12. Changes in Capital and Corporate Structure.
The aggregate number of Shares and interests awarded and
which may be awarded under the Plan shall be adjusted to reflect
a change in the outstanding Shares of the Company by reason of a
recapitalization, reclassification, reorganization, stock split,
reverse stock split, combination of shares, stock dividend or
similar transaction. The adjustment shall be made in an
equitable manner which will cause the awards and the economic
benefits thereof to remain unchanged as a result of the
applicable transaction.
Section 13. Service.
An individual shall be considered to be in the service of
the Company or a Related Corporation as long as he or she remains
a director or employee of the Company or such Related
Corporation. Nothing herein shall confer on any individual the
right to continued service with the Company or a Related
Corporation or affect the right of the Company or such Related
Corporation to terminate such service.
Section 14. Withholding of Tax.
(a) In General. To the extent the award, issuance or
exercise of Shares or SARs results in the receipt of compensation
by a director or employee, the Company is authorized to withhold
a portion of such Shares receivable or any cash compensation then
or thereafter payable to such person to pay any tax required to
be withheld by reason of the receipt of the compensation.
Alternatively, the director or employee may tender Shares with a
value equal to, or a personal check in the amount of, the tax
required to be withheld.
(b) Stock Withholding. To the extent a grantee incurs tax
liability in connection with the exercise or vesting of any award
that is subject to tax withholding and the grantee is obligated
to pay the Company the amount required to be withheld, the
Committee may, in its sole discretion, allow the grantee to
satisfy the minimum withholding tax obligation by electing to
have the Company withhold from the Shares to be issued that
number of Shares having a fair market value equal to the minimum
amount required to be withheld, determined on the date that the
amount of tax to be withheld is to be determined. All elections
by a grantee to have Shares withheld for this purpose shall be
made in writing in a form acceptable to the Committee.
Section 15. Delivery and Registration of Stock.
The Company's obligation to deliver Shares with respect to
an award shall, if the Committee so requests, be conditioned upon
the receipt of a representation as to the investment intention of
the individual to whom such Shares are to be delivered, in such
form as the Committee shall determine to be necessary or
advisable to comply with the provisions of the Securities Act or
any other federal, state or local securities legislation or
regulation. It may be provided that any representation
requirement shall become inoperative upon a registration of the
Shares or other action eliminating the necessity of such
representation under securities legislation. The Company shall
not be required to deliver any Shares under the Plan prior to:
(a) the admission of such Shares to listing on any stock exchange
on which Shares may then be listed, and (b) the completion of
such registration or other qualification of such Shares under any
state or federal law, rule or regulation, as the Committee shall
determine to be necessary or advisable. The Plan is intended to
comply with Rule 16b-3, if applicable. Any provision of the Plan
which is inconsistent with said rule shall, to the extent of such
inconsistency, be inoperative and shall not affect the validity
of the remaining provisions of the Plan.
Section 16. Non-Competition; Termination and Reversion.
If any recipient of an Award Competes with the Company or
any Related Corporation, then the Company shall have the right to
(a) cause any unexercised option or SAR held by such recipient to
immediately terminate; and (b) rescind the exercise of any
options or SARs which were exercised (i) following the
individual's Termination of Service, and (ii) within the six (6)
month period immediately preceding the recipient's Termination of
Service, and if the recipient has sold any Shares received upon
an exercise of an award governed by this subsection (b), to
require the recipient to immediately pay the Company the fair
market value, as determined by the Committee, of the Shares as of
the date of Termination of Service.
[LOGO]
Heartland Financial USA, Inc.
Proxy Card
PROXY FOR COMMON SHARES SOLICITED ON BEHALF OF THE BOARD
OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS OF
HEARTLAND FINANCIAL USA, INC. TO BE HELD ON MAY 21, 2003
The undersigned hereby appoints Lynn B. Fuller and John K.
Schmidt, or either one of them acting in the absence of the
other, with power of substitution, attorneys and proxies, for and
in the name and place of the undersigned, to vote the number of
common shares that the undersigned would be entitled to vote if
then personally present at the annual meeting of stockholders of
Heartland Financial USA, Inc., to be held at the corporate
headquarters located at 1398 Central Avenue, Dubuque, Iowa, on
the 21st day of May, 2003, at 1:30 p.m., local time, or any
adjournments or postponements thereof, upon the matters set forth
in the Notice of Annual Meeting and Proxy Statement, receipt of
which is hereby acknowledged, as follows:
1. ELECTION OF DIRECTORS:
[ ] FOR all [ ] WITHHOLD AUTHORITY
nominees listed to vote for all nominees
below (except as listed below
marked to the
contrary below)
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL
NOMINEE, STRIKE A LINE THROUGH THE NOMINEE'S NAME IN THE LIST
BELOW.)
Class I (Term Expires 2006): Lynn B. Fuller and John W. Cox, Jr.
2. APPROVE THE ADOPTION OF THE HEARTLAND FINANCIAL USA, INC.
2003 STOCK OPTION PLAN:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
3. APPROVE THE APPOINTMENT OF KPMG LLP as Heartland Financial
USA, Inc.'s independent public accountants for the year
ending December 31, 2003:
[ ] FOR [ ] AGAINST [ ] ABSTAIN
4. In accordance with their discretion, upon all other matters
that may properly come before said meeting and any
adjournments or postponements thereof.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER
DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION
IS MADE, THIS PROXY WILL BE VOTED FOR THE NOMINEES LISTED UNDER
PROPOSAL 1, FOR PROPOSAL 2 AND FOR PROPOSAL 3.
Dated: , 2003
------------------
Signature(s)
------------------
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NOTE: PLEASE DATE PROXY AND SIGN IT EXACTLY AS NAME OR NAMES
APPEAR ABOVE. ALL JOINT OWNERS OF SHARES SHOULD SIGN. STATE
FULL TITLE WHEN SIGNING AS EXECUTOR, ADMINISTRATOR, TRUSTEE,
GUARDIAN, ETC. PLEASE RETURN SIGNED PROXY IN THE ENCLOSED
ENVELOPE.